Sitting at a Fortuitous Crossroads

Some recent press has been given to a consequence of the “new urbanism” trend that we in the US are experiencing.  Whether because of Millennials’ delayed household formation, the increasing numbers of childless Baby Boomers, or simply a cultural shift from a suburban to an urban lifestyle, city living is way cool with even small and mid-sized American cities becoming destinations.  However, as resources are poured into destination cities from DC to San Francisco, Portland to Salt Lake, and Grand Rapids to Chattanooga, a new issue has cropped up: displacement of poorer, largely minority residents.

Two recent pieces caught my eye, both based on a study by Eric Tang of the University of Texas and the Institute of Urban Policy and Research Analysis.  To simplify his study’s model here, Mr. Tang looked at large cities and divided them into “progressive” and “conservative” based on historical voting patterns.  He then looked at the percentage of minority populations in each city.  While we might expect “progressive” cities to be more racially tolerant and thus have growing minority populations, Tang found that for the most economically successful of these cities, the minority population was falling as a percentage of the overall population.  And in one, Austin, which is regarded as this decade’s gold standard for urban success, the African American population is decreasing at an absolute rate.

So of course that got me thinking about Pittsburgh.

Pittsburgh is not yet in the same economic powerhouse league with San Francisco or Austin.  Our job creation quite simply is anemic at best.  We’re still building our momentum.  But momentum is building and now is as good a time as any to think about the consequences of success.  The new urbanism found in East Liberty and Lawrenceville, which is spreading to Garfield and Bloomfield, will eventually make its way to the Hill District and Homewood.  What we want for all these neighborhoods is a social, economic and racial mix.  That’s the ideal and it will never be perfect.  The percentages and type of mix are not as important as the freedom to have such.

Pittsburgh stands at an exciting crossroads where its position as an economic powerhouse and destination city is being re-established for this new millennium.  We need, indeed must make it a goal to raise the living standards of all the City’s and region’s citizens.  Those people who have stuck by Pittsburgh and western PA through the bad times and the less bad times deserve to benefit from renewed growth.  We simply cannot lazily rely on or hope that in-migrants with more desirable demographics replace current residents in our region, City and neighborhoods.

But what’s the prescription?  I’ll start with this one: education.  Better educational opportunity is the standard answer but it is, proven time and again, the absolute best, most efficient and effective solution.  Programs like the Pittsburgh Promise are prime examples of what’s needed.  Institutions like CCAC as well as outlying counties’ community colleges should continue developing programs targeting local workforce needs.  And our four year colleges and universities need to further encourage “entrepreneurial DNA” within their student bodies while taking full responsibility to provide the infrastructure that allows and encourages that talent to stay in the region.  New employment grows from these seeds and outside companies migrate into places where the workforce is trained, talented and smart.

A Good Move at PIT

It is widely reported this week that Pittsburgh International Airport – PIT in the language of airline personnel and frequent fliers – experienced a 1.5% monthly increase in passenger traffic compared to the same month a year ago.  More importantly, this is the fifth straight month of passenger increases.  Travel media names from Ben Mutzabaugh in the “USA Today” to Michael Boyd the oft quoted airline analyst are calling the bottom for PIT’s traffic declines and we can look forward to gradual growth for our once impregnable fortress hub now turned into an O&D, origination and destination, airport which means we must rely on growth in the local economy and its flying public.

I’ve often wondered why Pittsburgh, with a regional population over 2.5 million, generates relatively little airline traffic when metro areas half its size generate much more.  One example is Austin, TX with a metro area population slightly more than 1.5 million.  Yet their airport, which is not a hub for any airline, last month reached a monthly level of one million passengers.  PIT’s most recent month is reported at 657,000.  Can the difference be in tourist levels?  That has a bit to do with it considering Austin’s signature events such as SXSW and its ACL Music Festivals.  But I doubt that explains 50% higher numbers.

My theory on this is related to what I consider the best news out of this week’s announcements for PIT: Sun Air Express will be using PIT as a regional hub for service to small-market airports in Pennsylvania.  I believe a big part of the high passenger numbers in cities like Austin as well as traditional airline hubs such as Denver, Salt Lake City and even Dallas and Houston stems from their position as true transportation alternatives to driving.  Distances are greater as we travel west.  Populations simply become comfortable flying between business centers and then, by extension, geographically dispersed family and friends.  When Southwest Airlines started the concept of short, quick, inexpensive flights between cities in Texas, a transportation planner friend of mine pointed out that Texas suddenly had its own “Metrorail link” similar to the Boston-Washington corridor.  It was just one that took to the skies rather than the rails.

I believe there can be demand generated in sufficient numbers that Pennsylvanians [and maybe West Virginians and western Marylanders and some Ohioans] will use this sort of service for trips that would have meant car travel and all the problems that form of transport presents.  Will it take PIT to the million-passenger-a-month level?  Not by itself certainly.  But it’s part of the plan that will re-establish PIT as a larger, more important airline “hub”, even without status as a hub to a major carrier.  A good move.

This an’at

I have both said it and blogged it before and I will do it again here: Holly Brubach is a joy and a great resource for Pittsburgh.  Her proposal to turn the Granite Building into a true boutique hotel is very exciting.  She is the real thing and developing a one-of-a-kind hotel property exhibits the integrity that reflects the Pittsburgh’s narrative.  The news blog site NEXTpittsburgh.com, which itself is awesome, quotes a story of how a local business executive told her boutique hotels were for cool people and “cool people don’t visit Pittsburgh”.  Let’s have less of those like him and more of people like Holly.

