Driving the Midwest



Columbus stockade blues

Our first stop was Columbus, Ohio, the city where I was born. Columbus is a college town and holds over 65,000 students on campus at Ohio State. It’s an engineering and agriculture hub but the school – and city – have a vibrant arts scene and a true startup culture.

The perfect avatar of this cross between art and commerce is Drive Capital, a boutique investment fund situated at the mouth of the Short North Arts District. They pay lip service to investing in Columbus startups and they have invested in a few over the past years, but they are their to be poised for a renaissance not catch a wave.

In the 1980s the Short North was a haven for proto-hipsters and artists. Small storefronts held mini galleries and a monthly gallery hop was the thing to do for folks with a penchant for wine. The entire district – in fact the whole of High Street – received a full makeover in the intervening years culminating in the rise of multiple modern brick and steel buildings plunked down where dive bars and poetry bookshops used to be. The High Street of old, an amalgam of the aforementioned dives, convenience stores and head shops is gone, replaced by a modern walking mall. While I miss the stalwarts (the loss of Monkey’s Retreat, a comic book store, and Stache’s, the bar a friend and I played in at 16, are particularly saddening), I do enjoy the current crop of restaurants and coffee spots along with a massive and beautifully appointed student film center that shows first run and art films. The only place to get that fare used to be a few miles out of town at a theatre that had seen better days.

I asked around and even held a meetup in a bar while I was in town in an effort to meet some of the local talent. There was plenty. Most of it appeared to be in the tech service industries but there were definitely a few oddballs. One team presented an electronic musical instrument that worked like a theremin cross with an air guitar. Another, called Panopticon Labs, focused on keeping gaming honest. Theirs was a culture that was built on serving big clients, akin to the Central European startups that grew out of software houses but it also has engineering talent that rolls in from the school. Further, many of the startups aren’t tech at all yet still follow the tech VC trajectory. The locals agree.

Web Smith, for example, is a fixture in the Columbus scene. He’s an “e-commerce consultant” and is currently commuting between the heartland and New York. He’s seen innovation flourish in business that wouldn’t be considered startups in the technology world.

“Columbus has a disproportionate number of companies that began as small businesses and developed into VC funded, P/E funded, or cash-flow positive, high-growth brands. Jeni’s, Rogue, Startups.co, Homage are but four examples. Hot Chicken Takeover is the next company to achieve a similar trajectory,” he said. “These are real businesses that have avoided incubators and the spoils of prototypical startup culture. This is what Columbus is great at fostering.”

But all is not hot chicken and roses. Smith doesn’t recall a recent round of institutional funding. He estimates that most investors threw in “$100-200K” in the last few months while other companies have taken Ohio Third Frontier loans as part of a state-run project for small but growing startups. Ohio is also about to have a bustling medical marijuana market.

Across the country, cities like Columbus are thriving while cities where manufacturing found purchase are failing.

 

“The low cost of living along with the abundance of high-paying jobs is one great draw. I would also say that the city as a whole is truly trying to stay on the cutting edge,” said Dylan Gale, CTO Nuvestack. “There is apparently much more investment in Ohio than what I was aware of, although they are largely looking for fairly investor-heavy terms and many will have startups move out West if they become successful.”

But he’s also worried.

“I feel that the Midwest itself may be in for a bit of a downturn in the next 30 years. Some of the cities that were decimated as part of the rust belt have not returned to their former selves and may never do so. Many of the cities that did recover have grown with largely middle level IT jobs which are being automated and those are slowly going away,” he said. “I do actually worry that there is no direct path that many high-level engineers took in the IT world anymore. So many of my peers started out shaking the printer toner and worked their way up. I am not certain the middle-level jobs will always be around as stepping stones to get to higher levels. Too many things work the way they should from the start to require learning and innovation. It is also very difficult to take someone straight out of school and teach them higher level infrastructure knowledge without a solid understanding of the basics.”

What is happening in Columbus is at once unique and commonplace. Across the country, cities like Columbus – college towns, towns anchored by a hospital or a military base or finance – are thriving while cities where manufacturing found purchase are failing. Columbus is on the upswing while traditional manufacturing towns are in a gully.

A word on that. I tried for this piece to talk to some factory workers but they were hard to find. A friend’s son took a loading dock job because it paid well and imagines that his life could be different with a bachelor’s degree. Another man, a friendly carpenter who befriended my parents named Justin Giglio, sells and installs cabinetry now, a job that gives him great freedom, although he used to work in a cabinet factory. He says innovation without capital and support is sometimes foolish.

“Innovation is tough. Example: I can make a template/jig for my carpentry work, but what is the break even point? Will I be further ahead if I just continued the work without the template/jig? And it’s not like I have a 5 year contract for my work, so I may make the jig and then the work dries up. Then I made a jig for nothing.

“I have only lived in the Midwest, so I can’t compare and contrast,” he said. “Lots of people can build cabinets, but not a lot can sell them and prospect.”

Sadly, the return of manufacturing to the heartland, at least the kind that once supplied the tens of thousands of Midwesterners a steady job, a home, a pension, and sometimes a fishing boat, is dangled in the press as a sort of panacea, as if Armco or Wheeling Steel would come rumbling back out of the hills to save the day. In Columbus the Marysville Honda plant supplies an estimated 4,200 jobs but most of those are skilled engineering jobs taken by OSU grads. That plant, a bright spot in the Midwestern manufacturing firmament, will soon be joined by a $53 million Honda investment… in a massive data center.

The good jobs, the union jobs that gave a high school graduate or a new immigrant a nice house with a picket fence and their kids a good education, will never return. But a new generation is driving down the road to Honda’s data center and getting all that and more.

Don’t believe me? The best example is the tale of Vollourec in Youngstown. This French company is one of the largest manufacturers of steel tubing used in oil and gas mining in the world and, in a generally feel-good effort, they opened a new plant in an abandoned mill near Youngstown. Instead of tens of thousands of jobs, however, the mill hired 400 to manage their automated factory and when gas prices fell in 2015 the company laid off workers when demand for fracking materials fell.

This cycle – boom and bust – is exhausting, and folks in Rust Belt towns remain hopeful. Youngstown Mayor John A. McNally, for his part, kept his chin up.

“It better turn around,” McNally said in an interview in the local paper. “It’s got to turn around so Vallourec can put people back to work. It’s just a matter of when.”

Youngstown has embraced the new manufacturing. It’s a city of makers now, and micromanfacturing and 3D printing seem to be taking root in the town. It’s another rare bright spot in a seemingly cursed economic environment. But these years of confusion and insecurity are taking their toll in many ways.

We drove on.



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