Happy Quagmire

Best Pittsburgh economic development news going into 2006:

When former FreeMarkets executives Ron Langer, Scott Ambrose and John Benzinger worked at the then tech start-up's Seventh Avenue offices in the early part of the decade, they found it difficult to leave work each day without grabbing a beer together at the Seventh Avenue Grill.

Now that FreeMarkets has merged into Ariba Inc. and the trio has scattered to new jobs around the city, they still can't miss a little after-work alcohol elixir routine. But they needed a new hangout. So they opened their own bar. Earlier this week, the threesome launched Quagmires, a renovated bar on East Carson Street across from the buzzing up-and-coming tech mecca -- SouthSide Works.

Formerly known as Eli's Place, the guys spruced up the bar with paint purchased with money they earned from FreeMarkets stocks and are hoping to draw in a hodge-podge of the old and new -- Eli's used to be a South Side locals and steelworkers hangout. The old crowd is, of course, very welcome and Mr. Langer hopes to lure the growing tech crowd working at firms across the street.

"It's kind of funny," Mr. Langer said of the thirtysomething trio. "We all had the same dream to own a bar."

Link: http://www.post-gazette.com/pg/05365/630435.stm

Pittsblog Anniversary Approaches

In a few days, on January 1, Pittsblog will celebrate its two-year anniversary. Blogging will be light to nonexistent for the next few days as I re-charge the batteries for another year of this. In the meantime, thanks to all of you who have been reading and commenting for the last 24 months, including those who have disagreed with me, and especially those who have disagreed more often than not! Energetic disagreement over how to broker the future of Western PA is a good thing, since it shows that people care, and that people care with passion. Stay with it in 2006!

Slots for Kids!

The title is completely fanciful. But I read this morning's report about Jack Wagner's argument about gambling and an arena proposal with equally complete revulsion. He makes the case that "the state Gaming Control Board should award the lone Pittsburgh slot machine casino license to a gaming company that promises to fund a new arena for the city." Why? Because "a successful slots applicant must help the city in its time of economic need." (Quotes are from the story and not necessarily from Jack Wagner's comments.)

Jack Wagner is an experienced Pittsburgh politician. I don't know enough about him to know what he has up his sleeve. But if the paper reported his comments accurately, then he has the bargaining dynamic backward. Maybe he thinks that this is a way to ensure that the slots licensee kicks in millions for the benefit of the city. What it really does is give the slots licensee an unhealthy degree of leverage over the city's future. If Pittsburgh is party to a deal that brings an arena in exchange for slots, you can be sure that Isle of Capri, or whoever builds that building, will be looking to the City for favors for a long, long time.

Sources of Local Growth

It's the end of the year, and time for reflection. I'll keep most of my reflecting to myself, but I'll post these comments on some recent news coverage:

What's the largest and most successful economic institution in Western Pennsylvania? UPMC. The P-G has run an interesting series telling some of the story behind its rise. Part I; Part II; Part III. Like it or not, the core of Pittsburgh's economy isn't steel, and it isn't manufacturing. It's health care. If Pittsburgh plays its cards right, that can be a good thing over the long haul.

Meanwhile, a local accountant sings the praises of foreign investment in Pittsburgh. It would be easy to nitpick around the edges of his argument, but I won't. His central theme is that small manufacturing and foreign investment continue to play a role in the local economy, and he's right about that. It's important not to oversell the point, though, and it's important to recognize that neither foreign investment (especially European investment, which is his focus) nor manufacturing are likely sources of long-term growth.

The Future of Pittsburgh

I can feel the bandwagon leaving the station: Between a new casino/arena proposal, the Three PNC Plaza tower proposal, and proposals for the Fifth/Forbes corridor and the empty Lazarus building, Pittsburgh's next Renaissance is already here! And it's all about the residents -- no more building the city on the backs of big businesses.

