Is Peter Thiel Right About Chicago?

Photo Credit: Berlin, Germany, March 19, 2014. Hy! Summit – Image by Dan Taylor. www.heisenbergmedia.com

Peter Thiel recently made one of his trademark provocative statements by saying, “If you are a very talented person, you have a choice: You either go to New York or you go to Silicon Valley.”

The problem for Thiel was that he said this while speaking at an event in Chicago. No surprise, it didn’t go over well. An enquiring questioner wanted to know, “Who comes to Chicago if first-rate people go to New York or Silicon Valley?”

Thiel sputtered a bit and suggested he was employing hyperbole, but said “It’s an extremely important question, and it’s the type of question that we don’t ask enough,” though admitting he isn’t sure “exactly what Chicago should be doing right now.”

After being initially reported by the Chicago Tribune, the story was picked up byVanity Fair, Chicagoist, and Crain’s. A blogger named John Carpenter posted a sharp retort at Forbes.

Having lived nearly 20 years in Chicago and now two in New York, I’ve had a few observations about the differences between the two cities that I’ve resisted posting because it would inevitably be seen as taking a cheap shot at a city I chose to leave. But given the hook of Thiel’s comments, I decided to take the plunge.

Is Thiel right? Factually speaking, no. Obviously there are first-rate people in places other than San Francisco or New York. Given its size, history, status, etc. Chicago has a number of them.

But Thiel is highlighting something real with uncomfortable implications for the Windy City.

Cities of Ambition

Let’s rephrase Thiel slightly and we’ll get a stronger statement: if you’re a person with global-scale ambition, you move to either New York or Silicon Valley.

There’s a lot of truth to this version of the statement. Think about the egos and the ambition of the people in Silicon Valley. People like Thiel (Paypal, Palantir, others), Mark Zuckerberg (Facebook), and Travis Kalanick (Uber) practically define Silicon Valley. In New York, think about the incredible ambition of a Michael Bloomberg or a Donald Trump – two radically different people to be sure, but both extremely ambitious.

How many of these kinds of people live anywhere in the US outside those two cities? A few. You can think of Bill Gates (Microsoft) and Jeff Bezos (Amazon) in Seattle. Or Elon Musk (Tesla, Space X, et. al) who lives in LA. But there aren’t many. It’s telling that Mark Zuckerberg started at Harvard and moved to the Valley. It’s similar for Mark Andreesen (Netscape) and many others before them.

The bottom line is that the ambition level in Silicon Valley and New York is simply off the charts. That kind of ambition is not what you find in Chicago (or pretty much anywhere else). It can exist from time to time – think Barack Obama – but is a big anomaly.

If you are someone who is dreaming big – really big – it helps to be in an environment where other people are dreaming big. That means NYC or SF.

America’s New Upper Class Elite

Charles Murray’s book Coming Apart charted the rise of a new upper class, an elite – the people who really call or influence the shots in American business, politics, culture, etc – that increasingly lives in self-segregated bubbles of others just like them.

These bubbles of the American elite are heavily concentrated in four coastal cities:

[I]t is difficult to hold a nationally influential job in politics, public policy, finance, business, academia, information technology, or the media and not live in the areas surrounding New York, Washington, Los Angeles, or San Francisco. In a few cases, it can be done by living in Boston, Chicago, Atlanta, Seattle, Dallas, or Houston—and Bentonville, Arkansas—but not many other places.

Murray here puts Chicago in a special class; it’s one of the handful of cities outside the Big Four where it’s possible to be part of the national elite. That’s not nothing. But clearly there’s a big gap in there.

Murray undertook a variety of quantitative analyses to try to sleuth out the geography of the new elite. One of them was to look at where the graduates of elite schools lived, particularly the Big Three of Harvard, Princeton, and Yale (HPY). Here is what he found:

As mature adults, fully a quarter of the HPY graduates were living in New York City or its surrounding suburbs. Another quarter lived in just three additional metropolitan areas: Boston (10 percent), Washington (8 percent), and San Francisco (7 percent). Relative to the size of their populations, the Los Angeles and Chicago areas got few HPY graduates—just 5 percent and 3 percent, respectively. Except for the Philadelphia and Seattle areas, no other metropolitan area got more than 1 percent.

There’s an East Coast bias to these schools as we might expect, but New York has over eight times as many HPY grads as Chicago. San Francisco has over two times as many, and notably has more than much larger Los Angeles. This is pretty remarkable given that the region’s focus is technology, not exactly what comes to mind when you think HPY (although Gates and Zuckerberg tell a different tale, even if not actually graduates).

So Murray’s research also foots to Thiel’s observation in a generalized sense.

Personal Observations

I had four of my own previous observations.  First a pre-observation: I never noticed any difference between the caliber of Accenture people in Chicago vs. New York. (It generally seemed to me that in the consulting space, the talent level of Accenture employees was pretty consistent across geographies). Obviously I had a network that included a lot of Accenture type corporate people in Chicago, whereas in New York my network is more skewed to policy, media, finance, and startups (though includes quite a few Accenture people too).  These network differences obviously shape my personal experiences, but my observations are consistent with Murray and with some others who lived in both cities and with whom I’ve compared notes.

