(photo from Crain’s Chicago)
This post stems from this one and this one.
For a perfect example of what is wrong with Illinois and the Illinois entrepreneurial community look no further than Illinois Democratic Governor JB Pritzker and his announcement about quantum computing.
Politicians have been telling Illinois and Chicago voters to look at squirrels for years. They always look. It’s time they stopped.
Pritzker’s Illinois is a mess. All honest statistics support that assertion. You can shit tweet at me all you want. You can massage the numbers all you want. It’s a mess.
The man standing on third base who thought he hit a triple bought his office because the Democratic Party needed the money. He deflects all the criticism by showing everyone the "squirrel" of a potential quantum computing site on the lakefront. Crain's and the rest jump in line and report glowingly.
Quantum computing is not happening in Chicago and full-blown quantum computing isn’t happening anytime soon. Why?
First the technological piece. The College of Engineering at the University of Illinois built the internet. There are smart people there working on cutting-edge stuff that will change the world. They will be a big part of building quantum computing. The University of Chicago has some of the best physicists in the world and they will be a big part of the project too. The internet was implemented, scaled, and monetized in Silicon Valley despite all the expertise in the state of Illinois. Quantum computing will not be different.
In announcements like this, everyone focuses on the hope of the concept being proposed, not the nuts and bolts of how to achieve the hope. Quantum computing looks magical. It has gigantic promise and it’s a competitive race to get to the finish line.
Logically, it makes sense that with the best engineering school and best physicist school working together the state of Illinois, or city of Chicago would benefit and it would be the center of it all. But, because of the way the network is structured and operates, it won’t. You can’t change it. It is endemic to the culture and it has been there since the founding of Chicago in the 1800s.
Entrepreneurship works differently than political machines. Let’s look at that entrepreneurship piece because the government can’t build this. It’s got to be built by the private sector and the private sector will do it faster and more efficiently anyway.
How do you build an entrepreneurial ecosystem? Brad Feld, a venture capitalist firmly on the hard left of American politics, wrote a book about it. I agree with a lot in his book but differ on one big point. For what it is worth, my difference has nothing to do with politics.
Great entrepreneurial ecosystems are not government-led or government-stimulated. Entrepreneurs pick their noses and throw the boogers at the government. The most successful of them abhor government no matter what their political party is. They know the government gets in the way. Entrepreneurs don’t like rules. The government loves rules.
Governments can only break entrepreneurial ecosystems. San Francisco’s government was so bad, so totalitarian, so horribly misguided, that it almost broke Silicon Valley. Thanks to Garry Tan, it might turn around. Obtuse thought. If Garry can totally turn it around he might be a person who should be credited with helping save western civilization since so many things get created there that rapidly increase the standard of living in our society.
Pritzker is throwing $300MM at quantum computing. Virtually every dollar of it will be wasted. Governments can only spend, they cannot invest.
Here is where Brad Feld and I differ greatly. Great entrepreneurial ecosystems have millions and millions of dollars of risk-loving capital that invests its money in companies that look like nothing. Two people and an idea. Some very early traction. No real revenue. That money is looking for 30x return or better. It’s a capitalistic free market enterprise.
Without deep pools of capital you cannot have an entrepreneurial system and today, the capital has to be there first.
If we look at Chicago, there are no huge venture funds. Ask the startups. They go to Silicon Valley or New York to find a huge pool of risk capital that will invest in them. There are a lot of small funds. Some family offices are posing as funds like Pritzker. New York City, Boston, Silicon Valley, and even Los Angeles have hundreds of multi-million dollar or even billion-dollar funds that will invest at the very earliest stages of a business.
Great entrepreneurial ecosystems tolerate a lot of failure. You can't fail in Chicago without having a scarlet letter for the rest of your life. Capitalism has failure built into it and it is a feature, not a bug. Capitalism forces investors and entrepreneurs to be directly accountable for their decisions. The government doesn’t. Ask any investor in a great entrepreneurial ecosystem about failure. They have tasted it and felt it. But, no one cares and they move to the next thing. Chicago doesn’t have a culture that forgets failure.
Great entrepreneurial ecosystems have loads of entrepreneurs who have been successful and mentor new startups. They stick around. They might do another startup or they might invest in startups. They might teach at a school. They might go to meet-ups and offer advice. Chicago doesn't have that. Chicago has a precious few people like that.
Great entrepreneurial ecosystems have local companies and consumers who are willing to download the app on their phones or become early customers. Chicago doesn't have that. Companies in the Midwest are more conservative when choosing vendors than companies in the heart of entrepreneurial ecosystems. Individuals who are consumers who live on the coasts tend to gravitate to new stuff easier than people from the Midwest. That’s why trends start on the coasts.