A little sobering reality:

On the one hand, it is certainly a great thing to bring people downtown to live, give them the opportunity to buy and rent affordable housing, and offer them residential and cultural amenities that make downtown living both functional and fun. "We" should do all of that. Read through the Comments to my last post, and you'll see that I agree with a lot of the reaction to that post, much of which is supportive of the PNC Plaza tower proposal.

On the other hand, once this is all done -- if it is done, and that's a big, big "if" -- Pittsburgh and Western PA are no more likely to be thriving economically than they are today. The one phenomenon -- cool Downtown living! -- doesn't produce the other -- an economy that motors along nicely. "Buzz" doesn't build jobs. In fact, if the two things are related, the relationship is more likely to run in the other direction.

So as the real estate, gaming, and hockey worlds get interesting, and maybe even a bit successful, let's keep our eyes on the economic development ball. That ball is bouncing along in various other places, and with various other people, institutions, and firms, around Pittsburgh.

PNC to Build Potemkin Skyscraper

Could the news be any worse? PNC is putting up 2/3 of the cost of a new downtown skyscraper, and the state is putting up the rest. PNC's Jim Rohr said that without public help, the project would not be feasible.

Jim Rohr's comment means that PNC knows that this will never be a money-making project on a stand-alone, private basis. Local developers understand that the 1950s economics of large office tower developments (mom stays home, dad commutes downtown) are, at long last, behind us. The Downtown market doesn't need a new tower; the business community isn't crying out for more office space; the public couldn't care less about bright new buildings for corporate tenants. So why build a skyscraper?

Hypothesis one: Downtown is dead; long live Downtown! Maybe PNC doesn't actually want to build this building, and it won't actually get built. The announcement is intended to galvanize developer support for smaller-scale Fifth-and-Forbes residential and retail development, and maybe even for a new arena. Is this what the state and the city really want, and did they persuade PNC to go along? Is this what the Governor meant when he said, "I think we will mark this day as the day Downtown Pittsburgh turned around for good, once and for all"?

Hypothesis two: Downtown is dead; let's drive a stake through its heart. Maybe PNC really is leading this effort; it wants to build a building that will fail so spectacularly that PNC has an obvious excuse to claim that the region has no economic future -- as PNC walks out the door to Charlotte.

Hypothesis three: Downtown is alive and well and holds the key to the region's future. Maybe Pittsburgh's public and private "leaders" really are so clueless that they think that a new skyscraper, with an international law firm as the anchor tenant, will galvanize the Pittsburgh economy for the long term.

Turning Pittsburgh into 1920s New York, with more and better skyscrapers, is a step backwards for the city and for the region. Dumping public money into large-scale Downtown development is throwing good money after bad. It's top-down romance -- let's rebuild the glory days of old Pittsburgh, with lavish digs for big business -- masquerading as bottom-up progress. Any way you cut it, this is a vertical Potemkin village.

Pittsburgh Venture Capital Association

Thanks to Cori Shropshire's weekly column, I learn that the Pittsburgh Venture Capital Association is saying and hearing the right things:

Speaking of the Pittsburgh Venture Capital Association, a dining room at the Duquesne Club was jam-packed Tuesday to hear the "How do we grow the tech industry?" observations of Dr. [Rob] Lowe, Allegheny Conference on Community Development CEO Michael Langley, the state Department of Community and Economic Development's Rebecca Bagley and CMU and Pitt economic development vice president Don Smith. But it was panel member and BirchmereVenture principal Chuck Dietrick who left the crowd buzzing. Mr. Dietrick articulated a point that everyone knows but rarely speaks of -- the need for the private sector to become more involved in capturing, investing and sprouting new university-bred technologies. "We have a major commercialization problem in this area, and we haven't done enough to catalyze the private sector to do something about it," Mr. Dietrick said.

Well, some of us speak of it! Welcome aboard the Pittsblog bandwagon!

