Local Pride and Commitment

With Jamie Dixon demonstrating that his heart has always been in Fort Worth despite all these years of telling Pittsburghers how much he loved being here and at Pitt, I found it heartening to read that local high tech success story Duolingo is showing real commitment to staying in Pittsburgh.

Even more than the fickle world of college athletics [and who can blame players or staff for chasing gold, given their limited life spans within that ecosystem] the high tech game is one where start ups have to seek environments conducive to their success.  In other words, go to where the money, personnel and support resources will do the most to ensure an enterprise’s longevity.

It was reported last week that Shadyside-located Duolingo is taking 15,000 square feet of office space in East Liberty and plans to almost double its employee count within the next year.  That’s all great news but what caught my eye in the company’s announcement was the founders’ statement: “We’re proud to be a Pittsburgh-based company and to stick to our roots despite having been advised by leaders in the space to move elsewhere.”

Moving to greener pastures of funding is absolutely the norm in the high tech start-up world. But it has all too often been the path taken by many promising new companies started and fed in Pittsburgh’s nurturing environment as soon as they bring in some Boston or Silicon Valley or Research Triangle funding.  As I’ve railed against many times in this blog, the bleeding of local talent has to stop.

Duolingo is one company proving it can make itself a success right here in Pittsburgh. They may be the billion dollar public “hit” that our high tech scene has been waiting for and finally breaks the dam to where a succession of large high tech enterprises call Pittsburgh home.

Happy 200th Birthday Pittsburgh!

And it’s a monumental event that demands recognition, especially in this blog.

Two hundred years is a long incorporation, especially in our relatively young nation.  The sweep of history not only witnessed by but also made where the three rivers converge is rarely seen by other metropolises.  So everyone who now lives in Pittsburgh, or within Pittsburgh’s orbit, or has at one time lived in Pittsburgh, or visited Pittsburgh, or is simply aware and concerned that Pittsburgh and places like it prosper and grow, let them raise their glass to the next 200 years. We’ve seen so many great things come about recently. The best is yet to come.

Here’s to Pittsburgh, the essential American city.

Where's the Commitment?

Today brought news that Cohera Medical, a growing medical device company headquartered on Pittsburgh’s North Side, is leaving town for Raleigh, North Carolina. Raleigh is the biggest city in the Research Triangle Park area which has an established base of medical and biology centered companies.  It’s where a lot of Philadelphia based pharmaceutical firms established offices when looking for a sunnier clime and friendlier tax environment.  So while this makes sense on a number of business levels, I have to say that this sort of outmigration happening once a local company is nurtured to a sustainable phase has got to stop if Pittsburgh is to economically progress in any meaningful way.

The galling element of this story is that Cohera Medical is a spin out of the University of Pittsburgh.  The company had just received a $50 million investment by New York investors KKR and I have no doubt is under much pressure to now produce on a scale proportionate to that investment.  But I must point a finger at Pitt and ask how much of a role they could have played in helping this bio-med company maintain its Pittsburgh base?  Did Pitt even try?  What of Pitt’s vaunted efforts to build enterprises in the region as an outgrowth of their medical research?

Where’s the commitment Pitt?

Should Old Acquaintances Be Forgot

Just an end of the year musing on something that Pittsburgh has admirably and fully now moved past: the loss of US Airways’ hub.  It was much more than an acquaintance.  US Airways and Pittsburgh were akin to a married couple.  But this relationship definitely deserves to “be forgot”.

For me, the blessedly last insult came when US Airways final scheduled flight made stops in Phoenix, Charlotte and Philly, bypassing Pittsburgh, the city that gave birth to the airline.  But that shouldn’t have surprised anyone knowing that American Airlines’ CEO Doug Parker was at that point in control of the corporate joystick.  A convicted drunk driver, (one of his arrests was related to festivities celebrating America West Airlines – “America’s worst” in my deliberately limited experience with them - takeover of USAir), Mr. Parker was considered a wunderkind at the start of his career at American Airlines but the path to corporate dominance would have required patience so he left for Lufthansa and then did a midair turn back to America West. Thus began his ascent to claim his place back at the top of his ultimate goal, American Airlines.  Along that flight path he jettisoned assets [workers, airport hubs, prior corporate agreements with government entities] as if they were excess fuel.  Pittsburgh and Greater Pitt was his biggest dump.