Great entrepreneurial ecosystems are magnetic. They have network effects and a fly wheel effect. They draw people in because they foster the idea of "hope" and "anyone can do it". New York, Boston, and SF have that. LA has it to a certain extent. But, Chicago doesn't have that.
Generally, people choose to live in Chicago because they are from Chicago or the greater Midwest. No one grows up in California with an intense desire to move to Chicago. Besides, given the choice of paying a lot of taxes with high crime rates and cold weather in Chicago or the chance to do the same with better weather in San Francisco, where do you think they are choosing?
However, when the exchange trading floors were open Chicago was magnetic. The HFT industry has removed that magnetism because it takes highly specialized skills and computerized trading doesn’t need the same volume of people. It also can be done from anywhere.
The political machine in Chicago kills the culture that entrepreneurs need to be successful. It reinforces the things that entrepreneurs abhor. As I have said before, when you look at the quasi-government organizations that interface and are supposed to build an entrepreneurial community they look the same as other organizations in the city. Same people. Same focuses. Same failure.
Entrepreneurial ecosystems value differences of opinion. They value new ideas that radically put the old ones out of business. Read Marc Andreessen’s Manifesto. Marc grew up in Wisconsin and went to Illinois. He often says that there are people back in the Midwest sitting on their sack of seeds telling you that this is the way we always do it and telling you before you try that you can’t. When an outsider walks in the room they freeze them out and wonder who sent them. The Democratic Machine that has ruled Chicago for a century cannot tolerate outsiders or differences of opinion.
Big business has to toe the line.
Here is what Marc had to say about values. The Chicago Democratic Machine disagrees. It’s a fundamental problem and a big reason why the major center of quantum computing won’t be in Chicago. It will be an ancillary supporter.
Technological Values
We believe in ambition, aggression, persistence, relentlessness – strength.
We believe in merit and achievement.
We believe in bravery, in courage.
We believe in pride, confidence, and self respect – when earned.
We believe in free thought, free speech, and free inquiry.
We believe in the actual Scientific Method and enlightenment values of free discourse and challenging the authority of experts.
We believe, as Richard Feynman said, “Science is the belief in the ignorance of experts.”
And, “I would rather have questions that can’t be answered than answers that can’t be questioned.”
We believe in local knowledge, the people with actual information making decisions, not in playing God.
We believe in embracing variance, in increasing interestingness.
We believe in risk, in leaps into the unknown.
We believe in agency, in individualism.
We believe in radical competence.
We believe in an absolute rejection of resentment. As Carrie Fisher said, “Resentment is like drinking poison and waiting for the other person to die.” We take responsibility and we overcome.
We believe in competition, because we believe in evolution.
We believe in evolution, because we believe in life.
We believe in the truth.
We believe rich is better than poor, cheap is better than expensive, and abundant is better than scarce.
We believe in making everyone rich, everything cheap, and everything abundant.
We believe extrinsic motivations – wealth, fame, revenge – are fine as far as they go. But we believe intrinsic motivations – the satisfaction of building something new, the camaraderie of being on a team, the achievement of becoming a better version of oneself – are more fulfilling and more lasting.
We believe in what the Greeks called eudaimonia through arete – flourishing through excellence.
We believe technology is universalist. Technology doesn’t care about your ethnicity, race, religion, national origin, gender, sexuality, political views, height, weight, hair or lack thereof. Technology is built by a virtual United Nations of talent from all over the world. Anyone with a positive attitude and a cheap laptop can contribute. Technology is the ultimate open society.
We believe in the Silicon Valley code of “pay it forward”, trust via aligned incentives, generosity of spirit to help one another learn and grow.
We believe America and her allies should be strong and not weak. We believe national strength of liberal democracies flows from economic strength (financial power), cultural strength (soft power), and military strength (hard power). Economic, cultural, and military strength flow from technological strength. A technologically strong America is a force for good in a dangerous world. Technologically strong liberal democracies safeguard liberty and peace. Technologically weak liberal democracies lose to their autocratic rivals, making everyone worse off.
We believe technology makes greatness more possible and more likely.
We believe in fulfilling our potential, becoming fully human – for ourselves, our communities, and our society.
Of course I can't find the source I was looking for, but I believe Americans are becoming more risk averse over time. Especially young people. Good examples are Boeing, inability to build housing, inability to figure out how to re-build the Key bridge. It's infecting tech too, at least the retail side. 'Enshittification' is real. So many great things have become mediocre like Google search and Amazon shopping. Building lock-in is easier than innovation. Hopefully there are enough innovators for the future as new technology is the only way to address many of our problems.
"Chicago doesn’t have a culture that forgets failure." Your comments about the Chicago (anti-)entrepreneurial culture remind me of what used to be the informal motto of the Chicago Machine, so much so that it was used as the title of a book about it: "Don't make no waves, don't back no losers."