This week Pittsburgh was named on the Huffington Post as one of the 40 Prettiest Cities in the world.  Who knows who throws these lists together but it was nice to be noted alongside Venice, Paris, Sydney, Rio and the other more usual cast of characters.

The latest employment numbers for metro Pittsburgh are, to me, perplexing.  So many statistical measures of the region’s economy are positive: businesses are opening, young people are coming into the city – or simply staying after graduation, and the real estate development activity is higher than it’s ever been.  So while unemployment is declining, there is still a relatively low labor participation rate in western PA coupled with anemic job creation.  7,400 new jobs were created in September 2014 but most local economists say that something from the high teens to 20,000 new jobs a month are needed for a labor pool of 1.2 million workers.  What’s up?  Taxes?  Heck, look at New York, New Jersey, Minneapolis or even across state at Philly.  High taxes don’t seem to hold them back.  Lifestyle?  Can’t use that excuse any longer especially when Pittsburgh keeps appearing on so many “hot lists”.  So what gives?  More to think about.

It Takes a While

A couple items in the news this week reminded me that Pittsburgh’s current growth spurt is still in its infancy.  As I recently remarked to a long term Pittsburgher, the current generation of residents has no concept of the paroxysm that was the collapse of the steel industry.  A testament to the region’s resilience is that while something less than 20% of jobs were eventually lost and for most western Pennsylvanians, a semblance of the good life was still lived.  Pittsburgh and the region are regaining strength, rebuilding their economy practically from scratch.  It’s as if it were newly settled, akin to cities on the West Coast after World War II.

                                  

This week, an online piece about one of the Silicon Valley’s titan companies mentioned that it started with a visit to the Stanford Research Institute [SRI] in 1959.  It then took another 10 years for that particular company to develop into an ongoing entity, and still more time to become a Fortune 500 name.  So my interest piqued, I looked at SRI’s beginnings and discovered it was founded in 1946; immediately following WWII.  That’s almost 70 years of work in the Bay Area.  And even Xerox’s Palo Alto Research Center [PARC], which among other things played a major role in Apple’s early development, was started in 1970.  Note that it’s only been in the last dozen years that UPMC’s Hillman Cancer Center has hit its stride and this year’s establishment of The Brain Institute is a comparative newborn.  How many years will it take both these centers to spin out not only important breakthroughs in their fields but the expected economic benefits?  Time obviously will tell.  Patience is called for.

Related to this is the issue of whether Pittsburgh’s nascent entrepreneurial spirit is growing and do we ultimately have what it takes to re-establish as a world technology center.  Of course we do, as does anywhere else on earth if given freedom to think.  But I do wonder how and when that special Petri dish of circumstances forms to ignite the creative geniuses.  We’ve all heard that Michael Dell started his computer company in his University of Texas dorm room.  But in that same period at UT, John Mackey was dreaming of the natural grocery store that became Whole Foods and his lesser known housemate on campus, Kip Tindell, started his business plan for what became The Container Store.  Billion dollar companies all.  Why did UT during that period, long before high tech start ups were spoken of colloquially everywhere, provide ground for those ideas and not Pitt or CMU?  I’m just asking.  Time to make up for lost time.

A Delicious Coincidence

The Bookmark bookstore in downtown Oakland, CA is a great little indie with new and used books that supports their public library.  A few months back I picked up a copy of “Cheesemonger – A Life on the Wedge” by Gordon Edgar.  It finally made it into my summer reading rotation this past week.  Edgar is a punker turned cheesemonger-of-the-highest-degree.  He notes that it was thought provoking how he went from someone who simply needed a job, and found one at San Francisco’s famed Rainbow Grocery Cooperative, to a speaker at the American Cheese Society’s annual conference.  Who knew there was a cheese conference?  Who knew there was a cheese society!

And then the next day, by coincidence [though metaphysics teaches us there are no coincidences; only synchronicities] the Pittsburgh “Post Gazette” featured a story on two Pittsburgh cheesemongers attending this year’s ACA Conference.  And interestingly, their description of their first conference echoes stories Edgar relayed about his early attendance: awe over the cheese knowledge gathered and being star struck by the culinary firepower.  Here’s the link to the P-G story.  http://www.post-gazette.com/life/food/2014/08/21/Local-cheesemongers-take-a-cheese-field-trip/stories/201408180112

What’s great about the P-G piece is that it was 20 years ago that San Franciscan Edgar attended his first cheese conference, returned to his grocery cooperative and raised the bar on the City’s food culture.  That’s now happening in Pittsburgh.  All things happen in their own time so Pittsburgh might be 20 years behind the City by the Bay when it comes to food appreciation, but by my observation, it’s catching up fast.  From what I see, read and eat in Pittsburgh, the food culture has practically exploded.  What took other more recognized foodie towns decades to develop, Pittsburgh has taken on in the space of about 5 years.  Goodie foodie for us.  The momentum is unstoppable and it all goes to making Pittsburgh, like any city, a more livable and enjoyable place.