More Focal Points in Pittsburgh

Robbin also sent me a long list of nominations for local high tech Schelling points:

Every single Starbucks in town.
Atria's by the ballpark
(and ditto for the Seattle coffee there, that's where you go when you talk to the guys from Birchmere.)
The Palomino (that's where one goes with Draper or Cornerstone.)
How about the Blue Horse, how could you forget them, they have free wi-fi and are right here in Mt. Lebo, great parking, always a table open?
The big Coffee Tree roasters in Shadyside
and Pamela's across the street.

That's a lot of choices! Can we boil that down to a short list? The whole concept of Schelling points -- or focal points -- is that it takes only a handful of them to support the network. Too many, and everything falls apart.

Networking 101 for Small Businesses

My neighbor Robbin Steif, whose LunaMetrics got a nice plug in this morning's P-G, sent me a thoughtful description of how she's networking to build her business:

Everyone keeps asking me the same question: How does a small company like mine get customers? In the beginning, I was able to answer quickly and glibly, “With great difficulty.” But now I may actually need an answer to that question, so this is as good a place as any to start. (Plus, the moderator of this blog asked me the same business acquisition question, and it turns out that he is my neighbor, so I had better stay on his good side… As we all know, it’s a pretty small city.)

My field is Internet marketing – sending more traffic to a website, and converting more visitors into customers once they get there. Most of us still are trying to make our sites into profit centers, so educational opportunities are abundant. Fortunately, my secret passion is public speaking, so I look for opportunities to speak in public about Internet marketing. It’s an awesome way to establish expertise without taking out a big (expensive) ad that brags, “Hey, we’re the experts!! Listen to us!!” Every engagement eventually brings with it a new customer. The best part is that just today, the Carnegie Library called me and said, “We see you’re doing this seminar at the Riverside Innovation Center on Dec. 12, we’d like you to do speak at the Library in February.” And I will.

I love virtuous circles (good things that bring more good things), so I extended the concept to the Internet. (And what better way to reach a national audience?) I started my own blog. I published a paper on response rate vs. conversion rate to the Web Analytics Association website (I’m a member as well as an analytic geek), and I saw the link to my website show up the next day. After I signed a new customer last Friday, I created a press release that was optimized for “web analytic consulting”, and on Sunday I sent it out on a free press release service that mostly serves blogs. Four sites picked it up, and soon other sites will pick it up from them. Eventually, the blogs will make my little press release into news, and CNN will have to pick me up. (Hey, if it could happen to Dan Rather and John Kerry, then why not to my little press release?) Alright, so I won’t be on CNN this time, but you get the idea.

Twenty years ago, marketing to a local audience was difficult (I know that one for a fact, because this is my second business in Pittsburgh.) Marketing to a national audience was incredibly expensive. Now, it happens overnight for free – it just takes a little bit of thought and a few great search terms.

Robbin Steif, CEO
LunaMetrics™
Turning Browsers into Buyers

Pittsburgh TechCrunch

Thanks, Venky, for the tip about the Silicon Valley TechCrunch.

TechCrunch is an occasional, informal gathering of early stage entrepreneurs, geeks, and bloggers in the Silicon Valley -- people who want to be in on the very latest stuff for emerging Web technology and are happy to hang in a low-key BYO environment. There are presentations, and there is corporate involvement.

All of which sounds like something that Pittsburgh could use. All it takes is a couple of people -- people with companies -- to sponsor it and get it off the ground.

Link: http://wiki.techcrunch.com/ -- TechCrunch wiki (historical and organizing information)

Link: http://www.flickr.com/photos/laughingsquid/sets/1189482/ -- Flikr photoset from the most recent TechCrunch

Link: http://www.techcrunch.com/ -- the blog

Google in Pittsburgh

I have to be happy that Google is opening a small research outpost in Pittsburgh, even if it likely means nothing tangible in terms of expanding the region's economy. Google is coming here because the people it wants to hire are already here -- and they wouldn't leave. And that's a nice boost for the CS reps of Carnegie Mellon (not that CMU needed it) and Pitt (which doesn't get the play it deserves).

Actually, that's pretty good news, too.

