The Wall Street Journal - 09.03.2020

THE WALL STREET JOURNAL. Monday, March 9, 2020 |A

west’s existing talent. Kenzie

Academy , an Indianapolis

startup, has built an academy

to teach coding skills to lower

skilled-workers. It offers a 12-

month online course paid for

by a share of the student’s fu-

ture revenue. Co-founder Chok

Ooi, who started the company

in Silicon Valley before moving

it to Indianapolis in 2018, said

the only way to attract startups

is to make sure a base of talent

is available.

Former AOL chief executive

Steve Case says startups aren’t

growing as quickly outside tech

hubs because there has histori-

cally been little or no venture

funding available. Since 2014,

he has run an annual “Rise of

the Rest” bus tour that avoids

top tech hubs and seeks out

startups to invest in. In 2017, he

started the first of two $

million funds investing in com-

panies from Birmingham, Ala.,

to Chattanooga, Tenn.

“We do believe unless you

solve the money challenge,

you’re not going to solve the

talent challenge,” he said. “Un-

less you solve the talent chal-

lenge, you’re not going to be

able to cluster to be a leader in

the future.”

San Francisco, opened a second

office in 2017 in Pittsburgh.

About 40% of the company’s 300

employees live in Pittsburgh.

Mr. Humphrey said he found

it easier to hire outside San

Francisco. “There would have

been more strain on recruiting

when you’re in a hypercompeti-

tive market with thousands of

sexy tech companies within 2

miles of your office,” he said.

Many economists say getting

tech workers to settle outside

the major hubs won’t be easy.

They cite “agglomeration”—

when companies and talent

cluster in a few places—which

allows for ideas to spread more

quickly and for companies to

have a larger recruitment pool.

“The problem is [these cities

are] battling against these un-

beatable agglomeration econo-

mies,” said Jonathan Gruber, an

economist at the Massachusetts

Institute of Technology.

Traditional economic theory

holds that as business costs rise

in one place, companies move to

cheaper and less crowded alter-

natives. But companies aren’t

leaving because in today’s econ-

omy, talent is the most sought-

after asset—and tech hubs have

the largest pool.

Bills Advance in

Washington State

In Washington state, a bill

from Democratic state Sen. Joe

Nguyen aims to bar police from

using facial recognition for

broad surveillance.

Authorities could deploy it

to identify suspects or track

people suspected of felonies,

but only after taking steps such

as consulting the public and al-

lowing third-party auditing.

“Technology itself is not

what I’m scared of. I’m scared

of how it’s used,” said Mr.

Nguyen, who also is a senior

program manager at Microsoft

Corp.

A second Washington state

bill on consumer-data privacy re-

quires companies to post notice

when they use facial recognition

in public. The operator of a fa-

cial-recognition system would

have to get permission before

storing someone’s likeness ex-

cept when there is a “reason-

able suspicion” the person was

involved in a crime.

As the bills moved through

the state Senate last month,

Microsoft backed both. The

Washington Association of

Sheriffs & Police Chiefs op-

posed Mr. Nguyen’s bill, calling

it overly burdensome. The

American Civil Liberties Union

criticized both bills for legitimiz-

ing surveillance, saying the

state should let municipalities

make their own choices.

The state House passed dif-

ferent versions of the bills and

lawmakers are negotiating.

you should be where your cus-

tomers are, not in San Fran-

cisco,” said Mr. Brickman,

whose firm has helped five

companies move or open up of-

fices in Indiana.

Some startups are focusing

on how to cultivate the Mid-

resent 30 mostly family-owned

Midwest manufacturing and lo-

gistics businesses. The firm also

helps Silicon Valley companies

understand more clearly what

their customers need.

“If you’re developing a man-

ufacturing technology startup,

Max Brickman, 28 years old,

founded Heartland Ventures in

South Bend, Ind., to help con-

nect Midwestern companies and

investors to the latest technol-

ogy coming out of Silicon Valley.

