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The Tech Campus Moves Downtown

from the magazine

The Tech Campus Moves Downtown

States ponder expanding their university tech departments to big cities, hoping to maximize economic benefits. Winter 2019
Education
Cities

Much of today’s technology economy is located where a critical mass of talent and capital converge: on the campuses of elite research universities, in settings with strong entrepreneurial cultures. The key role that universities play in this equation is prompting some states to rethink the geography of their key academic institutions, looking to position them more effectively as engines of the local economy.

A case study for the challenges that states face in strengthening their knowledge-economy prowess can be found in Illinois. The University of Illinois’ renowned computer science and engineering programs have produced a Who’s Who of tech startup founders, including Steve Chen and Jawed Karim (YouTube), Jeremy Stoppelman (Yelp), Tom Siebel (Siebel Systems), Jerry Sanders (AMD), and Max Levchin (PayPal). It’s a track record to be proud of. From the state’s perspective, though, there’s one big problem: none of these accomplished people built his business in Illinois.

Changing this situation, so that Illinois reaps the startups and economic gains from the talent it produces, has been a priority since the state’s most famous defecting pioneer, Marc Andreessen, invented the modern web browser, a program called Mosaic, decades ago, while he was a student at U of I and worked at its National Center for Supercomputing Applications. Andreessen later commercialized his browser in Silicon Valley as Netscape—and the Internet, as we know it, was born. As Chicago venture capitalist Jeffrey Carter put it, “The best thing that ever happened to Silicon Valley was Illinois.”

Why do Illinois’ tech brains often escape to the West Coast? A commonly given answer: geography. The University of Illinois’ flagship campus is located in downstate Urbana-Champaign, a small region of only 240,000 people about two hours’ drive on I-57 from the state’s economic capital in Chicago. This disconnect between the location of a state’s flagship school and its economic capital is not unique to Illinois: other states should be rethinking their geographic strategy for the twenty-first century as well.

The location of most American universities is an accident of history. Like many state flagship universities, Illinois’ is a land-grant school created under the auspices of the Morrill Act of 1862, which granted every state 30,000 acres of federal land per congressional district to establish a university focused on agricultural and industrial studies. The land could be used directly to house the school; or sold, with the proceeds reinvested in the school. Illinois placed its land-grant school in Urbana-Champaign because a partially completed building from a previous attempt at starting a school there was available and the local community could use this asset to persuade the state to choose it in a bidding war over the university’s location. Chicago, with barely more than 100,000 people at the time, didn’t even compete.

It’s a similar story for most other universities. Most of their sites were chosen more than 100 years ago, for reasons no longer relevant. Purdue University is in West Lafayette, Indiana, because local businessman John Purdue and others offered $150,000 and land for the new school. Penn State University’s location in Centre County, Pennsylvania, was a result of a land grant from businessman and politician John Irvin. Columbia, Missouri, beat out five other cities to lure the University of Missouri by raising $118,000 in local contributions and land.

As states’ populations swelled and their economies expanded, cities with colleges began to diverge. Some states had established their flagship public institutions in the state capital or in another city that grew to be the state’s economic center. These included Ohio State in Columbus, the University of Washington in Seattle, and the University of Texas in Austin. But others—like Purdue, Penn State, and Missouri—were located in cities that grew with the college but remained small urban areas, “college towns” to this day.

In Illinois, these elements all grew apart. Springfield is the state capital. Chicago is a global economic colossus. Urbana-Champaign remains a quintessential college town. By Illinois standards, it’s doing well. It’s one of the rare regions in the state adding population, though at a slow rate. Like many college towns, it also has higher-quality amenities than a typical small industrial city would (though it is not a renowned locale like Madison or Charlottesville, either). But it never developed into a major population draw, and its elite-level computer science and engineering programs never catalyzed an economic explosion.

Urbana-Champaign marks a stark contrast with some cases where top universities were married to a major metropolitan center. The San Francisco Bay Area, with its Silicon Valley–based technology engine, along with private Stanford University and the flagship campus of the University of California system in Berkeley, is the best-known example. The Bay Area, and Boston, too, can perhaps be written off as unique anomalies that can’t be replicated. A more relevant comparison may be with Pittsburgh and its universities—notably, private Carnegie Mellon, with America’s top-rated computer science program, and the University of Pittsburgh. Pittsburgh’s university cluster, with cutting-edge expertise in areas like machine learning and robotics, has become a hotbed of driverless-car development. Many Silicon Valley firms are setting up shop there. Uber employs 700 people there, Google 600, and Ford 250. Many other firms have established and are expanding operations in the Steel City as well, including SAP, NetApp, Facebook, and Microsoft. The city is likewise full of local startups like Duolingo and Argo AI. And it was one of the 20 finalists in Amazon’s HQ2 competition.

