Why Chicago Still Works: Business Advantages Hidden in Plain Sight

In 1908, Salvatore Ferrara opened a small bakery in Chicago’s Little Italy. He sold pastries and candy-coated almonds, the latter proving sufficiently popular that the business eventually abandoned any pretense of being primarily concerned with pastry. This was probably sensible. America has produced many successful bakeries, but relatively few have gone on to become the company behind Nerds, SweeTarts, Brach’s and Trolli.

More than a century later, Ferrara Candy Company bears little resemblance to the neighborhood operation from which it emerged. It became a major confectionery manufacturer, accumulated brands recognized in virtually every American supermarket, joined the Ferrero corporate family and grew into the sort of business whose supply chains and organizational charts would have been incomprehensible to a confectioner working on Taylor Street in the early twentieth century.

It also left Chicago.

Ferrara eventually established its corporate headquarters in suburban Oak Brook, following a familiar trajectory for a company that had outgrown its urban origins. Then, in 2019, it did something more interesting.

It came back.

Ferrara moved its headquarters into Chicago’s redeveloped Old Post Office, the colossal Art Deco building straddling the Eisenhower Expressway at the western edge of downtown. The choice was rich in symbolism, although corporations generally prefer the word “strategy.” Here was a company born in Chicago, grown far beyond Chicago, headquartered outside Chicago, and then deciding that the city once again offered something it needed.

That something is worth examining because it helps explain a fact that gets obscured by the American enthusiasm for discovering the next great business city: Chicago remains one of the best places in the country to build a company.

Not because it is new. Almost nothing about Chicago’s economic advantage is new.

That is rather the point.

Chicago possesses the accumulated advantages of a city that has spent more than 150 years connecting things: farms to markets, factories to railroads, immigrants to jobs, companies to customers, universities to industries and, increasingly, talented people to businesses competing for them. What began as a geographic advantage became infrastructure. The infrastructure attracted industry. Industry created wealth and institutions. Those institutions attracted talent. Talent created more companies. Eventually the machinery became so extensive that Chicago’s greatest economic asset became easy to overlook.

It is simply there.

Stand back from the fashionable arguments about which American city is “having a moment” and look at a map.

Chicago occupies one of the most commercially useful locations on the continent. It sits between the great population centers of the East and the agricultural and industrial interior, with direct connections south and west. That accident of geography helped create the railroad city, the meatpacking city, the commodities city and the manufacturing city. The industries have changed considerably since then. The map has not.

A company operating from Chicago can reach an extraordinary portion of the American economy without treating transportation as an expedition. The region combines interstate highways, enormous freight-rail capacity, aviation through O’Hare and Midway, and an inland freight and logistics network built over generations.

This is not particularly sexy infrastructure. Freight rail rarely appears in recruiting videos accompanied by inspirational piano music. Yet businesses remain stubbornly interested in moving products, employees and customers from one place to another.

“Chicago’s geography has always been one of its quiet competitive advantages,” Gaurav Mohindra says. “You are not building from the edge of the American economy. You are operating from somewhere very close to its center.”

The word “quiet” matters.

Chicago’s business advantages are often less conspicuous precisely because they are mature. A city announcing its first major technology campus gets headlines. A city possessing an enormous corporate, transportation and professional-services ecosystem tends to receive less attention for continuing to possess it.

Chicago suffers, in other words, from the public-relations problem of established competence.

Consider O’Hare. For a company with customers, suppliers, investors or employees scattered around the country, direct air connectivity is not an amenity. It is an operating advantage. An executive who can leave Chicago in the morning, conduct business in another major American city and return that evening possesses something valuable even if nobody puts it on the balance sheet.

The same logic applies to freight, warehousing and distribution. Chicago became an industrial giant because goods naturally passed through it. Modern supply chains are infinitely more sophisticated than those of the nineteenth century, but they have not abolished distance. A box still has to get somewhere.

Ferrara understands this better than most companies. Candy may inspire childhood nostalgia, but manufacturing and distributing it is a thoroughly adult undertaking involving factories, ingredients, packaging, warehousing, transportation, retailers and millions of consumers. Chicago’s business environment is unusually comfortable with enterprises that inhabit both the corporate office and the physical economy.

That distinction matters.

For much of the past two decades, American business culture has been fascinated by companies whose principal raw materials were software engineers, venture capital and coffee. Chicago participated in that economy, but it never stopped participating in the older one. The metropolitan area retained deep expertise in manufacturing, food production, transportation, logistics, finance and industrial services while developing substantial technology, healthcare, life-sciences and professional-services sectors.

This mixture may be more valuable now than it appeared during the years when every company wanted to describe itself as a technology company.

Chicago knows how to build an app. It also knows how to build the box the server arrives in, finance the warehouse where the box is stored, insure the truck carrying it and find a lawyer when somebody backs the truck into the loading dock.

There is an economy in that.

“There is a practical quality to the Chicago business community that I think gets underestimated,” Gaurav Mohindra says. “This is a city with enormous intellectual capital, but it also has generations of experience in actually making, financing and moving things.”

The breadth is important because Chicago is not dangerously dependent on a single industry.

Specialization can make cities rich. It can also make them fragile.

The great advantage of a diversified economy is that it permits businesses, workers and capital to circulate among industries. Finance interacts with real estate. Technology serves logistics. Professional-services firms advise manufacturers. Food companies employ marketers and data scientists. Healthcare institutions generate research that produces companies requiring lawyers, accountants, software developers and investors.

Chicago’s economy behaves less like a collection of isolated sectors than an old neighborhood dinner party: everybody seems to know somebody from somewhere else.