And, well, despite the fact that Google may be turning into the Microsoft of the 21st century, Google is still cool.

Link: http://www.post-gazette.com/pg/05350/623231.stm

Bonus: The Technology Collaborative announces local high tech job growth.

Link: The Technology Collaborative

Entrepreneurial Teams

My colleague Gordon Smith, who is a professor of corporate law at the University of Wisconsin and major domo of the corporate law blog called Conglomerate, posted an interesting item yesterday about growing research into entrepreneurial teams:

Understanding teams is a burgeoning area of entrepreneurship research, inspired by the recognition that the "heroic entrepreneur" is largely mythical. Practically speaking, all successful entrepreneurs work in teams. It seems to me that this fact holds some potential interest for legal scholars. The structure of an entrepreneurial team must be influenced by available legal forms. Consider this:

Henry Ford has an idea for a car. The Dodge brothers have a machine shop. They want to form a relationship. What are the options?

Notice that your answer to that question likely involves a list of legal relationships: partners; employer-employee; principal-independent contractor; shareholders; joint venturers; etc. We could abolish all of these forms and allow people to create relationships from scratch, but it wouldn't take long before patterns started to emerge. At some point, we would give names to the patterns, and voila! We would have legal forms again. As a result, I assume that law must have something interesting to say about the composition and structure of entrepreneurial teams. (Or not. Maybe law just reduces the transaction costs of contracting and doesn't affect the shape of teams at all.)

I wonder: does the menu of legal forms vary enough from one country to the next that we might think of some countries as being superior to others in their ability to encourage entrepreneurial team formation?

Re-read that passage again, but do two things when you do: First, don't limit the menu of relationships to "legal forms," since legal forms are just reified species of social patterns, and social patterns come in a lot of different flavors, legal and otherwise. Second, in Gordon's last question, substitute "region" for "country" :

"Does the menu of social patterns vary enough from one region to the next that we might think of some countries as being superior to others in their ability to encourage entrepreneurial team formation?"

Pittsburgh would very much like to know the answer to that question!

Brillobox

It took over two months for word of mouth about Bloomfield's Brillobox to reach me -- a middle-aged suburban academic -- and it finally did. Then the Post-Gazette nearly beat me to it with this profile. So, either I'm still out of the loop, or the Post-Gazette is getting hip. Or both.

But the P-G doesn't explain the name. I guessed that it's a Warhol reference. Looks like I'm right.

Giant Inflatable Art

The Sprout Fund and Pittsburgh Roars are trying to get the Giant Inflatable Art Project off the ground:

The Sprout Fund and Pittsburgh Roars are making a call to local and regional residents to design larger-than-life works of temporary, inflatable public art that embody the spirit and themes of Pittsburgh Roars.

Pittsburgh Roars is a nine-month coordinated marketing initiative to promote Pittsburgh's museums, theaters, sports teams, cultural destinations and activities in 2006 in conjunction with the Carnegie Museum of Art's upcoming "Fierce Friends: Artists and Animals, 1750 to 1900" exhibition. To draw attention to Pittsburgh Roars, these exciting inflatable art objects will be placed together and individually, inside and outdoors at many different locations throughout 2006.

Link (for more information): http://www.inflatableart.sproutfund.org

Pittsburgh Genius

Coming to Pittsburgh television screens: Pittsburgh Genius

Pittsburgh Genius is a new cable television production that profiles Pittsburgh's cutting-edge academic research. The show will introduce to the public Pittsburgh's most creative and insightful minds. In addition to fascinating interviews, viewers will also get behind-the-scenes laboratory tours and real-life demonstrations. Guests will also discuss the social, ethical, economic, and political implications of their research.

The show will be broadcast on Pittsburgh Community TV Channel 21. Check back: the show will also be available on this website as downloadable video and audio/video podcast, too!

March of the Penguins

Don't Dan Onorato and Bob O'Connor have more important things to do than invest time in trying to placate a hockey team that adds nothing to the local economy?

