Great expectations
03 May 2017
Most recently came an Arizona Republic story
headlined, "What's Driving a Downtown Phoenix Tech Boom." It reads in part:
A San Francisco tech company that announced an expansion from Silicon Valley to downtown Phoenix last week cited a lively business climate and a light-rail stop as primary factors in choosing the city.
Representatives of a semiconductor packaging company moving its corporate headquarters in May from California to south of Phoenix Sky Harbor International Airport said the city is cost-effective and has the workforce they need. These recent examples are part of what Phoenix leaders say is a flood of tech industry leaders and startups looking to open in the city. Mayor Greg Stanton highlighted the growth in his State of the City speech on April 25.
I hate to be the one who suns on the parade, but a reality check is necessary.
For one thing, the top of the story lacks that basic of journalism, "How big is big"?
As in, a quadrupling of companies from a baseline of one leaves us with not too many firms.
Also, what is "tech"?
When metropolitan Phoenix gets credit for technology jobs, they usually turn out to be call centers or back-office operations. Most pay poorly.
By contrast, Seattle's tech jobs are actually undercounted because the tens of thousands of well-paid Amazon headquarters positions are classified under retail by statisticians.
Further down, we read more specifics:
Since 2012, the number of tech companies in the roughly 4-mile stretch (in the central core) grew from 67 to about 260, said Joseph MacEwan, research assistant for the Community and Economic Development Department....Over the same time period, technology jobs in that area increased from about 1,800 to more than 7,000." (According to the Census, the city had 124,000 firms in 2012 — this context from me).That sounds impressive, and maybe it is. But this counts firms with five or more employees, so many of these are very small and I go back to what is "tech."
It's not a classification used in basic U.S. Labor Department counts.
So we're back to "How big is big?"
For example, the invaluable database of the St. Louis Fed has no software publishing category for metro Phoenix. They total more than 58,000 in Seattle and 7,000 in Denver.
Indeed, there are no "all employees information" data categories for Phoenix at all.
Computer and electronic manufacturing jobs — none, as far as I know, in downtown — totaled 27,400 for the metro area in March, down from a peak of more than 56,000 in 1998 and continuing a downward trajectory.
Phoenix has badly lagged its peers in this category for many years.
And this ties into a chain of funding needed for startups to succeed, beginning with angel capital, as well as the expertise that the best VCs bring.
Phoenix needs a world-class university computer science institution. ASU claims its program ranked 31st nationally, but that's not world class nor is it in downtown Phoenix.
Attracting and retaining top young talent remains one of the metro's biggest difficulties.
For example
- A recent study ranked metro Phoenix 60th in adults older than 25 with bachelor's degrees of higher
- (Peers: Austin ranked 9th, Seattle 10th, Denver 17th).
- Only 26.7 percent had BA degrees or higher in 2015, below even the national average.
(Pro tip: Championship golf and sunshine aren't enough).
The top performing metros are at the headwaters of innovation and advanced industries, where the top executives and most talented people work.
For example, Seattle benefits from the headquarters of Amazon and, in suburban Redmond, Microsoft, as well as a huge cluster of startups and other tech firms such as F5 (this company just signed a lease for all of a new downtown skyscraper). These attract talent and capital from around the world. The University of Washington provides a pipeline of engineers and coders from a top, well-endowed computer-science program. The South Lake Union innovation district adjacent to a vibrant downtown is a huge asset.
- There is constructive news, especially the old buildings being rehabbed and the support from City Hall.
- Downtown has the spec developers and leasing agents against it, steering companies to the suburbs.
Why not have downtown open marketing offices in LA, the Bay Area, and Shanghai?
GPEC is not downtown's friend.
Neither is Phoenix's balkanization of city council districts.
Downtown should be the easiest place in the city to start a business, with speedy permitting, incentives, etc.
Also, emphasize livability: downtown needs plenty of shade trees and grass.
And look for best practices in successful cities and apply them where possible.
Another need; more international flights including to China
I'll repeat the same plea I've been making for more than a decade:
Leverage TGen and the downtown biosciences campus.
The "meds-and-eds" strategy is viable, but Phoenix is far behind where it should be (see, for example, the Mission Bay Campus of UCSF). The campus needs a hospital and private phrama firms. Surrounding areas could be great sites for biomedical manufacturing.
I write this not to bring you down, but it's critical to know the competitive landscape. Play in the Big Leagues — Phoenix already is, it just doesn't act like it.
