A Supply Side Problem

 

It’s been a while since I’ve vented my spleen over economic development events in Pittsburgh.  Things are definitely on the right track with lots of good news coming from the autonomous vehicle sector, artificial intelligence startups, various robotics enterprises, and not just health care but biotech and medical related startups.  And there’s a new optimism coming from the locals as evidenced by positive predictions not only from the chamber-of-commerce types but also business executives at the major corporations as well as the startup crowd.

What’s not to like?  Well it seems, as we used to say in a previous software company employer of mine, all is not smurfy in our smurfy world.

A report caught my eye recently that should cause concern among the crowd crowing about Pittsburgh’s new “tech hub” status.  The software company Zoom, which announced back in May that they were establishing a large development office in Pittsburgh, last month pulled back on that.  They noted that their Phoenix office, announced at the same time as Pittsburgh, was further ahead in hiring software developers and would take priority over Pittsburgh.  Huh?

In case anyone hadn’t noticed, metropolitan Phoenix is now literally twice the size of metro Pittsburgh, so undoubtedly there is a larger talent pool to draw from.  But who thinks of Phoenix as a tech hub when, huff and puff, Pittsburgh has all these software geeks being pumped out by our vaunted CMU?  The problem seems to be the only place pumping out software geeks IS Carnegie Mellon.  Zoom specifically mentioned Arizona State University as a source of developer talent.  OK, ASU is a major State university.  I’ve visited their campus in Tempe myself and it’s, well, big.  And I’m sure it pumps out a lot of software talent.  And in today’s high-tech economy there’s not time available to fiddle fart around searching for potential employees.  Human resource people are just like us: they’re going to follow the easiest path. And it seems Pittsburgh is not providing that pathway.

Thank goodness for CMU in this regard.  But I must ask, what about the, oh, two dozen or so higher education institutions in the greater Pittsburgh area alone, not to mention another dozen or so in the Tri-State?  What are they producing?  Obviously not what’s needed.  Here I’m calling out my own beloved alma mater, the University of Pittsburgh.  While Pitt is pulling its weight in the fields of medicine and bio-tech [at least it seems such although frankly I’m not sure it’s in the same league as Harvard, Emory, UCSD, or Stanford; yet] Pitt seems glaringly deficient in helping to satisfy demand for software engineers.

Let’s note that not everyone associated with software companies has a degree in computer science.  Software companies hire electrical engineers, mathematicians, mechanical engineers and others with STEM degrees as well as computer science majors.  While Pitt has only established a credible comp-sci program within the last decade, I believe it has a long history of engineering graduates, or at least I believe such.  The expression “if you’re not part of the solution you’re part of the problem” applies here.  Is Pitt, and many of its compatriot institutions in the area, putting out too many social science majors in an economy looking to hire STEM grads?

And what about CCAC?  Not everyone in a software company needs be a math PhD from Stanford.  Community colleges have proven they can train competent software programmers to the degree needed by firms such as Zoom.  Given the size of CCAC there should be a strong pipeline of those grads coming out.

Yup, the time for celebration has not yet arrived with regards to Pittsburgh’s shiny new economic future.  Competition from Pittsburgh’s cohort cities is tough and getting tougher; not to mention competition from locales worldwide.  Pittsburgh’s has always built its economic success on the foundation of more and better knowledge.  Its educational institutions need to and can do more.  Just sayin’.

Leading Indicators?

Well, well, well, downtown Pittsburgh is hitting the big [Texas] time with the announcement that Del Frisco's Double Eagle Steakhouse will be opening a location in downtown Pittsburgh in 2019.

Del Frisco's original location in Dallas is THE restaurant of choice for the oil and gas crowd.  Think gold Rolexes and black Escalades.

Could this be a nod to recent price increases in oil and natural gas, and thus the revival of the Marcellus region?  Can a $100 per steak restaurant chain be a leading indicator?

Along those lines I noted that Geekwire.com reported last Friday, in fact before any other media outlet did such, that Facebook was establishing artificial intelligence development hubs in Seattle and Pittsburgh.  Over the weekend there's been more reporting in the local Pittsburgh media as well as nationally based tech pubs and even the New York "Times".  Interesting to note that many of the pieces focus on how higher education institutions like CMU are being 'brain-drained' when academics can as much as triple their salaries at these corporate led AI efforts.