So now there’s no more US Airways [Useless Airways to many frequent fliers] on which to focus our opprobrium.  PIT now has the line-up of air-carriers standard at mid-sized, non-coastal airports [although I would like to see Alaska and Virgin added] with American in a somewhat outsized role due to history.  I know that frequent flier rewards programs are what inextricably bind many travelers to a particular brand, for better and worse. [Full disclosure: I’m a Million Miler on Delta.  Please know that MM status, along with an advanced booking, will get you ….maybe an exit row seat.]  So with American’s full transfer of US Airways FF program miles over to their own, the tendency in Pittsburgh’s frequent fliers flock, especially business travelers, will be to stick with American.  We should hope that tendency gets diluted over time.

Delta is the airline that, admittedly with local government subsidies that are, in turn, fairly standard at smaller airports, brought PIT back to having a non-stop European route.  OK, understood that it’s not a year round route but it’s a solid start.  Globetrotting Pittsburghers, especially higher-fare business travelers, should go out of their way to patronize that service.  And Southwest seems to be cautiously but continually adding to their routes from PIT.  I’m sure it caused some head scratching at SWA’s Love Field HQ when Pennsylvanians did not embrace Southwest’s PIT to PHL service.  It was that very route type, so similar to DAL-HOU or DAL-AUS, which built Southwest: intra-state city pairs that are many hours of driving time apart.  Sorry, US Airways frequent flier program had hogtied Pennsylvanians and consequently sucked more of their travel dollars to Phoenix HQ in order to finance Parker’s larger vision.  A vision where Pittsburgh now gives no whiff of competition to Philly.  Or Charlotte.  And as inside the company rumors have it, both those current hubs are about to be supplanted by Miami, a gateway almost equidistant from Europe, Latin America and Africa.  [Please don’t forget about the southern hemisphere where the world’s future is being born, literally.]

So wise up Pittsburgh.  Shake off old habits. Ring in some new.  You’ve now got more options than most mid-size airports.  Use them.  Or ultimately lose them and pay the price with higher fares and lower regional economic growth.

Let’s Note This One

It’s sometimes a good thing to look back, compare and then cogitate over events.  In the December 2, 2015 Federal Reserve “Beige Book” report, it was noted that for the Fourth Federal Reserve District, which includes western PA, sales of “new and existing homes rose almost 10%” compared with a year ago.  And “nonresidential contractors reported continued strong activity” in the commercial building sector.

On the same day, the National Association of Realtors in its 2016 forecast predicted Pittsburgh would be the second hottest housing market for millennials, pushed out only by Atlanta and ahead of Austin, Boston and Nashville.

The “Post-Gazette” reports that the millennial population of Pittsburgh is growing faster than the national average, with researchers at Cleveland State University’s [Cleveland!] Center for Population Dynamics saying “you could argue that Pittsburgh is the fastest-rising metro in the country in its population of college-educated 25-to34 year olds”.

And WalletHub, one of those popular sites that provides so many “best of” lists, has Pittsburgh pegged in the top 20 of Best Cities to Live ahead of Minneapolis and Charlotte and right next to Washington, D.C. and Portland.

At the same time, the Beige Book report quoted above also notes the following in the Fourth District economy: “The steel industry continues to struggle against an array of headwinds …”

How many years ago was it that if the steel industry struggled, Pittsburgh was on its knees.  Increased housing sales?  Growing population?  Forget it!  Remember a generation ago when the expression was “if the US economy gets a cold, Pittsburgh gets the flu”?  What a remarkable change has occurred.

Pittsburghers have always been proud of their city – and with good reason – but I also contend not proud enough.  Now let’s take some note of what has been wrought from our hills and river valleys.  And note it with real pride.

Pittsburgh’s Labor Market: the Future is Now

There’s been so much talk in both political and business pages about the Trans-Pacific Partnership, or TPP, that it got me to thinking about Pittsburgh’s increasingly smaller part in this larger and, for most, unsettling economic world order.

These far reaching economic partnerships are both credited with and condemned for broadening product and labor markets, with the result that both products and workers are further exposed to market forces.  But these international trade agreements are nothing new.  Trade pacts have always been concomitant with the actual trade.  Or maybe trade pacts were just realized in different guises than today.  Whether between Great Britain and China, Arabia and Africa, Portugal or Spain and the Americas – who knew if it was a trade pact or a police action or enslavement?  However characterized, contracts were drawn up and pathways of goods and people were established.

