The Urgency or Drive to Win

Does Your City Have It?

One of the things that’s nice about being in Grand Marais, MN for a couple of months in the summer is the ability to step back and try and get a macro view of the universe. You can look at a lot of things. Being my age (60), I am trying to figure out a few things. In comparison, your 20s, which is a hard decade, is actually easier to figure out.

The biggest difference between your 20s and 60s is the constraint on time.

Anyway, one of the things that are very interesting to me is the movement from high tax states to low tax states. It’s happening big time as people leave, or should I say, “flee” places like California, New York, New Jersey, and my home state of Illinois for lower tax lower cost of living states like Texas, Tennessee, Florida, Georgia, North and South Carolina, Nevada, Idaho, and Utah.

It’s convenient that the high tax states are run by Socialist Democrats, and the low tax states are run by Republicans.

Personally, two different marketplaces are most important to me. Trading and Venture Capital. It’s my background, so I try to keep a thumb on it.

If you went into the trading industry, you looked at two towns. Chicago, and New York. NYC was bigger than Chicago but more stock/retail focused. Investment banking was also housed in NYC. The big money and big deals were done there. Chicago was industrial and B2B focused. It was specialized, though you could make a ton of money. There was an opportunity in both places.

In a small sense, San Francisco, Boston, and Philly all had teeny financial trading opportunities, but the big kahunas were Chicago and NYC.

That’s changing.

Hedge funds have been slowly leaving both NYC and Chicago for Miami. Crypto has a nice toe-hold in Miami as well. When Chicago’s Ken Griffin said he was moving Citadel to Miami, I think that was the straw that broke the camel’s back. My guess is a lot of funds will relocate there or at least set up offices there.

Venture Capital is very different.

Miami is a bit player. It’s growing but it’s still super small. The ecosystem there is smaller than Chicago’s and Chicago isn’t a giant when it comes to venture capital. Some funds like Founder’s and a16z have set up shop there but it’s still not on the main stage yet.

When I look at places like Austin, Nashville, LA, Chicago, or other towns that get a little publicity or have a good mouthpiece touting them, there is more sizzle than meat.

There are certain things you need for a great tech ecosystem. First is money. Not just money but the money that seeks out high risk. Lots of towns have money but very very few of them seek risk for investment. Second, you need population density. Third, you need an open network where anyone can enter. Fourth, you need an intangible, the urgency or drive to win. Competitive spirit. Go big or go home. I can, I will, I must.

If you want an opportunity in startup land, my pals are telling me NYC is the place to go. Fred Wilson has always been a big backer of NYC and finally, it’s coming his way. The other place to go is San Francisco. But, it’s historically been, San Francisco. People are leaving SF for NYC. Call it the reverse Giants move.

Until around 2005, San Francisco was a pretty cool place to live. Now it sucks. The advantage NYC has over SF as far as dealing with the shitty stuff is NYC is bigger. It’s easier to avoid a lot of it.

Because of historical networks in media and of course, baseball, NY has always had a line to both LA and SF. They call it flyover country for nothing. I saw this first hand in a class I took from Professor Ron Burt.

NYC and SF have that urgency embedded in the culture of the cities. The networks there are super open, although, recently with the woke cancel culture they have closed off a part of their networks. That could create an opportunity for some other cities.

In Chicago, the only place I ever saw that truly embodied that drive to win or a sense of urgency combined with an open culture was on the trading floors of Chicago. We had three of them and there were 8000 people that worked there. Ironically, they were probably all unemployable by anyone else. There are too many rags to riches stories down there to enumerate but the best description of them is there were more millionaires per square inch on the trading floors than anywhere else on earth.

There were a lot of bust-outs and failures too.

People from the outside always thought the exchanges were clubby. They sort of were but when a new person showed up all they had to do was trade. If they were successful, they became a part of it. Unsuccessful, nice knowing you see ya. Untrustworthy or sneaky, we will run you out of the building on a rail.

Entrepreneurship ecosystems attract people like that. There is sort of a sifter. A lot of people like the idea of entrepreneurship or trading their own dough on the trading floor until they actually have to engage in it. It’s real risk, and really hard.

When I was chatting with a friend, I was reminded of an instance in my life. I was a pretty good basketball player when I was young and could actually jump and move. Now I can’t jump over my own credit card bill. When I was 14, our freshman team was undefeated in our conference. We only had lost two games, one to Proviso East (Glenn Rivers, Rickey Wilson) and one to Lockport. We were playing in our final game of the season on the road against a school that hadn’t won a game all year. It was the second half and we were up 20 points or something like that. One of our guys got fouled and I said, “Stick em in, we gotta have these.” My buddy looked at me and said, “They haven’t won a game all year and we are up 20.” I said, “We gotta kill them.”

