The Once and Future Silicon Valley

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By reconnecting with its past, Pittsburgh can find its future.

Success begets caution. Pittsburgh’s stellar success in the early 20th century with breakthrough innovation fueled a culture of conservative practices which serves us poorly today, according to Future Tech columnist for Pittsburgh magazine, science writer and technology entrepreneur Chip Walter, featured speaker at the September 25 Forum event. The key is returning to the city’s radical roots...

A hundred years ago, Pittsburgh was the nation’s Silicon Valley – an industrial version perhaps, but one that served as the prototype for America’s dawning 20th century economy. “All of the big thinkers, all of the big innovation, all the big fortunes were being made here,” according to science writer and technology entrepreneur Chip Walter, who will be a featured speaker at the September 25 Pittsburgh Product Strategy Network Forum “Cultivating Product Category Winners.”

“Everything from Heinz to Alcoa to Mellon to Carnegie Steel and Gulf. When you look at the major industries of the 20th century, Pittsburgh had its fingers in almost all of them. And much of the innovation in those industries was done here on the business side as well as the technological side,” he said.
Lots to Lose

Ironically, according to Walter, whose 2002 book with Star Trek actor William Shatner (I’m Working on That; Simon and Schuster) chronicled the fulfillment of the TV series’ imagined technology advances, the region’s success also carried the seeds of its own decline, although that didn’t become apparent until much later. “Huge fortunes got made. In the process, we also trashed the city and turned it into a mill – a money mill.

“Suddenly there was a lot to lose because huge fortunes had been made. So people grew more conservative. They also said, ‘we figured this out; we know to build businesses so we’re going to build them our way’,” he noted. “That’s real difficult 100 years later when you’ve got lots of new ideas and technologies flying forward that are radically different from the technologies that put the city on the map.”

“But the region’s future economy need not remain a prisoner of its past, Walter claims. “By lucky circumstance and hard work, we still have a lot of intellectual capital here and two great universities – lots of great ideas, enormous potential that comes out of the universities and out of the culture of the people that live and work in those areas,” Walter said. “But we don’t have a financial structure, at least locally, that seems to be as supportive of new and radical ideas which lead to disruptive markets as you would in places like Silicon Valley, which have a shorter memory and understand that you have to have wild ideas in order to create earth-shattering businesses.”

Scared money

“So we tend to play with what gambling friend of mine would say is ‘scared money.’ If I sit down at a table to play poker and I have $50 in my pocket and at every hand I’m thinking: ‘Should I bet $10? Should I bet $50? Should I bet $25?” That kind of thinking is lethal, according to Walter’s friend. “It’s just a matter of time before I lose. You’ve got to be able to go in and say ‘I’m playing like I’ve got all the money in the world’.”

Playing out of fear can become self-reinforcing. “If you’re an innovator and people keep telling you to become more and more conservative, then you might because you think that’s the only way you can succeed. But in fact, all the evidence illustrates that really big successes will come not from playing with scared money but with really laying new ideas on the line with passion, with vision, with guts, to get the glory,” he said.

““The hard thing is: how do you change the culture? And that’s one of the things we’ll be trying to do this particular evening – to begin to get people to think about how you can change the culture. If Pittsburgh wants to be a central player in the 21st century like it was in the 20th, it’s going to have to take the gloves off and be willing to take big chances. The people who live here and are coming up with business concepts are going to have to be encouraged. We don’t have very many examples over the last 25-30 years of companies that have come in here or started here that have really become category killers. Respironics is one. And maybe FORE Systems. But they got swallowed. FreeMarkets might be the next closest. The best example might be transplant surgery and the explosive growth of UPMC. US Steel is a good example of what can happen to a company if you don’t continue to innovate.”

Another route

Even so, there is an alternate pathway to success – particularly for established companies in major product categories, according to Walter. And it, too, has been the route to success for a number of the city’s venerable giants. “For big companies that own big shares of the market, history shows that all they have to do over long periods of time is be second into the market because they have the clout to incrementally expand the market. So they can watch the innovators go over the wall and get shot and then after they’ve wiped out a few machine gun nests, they can move in and take the market.

“But that doesn’t work if you’re an innovator. And that’s why innovations tend to come from smaller companies – I mean really new innovations, category killers. IBM is probably a great example; Apple took all the chances. They created the personal computer. Apple now has 5% of the market. IBM and IBM-style computers have 95%. So they came in second and IBM owned the market in almost no time,” he said.

Radical roots

Years ago, when they first started out, many of today’s conservative giants had introduced completely disruptive technologies into their respective markets, according to Walter. Others had found innovative ways of bringing those products to market. “Alcoa is a perfect example. Charles Martin Hall was a college student when he came up with the method for creating inexpensive aluminum. He had been in class when his teacher said ‘anybody that figures this problem out is going to get rich.’ And he said right then, ‘I’m going to be that person.’ And he went and figured it out and then hooked up with Alfred Hunt, came to Pittsburgh from Oberlin, and founded Alcoa. They started in a little building in the Strip District. It was an utterly disruptive technology that just upended the whole industry whenever they came into it. But my guess is they’re not doing a whole lot of disruptive work these days.

“Carnegie reinvented the way steel was manufactured. The same with Ford; he didn’t invent the car, but he invented the concept for the assembly line. You could even say of Ted Turner that he didn’t invent news; he invented new ways to deliver it. You have to look closely to see what’s the real innovation, what’s the real vision.”

ABOUT THE AUTHOR:
Peter Longini is a contributing writer for the Pittsburgh Product Strategy Network. Peter is a former professor of communication research at the University of Pittsburgh and professor of TV-Radio at Brooklyn College, CUNY. During the 1980s, he was an executive speechwriter at PPG Industries in Pittsburgh. Since 1992, he has been the principal of Peter Longini Communications, an editorial services company in Wexford, PA whose clients include various publications, public sector agencies, nonprofit organizations and corporations. In January 2003, Dr. Longini became an adjunct faculty member of New York University and Director of Communications for Cranberry Township, Pennsylvania. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it