Well as long as this new push to establish technology hubs includes Pittsburgh on the locational map - and it would seem that is happening - what's the worry?  One of the most perplexing questions regarding Pittsburgh's economy over the last 20 years has been that salary levels are consistently lower that its peer cities, even as Pittsburgh expands jobs in high tech, finance and medicine. I for one wondered when we were going to catch up and stop the regional brain-drain that took our best and most creative off to coastal cities and places such as Denver and Austin?

Maybe this is a leading indicator that is the start of competition for Pittsburgh's talent that will ultimately, finally lift the local salary scale.  Here's hoping for more good leading indicators.

Pittsburgh Makes Me Want to Live

There’s simply too much – well, there’s never TOO much – good news in Pittsburgh’s economic and community scene these days.  There’s always much more to accomplish but the recent news of growing companies and big money funded start-ups and a healthy real estate sector and the seemingly endless creativity in the restaurant and bar scene that changes almost daily, it seems Pittsburgh has hit its stride on a path to sustainable growth.  And it seems to be a growth that will benefit all residents in the metro and Tri-State area.  After all, even though it’s a platitude it’s still true: a rising tide floats all ships.

I’ve been around through a lot of the bad economic times for western Pennsylvania – and the northern Appalachian region in general – and I always knew what a wonderful place it was and is.  This new energy and optimism and excitement makes me, well, want to live forever [or at least a very, very, very long time] simply to see how much greater a city and region greater Pittsburgh will become.  I trust many others feel the same.

Happy holidays to all.

Back to Everyday Reality

Now that Anthony Bourdain has done his usual hatchet job, or insightful tour depending on your perspective, of Pittsburgh and our dining scene, let’s take a step back from the always fraught and fleeting waters of celebrity and return to the topic that originally spurred me years back to start blogging about Pittsburgh: the need for more jobs and higher incomes in this great city.

In the midst of Pittsburgh’s frenzy over “Parts Unknown”, a second frenzy was afoot both in the Burgh and across the country: Amazon’s HQ2 competition.  I believe HQ2 is simply one of the world’s wealthiest corporations looking to find out what government body will pay them the most amount of money.  Period.  This is not even a “pay money in exchange for jobs” scheme.  If a company is growing profitably, the jobs are a foregone conclusion – no one needs to chip in.  In addition, the location of those jobs will develop organically from what makes the most sense for the organization.  No, I believe our reportedly civic-minded CEO Mr. Bezos [recall it was he who “saved” the Washington “Post” by purchasing it] is rubbing his hands with anticipation to find out which governments [State, local] will pay how much to Amazon in order to “win” this competition.

And that disgusts me.

Therefore, at the risk of being considered a false prophet when I highlight continued growth in the Pittsburgh economy, or not sufficiently chauvinistic to champion an economic PR win for the City, let me say I hope Pittsburgh [and any other city one cares about] is not selected for HQ2.  My bets are on two cities that seem to have most of what Amazon is seeking: Atlanta and Dallas.   They are large even by international standards and thus have a workforce of sufficient size that 50,000 jobs would only produce a minor blip in employment statistics.  Both have true international airports with connections to all six inhabited continents.  And while Atlanta has a more developed mass transit system, Dallas [and the State of Texas] has the deep pockets to come up with many hundreds of millions if not a billion dollars in corporate welfare [or extortion].

What I hope for is an expansion of Amazon’s current Pittsburgh offices.  A thousand?  Two thousand?  Even five thousand highly paid, highly technical Amazon employees in Pittsburgh would be a boon to the City.  In my humble opinion, fifty thousand of those [too often entitled, elitist and gentrifying] techies would be a burden, especially in a metro area of Pittsburgh’s modest size.

Finally getting back to Mr. Bourdain, let us talk TV programming and what he sells.  Pittsburgh’s newfound sheen is merely Pittsburgh catching up to other well-regarded American cities.  There’s nothing new to report here.  It’s being done all over the country from Providence to Salt Lake, Milwaukee to Nashville.  “Parts Unknown” producers need to come up with some sort of “hook” to keep the show from sounding like a travelogue puff piece.  The best travel writing does that; think Paul Theroux as the curmudgeonly observer.  So yes, there is a true culinary renaissance in Pittsburgh exhibited by some generally acknowledged groundbreaking restaurants.  But heck: go to San Francisco and New York and Miami for REAL glitz and glamour.   No friends, Mr. Bourdain had to find something different about Pittsburgh that would keep him and his show in viewers’ minds until the next episode.  So wrestling and grunge bands and old steel mills as backdrops filled the bill. Are the decaying neighborhoods and the people left behind in a new economy a bit of lazy journalism on CNN’s part?  Well it’s not journalism; it’s an entertainment show.

