By Mike Bradshaw
A recent front page article in the Chattanooga Times Free Press reported on Chattanooga’s dramatic decline in an economic index produced by the Milken Institute. The irresistible irony that the Gig City could fall so precipitously in this empirical ranking while also basking in the glow of the nation’s first metro-wide gigabit network was the article’s lead.
The authors made a number of important points in their treatment of the news. And as a community that aspires to large goals, we would we be well-advised to pay close attention to what the report is telling us. However, the tantalizing headline aside, this index doesn’t really measure effects that technical innovation programs like GIGTANK or even the city’s nascent startup community can affect in the short term.
The report, “Best-Performing Cities 2013”, indexes a set of job and GDP-related indicators and ranks 200 of the nation’s top “Metropolitan Statistical Areas” according to these measures. The data is compiled from a variety of sources such as the Bureau of Economic Analysis, and it is analyzed by researchers at the Milken Institute to create the 200 Best-Performing Cities list.
The Best-Performing Cities Index is based on nine factors, which are weighted. Only four of those factors are related to high-tech, and the weight assigned to each is less than that of the other five general job and salary categories in the index.
The large majority of the index is weighted toward general job and wage growth. Less than 30% of the indexing is weighted toward technology-related jobs. Almost half of that 30% measures concentrations of tech industries in our five-county region. These are all critically important areas that our city’s political and economic development leaders, along with their counterparts in the surrounding counties, are working to improve. But, the City of Chattanooga is only a part of the story, and tech companies, especially startups, represent an even smaller fraction.
The Chattanooga Metropolitan Statistical Area (MSA) consists of Catoosa, Dade and Walker counties in Georgia and Hamilton, Marion and Sequatchie counties in Tennessee. This was the region analyzed in the study. This area is anchored by Chattanooga, and so the results are grouped and labeled as “Chattanooga” in the report.
The takeaway from these details is that the story is not really about the Gig City, GIGTANK, or the Gig. It’s not even about Chattanooga; it’s about the region. Our fall in the index indicates the scope of the issues are far larger than can be meaningfully affected by any one initiative – no matter what the impact that work might be creating. An interesting angle on the story is the fact that VW, Amazon and Wacker all located in our region during the period under study. It was also during this time that Chattanooga began building its reputation as the Gig City in global tech circles. Yet we declined anyway. And we didn’t just fall a few places relative to our peers; we fell almost all the way out of the rankings.
The actual irony here is that the success of bringing these great companies into our region may have also contributed to the drop in our ranking. The bump these companies brought to our area may have been heavily reflected in data for 2011, causing us to rise in the rankings. But these successes may have also played into the fall of our ranking when the rate of change leveled off from 2011 to 2012. Based on the description of the report’s data, it’s hard to conclusively confirm whether this is actually the case. However, what is clear is that these companies are good for our region, that the Best-Performing Cities index weights their impacts heavily, and that our ranking still fell. The underlying factor here likely has more to do with comparative wages in traditional industries, like those that established major footholds in the area a few years ago, versus wages in high tech industries, in addition to whatever effect the slowing of that growth spurt may have caused.
The Times Free Press quoted a local tech startup founder who observed that our city ‘needs a win’. Quickcue, which came out of CO.LAB’s annual event, 48Hour Launch, was recently acquired for $11.1 million. While this may not constitute a “win” by the standard of the Milken report and move our position in the index, it is a big hit by any definition. While the article’s authors made a fair point in relating the rise of the Gig City to the decline in the index, the implication that the startup community and tech entrepreneurs are falling short is a bit of a red herring. To improve our ranking in this report and similar reports about the regional economy will require larger tech companies to locate in our area in large numbers. This doesn’t happen quickly, and it doesn’t happen in a vacuum.
Silicon Valley is the standard to which aspiring startup communities around the world are most often held, and inevitably, it becomes the ideal they pursue. A recent article in MIT Technology Review, Silicon Valley Can’t Be Copied, showed why not a single effort to emulate the Valley has succeeded. The enormous gains Silicon Valley, Austin, Boston and other high-tech meccas are experiencing today grew out of decades of hard work and pursuit. However, the factors that led to their success give Chattanooga good reason to have hope for its own long-term prospects.
“(I)t was the people and the relationships” among the established industries and major universities in the region that fueled their success, The Technology Review article concluded. “The ecosystem supported experimentation, risk-taking, and sharing the lessons of success and failure. In other words, Silicon Valley was an open system—a giant, real-world social network that existed long before Facebook.
“It also doesn’t hurt that Silicon Valley has excellent weather, is close to mountains and the ocean, and has a myriad of state-park hiking trails. These help foster a culture of optimism and openness.”
This spirit is what people mean by the Chattanooga Way, and it doesn’t hurt that Chattanooga, besides being known as Gig City, is now more so than ever, the Scenic City.
Our startup community, according to the Milken Institute report, will play a key role in elevating our ranking.
“A key attribute of the most successful metros is their focus on startup firms and providing the support systems to help them succeed. An educated, talented workforce with strong technical skills allows communities to compete on productivity and not costs.” (p. 5)
Finally, the Times Free Press observes, “In the top-rated Austin metro area, 40.5 percent of all workers have a bachelor’s degree. That’s nearly double the 22 percent share of Chattanoogans with college degrees,” Ratnatunga (one of the report’s authors) said. This stark statistic won’t change in the short term. However, the best and the brightest are beginning to consider the Gig City as a great place to live and work. We’re all working hard to build upon that momentum. Big institutions and small startups are working together in a way that sets Chattanooga apart from anywhere else in the world. To move up in the world, as reflected in indexes and reports like The 200 Best-Performing Cities, will require us all to continue to tend to our business the Chattanooga way, keeping our eyes on the vision of our tech-enabled future prosperity.