Leaving steel behind for tech

Leaving steel behind for tech

The steel capital of America is emerging as a vibrant hub for AI and robotics.

In recent years, economic disruption has left many people in Pittsburgh uneasy – indeed, the city has become a symbol of the nation’s mounting concerns about the success of high-tech industries and their effect on wages and jobs.

Mayor Bill Peduto recently cautioned the city to avoid finding itself in the “precarious position” of Silicon Valley, where an explosion of tech wealth has left many people behind. “It’s at the front of everyone’s brain,” Peduto said.

In 2014, the number of Pittsburgh-area private-sector jobs in the scientific and R&D sectors – excluding academic positions – exceeded those in iron and steel mills, which were the lifeblood of the economy until their collapse 30 years ago, for the first time. As of March 2018, there were 41% more jobs in R&D than in the mills, according to the Pennsylvania Center for Workforce Information and Analysis.

Benefits of the tech boom have been limited, however. Around Allegheny County, where steel and natural gas industries still provide an important, albeit declining, number of jobs, about 12% of the population still lives in poverty.

Many neighborhoods are still pockmarked by long-abandoned warehouses and decrepit homes, and the population of 302,000 is less than half what it was in the 1950s. A number of once-wealthy US manufacturing cities, most notably Detroit, have experienced a similar fate.

Meanwhile, pockets of Pittsburgh now resemble a small-scale Silicon Valley, humming with fast-growing tech businesses that have attracted billions of dollars in private financing and young professionals commanding six-figure salaries. The city is a finalist in the race to become Amazon.com Inc.’s second headquarters.

Much of the new activity springs directly from the artificial intelligence and machine learning technologies pioneered at Carnegie Mellon University and the University of Pittsburgh, premiere academic institutions that have helped anchor the city through its industrial decline.

Carnegie Mellon faculty and students have been building self-driving car technology for decades, but only in the last few years has it become an industry.

Twenty-three start-ups came out of the University of Pittsburgh in FY2017, a record for the third straight year. Innovation Works, an early-stage investment fund that backs local companies, is meeting with about four times as many start-ups than it did a decade ago, said President and CEO Rich Lunak.

Global investors are starting to pay attention, too. SoftBank Group Corp (9984.T) last year led a $93 million investment in Pittsburgh-based AI company Petuum. Innovation Works recently hosted 30 Chinese investors interested in robotics and health care start-ups, Lunak said.

Uber’s self-driving business, which opened in January 2015, employs more than 1,000 people. Aurora, a start-up led by self-driving pioneer Chris Urmson, opened a new office in the Lawrenceville neighborhood in March, once a working-class area that’s now bustling with new construction, night life and high-end apartment buildings.

Housing prices in the city are up 36% over the last five years, according to ATTOM Data Solutions. Yet the median home price of $170,00 hardly conjures up the real estate frenzy that swept Silicon Valley.

Nowhere is the tension between haves and have-nots more visible than in the East Liberty neighborhood. Predominantly African-American and long troubled by high crime rates – and the target of redevelopment efforts – the area is a mélange of old mom-and-pop stores and upscale retailers and eateries catering to young professionals.

Peduto, the mayor, said the city is working on programs “to allow people who have lived through the bad times to be a part of the good times.” That includes a $10 million affordable housing fund.

“This is a city that has seen 70 years of decline,” said Christopher Briem, a regional economist at the University of Pittsburgh. “These issues of how to deal with or manage this type of growth are new here in Pittsburgh.”


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