My concern here is how will Pittsburgh survive in this new global market, [same as the old global market, to paraphrase The Who]; one that shifts the rewards of income ever more quickly among producers.  We’ve all read the articles about income inequality and how higher incomes are going to better educated workers in “knowledge industries”.  One disconcerting item often noted about these industries is that they create employment in the hundreds, or low thousands at best.  The era of heavy industry or consumer goods production that employed tens of thousands with decent wage rates has moved away from America to cheaper labor continents.  And still America continues to lose at an astounding rate those types of jobs that require large number of workers, skilled or otherwise, engaged in a large production [I don’t want to limit this to “manufacturing”] enterprise.  Gone are the days when one company can supply enough jobs to build a whole town in America, Silicon Valley burgs notwithstanding.

Adding to this outlook is a piece recently featured on CNBC’s Web site where one well-regarded investor proffered that artificial intelligence will make “most” current jobs “obsolete”. Robotics has a lot to do with that and Pittsburgh will hopefully continue to develop that expertise cluster.  But more generally, I believe the only real growth in employment will come from those jobs that can only be provided by one human being to another.  Medical research, health care, education, and to a lesser extent what are known as business services such as legal, accounting and sales.  Yes, oil and gas production provided a boost to Pittsburgh’s and the nation’s economy recently, but it has also declined almost as quickly due to its cyclicality.  And jobs in software development have been a boon to a number of local economies but aside from over-developing the Bay Area, Boston and Seattle, the increase in GDP is again, so uneven, that these industries seem to be drivers of the new income inequality.

Pittsburgh needs and deserves a more well-balanced economy and one that provides employment in areas that will generate higher incomes to more workers.  Many careers that are characterized as “creative” industries, while injecting elements of excitement into the local scene, are not those on which to raise a family or build an economic engine.  I hope Pittsburgh’s leaders in education, healthcare and government see the distinctions among various job creation project in light of the larger, much larger, and very rapidly changing global economic landscape.

To echo a recurring theme of my own and so many others, and as the only idea I can think of to end this piece, I have to note that educational attainment seems to be the key to income and quality-of-life development.  More discussions on that topic to come.

It’s All Gonna Be Fine

OK, we’ve all been here before.  Everyone relax and keep doing what Pittsburgh is doing: moving forward to a continually brighter future.

It was just announced that US Steel Corp will not be building a new [architecturally mediocre, IMHO] headquarters in the Lower Hill.  Anyone who’s been reading the business sections recently has smelled this coming.  US Steel is no longer the leviathan of metal it once was.  In fact, it may have missed the survival boat altogether.  Larger primary metals companies have built worldwide operations, mostly via the Third World, admittedly where environmental and employment concerns are sadly less of a concern.

US Steel played their own part in this current state of affairs.  My father was a draftsman in their engineering department.  Besides working on projects from Pittsburg, California to Birmingham, Alabama to Gary, Indiana he also helped US Steel sell its project expertise [and maybe sell off its intellectual capital] to steel companies in South Korea and India and beyond.  But in the 1960s and 1970s, US Steel was invincible, right?

But back to Pittsburgh’s brilliant future.  Let’s acknowledge the future of any world class city is and has always been in “knowledge industries”.  Not to deprecate manufacturing with that statement: in the late 19^th and early 20^th centuries, making steel [or glass, or aluminum or ketchup] WAS a knowledge industry.  What Pittsburgh gave the world a hundred years ago was nothing short of an economic revolution on the same scale as what the Silicon Valley is doing today.  But in those lyrics of George Harrison, all things must pass away.

Alcoa took its headquarters to New York and that was a gut punch.  But there are still many hundreds on the North Shore and more importantly, many well paid high tech researchers at their suburban research center.  Mellon Bank’s purchase was almost worse in terms of local prestige.  That was truly a sell-out by an outsider [from Charlotte, of all the upstart places] who was simply climbing the Wall Street C-level ladder.  But in the aftermath of all that Pittsburgh has more BNY Mellon employees here than they have in New York City [albeit probably not on the same pay scale].  And Kraft Heinz says it will maintain dual headquarters after the merger.  Dual headquarters almost never work [unless you are Shell Oil].  What galls most about Heinz is that the Heinz name is woven into Pittsburgh’s psychic fabric.   But that speaks to my point….

It’s time to make new history; weave a new pattern.  It’s time to keep that social and economic loom working [pardon my overplayed analogy] full time to produce the cloth that will be Pittsburgh’s re-emergence as a world class city taking a prominent place among those cities located on humanity’s mental map.