Revving Up Pittsburgh

A piece in this week’s “Pittsburgh Business Times” TechFlash section detailed a roundtable meeting Mayor Peduto hosted to discuss accelerating Pittsburgh’s technology sector.  Giving emphasis to these types of issues is a step forward and keeps this particularly important issue at the forefront.  The new Mayor should be praised for this type of initiative.

I noted the items discussed and some of the suggested actions needed to address perceived failings Pittsburgh and its region’s resources.  As a not exhaustive summary, mentioned were: lack of non-stop air service to the West Coast, a generally poor transportation grid, assistance to startups in obtaining customers, an organized marketing effort touting Pittsburgh’s entrepreneurial scene, a defined process for networking startup businesses and local resources, and consideration as “desirable” businesses those other than “high tech”.

All of these ideas are important, especially taken as a whole.  I believe I’ve made this point before: that an ecosystem needs to develop where each aspect feeds on the others and that in turn accelerates the overall economic development.  Is this circular logic?  In a way, yes.  But how did “creation” begin?  With a Big Bang we are told.  But what initiated the “big bang”?  What was the ultimate void from which the universe exploded?  No one has still answered that one.  Well, city and regional [and national] socio-economic ecosystems are similarly created, especially in a knowledge based economy that doesn’t depend on natural resource availability [as a nascent Pittsburgh did when coal, iron ore and limestone came together to start a steel industry].

I agree with one of the roundtable participants who stated with appropriate faith and belief that Pittsburgh feels like it’s on the edge of another rebirth – something is about to explode are words close to what was said.  I agree.  You can feel a big bang about to happen.

However, allow me to add an item that I still believe is most important: money.  Or a more precise definition: the local availability of financial resources, since “money” sounds a bit snarky.  One roundtable participant commented that when a local startup gets to a certain level of growth, outside investors come in and “harvest the companies and take them away”.  Well, outside investors do that everywhere and all the time.  Pittsburgh is not alone in that respect.  The financing is concentrated in the Silicon Valley, Boston, Seattle and increasingly, New York.  So that will continue until Pittsburgh develops more of an angel investor, later stage investor, and venture capitalist sub-ecosystem, shall I call it.   And while that can be encouraged by the Mayor’s office, or local economic development agencies, it mainly comes from individuals who believe in a location [Pittsburgh] and will invest their success in the efforts of others.  Here’s hoping more of those for Pittsburgh.

Free The August Wilson Center

The ongoing saga of the bankruptcy sale of the August Wilson Center is an embarrassment to Pittsburgh and hearkens back to the bad old days of industrial city machine politics.  Except that the “machine” in this case is a quasi-government agency, the Urban Redevelopment Authority.  As Pittsburgh grows into an attractive investment location for private development, the value of the URA has diminished.  But the URA, instead of realizing that their admirable efforts in previous decades have helped make this possible, is instead using this particular case to block the Center’s recovery from initial missteps in a bid to preserve their political power.

As Dollar Bank has stated in its most recent court filing, a high rise tower of some sort was always contemplated as part of the overall development.  Early in my career life I was a banker on Wall Street, schooled in the logic of lending.  I can absolutely imagine Dollar Bank staff viewing their initial loan for the Center as an investment that would ultimately be taken out – that is, paid off – by proceeds from a more fully utilized development.  I suspect it was the faith Dollar Bank placed in the ultimate growth of the downtown market that led them to make this risky loan.

The URA has already “peed on its own shoes” as they in sales situations.  By making this overall process so difficult for Dollar Bank, I can say with confidence that no other credible financial institution will ever again enter into a lending situation where the URA is involved.  By reaching for a one-sided solution they have ensured their own demise.  Further, they are denying downtown Pittsburgh the chance for a new “luxury hotel” to be built.   Think of the possibilities. We know there is demand downtown for another 4 or 5-star hotel property given the success of The Fairmount Hotel.  Marriott’s Ritz Carlton brand as well as The Fairmount’s fellow Canadian chain The Four Seasons, have holes in their listing with no properties in Pittsburgh.  Either one of those or any number of others are a natural for that space.

But the worst indictment of the URA’s actions is the obvious abuse of public funds that are involved.  That’s taxpayers’ money they are playing with and Pittsburgh and Allegheny County taxpayers should be outraged given the many budget shortfalls still coming their way.  And as part of the URA’s plan, they want the Pittsburgh Foundation to chip in some millions of dollars; money that could be put to other uses not as attractive to private investors.  Sadly I believe there is not much to be done at this point other than let this soap opera play to the end.

Organic Growth

Anyone with an interest in economic development, whether in Pittsburgh or Palo Alto or Penang, should read this piece linked below.  I believe urban history has shown us that sustainable, long lasting economic prosperity is organic.  It’s created of a place and not transferred in from somewhere else.

http://www.bizjournals.com/austin/blog/at-the-watercooler/2014/07/hell-mess-with-texas-recruiting-expert-says-state.html

PIT to OAK direct!

No I am not talking about establishing non-stop airline service between Pittsburgh and Oakland, CA, although some in the Allegheny County Airport Authority would like to see that happen.  I am talking about connecting Pittsburgh’s Oakland neighborhood with Pittsburgh International Airport, via downtown, in one continuous “spine line” light rail extension.

