Lessons Detroit Can Learn from Pittsburgh

-By Elizabeth Kunkle and Caitlin Blair

In the shadow of the ailing Big Three, the question arises: how can we bring Detroit back to its entrepreneurial glory years? This is one of the biggest topics of discussion in the state today, given that financial failure of the three largest automakers in North America, General Motors, Chrysler, and Ford, could result in approximately three million jobs lost in the first year alone.  Michigan used to be considered an entrepreneurial capital of the country and the world back in the heyday of American automotive innovation, but today, as creativity and adaptability in the American automobile industry stagnate, Michigan is left with nothing to show.

This story, however, is nothing new. Pittsburgh, a city less than 300 miles away from Detroit, went through a similar struggle just thirty years ago with the collapse of the steel industry. From 1981 to 1985, over 40,000 jobs were lost  in an era where the steel industry accounted for 10% of the job market . During the 1980s hundreds of thousands lost their jobs and moved en masse out of the area . Anderson Cooper at CNN, who briefly discusses this issue in his blog, explains it like this: “Pittsburgh, in effect, died. It had to find a way to reinvent itself after it had been relying on just one industry for economic growth for so long.”  Sound familiar?

Today, Pittsburgh has one of the lowest home foreclosure rates in the nation , has an unemployment rate that is less than a third of Detroit’s (6.3%  and 22.2%  respectively in January 2009), and is seeing consistent if not extraordinary economic growth in a time where the rest of the nation is hurting.

It took Pittsburgh many years and a lot of hard work to get to where it is today – this was no quick turnaround. Pittsburgh used its existing resources to improve. Over time, the town leveraged its intellectual capital in fields like engineering and the sciences to create now-booming industries that are considered to be at the forefront of their fields.

In the past decade, there has been a cohesive effort by state and local government, Pittsburgh universities, non-profit groups, and business leaders to foster economic growth in the area. One recent trend that Pittsburgh is a good example of is the establishment and expansion of university-business partnerships. By working collaboratively, universities, non-profits, and businesses in the vicinity have provided each other with the intellectual capital, funding, and resources needed to grow not only local industry but also a city-wide atmosphere of innovation and cooperation. Urban improvement efforts by the city ranging from brownfield redevelopment , to encouraging small business growth through seed funding, to the establishment of mixed-use developments have also contributed to this progress. Areas called “Keystone Zones” , where the government offers tax relief and development assistance to startups, are expanding and growing across the city. A former governor used money from big tobacco settlements to set up “greenhouses” in three major Pennsylvania city centers including Pittsburgh, tailoring them to the needs and expertise of the geographical areas into which they were placed. Pittsburgh’s LifeScience Greenhouse works as an incubator for research, startups, executive training, and corporate counseling in the life sciences sector. The creation of entrepreneurial companies and university spinoffs is encouraged from all directions, which is facilitated by the cross-institutional collaboration that now makes Pittsburgh the city it is today.

Pittsburgh was almost impervious to the recent nationwide economic downturn because of its financial conservatism and its active participation in a large variety of industries rather than reliance on a sole sector. Detroit can take a few lessons from this. Although it is too late to stop the Michigan housing bubble from bursting or to stop Michiganders from overextending their credit lines, Michigan can use its risk-averse environment to its advantage by practicing a more modest and long-term-focused financial model that resembles Pittsburgh’s. Detroit has to stop looking for that one new industry that will save the city and state’s economic situation and start looking at the multiple sectors where it can best utilize its preexisting resources and intellectual capital. We can expand in areas where we know that we have a competitive advantage and encourage our financial sector to follow, as the New York Times puts it in their article on the subject, the “resolutely unadventurous” credit model set forth by PNC Bank (the Pittsburgh National Corporation).

Putting aside individual agendas and using a more collaborative model would help unite Michigan businesses, universities, and government under a common goal of fostering innovation and entrepreneurship. Like Pittsburghers, people in Detroit must be patient in implementing changes such as these. However, if we can successfully combine these ideas to emulate Pittsburgh’s model, one can only hope to see an economically revitalized Detroit a few decades from now.

Many ideas throughout this article were inspired by our interviews with Virgil Gligor of Cylab, Donald Bonk of Carnegie Mellon University’s Office of the Vice President for Research, Amar Kapadia of Vocollect, David Weaver and Lynn Brusco from Pittsburgh LifeSciences Greenhouse, and Tom Link of the Pittsburgh Urban Redevelopment Authority. We would like to thank them for the tremendous insight and assistance that each of them provided to us.
Check out this story in the Lansing State Journal!