Of course, not all metropolitan economies are hurting. Greater Milwaukee jumped more than 100 places, to No. 66, this year -- one of several Wisconsin areas that are making the state an anomaly in the Midwest. (See "Everyone's a Knowledge Worker," page 99.) Another surprise is St. Louis (No. 44). The city's core continues to struggle, but its western suburbs are in the St. Louis MSA, and they boast a growing array of technology and business services firms. Day Veerlapati, president and CEO of S2Tech, a 75-person systems-development firm in the St. Louis suburb of Chesterfield, says lower costs, particularly lower housing costs, have helped him recruit software writers. "When I tell my friends in California that they can buy a four-bedroom house for $150,000, they start to salivate," Veerlapati says.
Many big cities are struggling to catch up. Michigan Gov. Jennifer Granholm, for example, has launched a much-ballyhooed "cool cities" initiative, which stresses cultural and artistic development aimed at attracting young knowledge workers and new-economy companies to suffering Michigan cities like Detroit (No. 213) and Grand Rapids (No. 259). Mayor Martin O'Malley of Baltimore (No. 258) is considered an emerging Democratic Party superstar for similar efforts to target the hipster crowd. Sadly, neither the demographic data nor our own economic analysis reveals any substantial improvements in those cities.
The problem lies not in a dearth of hipness, but in a failure among many large cities to address longstanding problems rooted in the industrial age, says Joe Gyourko, a professor of real estate and finance at the University of Pennsylvania's Wharton School. Many of America's older cities remain saddled with large bureaucracies designed for a larger population and a broader tax base. Even as that tax base has shrunk, few have managed to trim public payrolls or even boost productivity.
Philadelphia, for example, has succeeded in giving its center city an impressive face-lift -- attracting tourists, as well as a growing community of singles, gays, and childless couples. One result is that real estate values have risen dramatically. But the city's high business taxes, poor level of public services, crummy public schools, and reputation for political corruption continue to chase businesses to the neighboring suburbs (which, because of the population density of the East Coast, have their own MSA). "Philadelphia can't adjust to a high-mobility world where people can simply go somewhere else," says Gyourko, who has studied the city's long-term decline. "To business and to the middle class, it seems very hard to reform. It's simply easier to exit."
Are all established centers of high-wage employment destined to decline? Not necessarily. The existing concentrations of skilled workers and capital in a big city still can propel job growth. Seattle, for example, shot 91 spots up our list this year, to No. 72, thanks in part to Microsoft and its myriad spinoffs. New York and even hard-pressed San Francisco also are picking up steam.
Such growth may well continue into the decade's second half. Of course, so will competition -- not only from abroad, but from the increasingly competitive regions that top this year's survey. These are areas that appear poised to provide the next generation of entrepreneurs the best fields of opportunity. Places such as Boston, San Francisco, and Silicon Valley will probably remain prime places to launch new concepts or companies, but they no longer may be the places to build them. "We've lost the hunger," says John Butler, director of the Ic2 Institute in Austin, which studies economic and technology trends. "We don't really create jobs, we create companies. Route 128, Austin, and Silicon Valley are not where jobs are being created in America."
Venture capital networks are sprouting in Utah and Nevada -- areas that have traditionally looked to the coasts.
Meanwhile, new venture capital networks are sprouting in places like Utah and Nevada -- areas that have traditionally been forced to look to the coasts for investment capital. In 2000, there was only $100 million in early-stage funds in Utah, notes Greg Warnock, managing director of VSpring Capital in Salt Lake City. Today, he estimates, that total is more than $650 million.
It's no coincidence that Salt Lake City jumped 73 spots on this year's list, to No. 31. Says Warnock: "We are positioned to become a center of innovation." You don't have to look too hard to encounter similar sentiments in other centers of the new new economy. These areas not only are developing their own investor networks, they are becoming increasingly attractive for investors from the Bay area.
Treetop Technologies' Jason Crawforth built his company without venture capital. But he welcomes these developments. More investment capital means that more entrepreneurs and skilled workers will begin taking a second -- or, indeed, even a first -- look at his hometown. Once they do, Crawforth predicts, they'll be hooked by Boise's low costs and high quality of life. More than that, he believes Boise's human values, its sense of community and cooperation, will accelerate its evolution into a major technology center. "Boise is all about intimacy, about people knowing each other," Crawforth says. "People here are determined to work together to create a community that can compete with anyone."