Hey, it’s time to dream bigger these days.  Pittsburgh is finally coming into its fully realized renaissance self.  And the rest of the world is taking notice – taking notice with their moving feet and investments, more importantly.  If Pittsburgh is to grow and keep up with other economic centers in the US, even more so with world economic capitals, it needs a better transportation grid.  While highways are realities that will be part of any overall plan, I focus on a public transport extension here.  That piece of the solution will probably require a larger tax-payer commitment as well as the political leadership to create the momentum to build it.  So here’s my call-out to political leaders like Mayor Peduto or Allegheny County Executive Fitzgerald and all other mayors and State Legislators in southwestern PA locales: start to get serious about building a world class transportation structure for a region that has not had one; at least not since river transport for humans passed.

Popular will is building for funding a better transportation infrastructure.  This past week, the “Pittsburgh Business Times” featured comments from 82 regional business leaders giving their top priority for the region leading up to the year 2020.  Out of 82 comments, 33 noted “transportation” as their top priority and out of those, 10 specifically mentioned public transport between downtown and Oakland and/or the airport.  Transport was the single issue most often mentioned and the overall percentage was 40%.

And Pittsburgh is not alone.  A reading of business publications both national and regional show transportation infrastructure is an issue of greatest concern among economic leaders, along with job creation and educational opportunities.  Economic growth is usually a positive for most citizens, raising living standards and creating opportunities for self enrichment.  But growth comes with costs and responsibilities.  Cities in Texas, of which I have personal experience, are strangling themselves in traffic problems.  Traffic is consistently listed locally as the chief complaint by ordinary voters in this economic boom State.  Pittsburgh is growing again and even though it’s current traffic issues pale in comparison with say, Los Angeles, Boston, Atlanta or Washington, D.C., from what I read in Pittsburgh media, traffic is considered a major problem.  But let’s go beyond relieving traffic congestion.  Emerging world capitals from Shanghai to Lagos to Rio are building clean, efficient, fast transport modes between their airports – the gateways to the rest of the globe – and their city centers.  Pittsburgh needs to do the same between its doorway to the world and its downtown economic hub and then on to its creative hub in the Oakland neighborhood.

A Cracker and Some Sweets

Recent articles have noted what I think should have been obvious from the get-go regarding the proposed Shell Oil cracker natural gas cracker plant in Beaver County: that it will have a net additive effect to the region’s [the earth’s] air pollution.  C’mon folks, all you have to do is drive along Interstate 10 from Houston to New Orleans to get an idea of what fossil fuel processing facilities can do to the environment.  The good news, as stated by Shell spokespeople, is that we know a lot more about controlling pollution today than when many of “Chemical Alley’s” facilities were built.  And as a brand new greenfield plant, the opportunity for the best technology is there.  Metropolitan areas such as New York/New Jersey, Philadelphia, Los Angeles and Chicago – not to mention Houston and New Orleans, are all home to several oil and gas processing plants and their pollution levels are better than Pittsburgh’s according to recent reports.  Once the issue of particulate pollution generated in Pittsburgh’s neighboring Midwest power plants is solved, a new cracker facility should have a relatively small effect on regional air quality.

A “sweet” couple pieces about Pittsburgh’s emergence as a “creative capital” – to use that overused moniker – appeared recently in two different sources which I have linked here.  The “Austin Business Journal” featured a reporter who touted Pittsburgh’s growing appeal in relation to Austin’s reputed hipness.  Go here:  http://www.bizjournals.com/austin/blog/real-estate/2014/06/jans-must-reads-walkable-cities-heywood-hotel-and.html.

And in a related source piece, the “Pacific Standard” notes Pittsburgh’s rise among young creative types seeking a more affordable locale but one with “authenticity” along the lines of Brooklyn.  Go here: http://www.psmag.com/navigation/business-economics/talent-migration-work-creative-much-new-york-poor-pittsburgh-rich-82894/.

All of which makes sense to us – we’re so trend forward.

Those Who Cannot Remember the Past …

A current series of articles in the Pittsburgh “Post-Gazette” is highlighting issues around immigration to Pittsburgh in the new economy, and rightly so.  Immigration is one of this country’s seminal political issues and one that is central to the Pittsburgh region’s economic success.

But written between the lines of this and so many other pieces on Pittsburgh’s shortcomings is the subtext that, in fact, Pittsburgh’s situation is the result of some self-inflicted wounds and “the region should have known better”.  After all, look at how other regions have done it better, prima facie, their growth outstrips ours.  As usual in these pieces, there are quoted experts in the appropriate fields: everything from social sciences to economic development to corporate leadership and all of them have theories as to what Pittsburgh could have done better.

I have to question the ages and backgrounds of these people.  After reading the first two pieces in the “P-G” series I realized how old I am and how long ago was the time of Pittsburgh’s great economic upheaval – the complete death of the steel industry.  I suspect that many of the experts, especially those located in Pittsburgh, are too young to have lived through that era.  So despite the fact that I’m about to give a hint at my age, let me say I did and ….

Pittsburgh in 2014 is a modern miracle!  Detroit’s debacle in 2014 is nothing compared to the decimated economy that was Pittsburgh.  It was literally an economic collapse of “Great Depression” proportions.  I cannot exaggerate the shadow that was thrown over daily living; even the weather seemed grayer.  And yet, Pittsburgh survived.  And then it stabilized.  And now it is growing again.  The past is not prelude.  Great societies revive and renew and reinvent themselves.  Great people do as well.  As do great, truly great cities.  That’s happening in Pittsburgh now.  With acknowledgements to Santayana and exhortations from Gautama Buddha to enjoy the present moment. Peace out for now.

