Interesting blog post on the question of the day: Will you be Detroit or Pittsburgh

The analogy has been made a bunch of times, notably by the New York Times in November. The analogy goes something like this: The steel industry is another heavy capital-intensive business with little room for change and only once they faced complete bankruptcy were they able to restructure and run profitably. 

This blog post describes how Pittsburgh moved from 10% to less than 1% of the workforce in the steel industry:

“Detroit should take a page out of Pittsburgh’s playbook. In the 1980s, the state used local universities to pour funds into technology research. What blossomed was a thriving entrepreneurial community. The largest industries? Computer software, biotechnology, education and health care, all of which have held up well of late.

To be sure, Pittsburgh reinvented itself during a run of prosperity. It didn’t happen overnight and it didn’t happen without a tremendous amount of federal, state and local support and vision. Skilled workers who couldn’t make a living in Pittsburgh moved elsewhere, to thriving cities like Phoenix and Vegas.”

All good things to do for any city and Ann Arbor is the most likely place for this to succeed. However, there is a big difference between the steel and auto industries: cars are not commodities. To make a car, you need many more skilled creative and technical workers to design, architect, and sell the cars. It’s a different industry and other than the big decline and the high capital required, it’s quite different. 

The big advantage that Detroit has is an abundance of these skilled technical workers who are now likely to work for a lot less money in a place with a pretty low cost of living already, laying fertile ground for Detroit to become the next cleantech hub. 

Some argue, like the WSJ that there isn’t any inherent need for an American auto industry, which is a fair criticism. However, if the auto industry goes down, the effects will be felt throughout the country and would prove disastrous for our economy largely. Which is not to say it’s okay to bail them out (I’m on the fence on this issue), but rather the consequences of failure are pretty drastic.