Innovation Built on Pittsburgh’s Steel Skeleton
With an educated workforce, a low cost of living, and one of the best startup environments in the country, Pittsburgh is emerging as an innovation leader between the coasts.
In the 1970s, the Pittsburgh Steelers dominated the gridiron, winning four Super Bowls in five years. But even the Steel Curtain defense couldn’t protect the city against the looming steel collapse.
“I started high school in 1979,” Pittsburgh’s mayor, Bill Peduto, told POLITICO Magazine. “Willie Stargell and the Pirates, the ‘We Are Family’ team, wins the World Series. The Steelers win the Super Bowl…And Pittsburgh Dies. Everything was closing everybody’s father was losing his job, and all of us who were lucky enough to go to college knew there was no way we could come back.”
By 1983 Steel City was in freefall. Pittsburgh’s unemployment rate hit a staggering 17.1 percent. 212,000 people in the region found themselves out of work. Its population was hemorrhaging, losing more than 4,000 people a month.
Area leaders responded with denial and people held out hope the steel mills would reopen, said Bill Flanagan, executive vice president of the Allegheny Conference on Community Development, a private-public organization that has helped drive Pittsburgh’s transformation from a mill town to a tech hub.
“The mills would lay people off and bring people back, and that had been going on for hundreds of years,” said Flanagan. But reality set in once mill owners began demolishing plants and selling the steel for scrap. “That’s when people began to get religion and understand that the economy we had before was not going to come back.”
Pittsburgh Post-Gazette’s Bill Toland described it as “a region hanging on by its fingernails.” But hang on it did. Though it took decades for Pittsburgh to regain its footing, the city was open to change, albeit forced change, and had the ingredients and regional resources that would soon be used to diversify and turn the city into the vibrant economy it is today.
At a recent speech at Carnegie Mellon University, David Chavern, COO at the U.S. Chamber of Commerce, said, “Fretting over the loss of the kinds of factory jobs our parents and their parents held will not bring those jobs back. Instead, we need to win the jobs of the future.”
Witness to Lost Jobs of the Past, Creating the Jobs of the Future
Pittsburgh native Rich Lunak is part of that revival, helping to support future job growth as president and CEO of local startup investment firm Innovation Works. “There are a lot of tremendous assets in [Pittsburgh]: world class research universities, federal laboratories, a corporate community, great way of life, and cost of living. It’s an exciting place to be,” he said.
But the future didn’t always looks so bright for Lunak, who recalls graduating from high school in the early 1980s, when three-quarters of his suburban neighborhood were unemployed. Lunak’s father, aunts and uncles were among those in search of work.
That’s part of the reason Lunak’s father thought he was unwise to leave a good job in the automation division at Westinghouse, which he landed after graduating from Carnegie Mellon University. But shortly into his career, the tech-enthusiast jumped ship to work for a three-person startup.
Lunak said his father “had envisioned me retiring with my 50-year service watch from a larger company. But looking back it’s clear to me that job security is not based on who you work for, but what kind of marketable skill set you have.”
In Search of a Unifying Vision
Creating the kind of economy that opens up opportunities for a range of marketable skills requires a unifying vision among business and community leaders—something Pittsburgh was lacking in the wake of the steel bust. A report commissioned in the mid-90s, known as The White Paper, noted that there were more than 200 separate economic development organizations working for their individual constituents.
Yet in addition to such harsh truths, the report also cited strengths of the region, such as its’ innovation capacity and strong universities, healthcare, and engineering bases. “Pittsburgh had all the fundamental tools to rebuild its economy but lacked a shared vision and common sense that, ‘We are all in this together and we have to work together to be successful,’” said Flanagan.
The report led to the creation of a roadmap that not only consolidated economic development efforts, but also helped leaders identify five key sectors to focus on: manufacturing, finance, energy, information technology, and healthcare.
Officials from 10 counties formed an alliance to establish the Pittsburgh region itself as a competitive product. Instead of sending separate, competing development proposals to state leaders for funding support, participants of the Southwestern Pennsylvania Growth Alliance would offer a single list of priorities.
“As a result of the growth alliance, there were several counties among the 10 that got their first state, capital investment in their history because they never had the wherewithal to pitch Harrisburg by itself,” said Flanagan, whose own organization entered into a strategic affiliation with the Greater Pittsburgh Chamber of Commerce and the Pennsylvania Economy League of Greater Pittsburgh a decade ago.
An Innovation Makeover
In many ways, the report formalized what was already happening in the business and education communities. The Robotics Institute at Carnegie Mellon University—where they have had a 3-D printer for more than two decades—opened in 1979 and has led Pittsburgh’s makeover as a tech hub.
Carnegie Mellon is ground zero for innovation in Pittsburgh, drawing the attention of Bill Gates, Apple, Intel, and Disney. Today, Google’s 350 Pittsburgh-based employees inhabit 140,000 square feet of the old Nabisco factory. The company announced February 3 that it plans to add another 60,000 square feet to its Steel City empire.
The Pittsburgh makeover was, perhaps, symbolically complete when the University of Pittsburgh Medical Center (UPMC) signage was installed atop the U.S. Steel Tower. Though U.S. Steel is still headquartered in the building, UPMC is among the top employers in the region, with more than 40,000 employees. Other notable Fortune 500 companies based in Pittsburgh include FedEx Ground, H.J. Heinz Co., PNC Financial Services Group, and Westinghouse.
The business activity has helped to bring people back to downtown. Since 2000, the city’s population has grown by 40% and the residents are getting younger. As President and CEO of the Pittsburgh Downtown Partnership told Pittsburgh Magazine, “We are starting to see strollers.”
No Longer ‘Hell with the Lid Off’
Lunak is among the beneficiaries of Pittsburgh’s shared vision. While the economic strategy plans were still in the early stages of development when he joined the startup community, the regional collaboration helped spur new business growth. The startup Lunak joined — Automated Healthcare — was bought by McKesson Corp. in 1996. He served as head of McKesson’s automation division before joining Innovation Works a decade later, to help foster the local startup scene.
In 1868, writer James Parton famously described Pittsburgh as “hell with the lid taken off” to describe its smoke-filled, blackened air. Today, the city is looking to its golden future.
“Pittsburgh is very different than it was back then,” Lunak said. “We are starting to develop a much more thriving ecosystem.”
Note: This article is the first in a two-part series that will explore Pittsburgh’s economic and innovation ecosystems. Part II will be published on Tuesday, February 18.
Check out more photos shot by Ian Wagreich during his Pittsburgh trip:
An area of Pittsburgh that was once occupied by steel mills on either side of the river now had been economically redeveloped to house a shopping mall, corporate headquarters of several popular brands an high-tech industries.
Pittsburgh’s housing boom is a signal of growth for the region where new apartments and condominiums like these across the street from Google’s Bakery Square facility house a new generation of transplants to Steel City.
University of Pittsburgh’s Center for Biotechnology and Bioengineering sits on Technology Drive, an area once occupied by steel mills on the North side of the Monongahela River, not far from downtown.