LDN - Business

A tech boom in Pittsburgh brings hope and angst

[October 12, 2018] By Heather Somerville

PITTSBURGH (Reuters) - The city of Pittsburgh, the one-time steel capital that's long been a symbol of Rust-Belt decline, is emerging as a vibrant hub for artificial intelligence, robotics and biomedical companies eager to tap a rich talent pool.

Yet the resulting economic renaissance is leaving many locals uneasy - a symbol in its own right of the nation's mounting concerns about the success of high-tech industries and their effect on wages and jobs.

At a conference in Pittsburgh last month showcasing new technology companies, Mayor Bill Peduto cautioned the city to avoid 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 - for the first time exceeded those in iron and steel mills, which were the lifeblood of the economy until their collapse 30 years ago. As of March, 2018, there were 41 percent 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. Around Allegheny County, where steel and natural gas industries still provide an important, albeit declining, number of jobs, about 12 percent of the population still lives in poverty.

Pittsburgh's angst comes as new tech replaces old industry, offering the biggest economic opportunity since the first steel mills opened at the end of the 19th century, but with no assurances of who will benefit. The United States Steel Corp <X.N> building still sits downtown, among the constant reminders of a glorious economic past that gave way to despair 30 years ago.

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 U.S. manufacturing cities, most notably Detroit, have experienced a similar fate.

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 for Amazon.com Inc's <AMZN.O> 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.

"A lot of this has been research lab work that were concepts and dreams that are now getting to reality and giving people career opportunities," said Peter Rander, president of Pittsburgh self-driving car company Argo AI.

Twenty-three start-ups came out of the University of Pittsburgh in the last fiscal year, 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.

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An Aurora self-driving Lincoln MKZ car is seen outside the company’s office in the Lawrenceville neighborhood in Pittsburgh, Pennsylvania, U.S., September 21, 2018. Picture taken on September 21, 2018. REUTERS/Heather Somerville

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, in March opened a new office in the Lawrenceville neighborhood, once a working-class area that's now bustling with new construction, night life and high-end apartment buildings.

Start-up boosters are hopeful that Duolingo, a language-learning app founded by a Carnegie Mellon graduate and now valued at $700 million, could provide the city with a big tech IPO.

'WHAT WEALTH?'

Housing prices in the city are up 36 percent over the last five years, according to ATTOM Data Solutions. But 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. Historically African-American and troubled by high crime - and the target of redevelopment efforts for decades - the neighborhood is a mélange of old mom-and-pop shops and upscale retailers and eateries catering to young professionals.

Sam's Shoes, which opened in the 1960s and is the oldest business in the neighborhood, sits alongside a dollar store and across from trendy retailers Bonobos and Warby Parker. Sam Arabia, 58, who inherited the store from his father, points to the new apartment building across the street.

"They're all Google employees. They shop online," he said. "Not like the old customers."

Thomas Holland, who opened a T-shirt and ball cap printing store in East Liberty 40 years ago, said the tech renaissance will bring higher costs, not a better life, for people in his neighborhood.

"What wealth?" said Holland, 67. "We haven't experienced that yet."

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."

(Reporting by Heather Somerville; Editing by Dan Grebler)

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