Finally, some sprouts from local seeds!

This week it was announced that HP Vertica, a software engineering division of Hewlett Packard, was opening a full fledged office in downtown Pittsburgh.  Previously the organization was working out of offices at Pitt.  Cited in the announcement as a reason for the standalone office by Colin Mahony, VP and general manager for HP Vertica, he notes: “We’ve found that you have to go where the talent is and we’ve had great, great partnerships with CMU and Pitt.”

That’s exactly the kind of talk we want to hear for organically growing Pittsburgh’s job market and overall future.  Enough of what I’ve heard from a couple local economists that Pittsburgh’s slowdown is related to the general slowdown in US economic growth.  Huh?  Be a leader, not a laggard.  Incite your own job growth.  It’s about time we hear of more organizations that credit Pittsburgh’s higher ed talent pool as a reason to locate here.  It’s nice when eds and meds create jobs within their enterprises.  But it’s better when jobs and wealth are created by the ecosystems eds and meds help spawn.  Good on this one!

continuing a thought ...

After too much delay, building on the previous post but moving onto the more esoteric consideration of promoting manufacturing job growth in the Pittsburgh region: government assisted jobs development and promotion.  Miller targets Pennsylvania’s high corporate tax rates as strangling job creation, especially in the competitive field of new facilities location.  And in that he makes a valid point.  But these days government assisted jobs creation largely involves government subsidies.  Texas has become the master at stealing away both facilities and headquarters offices with rich government subsidy programs.  Witness last week's announcement that Toyota North America will bring 4,000 jobs from California and Tennessee to Dallas - with the State of Texas contributing $40 million to that move.  That can be done because Texas runs a large surplus in its budgets.  Why more of a surplus than most other states and certainly more than Pennsylvania and other Northeast/Midwest states?  How about another 30,000ft view of the obvious: because the State of Texas provides less to social and education programs than most states.  Texas shifts the burden of financing these programs to other government entities such as local municipalities and school districts.  Texas residents pay no State income tax but very high real estate and sales taxes.  Corporate taxes in Texas are also lower than Pennsylvania’s.

And that’s where the government and societal philosophy comes in: do we tax at the job-holder or the job-creator level.  By shifting the burden of necessary social and educational needs to residents, especially owners of housing who tend to be older, states like Texas are taxing the users of social programs, dependent children [via their parents] and the elderly.  This frees up resources [tax money] for programs [corporate location subsidies] that benefits job creators in the form of businesses. In turn, these business entities provide jobs that attract young people in their 20s and 30s that, once established, then become essential to job creation and future growth via family formation and corporate expansion.  Subsidizing old retired people to comfortably afford their homes is not part of the Texas strategy.  Subsidizing entities like Apple and Samsung and Facebook, to name three recently subsidized firms in the Austin area, is a strategy and a successful one, for job creation at least.

So which way should Pittsburgh head?  I don’t believe growth for growth’s sake should be a goal.  A high growth rate provides bragging rights but not necessarily a high quality of life – in fact from my experience it’s quite opposite.  So it comes down to “philosophy” as well as simply working with what you’ve got.  Those beautiful green hills and valleys and rivers of western Pennsylvania need to inspire a new creativity and a new path of innovation and success.

Of Place and Time

In the Sunday April 6^th edition of the “Pittsburgh Post-Gazette”, Donald Miller penned an excellent piece pointing out the clouds on the horizon of Pittsburgh’s relative economic revival, pointing specifically to slowing job creation and continues population losses.  I was traveling in southern California when I read the piece from sunny and dry Orange County, California.  Having just flown in that morning to John Wayne Airport I had a 30,000ft perspective [sorry, pun intended] on Mr. Miller’s focus on manufacturing jobs as key to growth in western Pennsylvania employment numbers.

As our jet came over the San Gabriel Mountains and descended into the coastal plain that is Orange County [the “OC”] you can’t help but be struck by first, the willingness of California’s Transportation officials to throw up highways everywhere. And then second, the incredible number of one and two story flat roofed structures that cover the landscape for most of the flight path into the airport; literally miles and miles of warehouse and manufacturing facilities.  These are companies that provide everything from minimum wage jobs for unskilled, newly immigrated residents to well paying jobs in high tech related industries.

And these are precisely the types of jobs Mr. Miller is dreaming of for the Pittsburgh region.

Here’s a thought on Pittsburgh’s ouster from the modern manufacturing jobs contest: geography plays a large role in this.  Pittsburgh is certainly at the bottom of the list when it comes to adding any new manufacturing jobs so we can point to any one of a dozen [or 49 or 99, whatever size the list] other cities as alternative examples.  But to name the big job gainers in this most recent tepid national growth cycle, let’s note Houston, Dallas, Denver, Phoenix, and southern California as the shining stars.  They all share the gift and curse of having flat, easily developable land that can be quickly cleared and has little physical attractiveness that causes the locals to throw up preservation arguments.  Plus, as a part of that landscape, major highways can be built with equal ease.  Because of Pittsburgh’s geography, it will never be able to compete in that arena. 

Get used to it and get over it.  Modern manufacturing as implemented by the military industrial complex requires oodles of cheap, available land and government subsidized transportation, meaning, highway networks.  All of those resources are in scarce supply in Pennsylvania and the Pittsburgh region.

