$1.6B in funding and $7B in exits: Chicago tech just had its best year ever

So, trying to replicate Silicon Valley isn't a good strategy. It's not very desirable. It's also not possible. Not for New York, not for Chicago, not for Seattle, not for Austin. Should these cities be grabbing a greater share of the new-technology action? Yeah, absolutely. But trying to replicate the culture of a sexist, racist suburban shithole whose high priests think it's OK to block off public beach access (cf. Vinod Khosla) is undesirable. It's happening slowly, but that shit is dying (although it will take two to four decades). Why does the contemporary Valley put such a high premium on pedigree? Because when a society goes into decline, nostalgia dominates. When the Valley was coming up, it didn't matter if you went to Stanford or UC-Irvine or a community college in Nebraska, so long as you were smart and could code. In its decline phase, you see the Stanford Welfare of Clinkle and Snapchat getting funded.

Talent has a natural desire to concentrate, and that might limit us to ~10 strong tech cities in the US, but Silicon Valley has blown past that natural inclination toward concentration. It's deep into the "congested" territory.

What makes Silicon Valley is that it's a condensation point for passive capital. Passive capitalists (teachers' pension funds that invest in VC firms) want returns, and don't seem to strongly care about where or how the capital is deployed. The priesthood that is trusted (in error) to do so are VCs who mostly live in California, and who almost never fund companies more than 30 miles from where they live, so the job and wealth creation is limited to a small geographic area (in which it's almost impossible for an engineer, if he's starting now or recently, to make wealth due to astronomical real estate costs) far away from where the passive capitalists live. Now, if the passive capitalists had a vote, they probably wouldn't want all of their money being directed at a small geographical area where most of them could never afford to live. All being equal-- and by "all", I mostly mean "return on investment"-- Nebraska police officers would rather their pensions be invested in Nebraska businesses and create jobs there... rather than have that money be funneled off to California. Of course, they'd be completely happy to have their money invested in California if that would bring better returns... but VC has been a low-performing asset class for a decade-- the VCs focus on their own careers rather than building great companies or generating returns on the portfolio-- so the passive capitalists are arguably getting screwed. If concentrating the passive capital in Silicon Valley was generating decent returns, then there'd be no reasonable argue against it, but it's not.

This is a long-form way of saying that I agree with you. Replicating Silicon Valley is a backward-looking strategy that won't work in Chicago or New York. These cities, instead, should focus on their own assets. I think Chicago (or Seattle, or Boulder, or for a longer shot, Minneapolis) is a contender for being a different kind of technical leader in, say, 2030... because Chicago has an unusual advantage of a perceived playing-from-behind while actually not being that far behind; that's fairly antithetical to the Valley's Dunning-Kruger smug cloud... but it won't look like the existing Valley. It'll be something different.

They attract the top STEM talent in Chicago and can pay them extremely well through profit sharing. There are a lot of engineers and "Xs who program" (where X ~= trader/researcher) taking home high-six and low-seven figure bonuses at the best groups. The people are usually very entrepreneurial and the firms have a "tech culture" where good code isn't a cost center. Why would guys getting market base, upside that pays yearly or quarterly, and autonomy trade that for $90k and a lottery ticket to build some glad-hander's dream?

Markets are slow and competition is fierce, so I think you will see a lot guys from these Getco-ish firms leaving because the opportunity just isn't there anymore or the firm culture has changed. Most of these people keep a low profile and have cash socked away. Some will end up bootstrapping their own businesses here in Chicago, building them in the image of the firms where they cut their teeth: nimble, revenue-focused, scientific, and sharing success with employees.

Anyone trying to attract talented STEM employees in Chicago should read these to see what they're up against:

http://www.nancyhua.com/2012/12/11/the-and-my-future/

http://qr.ae/3MPL1

You're wrong. I can make the same argument against people with long tenures. Some people, when they realize that they've been passed over for a promotion or that they're not being groomed for the role they want in the future, bounce (external promotion). That's the honest thing to do. Others stick around, play politics, work the system, slack, and wait for others to fail so they can capitalize on the chaos and move up the ranks. In other words, one could make the argument that the able, confident, ethical, honest people job hop and the political actors stick around and climb the ladder.

I don't actually believe that most people with long tenures are unethical. I'd put the correlation right around zero, to be honest about the whole thing. I think that there are patterns that cause good people to have long tenures and bad people to have short ones, and also patterns that cause good people to have short tenures and bad people to have long ones.

First, if this guy is really so great, why has he flamed out of 3 firms in 5 years?

Maybe he's technically excellent but bad at playing the politics. Perhaps he's an overperformer, like McNulty on The Wire. Maybe he's just unlucky. Maybe he didn't flame out, but each move was a major promotion that he wouldn't have been able to get internally.

Second, do I really want a guy who's bounced from firm-to-firm glomming up ideas and IP? Won't he do the same thing to me?

The problem isn't "job hoppers". It's attrition. When people leave, it's disruptive (and the internal disruption to your own processes is so much more of a threat than IP leakage, unless someone's actually stealing code and then it goes to the courts, that the latter is a rounding error). You can control attrition by treating people well and making sure that ambitious people have appropriate opportunities get promoted on time. It has little to do with the people you hire, and much more to do with how you manage them.

The anti-"job hopper" sentiment isn't really about IP. It's about being mean-spirited, and the IP justification is just made to back-fill an already-formed prejudice.

Isn't the misogynistic bro culture a function of a sheltered, narrow upbringing and a nationwide cultural infatuation with "apps" (which only the talented, sought-after Software Engineers can provide)?

From my experience, the bros come from all across the US and Canada, and not just the San Francisco Bay Area. I've lived and worked here all my life, and most people in the tech industry actually moved here from other states. So what's to say they all won't move to Chicago as well?