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BusinessWeak: Chicago's Demise Has Been Greatly Exaggerated
By
Adam Lashinsky
Silicon Valley Columnist
Originally posted at 5:08 PM ET 10/11/00 on RealMoney.com
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SAN MATEO, Calif. -- As the song goes, Chicago is my kind of town. I'm a native, an unabashed supporter and even a Cubs fan (fair-weather variety, natch). And having just returned from a weekend there, I'm happy to report that news of Chicago's demise, revealed in the latest issue of BusinessWeek under the blaring headline, "Chicago Blues," has been greatly exaggerated.
Full disclosure: I probably won't ever work in Chicago again. I shiver just thinking about the cold winters (one doesn't develop this aversion until one moves to California), and I've found myself repeatedly pooh-poohing the arguments of friends and associates there who've stridently claimed that Chicago is the equal of Silicon Valley in technology or New York in media or culture. I've argued instead that Chicago should quit whining about being ignored by the Coasts and go about fulfilling its destiny as simply the greatest city in the world that isn't a major financial or political capital.
But then comes this ridiculous BusinessWeek story that really requires some reaction from a Chicagoan with the ability to look at it from the outside. There's not a huge reason to read the story. It's extremely well described in the subheadline on the cover of the magazine. "It's a great, livable city," the copy begins, and you know there's a "but" coming. "But it's slipping as a business capital: Financial markets are shrinking, fewer corporations call it home, and the high-tech sector is lagging. Can Chicago turn it around?"
The gist of BusinessWeek's argument is fourfold.
First, the once-dominant commodity-trading exchanges -- the Chicago Board of Trade, the Chicago Mercantile Exchange and Chicago Board Options Exchange -- formerly known for their innovative ways, have lost their lead because of a stubborn commitment to the open-outcry system and a reluctance to go electronic.
Second, major corporations like Amoco, Ameritech, Morton Salt and Illinois Central have been swallowed up by out-of-towners.
Third, Chicago's days as a financial center are over because Bank One
(ONE:NYSE - news) is the only remaining major bank, while Boston and Philadelphia are more important centers for the mutual-fund industry.
And finally, technology can't get a solid footing in Chicago because the great entrepreneurs flee to California to start their companies, the primary example being Marc Andreessen taking his browser technology to Silicon Valley to start Netscape Communications (now owned, BusinessWeek might have pointed out, by Dulles, Va.-based America Online
(AOL:NYSE - news). In Defense of Chicago
This is all true. It's also largely irrelevant to the Chicago story. The decline of the exchanges are a blow, but they're more of a culture than a major jobs generator. Sure, the headquarters are dwindling, but Chicago always will be a center for American businesses. And as for major league, Chicago, unlike Los Angeles, has an NFL football team, not to mention two major league baseball teams, an NBA team and an NHL team.
In the business world, the article didn't emphasize major names like Motorola
(MOT:NYSE - news), Sara Lee
(SLE:NYSE - news) and R.R. Donnelley & Sons
(DNY:NYSE - news) and influential Chicago-based professional services firms like law firm Kirkland & Ellis.
The bank story is old, by the way: Chicago's banks largely got bought out a decade ago. And Boston and Philadelphia owe their prominence in the fund business to Fidelity and Vanguard, respectively, not to any intrinsic qualities of those fine cities. In fact, BusinessWeek's cover story largely was a rip-off of a major project written more than a year ago by my journalistic alma mater, Crain's Chicago Business, a hard-hitting publication that came to the conclusion that Chicago would survive these calamities.
The technology argument is a bit tougher to argue: On the one hand, there is only one Silicon Valley. Period. As University of California scholar Annalee Saxenian argued in her influential book "
Regional Advantage
," the fortuitous combination of Stanford University, Sand Hill Road, the weather and a risk-taking environment have made this Valley unique. That's not to say there can't be other centers of technology. There's nothing that cries out technology about Austin, Texas, other than that's where Michael Dell decided to plant his company.
But it's absurd to lament Andreessen's departure as a loss for Chicago. He left because co-founder Jim Clark, a former Stanford professor, already was there -- and Clark had the money. Great technology companies have been born in Chicago, notably Motorola, but also U.S. Robotics, which played on Chicago's strength as a center for telecommunications long before the World Wide Web existed. Chicago and Elephants
Indeed, the elephant in the room of the BusinessWeek article is Andrew "Flip" Filipowski, former CEO of software maker Platinum Technologies and now the head of public venture fund divine Interventures
(DVIN:Nasdaq - news). Filipowski has had the chutzpah to anoint himself dean of Chicago's tech funding community, and it is in no small part due to the flop of his me-too operation -- divine was meant to ape the success of CMGI and Internet Capital Group, but came much later to the game -- that Chicago has developed such a severe inferiority complex. Since Filipowski made himself the face of the Chicago tech world, that world has a frown on it today.
I wouldn't be surprised, in fact, if the leaders of Chicago's tech community provoked the BusinessWeek article with their woe-is-me complaints, which I've heard repeatedly. Chicago's fear of being left behind reminds me of the New Yorker, the Parisian and the Chicagoan who've been assigned to write an essay on elephants. The New Yorker pens, "Raising Elephants for Fun and Profit in Close Quarters." The Parisian turns out, "The Lovemaking Habits of Elephants." And the product of the Chicagoan: "Elephants: What Do They Think of Chicago?"
Chicago, you're a proud city with a gorgeous lakefront, stunning architecture, world-class theater, affordable housing, cosmopolitan restaurants, a bursting-at-the-seams tourist trade, outstanding universities, honest and friendly citizens, and companies and firms with leading positions in the industries that make America tick.
Quit apologizing to everyone else about what's lacking and just go about your business. And definitely don't pay any never mind to the blather that appears in this week's BusinessWeek.
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In keeping with TSC's editorial policy, Adam Lashinsky doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback and invites you to send it to
Adam Lashinsky
.
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