One other thing Pittsburghers should come to grips with is the City’s history.  That history is as heavily industrial as it gets – maybe as it ever will get. It was dirty, sooty and smelly as well as dangerous and life threatening or at least life-shortening at times. It resulted in areas of the City that still have little to no charm. New and clean and pretty will always beat dirty and smelly and nasty.  Pittsburgh will never be the California coast or the picturesque parts of the Deep South. So don’t expect every report on the City to be a glowingly enticing travel piece.  It can’t be.

All of this comes with the price of fame, Pittsburgh.  Get used to it.

Some Hard Truths

President Trump pulled out of the Paris Climate Accord and stated his intention to renegotiate the terms.  For anyone in business who has ever dealt with a tough negotiator, this approach should not surprise.

But as someone who literally happened to be within earshot of an office television at the moment he mentioned “Pittsburgh, not Paris” and then later on when he spoke of “Pittsburgh, Pennsylvania, Youngstown, Ohio and Detroit, Michigan” in the same context, I figured then and there some poo-poo was gonna hit someone’s fan.  Don’t get me wrong; this kerfuffle [only in Pittsburgh] over Pittsburgh being mentioned by the President who, for many, is making a colossal mistake in this Climate agreement pull-out is "mouse nuts" in the larger scheme of the world’s current issues.  But it has some relevance to how Pittsburgh perceives itself as well as how it’s perceived by the larger world.

I myself was not happy to have our burgeoning high tech hub described alongside Youngstown and Detroit [though full disclosure makes me admit there are many lovely parts of and fun activities in both those metro areas] as that typecasts Pittsburgh as one of the stereotypical dead and dying cities.  Well so be it.  Our President is from New York with all the prejudices that encompasses.

What I am dismayed with is the attitude, again, of Mayor Peduto who was “offended” that Pittsburgh was mentioned in the context of pulling out of the Climate agreement.  Or was it that the Left’s latest “evil one”, the anti-Christ to Peduto’s political party, simply uttered the term “Pittsburgh” from his lips?  Your call.

Here’s the thing: Peduto needs to admit to and then face up to the hard truth – as our friends in AA would have him do – that the popular perception of Pittsburgh as an economic backwater compared to more successful cities is, well, true.  Unemployment rate?  We have been consistently one percentage point higher than the national average during this anemic recovery period.  And let’s not talk about that rate compared with other second tier cities in our so-called “cohort group”.  We have an unemployment rate fully two-plus percentage point higher than cities like Charlotte, Columbus, and Nashville.   And don’t get me started about income levels.  It’s ALL ABOUT income, and Pittsburgh is a historical laggard when it comes to per capita income. What good is inexpensive housing when you don’t have income to afford a lifestyle you really want?

Lastly, while I’m on this rant, let’s talk about how the Pittsburgh region is still a net exporter of young and talented people to other parts of the country.  This is personal for me today.  Just this week my cousin’s daughter who was married last year to a great guy, both having jobs they enjoyed and a new house in Bellevue, announced they are moving to Atlanta for better jobs.  I lived in Atlanta and I know the god, bad and ugly and believe me there’s a lot of that.  But jobs?  Those it has in spades.  Something a young couple looking to make their mark on the world have a much harder time finding in metro Pittsburgh.

I realize Peduto isn’t the mayor of the metropolitan area.  But he’s the most visible spokesperson.  Maybe when he admits Pittsburgh still suffers from a century long economic malaise that shows little signs of going away will we finally see some concrete [tax cuts? more economic incentives for relocating companies?] actions to help stimulate the local economy.

Ending this screed on a positive note, I see that Milllcraft Investments has decided that the downtown Pittsburgh market is ripe again for condo development and is returning to a plan that puts condominiums on the former Saks Fifth Avenue site on Smithfield Street.  Millcraft believes there is demand for owner-occupied apartments as opposed to rental units.  This is great news for downtown.  Homeowners, even high rise homeowners, bring a level of social and economic stability to an area that can only translate into even more development. 

Kudos and Cranks

Kudos for the planned new Oaklander Hotel on the Pittsburgh Athletic Association property. Being managed under the Marriott Autograph Collection marque is a real coup for the neighborhood.  The architecture is pleasing and the brand is sufficiently high end to complement the development progress in the gem that is Pittsburgh’s university district.

