February 2019, ScientificAmerican.com 19VENTURES
Wade Roush is host of Soonish, a podcast exploring H S SS A
how technology will shape the future.Illustration by Zara PickenGetting Out
of Silicon Valley’s
Shadow
You don’t need programmers or venture
capitalists for a thriving local economy
By Wade RoushLet s sa ou re t e ma or of idd e a e, a (fictional) medi-
um-sized city in Texas. The coal-fired electric power plant out-
side town just closed, and the steel mill in the next county over
has gone bankrupt. Now voters expect you to do something
about rising unemployment and the shrinking tax base. You
might look at America’s booming metropolitan areas, such as
Boston, Seattle or Silicon Valley, and say what we need here is
an “innovation district” or a “technology cluster.”
Sounds great! But it’s rarely the full answer.You certainly wouldn’t be the first public official to fall under
technology’s spell. After all, when high-growth companies flock
to a specific location, jobs and higher incomes do tend to follow.
Take the Kendall Square cluster, loosely defined as the area with-
in a 10-minute walk of the subway station at the Massachusetts
Institute of Technology. It’s home to more than a dozen top bio-
tech firms. Google, Microsoft, Amazon and Facebook all have
research outposts here. And some 750 start-ups incubate at the
Cambridge Innovation Center. It’s all helped to give Cambridge
the lowest unemployment rate in Massachusetts and a family
income 59 percent above the national median.
Of course, the city is also home to high-paying institutions
like Harvard University and M.I.T. But that, too, is part of the
canonical definition of a cluster. Business scholars say it’s hard
to build a tech cluster without at least one research university to
generate ideas and qualified employees.
And the ingredient list goes on. A base of older tech firms
gives future start-up founders a place to train. Federal invest-
ment, which helped to put Silicon Valley’s semiconductor indus-
try on the map, is a huge boost. Finally, you need local venture
capitalists willing to invest in high-risk enterprises.
Put it all together, and you get what I think of as the proximi-
ty effect—a self-sustaining churn of people, inspiration, invest-
ment, intellectual property and profit. It’s no wonder that dozens
of U.S. cities, both large (San Diego, St. Louis) and medium-sized
(Columbus, Chattanooga), are investing in innovation districts.
But there’s a problem: it can take decades of planning to assem-
ble all the components of a cluster, and you can’t invest in just
one element while ignoring the others.
Floridians paid a lot to learn that lesson. Between 2003 and
2008 then governors Jeb Bush and Charlie Crist arranged hun-
dreds of millions of dollars in subsidies to bring biotech labora-
tories such as the Max Planck Florida Institute for Neuroscience
to the Palm Beach County area. The private-sector spin-offs
Bush and Crist had promised never emerged, and between 2007
and 2012 the state’s spending spree had brought fewer than
1,000 new jobs to Florida. “We didn’t have the infrastruc-
ture that was needed to develop the in dustry at a rapid
pace,” the president of the Business Development Board
of Palm Beach County told reporters.
Fortunately, cities don’t need to follow the classic clus-
ter model. There’s new evidence that regions can develop
fast-growing business scenes even if some of the tradition-
al cluster ingredients are sparse or missing. The Detroit
area, for example, is home to only a handful of venture
firms. But it’s developing a distinctive mix of start-ups
focused on what Detroit does best: manufacturing, robot-
ics and next-generation transportation technologies, with
a dose of software. Ted Serbinski, managing director of
Detroit’s Techstars Mobility incubator, has called it “the
intersection of steel and bits.”
In fact, quite a few of the metro areas that show the
strongest start-up growth lately fall outside the tradition-
al cluster definition. In the Ewing Marion Kauffman
Foundation’s 2017 rankings of start-up growth, the Columbus,
Nashville and Atlanta metropolitan areas placed third, fourth
and fifth, respectively. All have strong universities. But none
has a major tech-industry legacy or a substantial venture-
capital community.
As mayor of Middlevale, you’re not going to build a research
university from scratch or lure a flock of venture firms to town.
But you can focus on the skills your citizens already have and
look for ways to match those with the more digital, distributed,
globalized economy of the 21st century. Admire the clusters—
and then go your own way. H SA L
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