The Midwest: Solving The Networking Problem
A region that's long felt left behind has the assets to surge ahead. Others must realize it and get onboard.
PsiQuantum, the State of Illinois and a consortium of Midwestern universities recently announced the development of the Illinois Quantum & Microelectronics Park (IQMP). It would be located on the former U.S. Steel site on Chicago’s South Side. Source: gettyimages.com
First I want to thank everyone for reading, sharing and commenting on my recent post on talent, ambition and culture in the Midwest. It was easily the most popular piece I’ve written in this iteration of the Corner Side Yard and I’m glad it connected with many of you.
I do, however, want to rebut a couple of points made in the comments. I am not saying the Midwest is bereft of talent, by any means. The region is full of talent of all sorts. But it seems the region has issues with trying to support those with talent with the kind of nurturing and development they need to blossom here in the Midwest. I might be conflating talent with ambition somewhat (the two are different but can rise together) but when both are present in a person, all too often that person must move from the region to achieve wider success.
I’m also not saying the Midwest displays a “loser’s” mentality. I’d characterize it as an attitude of contentment when things are going well for the region that becomes resentment when things aren’t. A loser’s mentality to me would be meekly accepting one’s fate, as decided by someone else. But for people who never outwardly get too high or too low, resentment without action might be mistaken as such.
Pass-through place, weaker connections
In my earlier piece, I mentioned that the American settlement of the Midwest always had at least a small pass-through quality to it, as ambitious eyes continued looking further west:
“The region has always been overlooked by the ambitious, even as it was cleared of Indigenous people and settled by American colonists and European immigrants.
The sentiment is captured in Horace Greeley’s 1854 quote, “Go West, young man, and grow up with the country.” The Midwest was the first non-Thirteen Colonies American territory to be settled, after the War of 1812. That also made it the first to begin exporting its strivers in search of excellence.”
There was usually a pattern established in settlement that created relationships along the way. Following the War of 1812 in the Midwest, the American military would establish forts in Indigenous territories. The military would clear the lands of Indigenous people by war or treaty. White settlers moved in and established new farmsteads.
But we all know that settled communities would require much more to become functioning places. East Coast banks and financiers sought to exploit the riches of the region, and invested in people and businesses that would help them do it. At different times in the Midwest, the fur trade, the timber industry, large-scale farming, the national rail network, minerals extraction, and ultimately, large-scale manufacturing, pulled East Coast investors into the region.
East Coast investors also kept an eye out for other exploitable opportunities even further west. When gold and silver mining took off in the Rockies, they were there. When it became possible to harness the timber of Oregon, Washington and Idaho, they were there, too. When gold, silver, timber and oil were found in California, nestled into the pleasant West Coast climate, they were most certainly there.
In other words, before it was labeled as “flyover country”, the Midwest had already acquired a pass-through identity.
But California, and really the entire West Coast, was different than other American regions settled in the same fashion. The West Coast was the natural endpoint for the expansion of continental America. Sure, Alaska and Hawaii were lands that would become settled by Americans and achieve statehood, but America’s acquisition of Alaska and Hawaii were more akin to early forays into American empire-building. Bringing America to the Pacific Ocean had the feeling of taking the nation to its fullest extent.
My theory is that the West Coast’s enduring networks with East Coast moneyed interests were absolutely instrumental in its development – especially in California. The wealth generated in one economic cycle flowed easily into the next. Mineral and timber wealth supported the rise of oil production. Oil wealth fueled the film industry. So much wealth led to the rise of venture capitalists, Silicon Valley, the defense and aerospace industry. Opportunity after opportunity kept arising on the West Coast, and Eastern investors stayed around to cash in. After manufacturing reached its peak and began to decline, the Midwest had no equivalent.
That made the West Coast a region that was able to forge deeper and longer lasting business and institutional relationships with East Coast elites than other regions. I’d argue that the flip side to the West Coast’s 20th century explosion is that the Midwest developed a sense of being left behind that even preceded the manufacturing decline era.
You can take this point one step further. One outcome of Midwestern manufacturing decline was the loss of senior management and executive level talent as Midwest corporations closed, downsized or relocated. Very little came in from outside to replace them.
Network restoration?
This might come across to many as a sad story for the Midwest. But that’s not true. There is a way for the Midwest to reestablish its connections and restore its position as an economic powerhouse.
The answer is in the region’s collection of quality flagship public universities.
The American Association of Universities (AAU) is a collection of 71 prestigious research universities, united in the mission of advancing academic research, innovation and education. As a region, the Midwest’s universities figure prominently among the membership, making up 20 of the organization’s 69 U.S. members (McGill University and the University of Toronto are also members). Fourteen of the 20 located in the region I define broadly as the Midwest are public institutions. There are 38 public institutions that are members of the AAU, with eight being in California alone (all of them institutions within the University of California system). Taken together, major public universities in the Midwest make up nearly half of the organization’s public membership.
I’d say the highly-regarded private institutions, mostly on the East Coast, have done an excellent job of exporting talent to cities on both coasts. That’s how they’ve been able to facilitate the network-building between east and west. Midwest universities continue to produce talent through their public (and private) universities but have been less successful retaining that talent in the region. Why? I think it’s because the region’s public universities haven’t quite mastered the academic research/entrepreneurship connection.
But that may be changing.
Last month Illinois Governor J.B. Pritzker announced plans to construct the Illinois Quantum & Microelectronics Park (IQMP) on the former U.S. Steel site on Chicago’s South Side. PsiQuantum Corp., a Silicon Valley-based quantum computing company, is seeking to develop the first general-purpose silicon photonic quantum computer on the former steel factory site.
