Aaron M. Renn

All Things Aaron

Is Peter Thiel Right About Chicago?

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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.
  1. 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.
  1. 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.
  1. New Yorkers 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.

Comments

  1. I lived in Chicago after living in NY and SF. I concur with your observations that Chicago is underwhelming on many measures. It always felt like a larger version of a Midwestern city. While NY and SF were in conversation with Europe, Asia, Latin America, etc., Chicago was preoccupied with besting Detroit, Milwaukee, etc.

    One area that is an exception is in academia, especially the social sciences. The work that shaped the field of economics as it is today was done to a large extent in Chicago. I think the same can be said for sociology, political science and some other fields. Harvard collects work-class scholars after they have proven themselves, but more groundbreaking work happened in Chicago.

  2. If you’re in a fast-paced place, you have to slow down when you go somewhere else. Not only do people have knowledge of what is going on elsewhere, but they have the big-picture perspective to understand why.

    • And yet these world-bestriding connected Masters of the Universe crash the world economy (repeatedly) and lead the policy think tanks that justify multiple wars and invasions that destabilize entire regions.

  3. Aaron – Are you conflating “ambition” with “influence”? There are quite a few industries in Chicago that are lucrative and draw in highly ambitious people with a disproportionate share of grads of the Ivy League or Ivy-level equivalents (e.g. Northwestern and University of Chicago), such as financial trading, law and the consulting industry that you used to be a part of here. You can survive in any of those industries without an extremely high level of ambition and they’re large enough to create enough income to populate much of the affluent neighborhoods and suburbs of the city. I think the HYP definition of eliteness is a bit limiting – look at the top undergrad, business and law schools at Northwestern and University of Chicago (only NYC can claim to have as many grads of top 5 MBA programs living here). By the same token, I find the Big Ten presence to be a feature of Chicago as opposed to a bug because the public universities in the Midwest are generally much stronger than their counterparts in the Northeast (with many top programs in the “ambitious” fields of engineering and business, in particular) and they’re graduating thousands of more people per year compared to the Ivy League. It would seem that the pool of Big Ten graduates in close proximity to Chicago is a stronger “next tier” of talent beyond the Ivy-types than what NYC has (where NYC has been pulling from a lot of Big Ten schools like Michigan and Wisconsin at longer distances and now the Big Ten itself has shifted eastward with Penn State, Rutgers and Maryland).

    Regardless, I don’t think it’s a matter of *ambition*. You don’t become a partner of a Chicago-based trading, law or consulting firm without a ton of ambition (and beating out a lot of other ambitious people chasing that brass ring).

    Now, I do think that there’s an issue of *influence*. Technology, entertainment and politics have a disproportionate amount of influence on society, and those happen to be the areas where San Francisco, Los Angeles and Washington respectfully specialize in. (NYC is in a different category altogether since I agree with you that it’s a power in virtually every market segment of any importance out there.) Chicago seems to effectively have a high-end back office function to those industries – the city actually has a massive concentration of engineers and software programmers, but they’re often consultants or technical support for companies as opposed to the builders of them. Chicago has arguably the strongest live theater and performing arts scene in the country outside of NYC, but the best invariably end up heading to Broadway, Saturday Night Live (for top comedians) or Hollywood. There is also a strong political culture here (for better or worse), yet reaching the top in politics inherently means that you need to go to DC eventually.

    This begs the question: does Chicago actually need to change on this front? (This is separate from the question of whether Chicago needs to change its approach to crime, race relations, etc., which is an entirely different discussion.) Maybe more importantly, *can* Chicago realistically change on this front? With your reference to Big Ten grads again (I know that you went to Indiana), the irony of focusing on the attraction of Ivy League grads is that if Chicago had merely retained the talent from the computer science program at the University of Illinois (a quintessential Big Ten school and, for full disclosure, my alma mater), it would have nabbed some of the megastars of Silicon Valley such as Marc Andreesen (who you mentioned), Larry Ellison and the founders of YouTube.