His first fund of $20 million is

made up of investors who rep-

200,

100,

10,

Number of ‘innovation-

sector’ jobs in 2017

–10 –5 0 5 10 25%

Change in ‘innovation-sector’ jobs by metro area, 2005-17*

Chicago

Lost 13% of innovation-

sector jobs since 2005,

about 96,000 to 83,

Philadelphia

–10%

San

Francisco

+89%

Seattle

+41%

San Jose

+33%

San Jose

+33%

San Diego

+30.4%

Los Angeles

–4.0%

Boston

+18.2%

New

York

City

+3.5%

Milwaukee

–13.8%

Milwaukee

–13.8%

Milwaukee

–13.8%

Milwaukee

–13.8%

*Metro areas with at least 1,000 employees in 2017

Source: Emsi data via Brookings Institution and ITIF Stephanie Stamm/THE WALL STREET JOURNAL

crosoft is backing bills in Con-

gress and in its home state of

Washington permitting use of

the technology with oversight.

“If we don’t move past the

polarizing debates that have

blocked progress, people will

continue to be left without any

protection under the law,” Mi-

crosoft President Brad Smith

said.

The Washington state mea-

sures would allow facial recog-

nition for specific uses such as

investigating crime, control-

ling access to a building or

identifying a ticket holder.

Amazon, the world’s largest

provider of cloud-computing

services, declined to comment,

but has said it supports na-

tional standards. International

Business Machines Corp. has

called for “precision regula-

tions” that don’t allow mass

surveillance, and the CEO of

Google owner Alphabet Inc.

has said he is open to a tem-

porary pause while regulations

are developed.

Privacy advocates view in-

dustry-supported regulations

as ploys to conduct business

as usual.

“They are effectively geared

to allow these companies to

continue selling and profiting

from these technologies, more

or less unhindered,” said Mer-

edith Whittaker of New York

University’s AI Now Institute.

The market for technologies

involving some form of facial

recognition could be worth

$14.5 billion in 2025, up from

$2 billion last year, according

to research firm Omdia.

Supporters see facial recog-

nition as a means to keep in-

truders out of buildings, speed

up entry lines at stadiums and

airline gates, identify criminal

suspects and locate missing

children.

Opponents fear it will usher

in a surveillance state. Partici-

pants in street rallies or public

protests would lose their ano-

nymity. Retailers could iden-

tify people entering their

stores, possibly using it to

monitor people with shoplift-

ing convictions.

In the wrong hands, the

technology could be used to

target victims for financial

scams, extortion or other

schemes.

Studies also show that

some facial-recognition sys-

tems are less accurate on non-

white and female faces than

on white males, although accu-

racy has been improving as

the technology advances.

So far, law-enforcement

agencies are among the biggest

early adopters. One supplier,

N.Y.-based Clearview AI Inc.,

says it has 2,000 active users

at law-enforcement agencies,

largely in the U.S. and Canada,

including individuals who have

been given a free trial.

New Jersey Attorney Gen-

eral Gurbir Grewal says

Clearview’s facial-recognition

app helped officers identify

suspected sexual predators in

an online sting operation led

by Somerset County.

U.S. NEWS

Amid rising concerns how-

ever, Mr. Grewal in January

imposed a statewide morato-

rium on Clearview’s system

until guidelines can be drafted.

Even so, an outright ban

would be “an overcorrection

that could potentially under-

mine public safety,” he said in

an interview.

Privacy advocates have

raised concerns that Clearview

hasn’t submitted its algorithm

for federal accuracy testing, as

other companies have, and

that the free trials it gives to

police agencies don’t go

through the usual vetting for

government contracts.

Critics also worry about

Clearview’s methods. It

scrapes internet photo data-

bases, including social-media

posts. Other systems run nar-

rower searches, like scanning

mug shots.

That broader dragnet raises

the risk of abuse, critics say—

enabling anyone with the

Clearview app to take a photo

of a stranger and potentially

learn his or her identity and

personal details.

Clearview CEO Hoan Ton-

That says his firm compiles

photos that are already public,

and the technology is ex-

tremely accurate. Clearview

limits use to law-enforcement

and security professionals, he

said in an interview, though he

acknowledged potential inves-

tors have been given access.

For police, Clearview is “only

a lead, not a piece of evidence,”

and they still need to prove

their cases in court, he said.

In Congress, members of

both parties are discussing

limits on federal use of the

technology, including a pause

on new uses, but haven’t

reached consensus.

“This technology is coming.

What we should seek is a

means by which to make sure

that Big Brother is not com-

ing” along with it, said Rep.

Clay Higgins (R., La.) at a Jan.

15 hearing of the House Over-

sight and Reform Committee.