It’s one thing for these successes to happen when the universities were originally sited in what is today a major economic center. But can states make a geographic change when their major universities are not located in a major hub?

Cornell, a private Ivy League university that is also New York’s land-grant college, has made just such a geographic realignment. As a private school, it’s free from the political complications besetting state universities, and thus is able to make moves more rapidly than these public institutions. Cornell’s main campus is located in the upstate college town of Ithaca. Its medical school has long been based in New York City, and it recently opened a second major New York City operation: Cornell Tech on Roosevelt Island, a partnership with Technion–Israel Institute of Technology. Cornell Tech originated in former mayor Michael Bloomberg’s effort to create a technology-focused university in New York. Bloomberg held an open bidding process that drew proposals from several schools, including Carnegie Mellon, Stanford, and NYU. The city pledged to give free land and $100 million in funds to the winning bidder, with Cornell chosen in late 2011. Cornell Tech is up and running today, with new buildings on Roosevelt Island and several more planned for what’s envisioned as a $2 billion campus.

New York City’s motivation to get a technology-focused university is clear. Less attention has been paid to Cornell’s motivation. According to Dan Huttenlocher, dean and vice provost of Cornell Tech, one motivator was that the city was a complementary venue to Ithaca for realizing the university’s research ambitions. “We are focused on the digital transformation of the economy and society,” he says. “So many issues of the world are urban issues.” The critical mass of industry and the density of people make New York City a good place for those looking to be on the leading edge of digital transformation. It didn’t hurt that Cornell could tap into huge pools of donor money to win the competition and launch the campus. The school has raised $770 million in private funding so far.

The creation of Cornell Tech was a farsighted move. Amazon, on whose board of directors Huttenlocher sits, had planned to put part of its New York HQ2 facility just across the East River, in Long Island City, Queens, before political opposition made the company reconsider and led it to announce that it was abandoning its New York plans altogether. Still, the role played by Cornell Tech in initially attracting Amazon shouldn’t be overstated; New York clearly recognized that it had to be a producer and not just an importer of top technology talent to realize its ambitions in the industry. The university likewise saw the city as the right venue for its aspirations.

Cornell may be the best-known case of a top college making a big geographic move, but it’s happening elsewhere, too, as the case of Michigan State’s medical school demonstrates. University medical schools have long been located in a state’s big city, geographically separate from the university’s main campus. These schools require a critical mass of patients to operate at a scale more easily attained in a large metro.

That’s part of the rationale for Michigan State College of Human Medicine (MSU-CHM) relocating its medical school headquarters to Grand Rapids and building a major medical school campus there. MSU-CHM was previously headquartered at MSU’s main campus in East Lansing, a state capital region of 478,000 people that’s bigger than a typical college town but still not a major city. Traditionally, MSU-CHM was focused on primary-care training and less on research. The new medical campus was part of an effort to beef up its research capabilities. Originally, the school considered relocating the entire East Lansing operation to much larger Grand Rapids. This understandably produced significant opposition, so the Grand Rapids operation ended up being an expansion. (The East Lansing medical campus was itself subsequently expanded.)

“Most university sites were chosen more than 100 years ago, for reasons no longer relevant.”

The Grand Rapids campus and research center were sited in that city’s Medical Mile district, where two local hospitals had recently merged into a regional health-care system and a new independent biomedical-research organization, the Van Andel Research Institute, created by one of the billionaire founders of Amway, had also recently opened. Jerry Kooiman, chief external-relations officer for MSU, calls the combination of the hospitals, Van Andel Research Institute, and academic medicine a “powerhouse combination.” Grand Rapids previously had no medical school, so its motive to acquire one is obvious. From MSU-CHM’s perspective, the lure was a bigger market, a bigger local health-care system, a strong tradition of local philanthropy, and the research institute. “These synergies are unparalleled for research discovery and the transformation of health,” Kooiman says.

