Monday, January 31, 2011

Rise And Fall Of Texas

If people vote with their feet, then Texas has won the election. In particular, the Triangle is a hot destination. Then why is Dallas looking at Rust Belt Pittsburgh with envy? It's about talent and innovation:

It's natural to hail the Pittsburgh Steelers for winning Super Bowls. But give props to the city of Pittsburgh, too, for rebuilding and reshaping a Rust Belt economy, and creating one of the country's most livable cities.

The path to recovery is worth recounting, not only because Pittsburgh fans are streaming into Fort Worth, where the Steelers are staying for next Sunday's title game. But it could be instructive for leaders in North Texas, who keep talking about strengthening local colleges, fostering more collaboration and creating Tier One research centers.

Pittsburgh's renaissance was largely built around its world-class universities and their strengths in medicine and computer science. That concentration of academic talent and market power may be unrivaled anywhere short of Boston.

One can celebrate Pittsburgh without disparaging Dallas. The growth in North Texas is undeniable and remarkable. But concerning prosperity and cost of living, Pittsburgh is ahead of both Dallas and Houston. Texas could learn a few things from Southwestern Pennsylvania.

Furthermore, much of the population growth in Texas is more a function of immigration than domestic migration. Looking ahead to 2040, the trend is clear:

Without immigration, the population of Harris County is expected to be only 4.3 million, not much increase at all. But using the immigration rate from 2000 to 2007, Harris County is expected to be 6.8 million, a 70% increase or almost 1.8% growth per year. The SMSA is expected to grow even faster, from 6 to over 11 million by 2040.

Proximity to Mexico, particularly large border cities, is what drives immigration to Texas. It's not the state policy (e.g. low taxes) that is the crux of the attraction. For all its growth, Houston lacks brain power. From the same article:

Again, choices abound. Will Houston become the Pittsburgh and Detroit of the 21st centuries?

Those cities rode their industries into the ground—first Pittsburgh and the steel industry in the 1970s and Detroit and the auto industry today. Or will Houston invest in the diversified technologies of the 21st century?

While Houston has lots of money, Houstonians do not invest as much in high technology investment as investor do in Dallas-Fort Worth and, of course, Austin. Houstonians know what a good real estate or oil deal looks like, but they don’t know nearly as much about a bio- or nanotechnology investment. For comparison, Austin has about three times the venture capital investment even though its economy is only a fraction of the Houston economy.

Two industries in particular might the targets of that investment.

The information technology will have largely been exploited by 2040, unless a whole new technology like quantum computing becomes feasible. At any rate, Houston has never been a leader in information technology anyway. Rather it is the biological technologies that promise the next wave of technological innovation, and the Texas Medical Center could be a platform for participating in the growth of that industry.

The high tech spinoff from the Medical Center, however, has been disappointing to date, perhaps because of the relatively low venture funding in Houston. Talented entrepreneurs with good ideas and technologies need to move to the coasts to get funding. Will Houstonians stop this brain drain by 2040 or not?

In this sense, Houston is way behind Pittsburgh. The region has most of its eggs in the basket of energy. The remark about Detroit and Pittsburgh is a reference to over-dependence on one industry. Houston, we have a problem. The booming population masks a vulnerable economy. Even a more diversified Dallas is considering the value of the Pittsburgh model.

I'll circle back to our fixation with population numbers. The metric is almost useless, a relic of the industrial era. We need to rethink how we measure regional success.

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