That’s urgency. That’s the drive to win. I always had it and I still have it. It boils beneath the surface and doesn’t always come out, but once that fire is lit it is hard to turn off.

People like me figure out a way if they want it bad enough. Failure is a part of the process. It’s a feature, not a bug. Sometimes, you go off on a tangent that is a dead end. You hate it because of the time wasted, but you might learn something useful along the way. Maybe the tangent leads to another tangent that leads to your one true calling.

Successful people follow their effort.

My wife has made the point that when the Pilgrims and others emigrated from the Old World to the New World, there was a great sifting that went on. The risk takers left the Old World. They didn’t care that they would face great hardship in the New World and an uncertain fate. There was hope in the new place and they knew the old place had no hope or opportunity.

It wasn’t just about religious freedom or personal freedom.

That risk-taking ethos embedded itself into American culture. We haven’t always been woke like we are today. ESG wasn’t a thing. Champagne socialists didn’t exist. It wasn’t until people figured out how to use the government to corrupt the system that crony capitalism and all the other bullshit started. That was sometime in the 1800s. Even with that, America still was the most innovative place in world history and the place with the best opportunity. Despite what/where we are today, it still is.

I wonder how much of the emigration from high tax states to low tax states is similar to the sifting that happened when the US was founded? Although, I know a lot of liberal socialist slackers that have emigrated to the “free” states. Demand curves do slope down.

In cities like Chicago that are overtly political and have closed networks, that drive to win isn’t there when it comes to the startup community. There is always some qualifier. Do they know the right people? Did they raise from the right firm? Do they hire enough XXXXXX (fill in the blank victim class)? Are they XXXXX (fill in the blank victim class)? If you need someone’s blessing to be successful or get credit for the work you did, it’s not going to foster a growing thriving entrepreneur community. If you are different politically, skin, sex, gender, and people care so much about it that it becomes a factor in the way you are described or the way they describe themselves, it won’t be a thriving ecosystem.

Here is a hint to understand one of the underlying things driving the local culture. If they have a lot of politicians speaking at entrepreneurship events, don’t relocate there. If they have a large majority of events that highlight victim classes instead of success, don’t go there.

I get emails all the time from various startup organizations. All I see is virtue signaling. Why not just celebrate success?

NYC and SF have some of the highest taxes, highest rents, and highest cost of living in the United States. SF is one of the shittiest, literally, places to live in the US. NYC is full of garbage and smells. Why are startup people that make relatively little money because they are working for the equity go there?

Hope and opportunity. They got a chance to make a billion.

People that are pursuing that dream don’t really care what the government debt level is. They will live in just about any situation, as long as they have a chance.

An acquaintance of mine who is now a billionaire moved from Boston to Chicago just to trade. He lived in a house with 8 other people. He found a way and nothing was going to stop him.

If I were 21 today and the same sort of person I was back then facing the circumstances that I would face today at age 21, I wonder what I would have done to create an opportunity for myself. Notice, I said, “create an opportunity for myself”. No one does it for you! You don’t get in through the back door and while you might have mentors that help, no one does the work or takes the risk for you. Back then, I got a sales gig to learn some skills and start a career. I went to the trading floor to try and get rich, consequences be damned. There were significant downsides to trying.

I couldn’t go to the trading floor today because I don’t have that skill set. I am not a computer or math geek. But, I still have the same characteristics and psychological makeup.

My guess is today I would have gone to NYC to do investment banking, or to SF or NYC to work in sales for a startup. Maybe I would have gone to law school but worked in fund formation or something like that. I would have found a way. I was willing to sacrifice a lot to get where I wanted to go.

Interestingly, businesses that have merit-based cultures and not overly politicized ones attract people that want a merit-based culture and are competitive. They weed out the chaff. Highly politicized business cultures eventually collapse upon themselves.

If you don’t have that urgency, aren’t driven to win, that win at all ethical costs makeup, you do not want to be in startup land and you shouldn’t move to a startup hub. If you aren’t accepting of all new ideas, people from all political stripes, don’t go into startups. Excepting you can reject communists. Commies aren’t cut out for startups or trading. At least their communist tendencies don’t come out until after they have made it. I speak from personal experience. Oh, demand curves slope down for commies too.

Extrapolating, cities that don’t have or foster a culture like that won’t have a sustainable startup culture either. It might last or subsist for a number of years, but it won’t see exponential growth.