One bill from Sens. Roy

Blunt (R., Mo.) and Brian

Schatz (D., Hawaii) would al-

low companies to use facial

recognition with public notice,

consent, and third-party test-

ing. It has Microsoft’s backing,

but hasn’t gained momentum.

WASHINGTON—Amid rising
calls for regulation, technol-
ogy companies are pushing for
laws that would restrict use of
facial-recognition systems—
and head off the more severe
prohibitions some cities and
states are weighing.
Microsoft Corp., Ama-
zon.com Inc. and others stand
to profit as government agen-
cies and businesses expand
use of the technology, which
can require large investments
in machine-learning and
cloud-computing capacity.
That opportunity is threat-
ened by campaigns to severely
restrict its use.
San Francisco and six other
cities have passed laws to
block government use of facial
recognition. Lawmakers in
New York, Massachusetts, Ha-
waii and Michigan are consid-
ering some form of ban or
strict limitation.
Pressed by advocacy
groups, concert promoters
Live Nation Entertainment
Inc. and AEG Presents, which
stages the Coachella Arts and
Music Festival, say they don’t
have plans to use facial recog-
nition at their events.
More than 60 college cam-
puses have also disavowed the
technology, activists say—in-
cluding the University of Cali-
fornia, Los Angeles, which
confirmed it nixed a proposal
to link its security cameras to
facial-recognition systems.
A coalition of 40 activist
groups led by Fight for the Fu-
ture is circulating “Ban Facial
Recognition” petitions that
call on lawmakers to block
government agencies from any
use of the technology. Erica
Darragh of Students for Sensi-
ble Drug Policy, part of the co-
alition, says recruiting volun-
teers is a snap: “Facial
recognition freaks people out.”
If elected president, Ver-
mont Sen. Bernie Sanders
says, he would bar police from
using it.
Against this backdrop, Mi-

BYRYANTRACY

Big Tech Seeks Facial-Recognition Laws

Companies push for

nationwide rules as

cities and states look

at bans, severe curbs

A live demonstration of the use of artificial intelligence and facial-recognition technology earlier this year in Las Vegas.

DAVID MCNEW/AGENCE FRANCE-PRESSE/GETTY IMAGE

San Francisco entrepreneur
Madhu Chamarty got the idea
for his latest startup from Am-
azon .com Inc.’s search for its
second headquarters, which
included finalists like India-
napolis, Pittsburgh and Colum-
bus, Ohio.
For him, the search high-
lighted overlooked cities away
from the coasts that had the
talent pools to host tech com-
panies. Early last year, he
launched BeyondHQ , a startup
that uses technology to find
new homes for Silicon Valley
firms looking to move inland.
“It’s not that magic only
happens in San Francisco and
New York,” he said.
Mr. Chamarty is part of a
group of entrepreneurs work-
ing on spreading tech talent
more evenly across the U.S. The
goal is to attract funding and
workers to places far from the
tech hubs in Silicon Valley, New
York City, Boston or Seattle.
Five metropolitan areas—
Boston, San Diego, San Fran-
cisco, Seattle and San Jose, Ca-
lif.—accounted for 90% of all
U.S. high-tech job growth be-
tween 2005 and 2017, according
to a recent study led by Rob At-
kinson of the Information Tech-
nology and Innovation Founda-
tion and Mark Muro of the
Brookings Institution.
States between the coasts
have long touted their low cost
of living or quality of life to at-
tract talent. The new crop of
entrepreneurs is bringing relo-
cation services, tech training
and investor dollars to accom-
plish similar goals.
Patrick McKenna, a Silicon
Valley entrepreneur, started the
nonprofit One America Works
in 2019 that provides similar
services to Mr. Chamarty’s Be-
yondHQ. He says tech concen-
tration in just a few cities has
led to problems such as a lack
of affordable housing and traf-
fic congestion.
“You can’t keep moving ev-
erybody to Silicon Valley,” he
said.
Matt Humphrey, chief execu-
tive of LendingHome , a spe-
cialty loan startup founded in

BYSHAYNDIRAICE

Startups Get Pitched on Virtues of Overlooked Cities

Entrepreneurs are helping startups find the talent and funding they need in places like Pittsburgh, above, instead of tech hubs like Silicon Valley, New York, Boston and Seattle.

MICHAEL M. SANTIAGO/PITTSBURGH POST-GAZETTE/ASSOCIATED PRESS