So what’s the answer?  One approach involves smaller companies that produce high value-added products.  Electronics and high tech instrument manufacturing would be two examples.  Something like All-Clad cookware, is another.  More of that please.  And here I’ll pull an example from another travel experience that speaks more to what Pittsburgh should emulate.  I’ve noted more than a couple times while on trains in Switzerland and Germany, the number of small towns and villages that have some sparkling clean industrial building integrated right into the town.  Often these facilities will have large multinational corporate names attached but just as often they are specialty manufacturers, maybe family owned, that provide the economic basis for a prosperous community.  I can see those tucked into the hills and valleys that form western PA’s landscape.

Donald Miller’s piece also notes the need for State involvement to promote manufacturing job gains.  His assertion, one that I agree with, touches on an existential debate over the role and impact of government as it reflects the public’s collective will.  I will save that discussion for a subsequent post.

Under Utilized Resources

New Pittsburgh Mayor Bill Peduto recently noted that the Hill District was a prime focus for development under his administration.  Excellent!  The Hill District and north Oakland as well as Homewood are very large neighborhoods that are more than under-utilized resources, they are diamonds in the rough.

The Hill especially has broad tracts of developable land and sits right in the center of the higher education centers of Oakland [Pitt, CMU, Carlow], The Bluff [Duquesne], and downtown [Point Park].  The spinoff opportunities from these schools alone are limitless and could provide meaningful, achievable jobs for neighborhood residents.  Combine that with the historical sense of community at the heart of the Hill District and there exists a real “place” in the metaphysical sense, all of which defines a true community.

Homewood is similarly well situated geographically if also with a few more issues to overcome than the Hill.  Crime seems notably more present in Homewood than the Hill of late.  But that could be a factor of a larger population density or a younger demographic.  Whatever the causes, the solution must come from a focus on the neighborhood and a committed determination to change that situation for the better.  Homewood backs up against the economically resurgent East Liberty and some of the wealthiest neighborhoods in the City.  There is real potential for development to occur that is inclusive of Homewood’s current residents.  Economic prosperity percolates up.  I hope Mayor Peduto’s team turns on the stove for this brew in both neighborhoods.

PIT - A Dose of Reality

This past week, Bradley Penrod was ousted as President and Chief Strategy Office of the Allegheny County Airport Authority which is, primarily, Greater Pittsburgh International Airport.  [Though let me add that from my years in corporate America and having grown up below the flight path to Allegheny County Airport, every major city needs at least one general purpose airport to accommodate the wealthy and powerful who don’t care to endure the current state of air travel like the rest of us do.  Thank goodness Allegheny County exists and seems to thrive in its arena.]  Much has been made about what Mr. Penrod did or didn’t do for PIT during his tenure.  And I note that no one in the Pittsburgh media has really been kind to him.  This is despite differing opinions reported from airline analysts outside of Pittsburgh.  Allow me to come to Mr. Penrod’s defense on this account as well.  My bottom line is that PIT is a fine airport.  It’s not Atlanta or Chicago and thank the good Lord above for that.  As a frequent flyer and a million-miler on one airline, I can tell you I go out of my way to avoid the so-called fortress hubs.

My support for Mr. Penrod comes here in the form of a series of questions that I cannot answer but I hope those at the Airport Authority are at least are studying.  But first here are a couple facts that stand out boldly when discussing PIT’s standing among other big, and not so big, city airports.  Pittsburgh is relatively small.  I love the fact that Pittsburghers believe they should measure themselves against New York, Chicago and San Francisco.  So shall it ever be and that kind of thinking has benefits longer term.  But the cold, hard fact is that a market area of about 2.5 million people cannot sustain the same kind of O&D [origin and destination traffic] that those cities and even Philly or Denver or Seattle can.

Airlines are very opportunistic from a business perspective.  If there is demand between any city pair, one of them will offer a route.  Air travel produces some of the best marketing data available.  Every airline knows exactly where every flier is headed.  There is no need for a market study; it’s all in the reservation system.  If PIT suddenly had 2,000 fliers a day traveling to Europe or Asia via connecting hub cities, there would be more than just Delta offering a seasonal flight to Paris.  Austin’s new non-stop service to London on British Airways is testament to that: a relatively small mid-continent US city gains a non-stop overseas.  Mr. Penrod can offer all kind of incentives short of paying the bills of an air carrier and none of that matters as much as O&D traffic between destinations.

And PIT, domestic US airports, and every US-based carrier are facing even stronger headwinds than is being reported by the popular media in the US: the growth of international mega-hubs.  Longer range jets and the super sized jumbos like the A380 favor the new mega hubs such as Dubai, Qatar and Seoul.  These places make Atlanta and Chicago look like …St. Louis and Cincinnati and Pittsburgh.  Even America’s largest airport, Atlanta, will find it hard to compete as these new hubs and their primary carriers are government financed.  Allegheny County does not have a rich sugar daddy oil chieftain to subsidize rates.

Now to my questions:

-       Why is it that PIT’s passenger traffic has continued to fall almost every month for the last two years when airline traffic in general is growing post-9/11?

-       Is this mostly attributable to USAirways continued pullback?  If so, is PIT reaching some sort of equilibrium?

