Removing Barriers: Entrepreneurship and Innovation in Pittsburgh

I've been blogging here for more than seven years, on and off.  By design and by accident, certain themes keep popping up.  Fancy cupcakes, for example, as metaphors for renewal. 

This post will return to a related but different theme, and I'll try to avoid distracting pastry-based analogies. 

The topic:  What Pittsburgh Wants, What Pittsburgh Needs, and How to Get the Region Moving in Both Directions.

Pittsburgh Wants lots of things.  Another Super Bowl.  Another Stanley Cup.  A baseball team that can win on the road and finish above .500 for a season.  Pittsburgh wants to remember the great old days.  The first Renaissance.  Maz.  Franco.  Pops.  Mario.  The second Renaissance.  Increasingly, Pittsburgh wants the things that the rest of the world wants:  More money.  More jobs.  Decent public transit.  Clean air.  Clean water.  An end to self-regarding political bickering.

The "classic" Pittsburgh way to address its Wants is to Divide the Pie.  "Classic" Pittsburgh thinking, something that everyone can see in action at just about every level of the region's politics, culture, society, and economy, is "Zero Sum" Pittsburgh.  Making me or mine better or bigger means taking something away from you.  The best and most stylish way to present issues using Zero Sum thinking is to make the genuine case for "tradeoffs."  In a society of limited resources, we can't have everything, so we have to make choices.  The worst and most brutal way to present issues using Zero Sum thinking is to argue that we've never done things that way before, and doing things differently would mean no longer doing things the way that they've always been done -- which usually means:  the way that I like, or the way that makes money for me, or the way that makes me important, or some combination of these.  There are lots of ways to use Zero Sum thinking that lie between these two poles, and in public debates about Pittsburgh today, we see many of those other Zero Sum methods in action.

What I call "classic" Pittsburgh thinking dates, I am estimating, from roughly 50 years ago, and it continues to operate up to and through the present -- though in a minute I'll change directions.  It dates more or less from the era when the region's population started to decline (late 1950s, early 1960s), and accelerated in the 1980s when the region's psyche caught up to (and caught on to, necessarily) its ongoing and suddenly traumatic economic decline.  Zero Sum thinking relates to real economic and social conditions, and when Pittsburgh's era of abundance started to disappear around 1960 (to pick an arbitrary date from the right era), the conditions were ripe for Zero Sum thinking to creep in.  When the population as a whole realized that the era of abundance was truly over -- in the early and mid- 1980s -- Zero Sum thinking kicked in across the board.

Now for the direction change.  It's a change toward "new" Pittsburgh thinking.  "New" Pittsburgh thinking is not about Pittsburgh's Wants.  It is about Pittsburgh's Needs.  Pittsburgh Needs neighborhood revitalization.  Improved public/private coordination.  A diversified economy of small and growing firms.  Better opportunities and outcomes for low-income communities.  Some of the same things that it wants:  a healthy environment, a sensible and responsible public sector, a winning baseball team.  The "new" Pittsburgh way to address its Needs is to Grow the Pie.  This way of thinking is also in evidence in Pittsburgh today, and it has been in evidence in increasing quantities over the last decade, more or less.  To the extent that Pittsburgh has experienced some kind of recent if incomplete "revitalization," that development is due to the idea of "Grow the Pie" Pittsburgh, not "Divide the Pie" or "Zero Sum" Pittsburgh.

Right now, Pittsburgh has yet to fully maximize its "Grow the Pie" potential, in part because many of its potential "Grow the Pie" institutions are hamstrung by legacies of "Zero Sum" thinking.  Here's a concrete example of what I mean, prompted in part by a lengthy round of conversations that I've had with innovators, investors, and their partners over this Spring, and prompted in part by the upcoming Pittsburgh roundtable as part of the Obama Administration's "Startup America: Removing Barriers" initiative.

There is almost universal agreement in the Pittsburgh region that Pittsburgh needs more innovation, more entrepreneurship, and more investment in start-up companies with growth and income potential.  More basic R&D needs to move out of corporate and uninversity labs into commercial enterprises.  More of those enterprises need funding, and more of those funded enterprises need to stay in Pittsburgh and grow.  More enterprises in other parts of the US and the world need to relocate to Pittsburgh and grow here.  More, more, more is the shared mantra. 