    Did Chicago do something wrong and, if so, is it correctable? If it can’t realistically be changed (e.g. you’re never beating LA as an entertainment center no matter what resources you throw at it), does it ultimately matter if a city has a lot of ambitious people that don’t happen to be in the very top influential industries that draw headlines (but maybe excel in still very important areas, such as the law and finance)?

    This is an already long-winded post and I’m not sure if I have any answers. It’s easy to point out the differences between Chicago, NYC and San Francisco – that’s low hanging fruit. I’m just trying to frame the true scope of the issue, whether it’s actually a problem, and whether it can legitimately be changed. I’ll stop here for now (although I have a lot of other thoughts).

    • This response says it all.

      Also, Aaron you spend too much time granting the features that make NYC unique and great to lesser cities like SF and LA. The truth is, Chicago is just very much on your mind because you lived there for so long, and now you live in NYC. You know Chicago’s strengths and shortcomings. It is natural to make comparisons.

      Have you walked around SF or driven around LA nearly as much? Can you possibly compare them to NYC and view them as anything remotely close to being its peer? In sheer thrust of built environment, actually, only Chicago really comes close. I believe your whole premise is flawed–you are not only being unilaterally unfair to 1 city, you also may be asking the wrong question.

    • Thanks for the comments.

      I don’t think Chicago did anything wrong per se. This is just how the world developed.

      It’s possible to tell a great story about the city, but pretty much every city can tell a great story. Look at it the other way. Chicagoans have no problem saying that they suck in all the top talent in the Midwest. Every factor that Chicago itself would argue for in favor of its unique status and dominance in the Midwest (even over say Minneapolis), works when you look at the tiers above Chicago too. These forces have worked in both directions. They’ve benefited Chicago enormously in some ways, but also badly hurt it in others.

  5. Chicago’s has the problems of most American cities, but the benefits of a relatively few. It is not the largely industrial city of my youth anymore. It’s transition has been shockingly successful, but has left many behind. It had no choice but to step up to the global stage, which it has attempted repeatedly to do for over a 100 years. It’s a regional capital, but its region is one of the wealthiest in the world, both in human and natural resources. Its transportation network connects it to the rest of the world unlike most other American, and even world, cities. Its urban amenities are unlike most other American cities. It’s not New York, Washington and LA. It never will be.

    It’s Chicago.

    • Well put.

      Chicago is just its own thing. Screw the “larger conversation”. I don’t even know what that means.

  6. Aaron, I think there are actually 3 issues here that, in this post at least, seem a bit conflated to me. First is the raw level of talent a city attracts. New York is certainly near the top, but I think a number of other cities attract top talent in their fields. Boston is the smartest city I’ve ever been to. It has so many universities and top notch research institutes and hospitals it is amazing. For sheer brainpower I give them the crown. DC,Houston, and other places attract the same top talent in their respective cities. Even Detroit in its own way has top notch engineers.

    Which brings us to#2. The type of industry that powers a major city. Yes San Francisco has a huge world influence. Computer tech, by is nature and current position in innovation, currently had an outsized impact on everything. Boston’s key fields, Ed’s and Meds , is hugely important but doesn’t have the immediate impact that IT does. It takes longer to make big discoveries and bring them to market. But make no mistake, Boston’s biotechnology industry is posed to reshape humanity just as much or more than tech, or media or finance.

    Third is ambition. Think there’s more ambition in New York than Boston? Go see what they’re working on in those labs in Cambridge. As just stated above, I think the immediate results are muted because biotechnology is so much harder than creating Facebook. But I think the ambition is there in many places. No way you can cure cancer or reshape the human genome without ambition.

    I’m using Boston because I’m familiar with it, but there are a number of cities that have clusters in which talent and ambition are brimming, but they’re just not as obvious.

    Having said that, I do think NY had a unique position in several impact industries that we see shaping the world-finance, arts, media. I would just be a bit more discerning in dissecting the reasons for that position.