-       Why do Pittsburghers complain about an airport that is not overly crowded, pleasant to negotiate, and with more than adequate traveler amenities and services?  Gosh golly when I land at ATL or LGA I have to physically steel myself for the assault on my senses, not to mention my legs as I have to dodge the great unwashed INfrequent flying public.

-       Has PIT tried for more cargo service?  OK, admittedly cargo service also follows demand and Pittsburgh itself is not a regional transportation hub like Atlanta, Charlotte or Dallas, where interstate highway convergence lends itself to multi-modal transport.  But, cargo carriers are always looking for a better deal and doesn’t the local Chamber of Commerce always tout Pittsburgh’s being within 500 miles of most of the planet’s population, or something close to that?  What gives?

-       I asked the above question because cargo can lead to airline service.  Witness EVA Air and Taipei.  EVA Air is mostly a cargo carrier for the Republic of China [Taiwan].  They fly jumbo jets only and started out with just cargo.  But they discovered that with only some modifications, every cargo plane could carry some passengers as well; and they do.  An EVA Air, or similar airline, could bring an overseas connection to Pittsburgh not totally dependent on passenger volume.

-       Finally, a metaphysical question: what is unique about the Pittsburgh economy that a now growing economy, serving almost 2.5 million people, has an airport that is continuing to lag passenger numbers in similarly, and smaller, regions?  Is it demographics?

To that last question, here’s an anecdote from the recent past.  When British Airways operated a direct flight from PIT to Heathrow, it was typically close to sold out.  I flew it once and in coach class, it was sold out and hard to get a reservation. But that’s the important detail: coach class was sold out, first class was not, and hardly ever was.  A friend of mine who served on a local government airport commission at the time relayed that BA specifically pulled that route because it was a money loser.  “But how could that be when you practically could not get a reservation?”, I asked.  Because the difference between making money on an overseas route and losing it depends on first class capacity, he replied.  In these days of corporate penny pinching, I fear even fewer first class seats can be sold out of our static corporate center in western Pa.

As I said, a dose of reality is in order and Bradley Penrod deserves a break for his efforts on behalf of the airport.  Good luck to his successor.

Things Are Looking Up

Things in Pittsburgh have been looking up for quite some time now.  But I note that a few somewhat lightly reported items from around the news sites indicate a nice growth trajectory in the Steel City.

Access roads work continues in the area of the possible Shell cracker plant.  While new heavy industrial facilities in the Pittsburgh area are viewed by many with uneasiness, the economic benefits of this facility are undeniably huge.  And in an age of general corporate and political acceptance of environmental regulations, a state-of-the-art cracker plant should have the best environmental safeguards available.  From a historical perspective, I believe it puts Pittsburgh back into the league of cities not immediately associated with heavy industry but where oil and gas still plays a major role: New York, Los Angeles, Houston, the Bay Area and Philadelphia.  Anything that moves Pittsburgh back to that playing field is good.

Pittsburgh’s food scene is booming.  In the last couple months, Pittsburgh’s food scene has garnered stellar mentions in “Food & Wine” magazine, the New York Times, USA Today, not to mention all the broadcast media coverage for Kevin Sousa’s Superior Motors successful Kickstarter campaign.  For better or for worse, food in America involves public relations, perceptions, media coverage, and a little glitz & glam.  So run with it, Pittsburgh; that’s the way the game is played.  Analogous to the tendency to “hate” Starbucks and “like” local coffee purveyors, if that’s what it takes to develop an appreciation of more sophisticated alternatives, then so be it.  Don’t hate the methods; love the results.  A recognized food “scene” has innumerable side economic benefits as well.

There’s a growing influx of “out of towners”.  Not so much the actual numbers but the quality and diversity of newcomers in areas of commerce and culture where Pittsburgh is attracting out of town names, both corporate and individual, is noticeably growing.  Dynamic places thrive on that: people and companies move in and some move out.  It keeps the ecosystem fresh.  But it’s been a number of decades since Pittsburgh has experienced that and boo yah it’s happening again.  One hurdle to overcome is to grow the number of non-US immigrants [I despise the term “foreigner”] but that aside, the new-arrivals lists is getting much better.  Real estate investors, retail stores, restaurants, hotels, law firms, service firms ancillary to oil and gas extraction, and of primal importance, oil and gas firms themselves, both regional offices and actual headquarters.  While Shell Oil undergoes a corporate realignment that may indefinitely delay spending billions on a cracker plant, the possibility of it putting an Eastern Region office in Pittsburgh is strong.  As is the probability that Chevron will have its regional HQ up and running in a couple years.  [How ironic it would be for the company that took Gulf Oil out of Pittsburgh to come back with net more jobs than it removed.]

All in all, the uptick is there for anyone to see who reads the business, entertainment or lifestyle section of your favorite daily, with more praise for Pittsburgh being a medium size city with TWO general circulation newspapers.  Now all that we need is stronger belief by Pittsburghers themselves that things are looking up and the out of towners will be more willing to invest sensing that local enthusiasm.

A Commentary to Mark A. Nordenberg

In a previous blog posting, “An Open Letter to Subra Suresh”, I urged the new President of Carnegie Mellon University to assume a more prominent role in expanding CMU’s Oakland neighborhood into a global nexus of technology innovation.  Recently I received a packet from the University of Pittsburgh’s Chancellor, Mark A. Nordenberg, detailing the state of Pitt.  For full disclosure, I admit to being an active alumnus of and partial to the University of Pittsburgh.