"More," however, isn't enough.  I'll break down what that means into three categories of "more," to illustrate how "Zero Sum" competes with "Divide the Pie" even in the entrepreneurship/innovation space.  If Pittsburgh is going to Break Down Barriers, these are the Barriers to attack:

1.  More funding.  There is a belief in some quarters of the Pittsburgh innovation community that the chief problem that the region faces -- and perhaps the only problem -- is the amount of risk capital that is available here.  In some tellings, there is just not enough risk capital in Pittsburgh in general.  In other tellings, there is plenty of capital, but too much of it -- even in the angel and venture spaces -- is too conservative.  The kinds of risk plays that one sees in Palo Alto are rare in Pittsburgh.  Investors in Palo Alto are willing to take flyers on deals that their gut tells them are at least potentially viable; in Pittsburgh, even the smallest deals are vetted ... and vetted ... and vetted ... by incubators and counselors and university offices, long before investors are brought to the table.  The result is that Pittsburgh innovators and entrepreneurs learn to be more conservative than their West (and East) Coast counterparts and competitors.  Descriptively, I don't think that anyone wants to see less investment capital in Pittsburgh.  The barrier in the "more funding" space is a Zero Sum or Divide the Pie barrier.  I hear a spin in the innovation space that this conservatism is good for Pittsburgh:  We have limited financial resources in the region, so it's important not to get too excited about anything and only pursue the plays that are highly likely to succeed.  We have a low failure rate in the start-up space, and that's important, and good, because we have to conserve the resources that we have.  (Zero Sum thinking tends to be circular thinking.)  Grow the Pie thinking, by contrast, argues that Pittsburgh needs to import more capital that operates at the edges of the risk spectrum.  More risky plays fail at great rates, but other things being equal, when they succeed, they succeed in big ways, too.  If Pittsburgh is ever going to become more than a pleasant, somewhat revived region, it needs big wins as well as a lot of small wins. 

My own take:  Funding is part of the problem, but more funding and more risk capital are not the only answers.  The Zero Sum barrier operates in other parts of the innovation economy.

2.  More talent.  The innovation space needs innovators.  In (Richard) Floridian terms, "creatives," and young creatives especially.  But the innovation space needs innovators across age, gender, race, national origin, and technical and cultural ranges.  Engineers and artists; programmers and composers (of course, these days composers may *be* programmers!).  Entrepreneurs (who are creative) *and* inventors; business leaders and community development visionaries; VPs and managers as well as CEOs.  It's a big pool of need.  The Floridian narrative argues that places like Pittsburgh need to find these people and bring them or keep them in place.  Build public amenities to attract them.  The people will come; resources and development will follow.  (Florida isn't making a new case; remember that the Civic Arena in Pittsburgh was built as an opera house, not a hockey arena; the point was to offer cultural amenities to the cultural elite of the early 1960s.)  The good news for Pittsburgh is that Florida may be wrong.  Or, the original, pure version of Florida may be wrong.  "Creatives" don't rebuild economies; instead, economies get rebuilt on the backs of talent.  And Pittsburgh, as many people know, both here and beyond, is a great producer and hoarder of talent.  A ton of college students graduate in Pittsburgh every year; thousands of them stay in the region.  A modest but growing and visible number of 20- and 30-somethings are moving into Pittsburgh, taking up the cause of Lawrenceville, the Strip, Greenfield, and the South Side, among other neighborhoods.  (Why?  Cheap housing and 21st century "authenticity." Translation:  this isn't New York or LA, where the only thing that counts is money and status.)  Where talent clusters, opportunity follows.  Courtesy of Jim Russell, read about Revere Data, with HQ in San Francisco, which moved to Youngstown and is growing, courtesy of the talent pool there.  If Pittsburgh is getting recognized as a bigger and better pool of talent, where, then, is the barrier?  Lurking Zero Sum thinking infects this space:  As I noted here, the "you're not from here" mentality keeps that talent from fully participating in local economies and culture.  In my own domain, legal education, the existing legal profession in the region is delighted to welcome new law graduates who are trained to think entrepreneurially -- so long as those new grads go to work as junior lawyers in existing firms, supporting the lead of the current legal players.  Let us say that there is a range of opinion about the wisdom of populating the local legal profession with a tier of new grads who not only think entrepreneurially, but are trained to act entrepreneurially -- that is, competitively.  There are plenty of lawyers in Pittsburgh who welcome peers as competitors, but there are plenty who are skeptical.  Competition in the talent pool is a Grow the Pie challenge.

