While traveling around Chicago, the conversations I have with people are generally routine. I ask them about Chicago, what startups I should see and if they see anything wrong with the technology ecosystem. They answer my questions, then parlay with the question of what I’ve observed so far while being the reporter-in-residence for the total time of two weeks. We go back and forth over the issues I bring up, and then finally, they admit that all of the failures and successes of Chicago tie back to one concept: The Midwest Mentality.
Understanding the Midwest Mentality is key to understanding the entire Chicago ecosystem. It affects how startups are created, who gets funded and who gets accepted into the ecosystem. It is the glue of the shoe, the plugs in the boat and the sandy foundation all wrapped up into one.
To understand where I’m coming from, I’m not from the Valley. I’m from Upstate New York and I grew up in Europe. So to say that the mentality of Midwestern is foreign to me is like saying that some ship sailed from Ireland and sunk a few years back. It’s an understatement. Although I’m coming from a different perspective, it appears to me that after having looked at the ecosystem from an outsiders’ perspective, the entire concept can be boiled down to one term: pragmatic.
Pragmatism is defined as dealing with issues on a practical level, rather than a theoretical one. What does this mean in the context of startups? Well, it means that there is no “let’s build a cool tool and then figure out the business model”. No. In fact, if you do that here, you don’t belong. That’s a plain fact that I have found very few people disagree with.
In the context of building a specific type of company, what does this mean? Again, these are loose rules and anything is possible. But according to one of the resident experts on the Chicago ecosystem, Paul Lee, it means that the biggest companies in the technology world would be impossible to build here. Specifically, the company multiple people, including Lee, brought up was Twitter.
According to native Chicagoans, Twitter couldn’t be built here for two key reasons. The first is that Chicago is not a city built to house fast scaling products (more on that in a later post). The second is that while Twitter is starting to build up a revenue stream, they are nowhere near profitable. This means that they don’t fit it with the model of solid revenue streams that Chicagoans hold so dear to their hearts.
This is because along a pragmatic line of thinking, Twitter is an unsustainable business. Sure, Google and Facebook were unsustainable businesses at one point and are now massively profitable, but Chicagoans aren’t inclined to look at the theoretical. If you don’t have a clear path to profitablity, you aren’t going to be welcomed. This flies in the face of the Valley notion that if you receive enough funding and get enough runway, you can build an awesome product and worry about finances later.
That model works wonderfully for the Valley, but again, Chicago refuses to get on the bandwagon. Which is their perogative, but it is interesting, as it essentially means that no “hot” startup could ever exist in Chicago. Aside from Groupon (again, more on that later), it will be incredibly shocking to myself, and to Chicagoans, if a company like Facebook or Twitter comes out of the area.
Which is a major problem, because while hockey-stick companies aren’t the be all-end all of an ecosystem, they are important. In fact, they can provide just the injection of adrenaline that is needed to propel an ecosystem forward. The hot companies may fizzle out, proving the Chicagoans right, but while they are alive, they bring in a massive amount of talent, energy and enthusiasm.
Without hot startups, you are left with the problem of attracting investment and talent with names observers don’t truly know. For those that don’t know, when I’m not traveling, I run the ticker. To say that I read a lot of news is an understatement. Thousands of articles every day, and in all of that time, I don’t read much about Chicago or the ecosystem. Not startups that raise hundreds of millions in funding, or startups that are doing hundreds of millions in revenue. If someone like myself – whose job it is to read everything, everywhere – doesn’t know about some of the stronger companies here, you can bet that external investors and engineers don’t know about it.
The Midwest Mentality isn’t all bad though. It creates a breed of companies that is vastly different from coastal companies. The companies are not Google, but they do have a steady stream of growing income. It is also good for the employees of the companies. Instead of working on a startup 24/7, employees take the weekend off and don’t work through the night. It doesn’t help in the creation of amazing technical feats, but it does allow people to have lives.
Which is another thing that Chicagoans and Midwesterners are rather enthusiastic about. While I’m no anthropologist, and have no recent census data at my disposal, a number of coastal transplants complained that people here got married too soon. Not high school marriages, but rather the idea of getting married at age 21 is no big deal. That’s fine, but it also means that the ecosystem can’t rely on the insane work hours of the independent, no responsibilities generation. Instead, you have a number of people who would normally be able to work into the night, but instead need to go home at 7 or 8 to spend time with their kids and families.
Yes, many people see this as a plus. “You work too much” is something I hear all too often from my non-startup inclined family members. That is a valid argument, but it also is the type of argument that holds an entire ecosystem back. It means that the ecosystem is lacking a key facet of its workforce, and that unless it changes, it will always hold them back.
This isn’t to say that the people here and elsewhere in the Midwest don’t work hard. They do. In fact, the Midwest work ethic is likely a key reason for the Valley’s success. People left the Midwest and took a historically strong work ethic, and combined it with the radical nature of the Valley to create some of the largest companies around. If we look at the history of the Valley, and specifically at Fairchild Semiconductor and Intel, the passion combined with the Midwest Mentality created things many people took as impossibilites.
Reading from an excellent piece published about Intel co-founder Robert Noyce in 1983, titled The Tinkerings of Robert Noyce. An excerpt describing the culture, a result of the fusion of the Midwest with the intensity of the West:
“If you were a young engineer and you had an idea you wanted to get across, you were supposed to speak up and challenge Noyce or anybody else who didn’t get it right away. This was a little bit of heaven. You were face to face with the inventor, or the co-inventor, of the very road to El Dorado, and he was only forty-one years old, and he was listening to you. He had his head down and his eyes beamed up at you, and he was absorbing it all.”
This isn’t just something that happened 40 years ago though. If we look at current Silicon Valley heavyweights, we see that the work ethic of the Midwest brings quite a bit to the table. Marc Andreessen, Evan Williams, Max Levchin. Each of which come from the Midwest, and yet didn’t only rely on the pragmatism of the Midwest.
Many people here in Chicago point to these examples and proclaim that the area is great at creating leaders in thought and action, and that all Chicago needs to do is to keep them here. What they don’t understand is that working hard isn’t enough. That the Midwest Mentality isn’t enough. What an ecosystem needs is the work ethic of the Midwest – which Chicago has in ample supply – combined with the intensity that the Valley has shown over the years.
Sure, being pragmatic has its benefits. Work a 9 to 5 job and see steady, predictable growth over time. You get a salary, and you are possibly acquired. You spend time with your family and get to send your kids off to college. That’s fine, but its not revolutionary, which is something that the technology industry – regardless of geography – is based upon.
The steady life only gets you so far, but in the end, the pragmatism is both Chicago’s greatest asset and its greatest liability. Which really is the entire problem with the Midwest Mentality. Midwesterners have their priorities straight, but nothing generationally disruptive comes out of being conventional.