What Are Second Cities Good For?
Second City is a comedy, sketch, and improv group that helps shepherd young talent to the big screen. Stars like Tina Fey and Martin Short didn't start as interns in mailrooms—they were stars in smaller markets, bringing talent from Toronto and Chicago to New York and LA to make it big.
The Rise of Second Cities
I grew up in Austin and moved to Seattle. As you might expect, they're very different in many ways. But to my surprise, when people started asking me about my journey here, I was shocked by how similar they felt. The reason isn't complicated—these places grow like weeds.
Throughout my childhood, Austin transformed from a rounding-error college town in Texas to one of America's top ten largest cities. Similarly, Seattle has been the second-largest beneficiary of the trillion dollars technology firms throughout the 21st century.
I used to work summers with a veteran from Hell, Michigan. Hearing him describe conditions in his hometown—surrounded by a decrepit industrial power plant, with a desolate downtown filled only with dollar stores and vape shops—helped put into context the relative uniqueness of all the cranes and endless construction traffic of my childhood.
But describing the negative is obvious. The question remains: What are second cities good for? Why do they exist when talent could be allocated differently?
The Seattle Example
Do you know where Stripe's CTO lives? Seattle. I've been wondering why for a while, and here are a couple of reasons that come to mind.
People in Seattle are generally technical and reserved. I've found their relative introversion to be 80% a function of the weather. Still, the other 20% deserves analysis too. Some of this could be attributed to the former investment in public education—people here "look" like they know the derivative of cos(x) is -sin(x). Other parts could be traced to the large portion of Asian American immigrants, who raise educational standards for everyone through consistent effort.
This introversion helps explain Microsoft's growth into the world's largest enterprise technology company. They were the fastest-growing technology company in the world, bringing in talent from across America and the globe, building a market that people never would have expected to surpass GE when they first started. They skirted virtually all regulatory pressure until they dominated the market.
Amazon too. The story goes that Bezos didn't even know where he would move on his journey to the West Coast, choosing Seattle over San Francisco while still on the road. I believe that because Seattle was underexposed to Sand Hill Road's venture capital ecosystem, Amazon was better able to build software, attract and retain talent, manage costs, think differently, and improve user experience by escaping the relative noise of SF—which in every other way is supposed to be the head-down grinder capital of the world.
The Advantages of Second Cities
Second cities offer a lower cost of living and more traditional American lifestyles than are currently affordable in our nation's most expensive cities. That's at least a partial reason why Stripe's CTO would be based in Seattle. He can manage a more technical workforce more quietly, and still generate edge and creativity.
Similar dynamics play out elsewhere: Pittsburgh's innovations in self-driving cars, Princeton and Bell Labs' success in theoretical computer science, and Boston's work on base and prime editing.
Innovation and the Future
What kind of creativity will make the future? A basic framework for this question is a 10X technological or process innovation that creates a path to monopoly (à la Thiel). Here lie some of the secrets of companies like Dell Computer, with their triangle graph of innovation that my mom used to tell me about, or a vertically integrated rocket company out of Hawthorne, California.
Dell created a radically better computer assembly mechanism from a dorm room. This evolved into meaningful platforms at every layer of the enterprise tech stack, with significant scale advantages at the data center level. But these innovations are from a different time. Future innovations will either happen with AI or depend on new factories.
Resource Advantages
Second cities have meaningful advantages regarding permitting and resource-intensive projects. It cannot be overstated how important it is for new companies to have access to:
- All the power they need on reasonable timelines
- A pro-growth regulatory environment
- Intelligent and inquisitive leadership interested in the future
- A surplus of technical talent
- Competitive tax policy
Capital formation has changed for these resource-intensive projects, and there's more enthusiasm for funding outlier ideas because SaaS revenue is being challenged by AI scaling.
The Critical Question
The defining question about any second city is when the next superlative founder chooses to relocate there, as opposed to the dominant established hubs. The ultimate challenge is how to create a flywheel of young, industrious talent focused on new, technical things.
Second Cities and Tech Frontiers
What do second cities have to do with the frontiers of technology? In many ways, this is domain-dependent. Talented performance engineering teams are located in Chicago and New York for a reason. Protein design exists because of the work of one major group from Seattle.
But if you want to work on new things that aren't AI, you're probably well-served in a second city. You'll need to join one of the pioneering groups and find real ambition in under-covered markets. Reversing enterprise inertia will be more complicated and nearly fatal in most cases. Still, if you're trying to operate on the lunatic fringe, second cities have unique advantages in talent recruitment and focus.