From a WGN-TV news report:
“Officials said PsiQuantum will serve as the campus’ main tenant at the IQMP and will build and operate a full scale, fault tolerant quantum computer, the first in the United States. The computer will help cut down development timelines for making life-saving drugs and help develop new materials and green energy solutions.”
PsiQuantum is being brought to the Midwest in part because of the work of the Chicago Quantum Exchange, a collection of “top universities, national labs, and industry partners to advance the science and engineering of quantum information, train the future quantum workforce, and drive the quantum economy.”
From the CQE website:
“The CQE is based at the University of Chicago and anchored by the US Department of Energy’s Argonne National Laboratory and Fermi National Accelerator Laboratory, the University of Illinois Urbana-Champaign, the University of Wisconsin–Madison, Northwestern University, and Purdue University. Our community includes more than 50 corporate, international, nonprofit, and regional partners and is one of the largest collaborative teams working on quantum science in the world.”
This is an excellent example of restoring the networks that spur economic development. For far too long, the talent of the Midwest has been overlooked and undernourished. This is the kind of nurturing the region has been needing to stimulate the next era of economic growth. Let’s make it happen.
Just wanted to add a correction to my previous comment. Microsoft to date has only purchased 1672 acres (2.61 sq miles) of land in Mt. Pleasant - not 2250 acres. Still, within the next week, grading wil begin on the final portion of the initial $3.3B phase of the project. This phase will be completed by 2026, and include at least 12 buildings totaling 4.1 million square feet which already would make it the second largest data center complex in the US. In May, (at which time Microsoft's land holdings totaled only 1395 acres) it was estimated the total investment on that amount of property could reach $10B. With the additional land purchases since May, the total potential investment is now likely around $12B or more. There's another 1700 or so acres of farmland directly south of the Foxconn and Microsoft combined holdings that would seem ideal for further expansion of the technology park. The next few years should be exciting as Microsoft's plans continue to evolve. Could it end up being the site for a rumored $110B data center planned by Microsoft complex to host ChatGDP.
One of ironies is that in part due to the network effect you described, and the personal connections of Microsoft's two current top executives to SE Wisconsin, we've managed to transition our hopes for a high-tech future from Foxconn (which made a net profit of $4.5B on $198B in revenue in 2023) to Microsoft (which made a net profit of $72.4B on only slightly greater revenue of $212B last year). Microsoft is in vastly superior position to follow through on its capital investment plans.
Another interesting wrinkle is that Foxconn is the world's leading manufacturer of data infrastructure products and Mt. Pleasant (where they have still managed to invest $1B) remains their primary US facility with the main products at present being data infrastructure products. So there could end up being some further synergies between Foxconn and Microsoft's plans, and a further unique advantage this data center could have over every other in the US.
I’m reminded of an article by Jim Russell making the case that “Brain Drain is Economic Development” (When Leaving Home Is Good for the Hometown - Pacific Standard (psmag.com)).
“For a developed tech market such as Boston, little would be gained from losing talent to Silicon Valley. For a developing tech market such as Minneapolis, much could be gained from losing talent to Silicon Valley or Boston. Similarly, talent just graduating from college is relatively undeveloped. The migration from a place of talent production to a talent refinery such as New York City could benefit both migrant and source town, as well as the destination. Regardless, the hometown girl gains knowledge in a global city that she was unable to glean where she grew up. For the place left behind, it must figure out how to tap that experience and promote its own economic development.”
Essentially brain drain from Midwestern universities in theory should in the long run be helping to build our network with the coastal cities. This certainly seems to be the case with another high-tech project currently underway on the west side of Lake Michigan, namely the construction by Microsoft in Mt. Pleasant, Wisconsin, of what reportedly will be one of the largest and most advanced AI and cloud data centers in the world. As of July 2024, Microsoft has acquired >2,250 acres of land in Mt. Pleasant for its planned campus (including a large portion of the failed Foxconn project site). The selection of this location was in part a result of Microsoft President, Brad Smith’s connections to Wisconsin (born in Milwaukee and raised in Appleton). Like the PsiQuantum project, access to water from Lake Michigan water was a factor as well. (Building a data center economy: Microsoft’s Mount Pleasant project could be game changer for Wisconsin (biztimes.com)).
The 2000 construction jobs over the next decade and the 2000 reported permanent jobs are exciting (although I think everyone in Wisconsin is a little skeptical about forecasts of jobs for this site after the Foxconn debacle). But what is perhaps more exciting in terms of innovation and long-term impact is that the project is paired with the creation by Microsoft of an AI-Co Innovation Lab at UW-Milwaukee, which will join six other similar labs created by Microsoft around the world, but be only the third in the US (with the others in San Francisco and Redmond), and be the first dedicated to the manufacturing industry as well as the first on a university campus. The AI-Co Innovation labs are intended to give businesses a space to build, develop, prototype and test their AI-centered solutions. With the scale of Microsoft's reportedly investments in AI, there would appear to be a strong incentive for making these centers as impactful as possible - and Microsoft has the money and expertise to make this happen.
Milwaukee-area manufacturing businesses are already "all-in" on AI in terms of building the data centers themselves, with Johnson Controls reporting over $2 billion in revenue in the past year linked to data center projects, and Milwaukee Tools developing a new line of tools specifically for work on data center construction and maintenance projects. But the lab will provide opportunities for further innovation of what are already highly innovative companies (with Milwaukee Tools averaging 1 patent per week).
The decision to create the lab at UW-Milwaukee is without question another example of the benefits of "Midwest brain drain" with the key connection being the school’s link to Satya Nadella, Microsoft’s CEO, who earned his master’s degree in computer science at UW-Milwaukee in 1990, and who has personally donated $2 million to the school to support efforts to recruit retain and graduate undergraduate students from marginalized and underserved communities, preparing them with the skills to pursue careers in computer science, data science and information technology.