The equity thing needs to be addressed badly, my theory is that it's the result of our manufacturing past. We still have those manager/worker cultural remnants. I talked to one woman who said she "couldn't wait to turn 30 so people would take her seriously." We probably have some of the best engineers in the world here, but most of them aren't in startups, they're building corporate IT or middleware. You're not seeing a ton of new spinoffs from Groupon because the equity was so concentrated pre-ipo. Until we get a virtuous feedback loop of young guns spinning out of companies WITH some cash, it's probably not going to change. The VC community here is risk averse and typically only buys revenue.

I disagree with point #3. Rails, Django, 8th light, Groupon, etc... have done more for craftsman culture than anywhere else I can think of. The midwest work ethic and quality standards have a lot to do with that.

It's a flood of NWU/Kellogg and UC/Booth MBA grads that continually stream into the market and slosh around the consulting firms before filling up the lobby at 1871 trying to catch the eye of a Pritzker.

I left a Chicago-area startup that ticked off about 90% of your boxes above. It was a nightmare. The company is still going and the CEO is still busy running around talking about being a startup CEO instead of shipping the damned product.

Finance is also an extremely tempting lure. The pay is quite good (e.g., significantly better than Google), the hours are better, and the firms are generally supportive of external work. Many of the finance firms my friends work at (I've lived in the Chicago area most of my life) allow/encourage/hire people to serve on the C++ standardization committee, were co-founders of major open source projects such as R, etc.

It's hard to lure people away from jobs like that where you're paid a lot and have a ton of freedom for a potential exit that's smaller than what you currently make, unless your startup becomes Google.

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

It's because Chicago's culture is excessively risk averse. There seems to be a tendency to seek permission or acceptance from peers and others before taking a risk (either in business, fashion, life, whatever).

This is actually great for bootstrapping, because it keeps you in touch with the real world and immediate customer demand.

But it leads to fewer qualified, technical people there with no history of 'business' thinking that striking off on their own and starting a company is a good idea.

The people who do start companies there are often the ones who have gone through some kind of training program (MBA, work experience, etc.) that in their minds has qualified them to start a company.

So I propose that it's not that the MBA types are overrepresented, it's that technical folks and others are underrepresented, because they're tending to not start companies.

Disclaimer: totally conjecture, based on living in Chicago for eight years, but being from California and now living in NYC. In moving from Chicago to NYC the most striking difference (for me), other than the diversity, was the spirit that no one cares about you or what you do, so you might as well do whatever you want or think you can. For some that means starting companies.

Again this seems like selection bias at play. Chicago's history is actually built on the back of excessive risk taking, not risk aversion. Its a cultural touchstone that is built into the cities image.

And if you look at areas outside of the web, there have been huge payouts for risk taking very recently (trading is the most obvious one).

I suspect that what people are saying is "Chicago doesn't do as good a job of building SV style startups as SV. The kind that is based on a constant flood of inexperienced dev talent, high turn over, and equity based compensation. Due to this there are very few blockbuster technology firms and relatively fewer people with that kind of experience to lean on when trying to emulate the SV model."

I think that is probably a fair assessment, but I also think that it is generally a bad idea to try to emulate the SV model, when for the price of a cross country voyage, you could be in SV.

SV has similar problems in the reverse direction. Talk to bootstrapped founders there some time. They walk around feeling like they have 3 heads. And don't get me started about the misconceptions of the way capital markets work. Having been pitched a couple of SV startups that were going to disrupt commodities trading, I can assure you misconceptions about how "business" works go both ways.

I don't know if the culture is that much more risk averse than SF, but rather that the risk calculation is different. There's such a big tech ecosystem out in SF that "failure" as an entrepreneur might mean raising more money for the next project, or failing that BigCos fighting to hire you. Without the same depth of tech infrastructure, the downside risk is much higher in Chicago (or really, anywhere that's not SF).

Any time you replace objective evaluation of people with subjective holistic evaluations, you get a system that seems more humane and less sharp-cornered, but you also get corruption. It's the question of which is better: sheer cold fairness or sticky warm humanness that can devolve into corruption or even a reputation economy (meaning, "extortion system") if the powerful abuse their roles in the judgment of others.

You can look at it charitably and say that the VCs are doing good by caring more about the reason for failure than the fact of it. Or you can look at it negatively and say that it creates a culture where (a) slimy operators good at creating impressions can play politics and let their companies rot, knowing that their backers will see their failures as "good faith" regardless of the facts, and (b) those with power over the "holistic" element of evaluation evolve into reputation-making and -breaking extortionists. The "right answer" is somewhere between the two.

With Chicago, I think the problem isn't that there's a lack of good jobs for technical people, but that the job-hopper stigma is still very strong in finance (and that's true everywhere; it's not geographical, and the attitude is similar in SF finance). So it's hard for a trader to bounce back if the startup doesn't work.

If hedge funds were willing to hire people with typical startup/tech CVs-- those tend to show the brutally honest behavior of job-hopping (even at 2 years, or 6 months) if one's career is stagnating, rather than sticking around for 5-6 playing the system or slacking like white-collar people are "supposed" to do when passed over, because it's somehow more disloyal to leave than to slack for years-- then people would less afraid to do startups. The fault isn't with Chicago per se. It's with finance and the F500 world and their anachronistic hatred of the "job hopper".

There's a lot that I don't like about California startup culture but I think job hopping is a good thing. If you're ambitious and it's clear that you've been passed over for advancement, it's better for everyone to move on than to stick around and suck out a salary and play against the system for 5+ years because the white-collar world thinks you're "supposed" to show "staying power" or "loyalty".

At any rate, I think you're completely right. I don't think that California is more or less risk averse than the rest of the country, nor do I necessarily think that risk seeking is even a virtue. California entrepreneurs get to look more risk-friendly just because there's such a high frequency managed outcomes (acqui-hires and executive positions made available if the VCs judge you to have failed in good faith) that VC-funded entrepreneurs can count on one. Where it's pernicious is when these founders justify massive equity disparities (compared to the 0.5% that the first engineer gets) because they "took all the risk" when, in fact, most of these VC-funded founders don't take any more risk than any other corporate employee.

Going away to do a startup doesn't send the same signal. I'd gladly hire someone who did that.

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.

Not everyone who downvoted that (admittedly, not well-expressed, insofar as some thought I was accusing Spiegel of causing the Sony hack rather than simply benefitting from it) comment was a Speigeloid. The Spiegeloids are the ones who have been repeatedly downvoting random comments of mine just because I wrote them. (Or, an alternative explanation would be that the Hacker News community has suddenly become much meaner... but I doubt that.) In other words, stalker-downvoting (seeking out someone's comments and, without reading them, downvoting them).

I have no idea when it comes to their personal identities, but I know that I have at least 4 stalker-downvoters. They could be sock puppets of one person. For all I know, it could be Spiegel himself (but I doubt that).

Absolutely. Many of the early startups were based on needs that could serve people and corporate partners. We don't have a lot of app based businesses.

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.

Maybe I run in the wrong circles, but developer compensation is actually slightly elevated due to the trading houses. This is cyclic to some degree but when trading houses are flush they tend to be able to just come over the top of other businesses (and they have a culture of doing so). I think that also depresses the value of "equity" compensation. Lots and lots of developers in Chicago actually know how options work (how to price them etc) and are weaned on a diet of cash bonuses. It makes equity packages unattractive to that class of developer. Maybe that has a trickle down effect that causes equity to not be a major compensation component?