Am I being unfair? Consider this, from the well-presented, unaffiliated "Slots for Mario" website:

Whether a hockey fan or not, it’s hard to argue the positive effects of having a professional hockey team in Pittsburgh. The Greater Pittsburgh Convention and Visitors Bureau estimates that the Pittsburgh Penguins generate over $71 million per year for the region in taxes, ticket sales, food, parking, hotel, and area businesses. But it’s not just about the local economy; it is also the civic impact and national status as a major city with major amenities. Without a new arena we risk the possibility of the Penguins not being able to compete in Pittsburgh. Considering all of the economic woes that the region has gone through in the last 30 years, we can ill afford to loose a major league sports franchise, especially when other bigger cities around the country are working so hard to get one.

Well, I can argue with it. Can you name a major city with major amenities that has no NHL franchise? I can. Seattle. San Francisco. Vancouver. [Vancouver has the Canucks. Thanks, Mallard.] Houston. How much luster and "national status" do NHL franchises give fading Rust Belt cities like Detroit and Buffalo? Is Cleveland less important that Pittsburgh because it has an NBA club but no NHL franchise?

Revenue boost? Ask the North Shore neighbors of PNC Park whether that ballpark -- with far more home dates per year than an NHL team ever plays -- has matched "regional economic impact" forecasts.

Hockey fans are passionate, there's no doubt about it, but hockey just isn't a major sport. And even if it were, no city with hopes for rebuilding its economy should pin its hopes on sports teams. That's borrowing against an uncertain future in order to hold on to memories of glory.

If the Penguins have a long-term future as a business, then the Penguins should be able to finance a new arena for themselves. Have them stay, but have them pay their own way. Not only is there no room for local public funding in this project, there should be no room in it for state public funding. Those are my tax dollars you're playing with Mario, and I want them back.

And don't get me started on linking the Pens to slots. Slots are a bad idea to begin with, but that train seems to have left the station. But state-sanctioned gambling and sports? Are you kidding?

Link: http://www.post-gazette.com/pg/05347/621499.stm ("Onorato: Penguins can still be saved; Says he, O'Connor working on a plan")

Link: http://www.post-gazette.com/pg/05345/620698.stm ("'Slim chance' Penguins will stay in Pittsburgh, Lemieux says; Owner cites lack of progress on new arena")

MetaBlogging

Over at The Front Weekly, David DeAngelo of 2 Political Junkies has a nice roundup of some of Pittsburgh's better-known blogs.

Mellon-choly Baby?

I can't pretend to have my finger on the pulse of Pittsburgh, but rumors have reached my ears that Mellon Bank is ready to deal.

This morning's piece in the New York Times does nothing to put that rumor to rest.

(By the way, I've heard the same thing about PNC. Five years from now, will there be a financial services industry in Pittsburgh?)

Let's Do Lunch (or Breakfast)!

I'm still collecting my thoughts about how the entrepreneurial high technology community in Pittsburgh can move forward, but here's one. We need what Thomas Schelling call focal points. Schelling's famous example came from New York City. When asked where they would expect to meet someone in New York without pre-arranging the place, Schelling's respondents pointed to Grand Center Terminal, the information booth, at noon. The information booth at Grand Central is a focal point.

In short: Focal points, or "Schelling points," are shared expectations that manifest themselves as places and things, helping distributed communities coordinate their efforts. In high tech and other business communities, can restaurants, of all things, be Schelling points? I think that they can.

Where does Pittsburgh's high tech community meet to eat?

If you want to chat over lunch or breakfast, what are the happening, must-use restaurants around Pittsburgh? Where can you wander in at meal time during any day of the week and expect to see high tech investors, lawyers, entrepreneurs, and high-level managers doing deals?

My guess -- and you can correct me in the comments -- is that this kind of "A-List" places-to-eat-at-and-be-seen is still waiting to happen.

