Saturday, March 13, 2010

The Next Pittsburgh: Waterloo

Waterloo (Ontario) has been through a few economic transformations. The region is on the cusp of another one. Not surprisingly, Pittsburgh is the model:

If you don’t believe entrepreneurs can help turn a city around, talk to Tom Murphy. From 1994 to 2005, he was mayor of Pittsburgh, a place once considered an economic writeoff. In the 1980s, Pittsburgh’s dominant steel industry collapsed, sending unemployment above 18 per cent. Some 120,000 workers lost their jobs in shuttered mills, and soup kitchens sprang up across the city.

Today, the Pennsylvania city has reinvented itself as a hub for medical research, robotics, high-tech manufacturing and financial services. Murphy was there for much of that transformation, and he thinks there are things Waterloo Region can do to spark a renaissance not based around big manufacturing operations.

“The biggest challenge we had was we were big corporations and big unions, and not very entrepreneurial,” Murphy said from his office in Washington DC, where he’s now a resident expert in urban renewal for the Urban Land Institute.

Pittsburgh changed that by providing entrepreneurs with money — and lots of it. It drew venture capital firms to the city by taking advantage of a program where state pension funds matched investments in local companies. This gave investors an incentive to pour money into promising companies in the former steel town, and it kept young, bright entrepreneurs from leaving the city.

Murphy boasts there are now 17 venture capital firms headquartered in western Pennsylvania. In the 1980s, there were none.

This historical narrative puts a different spin on my understanding of the Pittsburgh redevelopment story. In about a generation, the city took a great leap forward. I'm not sure that is accurate.

Murphy would know a lot more about it than I. I see the reinvention as 50-60 years in the making. Pittsburgh's entrepreneurial economy is a talent dividend from investments in human capital that predated Murphy's tenure as mayor. Furthermore, the spectacular growth of venture capital that Murphy mentions was a macro trend.

Murphy's Pittsburgh renaissance comes across as a bit disingenuous. I'm not trying to undermine his legacy. I think he deserves more credit than locals typically allow. But is this sound advice for Waterloo? Can that region really reinvent itself a la Pittsburgh in such a short span of time? I'm skeptical.

1 comment:

Brian French said...

Good for you. A lot of people are getting taken in by get rich quick schemes, especially "creative class".
It takes a generation for a place to make a significant turn around. And as often as not, the turnaround happens, it is not planned.
Sometimes bottom has to be hit before enough energy is produced to commit to a renaissance and attract new things.
KW has a very strong industry that is not threatened. The only raw material it consumes is gray matter. Not only does it benefit from its own universitys but those in Toronto and Hamilton as well. As an edge city, it was and is perfectly positioned.
I've spent a lot of time in Pittsburgh over the years and I quite like the place. The town that birthed Warhol must have had something special in its fabric.
But KW has a lot better basis for continuance of growth that Pburgh ever did.