That packet contained a spiffy brochure detailing Pitt’s achievements for the years under Nordenberg’s leadership.  One particular section that caught my attention was titled “Extending Our Commitment to Effective Partnering” where a description of Pitt’s partnership with Carnegie Mellon under its former President Jared Cohon was featured.  A quote from that section was “the combined academic strengths of Pitt and CMU are surpassed in only one other American neighborhood – Cambridge, Massachusetts, home to both Harvard University and the Massachusetts Institute of Technology – and that effective partnering between Pitt and CMU not only can elevate both universities but can make our region stronger.”

My comment to Chancellor Nordenberg and his yet to be determined successor is “well then, assuming that’s all true, get it done!”  One could argue that the phrase “surpassed in only ONE [my emphasis] neighborhood” is hyperbolic.  I might argue that if neighborhoods are measured by travel time proximity, then the San Francisco Bay area also surpasses Pittsburgh’s Oakland neighborhood with the University of California and Stanford University as cross-bay neighbors.  But that nitpick only strengthens my argument, one that I have expressed often in this blog, that Pittsburgh has the same resources as Boston and San Francisco/Silicon Valley.  I’ve taken CMU to task for not promoting more development with buildings targeting new technology users, as is so evident in the area surrounding MIT.  Pitt has done only somewhat better with their most recent growth out toward Shadyside at the University of Pittsburgh’s Cancer Institute.

I believe this is truly an example, an instance, and an opportunity to prove the old saw “build it and they will come”.  Time and again, across America in established high tech nodes such as Boston, Seattle and Austin, technology companies cite the availability of skilled employees and infrastructure as reasons for establishing new offices.  I have to believe Google’s expanding Pittsburgh presence is manifesting that thought.  Let’s make more of that in Oakland.

Pitt and CMU are already cranking out enough talented engineers and bio-scientists to fill a new office building annually with every graduating class.  Physical space needs to be built.  Infrastructure doesn’t appear without hard work from all stakeholders.  Someone needs to take the lead and spark real estate developers and government and economic development teams to make their moves.  I think Pitt’s Chancellor is in a unique position to provide that spark.

The Way Forward: An Alternate Path

In an excellent editorial piece for the January 4, 2014 edition of the “Pittsburgh Post-Gazette”, Harold D. Miller provided those concerned with Pittsburgh’s socio-economic development much to think about.  Working from US Census Bureau statistics, Miller presents a not flattering picture of the City and region.  One can argue the relevance in 2014 of using the most recently available Census figures from 2011 and citing a private foundation study that looked at cities in 2010.  Also, “snapshots” are just that – one time views that neglect trends which are the basis of most economic decisions in the private sector.  But I am not deprecating Miller’s analysis.  His viewpoint needs to be heard loud and clear by Pittsburgh’s thought leaders in all areas of business, education and the arts.

What I am concerned with is his reliance on government solutions to Pittsburgh’s recent history’s lack of entrepreneurial activity.  “Cut red tape” is one suggestion which on the surface we can all agree on.  However expecting governments to act on this in a timely manner is naïve.  What’s more, much of Pittsburgh’s “red tape” problem is related to the State of Pennsylvania.  No matter though, I’ve often asked the question “If government regulation is such a limiting issue for western Pennsylvania, why is it that hotbeds of high tech development are found in California, Massachusetts and New York?”  You think Pittsburgh startups have a lot of red tape?  Look at the municipal and State regulations in Palo Alto or Cambridge.

“Improve access to capital” is another prescription.  Absolutely and I’ve blogged on that topic previously.  But Miller suggests that government funded programs like Innovation Works need to be expanded.  Sure, entrepreneurs will take money from whatever source presents itself.  But if you look at regions such as metro Boston, the Silicon Valley, and Puget Sound you’ll see that establishing a self-perpetuating ecosystem of entrepreneurship, especially in high tech, is best begun and most sustainably with something akin to an economic “big bang” resulting from all the right pieces being in place.  You can’t force a vibrant, shiny, new economy on a region that’s not ready for it. I find Miller’s prescriptions have a subtext of forcing Pittsburgh into a new high tech era with a Big Brother, top-down approach relying on more government programs at the same time he calls for less government “red tape”.  At the same time Miller decries Pittsburgh’s lack of small business formation, a bottom up approach.

Perhaps it is merely a difference in attitude that separates me from Mr. Miller.   But I believe Pittsburgh has all the right pieces for an economic “big bang”: world-class universities [that overused term truly applies in this instance], a great urban lifestyle located in the midst of one of America’s best regions for outdoor leisure activities, and a social fabric the nurtures people and their dreams.  Am I looking at Pittsburgh through rose colored glasses?  You betcha!  But my viewpoint is also based on empirical evidence from the last few weeks: Google continues to expand one of only three engineering offices it has in the world, Computer Sciences Corporation chooses Pittsburgh for a 500 person office over 400 other locations they studied, and Kevin Sousa reached his $250,000 Kickstarter campaign goal for a restaurant and sustainable farm in Braddock.  Add to that the constant stream of funding announcements for high tech start ups, the addition of out of town businesses from Marcellus Shale oriented law firms to hip boutique hotels, and I see more than momentum. I see a region that started a generation behind Boston and two generations behind the Bay Area and Seattle and that is finally on the path that, 40 years from now, will be viewed as the natural path to even greater prosperity.