Some nominees, to start us off:

Starbucks at the Omni William Penn
Coca Cafe, in Lawrenceville
Union Grill, on Craig Street in Oakland
McCormick & Schmick's in the SouthSide Works
There must be someplace in Sewickley. I don't know Sewickley.

Ineligible: Any private club. Even the new ones -- which are very nice -- signal "insiders only." The rest signal old money, old top-down Pittsburgh.

Is there a market opportunity here? For an entrepreneurial restauranteur, is there room to create the Pittsburgh equivalent of Buck's Restaurant or the Il Fornaio in Palo Alto's Garden Court Hotel?

Much Fanfare About Nothing

I know that it's beating a dead horse in this town to highlight the narcissism of the Social Register crowd, but I can't help quoting this nugget from the "Letter From Editor" that heralds the new "Fanfare: The Well-Lived Life" magazine. A copy arrived in my mailbox recently:

"We hope you enjoy Fanfare Magazine as much as we at Trib Total Media enjoyed producing it for you – our region’s true A-Listers."

That's it: I'm on the A-List! At long last. All this blogging finally got me somewhere.

(Memo to Fanfare and Trib Total Media -- hire a copyeditor.)

Link: http://www.fanfarethemagazine.com/

Pitt Start-Ups

Interesting report in today's Post-Gazette:

Pitt ranked sixth in the number of start-ups spawned by technologies developed by Pitt researchers in the fiscal year that ended in June, beating out such tech-heavy schools as the University of Minnesota and Cornell, the Association of University Technology Managers said yesterday.

This is very nice, but this is no time for anyone associated with the university to declare victory for the entrepreneurial spirit. It's merely a good start. Both Pitt and the region need to do better -- and to do better consistently, over a number of years. Consider the following comments by Carnegie Mellon faculty member Rob Lowe:

Carnegie Mellon University didn't do as well as its Oakland neighbor -- it received $225 million in research dollars, issued 21 licenses and crated four start-ups.

But to compare Pitt and CMU would be like comparing apples and oranges, Dr. Lowe said, because CMU only receives only half as much sponsored research funds.

For the city to emerge as a technology hub, both Pitt and CMU must continue to grow the number of licenses and start-ups spawned by its research, he added.

"Having seven or eight start-ups emerge from university research'' every year over several years "is when you can tell we're doing well as a city," Dr. Lowe said.

Link: http://www.post-gazette.com/pg/05340/617720.stm

Breakfast at Jo Jo's

NPR's Splendid Table broadcast this wonderful short feature recently on breakfast at Jo Jo's in the Strip.




Link: http://splendidtable.publicradio.org/whereweeat/stern_jojos.html

Transience and Innovation

From yesterday's NY Times, a report of a study that concludes that Silicon Valley tech professionals really do change jobs more frequently than professionals in other regions, or in other fields. The question -- still unanswered -- is whether that phenomenon is related to vitality of the Valley's tech sector:

After all, the argument that Silicon Valley's job hopping fosters innovation contradicts economists' common assumptions. "It didn't feel right to me," James B. Rebitzer, an economist at Case Western Reserve University, said in an interview.

When employees jump from company to company, they take their knowledge with them. "The innovation from one firm will tend to bleed over into other firms," Professor Rebitzer explained. For a given company, "it's hard to capture the returns on your innovation," he went on. "From an economics perspective, that should hamper innovation."

He found a possible answer to the puzzle in the work of two management scholars, Carliss Y. Baldwin and Kim B. Clark. In their book "Design Rules: The Power of Modularity" (MIT Press, 2000), they argued that when there is a lot of technological uncertainty, the fastest way to find the best solution is to permit lots of independent experiments. That requires modular designs rather than tightly integrated systems.

"By having a lot of modular experimenters, you can take the best, which will be a lot better than the average," Professor Rebitzer said. Employee mobility may encourage productive innovation, as people quickly move to whichever company comes up with the best new technology.

Link: Virginia Postrel, "In Silicon Valley, Job-Hopping Contributes to Innovation"

Link: The Rebitzer (et al.) paper