Saturday, April 16, 2011

Houston Has A Problem

Houston looks poised to tumble. The anxiety about that city's position as the "Energy Capital of the world" is ironic, particularly with oil prices so high. Yet the unease is obvious:

“I would imagine 50 years ago if you had gone to the Automobile Maker’s Club of Detroit and asked them if they would be the car capital in the future you would have heard a similar list. But nothing is inscribed in stone,” he said. “There are a lot of places where they’re hungrier than us for this business, and we need to be very cognizant that these things [such as NASA, the Texas Medical Center and the Ship Channel] aren’t here just because they happened, but because we chose to put them here.”

Kumar concurred.

“We’re at a cusp where the technology and the business models are destructive enough that we can’t fall asleep at the switch,” Kumar said. “The long-term equilibrium is about to shift.”

I argue that the "long-term equilibrium" is already shifting. Many cities that suffered most through the Great Recession of the early 1980s, such as Pittsburgh, are poised to rocket past Houston. People are beginning to notice the unique opportunities available in the Rust Belt.

A few months back, I blogged about Houston casting a wary glance to the future. The concern expressed then and now is genuine as well as rational. What I see is a desire to be more like Pittsburgh, which is undergoing its own energy boom. What Pittsburgh has that Houston wants:

Houston isn’t usually thought of as a place that creates new innovations, panelists said, although there have been plenty of ground-breaking developments here, including the birth of the nanotech industry.

Rather, Houston has excelled at taking innovations and economically transforming them, adapting niche products and new technologies to mass-market business applications, said Praveen Kumar, a finance professor at the University of Houston and director of the Global Energy Management Institute.

“Here is where we can differentiate ourselves, as the place that has developed the specialized workforce to take those ideas to the next level,” Kumar said.

Given their histories, Rice University and UH likely won’t be able to catch up to major research universities like Stanford or others by way of the federal research grant model, Kumar said.

I like the policy suggestion. But Pittsburgh is in a much better position to execute this strategy. And its regional economy is much more diversified that Houston's. A shock to the energy industry won't derail Pittsburgh like it would Houston.

As for developing a specialized workforce, Pittsburgh excels at that. Talent production is a major competitive advantage for Southwestern Pennsylvania. I think Pittsburgh can beat Houston at its own game.


Paul Wittibschlager said...

Interesting perspective on Houston.

Houston is THE research city for the North American energy market. It is not the source of the energy, it is the source of the expertise on how to get the energy, whether it is in Saudi Arabia, Alaska, or the Marcellus Shale region. In Houston, Exxon employs 14,000; Shell 11,000; Varco ~ 7500; BP ~ 7300; you get the picture. I think Houston's status as energy research central is pretty solid .... unless we stop needing energy. The only problem Houston has is where they're going to stash all the money from Exxon, Shell, and BP.
More info:

I do enjoy reading your blog.

rootvg said...

So, how's life in DC?

Jim Russell said...


Just arrived in the DC area yesterday. I'm driving to Youngstown today. I won't have time to settle into the NOVA region until late June.

I can say that spring is beautiful here.