Cornell Tech and Michigan State’s Grand Rapids medical campus and research center illustrate that the critical mass of people, institutions, and financial capital is an important motivator to draw universities to bigger cities, even apart from any state economic-development rationale. Other state schools are seeking greater geographic proximity to major markets. The University of Virginia’s Darden School of Business, for instance, has been expanding into Arlington, in suburban Washington. It’s unsurprising that many of these moves involve graduate schools. It’s tougher to pull off similar moves for undergraduate functions, since so much of the undergraduate experience is tied to main-campus life.

Illinois is arguably the state with the most to gain from some type of geographic realignment. It’s been a topic of conversation and debate for years. Former governor Bruce Rauner put forth the most aggressive solution to date, one that draws heavily on the Cornell Tech approach. The Discovery Partners Institute (DPI), to be located in Chicago’s South Loop, is envisioned not as a degree-granting institution but rather, in partnership with other universities and corporations, as a center for cutting-edge research in areas like big data and food and agriculture. DPI anticipates rotating faculty and students from the University of Illinois and other schools, as well as hiring its own faculty. The state has already appropriated $500 million for the project and is exploring partnerships with Israeli universities.

Unlike Cornell Tech, the University of Illinois, as a state school, is subject to the vagaries of Illinois’ notoriously dysfunctional politics. Understanding that it would set off alarm bells downstate, Rauner packaged the Chicago DPI center with investments in other innovation centers at campuses around the state, not only at Urbana-Champaign but also at other state schools, labeling this larger initiative the Illinois Innovation Network. “We want to make sure that this is not just a Chicago-centric thing,” said Rauner’s deputy governor Leslie Munger. Yet undoubtedly, Chicago is the heart of it.

Leaders in Urbana-Champaign are alarmed at the prospect that university assets might move to the Loop. Laura Frerichs, director of the University of Illinois’ Research Park and economic-development director for its Urbana-Champaign campus, emerged as a major DPI opponent. She believes that there’s no inherent limitation in her community’s ability to retain talent and build a technology economy. She points to local examples of technology success, such as Wolfram Research, the global software company behind the well-known Mathematica platform, which is headquartered locally and employs 350 people. The research park that Frerichs runs has attracted numerous major firms, including ABInBev (formerly Anheuser-Busch), Caterpillar, and AbbVie.

“Champaign-Urbana is wonderful,” Rauner once said, “but it’s very hard to keep a company of more than six people there. There’s no convenient transportation, not much of a workforce, and it’s very hard.” The situation is not as bleak as Rauner suggests—and he later walked back his remarks—but the fact remains that to the extent the tech industry is coming to Illinois, it’s coming to Chicago, not Champaign. Google has established an office in Chicago’s Fulton Market district and is reportedly in discussions about a major expansion that could bring as many as 5,000 jobs. Other major tech firms like Facebook and Salesforce are also choosing Chicago.

Yet Chicago itself is underperforming as a tech hub relative to its status as the nation’s third-largest metro area. Over 80 percent of the nation’s venture capital is flowing to four major markets: the San Francisco Bay Area, New York, Boston, and Los Angeles, and they have actually been increasing their dominance. Chicago was bypassed for Amazon’s HQ2 facilities in favor of higher-cost New York and Washington. This helps explain the logic behind trying to leverage the power of the University of Illinois by marrying it to Chicago.

The biggest political risk to DPI is the state’s transition to a new gubernatorial administration. Rauner lost his reelection bid to Democrat J. B. Pritzker, who criticized the DPI plan. Yet Pritzker has championed Chicago’s technology sector. He has invested in Chicago technology firms and was the driving force behind the creation of a facility known as 1871 (named after the year of the Great Chicago Fire) as a sort of headquarters institution of Chicago tech. He clearly understands the logic of DPI. As governor, he’ll likely want to put his own stamp on it and perhaps rebrand it, not cancel it. Then again, relying on rational behavior in Illinois politics has never been a winning bet.

Yet it might be a bet that the state can’t afford to lose. States, particularly those in heartland locations like Illinois, simply can’t settle for getting less than the maximum economic value out of their key state university assets. These schools’ main campuses may not be going anywhere, but states that figure out how to realign their university assets in a more geographically strategic way will put themselves at an advantage over the competition.

Photo: Chicago’s Loop, where the University of Illinois has recently opened the Discovery Partners Institute, a center for research in areas like big data and food and agriculture (MARCEL MALHERBE/LAIF/REDUX)

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