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‘Winner take most’: New tech hubs won't rise without big changes

Mark Muro of Brookings on the 'calamitous divergence' between tech hubs and hollows -- and what it would take to change it.

A mural in Austin

Tech jobs are more concentrated than ever in cities like Austin, according to a new report from Brookings.

Photo: George Rose via Getty Images

For the last decade, Mark Muro has sought to unravel the mystery of America's tech hubs. Why aren't they sharing the wealth?

In places like Silicon Valley, Seattle and Austin, the world's most valuable companies have hired hundreds of thousands of well-paid office workers since 2010. But even though that has fueled side effects of rapid job growth like skyrocketing housing costs, soul-crushing commutes and an increasingly visible tech backlash, employers haven't stopped hiring in the same cities.

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"Nobody feels like they're winning" in the tech economy, said Muro, a senior fellow and policy director of the Brookings Institution's Metropolitan Policy Program. "Not even the winners."

In a report released this past week, Muro found that top tech jobs are more concentrated than ever in exactly the cities you would expect: San Francisco, San Jose, Austin, Seattle, Denver. That's despite the efforts of figures like former AOL chief Steve Case who argue for sharing the wealth by directing corporate expansions, startups and coding bootcamps to the Midwest, the South or the coal-mining communities of Appalachia.

When Brookings compared the growth of "digital services" jobs in software, data processing, systems design and information services from 2010 to 2018, it found that the dominant tech hubs had only increased their share of the nation's overall tech employment. The Bay Area, for example, is home to 11% of digital services jobs, up from 7.5% in 2010.

It's the latest look at tech jobs for Muro and fellow researchers at Brookings, who found in a report last year that a few "superstar" cities are creating a "winner take most" economy. Before that, they studied how the "digitalization of everything" is expediting the nation's employment and wealth disparities. It will take aggressive policy changes — a series of new billion-dollar local investments, for instance — to counter these trends, the researchers argue.

We spoke with Muro about why the tech job divide is linked to corporate consolidation, the nature of early-stage technologies like AI, and even the role of couples who work in the same industry. There's a glimmer of hope in places like Wisconsin and Utah, he said, but don't expect a remote work revolution quite yet.

This conversation has been edited for length and clarity.

The report describes a "calamitous divergence" between tech hubs and areas of the country where economies are being hollowed out. What are the stakes of that divide?

First, it is true most places are adding some jobs, so that's good. But fundamentally, that they're losing share [of overall tech employment] is an indication of, really, lost competitiveness — lost fundamental power in the industry. The further concentration in the Bay Area, Seattle and Austin underscores that the most significant high-level work, and probably the most fundamental decision-making, is happening in those places.

I think the people in a Columbus or an Indianapolis feel some progress. But also that they are not central, and that they are one corporate decision at headquarters away from losing what they have. It comes down to probably the technical work going on, but also the power of peripheral units versus headquarters.

So growth is tenuous outside the main tech hubs?

There's a sense of precariousness. Startups are few and far between. There aren't deep ecosystems. There may be thin pools of workers. It becomes harder for, say, a couple to relocate if there's only, like, one or two jobs. Tech feels like a shakier undertaking in some of these places.

On the flip side, in places where the concentration of tech jobs continues, like the Bay Area, that leads to concerns like housing costs.

Nobody feels like they're winning, not even the winners. Superstar places are overheating: Housing prices are spiraling, congestion is at crisis levels, homelessness has become an epidemic. Certain high-level work is going on there, and probably has to go on there, but many workers in these industries feel that something is wrong, and they feel that the negative side effects of working in these hubs are really hard to take.

The question that I've had is, then why aren't they decentralizing? This is where I get to the fundamental nature of the technology. Digital technologies are all about talent. They're all about concentration and agglomeration, and then the returns are so intense. They're sort of winner-take-all, superstar economies, where there are near-infinite returns on marginal investments.