My own take:  Funding and talent are great, but more funding and more talent aren't enough.  There is one more key Zero Sum barrier.

3.  More grease and glue.  Dynamic economies have money and have talent, but they also have a host of institutions that put those things together as firms, neighborhoods, communities (universities, not-for-profits, etc. etc. etc.).  Talented people need to find the money and other resources to support their work.  Investors need to be steered to the opportunities represented by talent.  There needs to be an accessible community of people and organizations with information, expertise, and wisdom and who use all of those things for public as well as private benefit, at reasonable cost and efficiency.  These are the region's social infrastructure.  They are the grease of the innovation economy, because they move money and people around.  And they are its glue, because they help give new firms and other entities institutional form and durability.  Even a city of modest size, like Pittsburgh, has a thick tier of institutions that do this work, or at least appear to do it.  Technology transfer offices at the universities.  Foundations.  Government offices that support small businesses.  Banks.  Incubators, accelerators, and early-stage investors for small companies.  Networking organizations.  Industry groups.  The ACCD and its affiliated acronymic partners.   Individual investors, serial entrepreneurs, and so-called "scary" people.  The Zero Sum barrier here is simple and clear.  Far too many of these organizations and individuals -- though far from all of them -- operate in a Divide the Pie mode.  "This is way things are done; why should we do things differently" is either explicitly or implicitly part of their program.  Or, "look around; the system works really well; Pittsburgh's current condition is evidence of that."  That message is, at times, explicitly offered in my conversations around town.  (It is also related to my point in "Talent" above that newcomers to Pittsburgh often feel excluded by Pittsburgh's traditional cultural and business patterns.)   I want to be clear that in no way do I think that these people or these messages are harmful; nor do I think that Pittsburgh is not a better place today than it was a decade ago, and in no small part because of the grease and glue that the region has relied on during that time.  Pittsburgh has improved.  Substantially.  But Grow the Pie thinking today sees a Pittsburgh glass that is half full, and it wonders who is going to hold the pitcher that will fill it to the top.  (I made it almost to the end of this post without mangling metaphors!)  With new "grease and glue," and/or existing "grease and glue" that embraces novel (and potentially un-Pittsburgh like) ways of building and supporting new ventures, imagine (as the PRA might say) what is possible with the other resources that Pittsburgh can bring to bear. This is related to but conceptually distinct from the money and the talent that are challenges 1 and 2.  Connectivity is a Grow the Pie challenge in and of itself.

My own take:  "Grease and glue" is a vital part of Pittsburgh's Needs, both in the sense of what Pittsburgh Needs and how to provide what Pittsburgh Needs, and it is in many respects the most difficult of the three challenges that I've described.  In truth, however, all three challenges need to be attacked simultaneously:  Risk capital won't come to Pittsburgh and stay here unless investors are confident that risk-oriented opportunities are present.  That confidence depends on the presence and success of a deep pool of talented people.  The presence and success of money and talent require an effective -- and visionary -- social infrastructure.

"New" Pittsburgh thinking -- "Grow the Pie" thinking -- is no panacea, either in the innovation space or in the region as a whole.  We (still) live in a world of limited resources, and tradeoffs really do exist and need to be made.  So some of the point that I'm making is about maintaining a certain level of fundamental optimism, even in the face of some really, really bleak stuff.  (I like to think, sometimes, that this reflects my inner Californian.)  Even when we apply "Divide the Pie" thinking, we don't need to accept the size of the pie; there is the City of Pittsburgh pie, there is the Western PA pie, there is the "Power of 32" pie, and there are pies of successively larger scales, all the way up to the intergalactic pie.  Choose your pie when you can; don't always accept the pie that's handed to you!