  7. I don’t remember if I’ve ever commented on theurbanophile in the six years I’ve been reading. I get the feeling [not that it will make me any buddies, necessarily] that most of the readership here would grab that brass ring for Chicago or their own fair city, and make it the talent magnet, if that were really up for grabs. And I think that that wouldn’t be a commendable choice. From a certain standpoint talent is a gift, but look at the very language Aaron is led to use:

    “…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…”

    Smartness lets you believe you can reasonably stand in reach of more rewards per fixed time period than the next guy for the same amount of risk. This tempts you to clever efficiency, optimum speed. Maybe slowness is your way to maximize whatever desired rewards; then do that. Google has an urb-tech subsidiary because they view cities the way other bright people view careers — as an engineering problem.

    ==
    Intermission:

    3 (that I know of) of the top ten in my rural Texan high school class have relocated to London, and I am one of them, so I am really one to talk here; but on the other hand I know that attaining great or elite status is shorthand for doing better for oneself than 99% can w-r-t the metrics that other smart people value. Peter Thiel might amend this to say that it’s about the metrics that smart people are GOING TO value next, but whatever. This is just a slightly more abstract version of a very concrete power payoff. Truth is, if goodness means relying on something more deeply than you trust in your relative greatness, it is mind-wrenchingly hard for a great person to become a good person.

    ==

    NY/SF/LA/DC-and-London are where the money is: If you can cut it, you can go there. Is that really ambition or a path of greased resistance? So you understand that proximity to pursestrings reinforces itself. But part of that feedback loop is that, by and large, those who are shaping the world in their image are those afraid of getting left behind, wise enough to leave the loop’s ground rules unchallenged and merely distinguish themselves. A prof at MIT said to me after a visiting exec’s lecture, “Yes, I know the man is a shark, but I’m talking to this class about investments, not who I’d have over to dinner.” Is that even ambition? Seems a coward’s brand of overachievement. And philosophically dangerous to ever flirt with the feeling that being admirable (in the sense of thoroughgoing grace, say) is the booby prize for second-place finishers in the race to the levers of influence.

    I’m sorry to drone on. Command of smarts, though, will make a person and a city, however canny, lazy. When there are always so many birds in the bush to be brought to hand, aiming high, it takes a brave city or person to set other more enduring goals altogether, and risk losing out on the (more typical, with gusto) HPY-style admiration.

  8. So in other words, Chicagoans are just less work-obsessed egoists (or let me paraphrase: douchebags) than SOME of those who reside in Silicon Valley or NYC? (I say some because I happen to enjoy the company of many coastal denizens.)

    I’ll take that compliment any day.

    But on a side note… There’s literally zero empirical evidence to state that Chicagoans don’t “dream big.” So aside from the refreshing humility you often see in people here, I’m not really sure where you’re going with that one Aaron.

    And in regard to where graduates of “the big three” (Harvard, Princeton and Yale) reside? Someone might have forgotten to pass you and Murray the memo that UofC is now among those “big three”: http://www.chicagobusiness.com/article/20160913/NEWS13/160919966/u-of-c-named-third-best-u-s-university

    “But I continue to be astonished about how much New Yorkers know about what’s going on, not just around the world but across the country.” And I continue to be astonished by how adorably American and provincial New Yorkers are when they continuously (sometimes feverishly) stammer about how knowledgeable they are about certain topics… When in fact they’re just regurgitating whatever parochial views they absorb from their Anglo-centric media outlets and parity parties (‘scuse me, I meant to say dinner gatherings).

    Honestly… I find some New Yorkers (often the more privileged) to be some of the most out of touch individuals I’ve ever encountered. And their inability to listen or open their minds to views that contrast with their own is a huge turn off.

    That’s not to say that Chicago doesn’t have its issues. I’d be all with you if you actually stated some of those (financial crisis, lack of investment in poor neighborhoods, necessary infrastructure upgrades, the need to implement common-sense business reforms to loosen entrepreneurial regulations, lack of a unified global marketing effort of city’s many strengths, etc.).

    But look, whatever makes you and your peers feel like the life-sucking existence often endured in these “global powerhouses” is worth it… Right?

    So here’s the main point: after making it through all of your ramblings, they really amount to nothing more than an anecdotal spew of misinformation from a typical white Gen X American. Still… The “homey,” ambitionless, husky, Midwestern farm-boy in me can’t help but say good luck selling those ideas to your “hyper intelligent” peers, Aaron.