I think this has a lot to do with the fact that we're not at a mature stage of tech. This is a period of disruptive, relatively new technologies that may demand more of this kind of agglomerated, intense creative work. One other question is whether this also has to do with the platform economy. People may be functioning as essentially five to seven big platforms, with their headquarters in Seattle or the Bay Area.

You also address what Steve Case calls the "rise of the rest." I'm from Columbus, Ohio, where there's more talk about startups and investment, and big companies are putting some facilities in the middle of the country. But you say that phenomenon is overstated?

I mean, the rise of the rest is a beautiful idea. We all hope that it happens. I fear that it's something that is not now possible given the structure of the tech sector, and also this early-stage period of platform creation.

There are some very exciting stories in the heartland. We talk about Madison, Wisconsin, where a company called Epic has created essentially the Excel spreadsheets of health records. I think they've created 10,000 jobs. That's an example of a place that has broken through. It has increased its share.

What's the difference? Why were they able to gain traction?

After San Francisco, San Jose, Austin, Seattle, Denver, you see Phoenix, which is proximate to California. Then Charlotte, Madison and Provo. Utah has been a very entrepreneurial place, and Intuit is there, along with a number of other startups that have become big.

Madison and Provo are very interesting to me, because they're a little smaller and university-based. But these are just small, you know slivers, of share change. This is not to take away from the great entrepreneurship going on there. I would say that the success they're having is almost despite the fundamental structure of the tech sector.

One question I get all the time is how does remote work play into all of this? Some big companies, like Oracle and Salesforce, have a significant number of employees in smaller markets. These arrangements help with problems like housing in big cities.

You know, Salesforce has put 3,000 jobs in Indianapolis. Moving units is one thing we've all been waiting for, and likely will happen. Remote work does seem possible. Zoom and BlueJeans and various online links all seem to work better, and for some functions that probably will work fine.

But there does still seem to be a hesitation about decentralizing, and one of the great stories of the last 15 years has been that even as technologies better allow decentralization, we've seen more centralization. There's something about these technologies and these firms that have kept them from really substantially disaggregating. They've wanted to stay clustered.

I think that has something to do with that we're at the shallow end of the pool with say, AI, a compelling new technology on which a lot of work is being done. But it could be an element of grouping — you know, executives may just think that they can't decentralize. I mean, some of the VCs are telling them to put more people in the heartland and to find cheaper sources of talent, but they don't always do that.

So what do you do about this? What seems the most consequential for creating new tech jobs in other places?

To date, the main effort has been to encourage bottom-up entrepreneurship, and to do the things that would build a strong local ecosystem, and then to encourage startups and funding and so on. Universities have tried to work closely with local tech clusters. Steve Case has done a great job calling out the need for more entrepreneurship, and places have worked to ensure there's sufficient capital.

I think you could guess my view is that's all outstanding, but may in the long run not truly change the game. We [at Brookings] think we should have a competition to identify 10 places that have a great university, that have tech ecosystems coming into form, and kickstart them. Literally just shove 10 places up the growth curve by awarding them something like $1 billion over 10 years, especially focused on R&D investments into the university and inclusive tech training and placemaking. We've done it before. We sort of accidentally created Silicon Valley. We need to try harder.

What about the global version of this, where we see governments from Canada to Singapore trying to lure tech talent to their countries?

The divergence trend is occurring almost everywhere, which I think is a hint that this probably does have a lot to do with the technology, rather than just policy. Nothing has been more powerful than steps to enhance the creation of talent clustering, such as what's going on in Toronto.

With great universities and also a very pro-immigration environment, Toronto has become a major tech center in the middle of North America. They've had a strong national push to create what they call superclusters around tech and AI, so I think there are a lot of hints there.

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What are the biggest questions this job divide raises for the future?

The winner-take-most structure of technology seems to be creating an environment in which even the winners feel dissatisfied, and others are left out. With too little of the nation feeling truly invested in tech, you could see a diminished readiness to support tech, or for senators from red states to vote for R&D investments.

The worst thing here may be the erosion — not just harm to individuals' lives and diminishing opportunity in these communities — but also a loss of consensus around innovation. And that would be a true tragedy.

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