With that, my observations are:

1. New York has a higher horsepower rating. Growing up in Laconia, I was a straight-A student and valedictorian of my high school without studying. Similarly, I was simply smarter than most people in college. As I moved up in life, the competition got tougher, obviously, but even at Accenture I basically just had more horsepower to throw at problems than most. (You may recall that I was also somewhat lazy during this period). In New York, that’s just not true. I am constantly around people who are at least as smart as I am, if not smarter. You can’t just think you can get ahead here by throwing more MIPS at the problem than the next guy, because he’s just as good as you or more so.

2. New Yorkers have incredibly vast and wide-ranging knowledge. That famous New Yorker cover portrays NYC as an incredibly provincial place. And it is. But I continue to be astonished about how much New Yorkers know about what’s going, not just around the world but across the country. A couple years before moving there I was visiting the city and had dinner with Fred Siegel in Brooklyn. When I mentioned Indianapolis, he proceeded to provide a number of extremely accurate and insightful comments about the city. I was taken aback. What were the odds he would know anything about Indianapolis? I’ve since come to see that kind of encyclopedic knowledge as commonplace. People in NYC are connected to networks and have their fingers on the pulse of what is going on all over the country and the world. I’ve similarly ceased to be amazed every time I run into someone with a vast array of cultural knowledge. People here are just like that. This is a world away from the much less connected and more limited expanse of knowledge in Chicago.

3. Chicago is Big Ten, New York is the Ivy League. The numbers above illustrate this well. Chicago is dominated by Big Ten grads and Notre Damers. New York has a vast seat of Ivy League and other elite school grades.  This is well attested above, so no more on that.

4. New Yorker are connected to the highest levels of politics, business, media, and culture. This is almost a truism, but it’s remarkable when you actually experience it. This is where the sausage is made. (I suspect one can get a similar feeling in DC, or in SF for tech, or Houston for energy). A friend of mine who was also a long time Chicago area resident that now lives in Philadelphia observed, “Chicago doesn’t know they’re not in the game. They’re in a game, but they’re not in the game.”

None of these is probably news in a sense. They were things I could have probably told you before. But intellectual awareness of truth is one thing, visceral experience of it is another.

The Draw of New York and San Francisco

Now, none of this is to say one must live in NYC. I love it, but when I was two years into living in Chicago, I loved that city even more.  Some people have a transformational experience in college as they are exposed to new experiences, ideas, people, etc. That wasn’t the case for me. But I did have that in Chicago. Moving to Chicago was personally transformational for me in a way that moving to New York was not. (Of course, I was much younger then too). And there are lots of places in America that I think I could enjoy living in. Let’s not invest too much in NYC and SF.

On the other hand, let’s not invest too little either. It’s clear that Greater Greater New York, and the Bay Area, are uniquely dominant and have a unique draw. It’s the same with London in Europe. (No surprise that the top overseas expansion destination for Chicago based firms is London. Boeing has 2,000 people in London – four times as many as at its Chicago HQ – and plans to double that. Where do you think the top intercontinental investment location for London firms is?)

If you want to get a sense of this, just read Ted Gioia’s piece in the latest City Journal about how New York became the capital of jazz, displacing New Orleans and Chicago, and beating back a midcentury challenge from LA.  And Michael Agovino’s piece in the Village Voice, “Almost Famous, Almost Broke: How Does a Jazz Musician Make It in New York Now?”  As Gioia puts it,

Jazz has gone global. Just like your job, your mortgage, and the cost of gas at the pump, the music now responds to global forces. As a jazz critic, I now need to pay attention to the talent coming out of New Zealand, Indonesia, Lebanon, Chile, and other places previously outside my purview. Almost every major city on the planet now has homegrown talent worthy of a worldwide audience.

Yet one thing hasn’t changed on the jazz scene: New York still sits on top of the heap. Great jazz artists often don’t come from Manhattan, but they struggle to build a reputation and gain career traction if they don’t come to Manhattan. The recent sensation over Indonesian jazz prodigy Joey Alexander is a case in point. At age eight, this formidable youngster had already caught the attention of jazz icon Herbie Hancock, and at nine, he beat out 43 musicians (of all ages) from 17 countries to win a prestigious European competition. A year later, Alexander’s parents moved to New York, realizing that even the greatest prodigy in jazz needed what only that city could offer.

And as Joel Kotkin, who frequently speaks to audiences full of civic leaders around the country, told me, “No matter where I go, invariably the richest guy in the room has a kid in either New York or San Francisco.”

Chicago: The Semi-Elite City

This problematic status of Chicago as “semi-elite” is really at the root of many of its problems. It’s something I’ve talked about before, such as by noting its global city functions are weaker, and resultantly it spins off far less wealth and tax revenue. Or my notion that it’s the duck-billed platypus of cities.

This isn’t unique to Chicago. It affects other cities like Amsterdam. Simon Kuper of the Financial Times wrote a column on the rise of the global capital about how young up and comers in the Netherlands had their sights set on London, not Amsterdam. As he put it, “Many ambitious Dutch people no longer want to join the Dutch elite. They want to join the global elite.”

As with Thiel, I don’t have the answer to this problem, but he’s absolutely right that it’s one that’s too seldom asked, but which needs to be squarely faced. Studying and comparing notes with these other cities like Amsterdam and how they are coping with this problem might be a good start.

In the meantime, to end on a positive note, I do think there are fields where one could unquestionably have top level talent and ambition, and move to Chicago in search of success.  I would include aspiring comedians, chefs, architects, and indie rockers in this list. There may be others. Protecting and building on these while finding a strategic response may be another good place to start.

from Aaron M. Renn
http://www.urbanophile.com/2016/09/19/is-peter-thiel-right-about-chicago/