Cranks on Mayor Bill Peduto’s smear campaign on Uber.  First he accuses Uber of being the reason Pittsburgh did not win the Smart Cities Challenge competition.  [Full disclosure: a friend of mine works for a global engineering construction firm that has been hired to assist Columbus with their winning projects and he tells me Columbus’ approach was more in line with what the feds wanted for this initiative.]  Then he launches a public relations campaign accusing Uber of not using its resources to benefit more Pittsburghers.  Huh?  Seems to me Uber is providing a lot of benefit to Pittsburgh and the region by locating a major research effort in the City and providing hundreds of jobs that may grow into the thousands.  And high paying jobs at that.  Being blunt, let’s face facts:  beggars can’t be choosers.  In my DNA I know, and in my bones I feel Pittsburgh is truly one of the most special places on the global map.  However, it’s certainly not a hot spot for economic success by most current definitions.  Companies like Uber are the way to make up for a period of economic stagnation tracing back to WWII.

Kudos to Ford Motor Company and Argo AI for bringing $1B in investment “to Pittsburgh”.  I qualified that statement as I will wait to see how many jobs are actually created in Pittsburgh given Ford’s plans to also spread research across Detroit and the Bay Area. Still it’s a nice public relations win for us.

Cranks again on Peduto’s Administration for somehow screwing up the Penn Plaza redevelopment.  Now there are lawsuits and counter lawsuits.  WTF?  OK, I know I will be lambasted for saying this but I’ve lived in gentrifying cities all my life – from Boston in the 70s to a New York back from bankruptcy’s brink in the 80s to the Buckhead neighborhood of Atlanta when its total metro area was [believe this or not] still smaller than Pittsburgh’s.  Gentrification happens.  You cannot stop it if a city is to grow and prosper.  Stopping development is not the way to make impoverished citizens’ lives better nor encourage the arrival of new citizens who can create wealth for a larger community. Pandering to the overly progressive crowd may score political points for a politician who is seeking future offices but it has never been shown to make citizens lives better.  I would hate Pittsburgh to become another… Caracas.

Kudos to Angelique Bamberg and Jason Roth of the Pittsburgh “City Paper” for their always well-reasoned and well-explained restaurant reviews.  Particular props for a recent review that complimented a restaurant’s restrained use of the “industrial look” in their fixtures.  Bamberg and Roth noted that it may be time Pittsburgh broke out of its adulation of its industrial past and went for interior architecture that provides more light and air. Bravo!  Less brick and more glass please, interiors and exteriors!

Kudos to Pitt, CMU and UPMC for their April 18^th conference, The Next Big [Data] Thing.  Let’s finally get some momentum on Pittsburgh putting together the obvious pieces of high tech know-how, software engineering, medical and bio-engineering expertise, and a good quality of life environment to start a world class, world ranked, world beating digital health industry.  The Pittsburgh Health Data Alliance is thinking the right way when UPMC’s Program Director notes that Pittsburgh has all the components present to become as dominant in digital health as coastal university centers.  Bravo!  Let’s get competitive here, economically speaking.

Lastly, I have to quote HM Queen Elizabeth who famously referred to a bad year in the Royal Family’s life as her “annus horribilis”.  Well over the last few months, Pittsburgh has suffered the same with the deaths of Thomas Starzl, Arnold Palmer, Dan Rooney and Henry Hillman.  Great cities always find new blood to carry on the vision and work of their best leaders.  Let’s support those who can fill the shoes of those Steel City heroes.

Good News x 2

There’s more evidence Pittsburgh is firmly established as a “high tech” locale.  This past week, two Pittsburgh start-ups were purchased by publicly traded “new economy” behemoths.  Thar Pharmaceuticals was purchased by privately held pharmaceutical company Grunenthal GmbH.  Headquartered in Aachen, Germany, Grunenthal has operations in Europe, Australia and Latin America, and reports 2015 revenues of approximately US$1.3 billion.  That news was followed by Pittsburgh-based startup FacioMetrics being purchased by Menlo Park, CA based Facebook which needs little introduction.

The acquisition of innovative startups by larger, more established and better capitalized companies is one of the ways technology progresses. Acquisition of the region’s creative startups by large, established companies is one of the ways that Pittsburgh’s high tech community progresses, growing larger and establishing its bona fides in the global economy.  Here’s hoping that both acquisitions result in the establishment of local Pittsburgh offices for Grunenthal and Facebook.  Equally as important, let’s hope an additional outcome of these purchases will provide Thar Pharmaceutical’s and FacioMetrics’ founding entrepreneurs with new capital to pursue future ideas and dreams here in western Pennsylvania.