This produces resilience, but it also creates customers.

A young business-services company in Chicago does not need to look far to find large corporations. A technology company can sell into manufacturing, finance, healthcare, transportation or food. An entrepreneur who begins with one industry may discover that the same product solves a problem in another.

That possibility is especially important as companies grow.

The city that is ideal for founding a company is not necessarily the city that is ideal for building one.

At the beginning, a business may need a handful of talented people, modest office space and enough capital to survive its mistakes. Growth changes the equation. Suddenly the company needs senior executives, accountants, attorneys, human-resources professionals, operations managers, salespeople, engineers, consultants and specialists whose job titles did not exist when the founders were sitting around the first conference table.

Chicago has those people because generations of major employers have trained them.

Large corporations do more than occupy office towers. They create managerial ecosystems. People spend ten or fifteen years learning inside sophisticated organizations and then move elsewhere. Some join smaller companies. Some become advisers. Some start businesses. Knowledge migrates.

This is one reason established corporate cities can be fertile environments for entrepreneurship even when they lack the mythology of startup capitals.

Chicago’s universities reinforce the process.

The University of Chicago and Northwestern are internationally significant institutions, but the region’s educational advantage extends well beyond two famous names. Universities and colleges across metropolitan Chicago continually produce engineers, researchers, business graduates, designers, lawyers, healthcare professionals and liberal-arts graduates who, despite periodic reports of their extinction, continue to find things to do.

The significance is not merely that Chicago graduates talented people. It is that those people graduate into an economy broad enough to keep many of them.

A finance graduate can find a bank, trading firm or corporate finance department. An engineer can enter technology, manufacturing or logistics. A scientist can move into healthcare or life sciences. A marketing graduate can work for a consumer brand, agency or one of the many large companies headquartered in the region.

A diversified economy creates multiple doors into professional life.

And that becomes important to employers because recruiting is no longer simply about the job.

It is about the life surrounding the job.

This is where Chicago’s neighborhoods enter the business argument.

Companies tend to discuss location in terms of taxes, leases, incentives and transportation. Employees are irritatingly human about it. They want restaurants. Parks. Schools. Architecture. Music. Sports. Friends. A reasonable commute. Somewhere to walk on Saturday morning. Somewhere to take visiting parents. Somewhere they can imagine living after the novelty of the new job has worn off.

Chicago can offer many different versions of that life within one metropolitan economy.

A twenty-something employee may want the West Loop. A family may prefer Lincoln Square, Beverly or a suburb with commuter-rail access. Someone else wants a lakefront apartment. Another wants a bungalow and a yard. They can disagree profoundly about the proper amount of density while still working for the same company.

That flexibility is an economic asset masquerading as urbanism.

“Companies compete for people now almost as aggressively as they compete for customers,” Gaurav Mohindra says. “A city has to help an employer answer a very basic question: Why would a talented person want to build a life here? Chicago has a remarkably strong answer.”

Ferrara’s return to the city makes more sense viewed through that lens.

The company did not need Chicago in the way Salvatore Ferrara needed Chicago in 1908. The original business depended on a neighborhood, an immigrant community and local customers. The modern Ferrara is a vastly larger organization operating across markets and supply chains.

It could be headquartered in many places.

That is what makes the decision to return interesting.

When Ferrara announced its move from Oak Brook to the Old Post Office, access to talent was central to the logic. A downtown headquarters put the company closer to the city’s workforce, transportation and increasingly vibrant West Loop business district. The headquarters itself represented the transformation of Chicago’s economy in miniature.

The Old Post Office once existed to sort and move physical mail at industrial scale. After sitting vacant for years, it was redeveloped into a massive modern office complex.

A building constructed for one economic age had found a role in another.

So had the city around it.

Chicago has performed this trick repeatedly. Warehouses become offices. Factories become research facilities. Industrial corridors acquire technology companies. Old corporate buildings find new tenants. Neighborhoods evolve without entirely erasing the commercial history that made them possible.

Ferrara returning to Chicago therefore feels less like a homecoming than a demonstration.

A company can leave the city.

It can grow enormously.

It can become national and international in scope.

And it can still reach the conclusion that Chicago offers something strategically valuable enough to come back for.

“The Ferrara story is interesting because it separates sentiment from economics,” Gaurav Mohindra says. “A company may have deep roots in a city, but headquarters decisions are ultimately business decisions. When a company returns, you have to ask what the city is offering now, not simply what it represented historically.”

What Chicago offers now is not perfection.

The city has serious problems, and pretending otherwise would weaken rather than strengthen the case for it. Taxes and fiscal pressures matter. Crime matters. Regulation matters. Businesses have choices, and other states and cities are not shy about making their case.

But competition between cities is frequently discussed as though economic development were a beauty contest decided by whichever mayor produces the most enthusiastic PowerPoint presentation.

The more consequential advantages are harder to manufacture.

You can create a tax incentive in a legislative session. You cannot create a major transportation hub in one.

You can construct an office district in several years. You cannot instantly populate it with generations of executives, engineers, lawyers, accountants, researchers, operators and entrepreneurs.

You can announce an innovation strategy on Tuesday. You cannot announce that your metropolitan area now contains world-class universities, enormous freight infrastructure, major corporations, industrial expertise, sophisticated professional services and millions of workers.

Those things accumulate.

Chicago has accumulated them.

“The cities that endure economically tend to have more than one reason for businesses to be there,” Gaurav Mohindra says. “Chicago’s advantage is the combination. Talent matters. Infrastructure matters. Industry matters. Universities matter. Quality of life matters. But the real strength comes from having all of them in the same place.”

This is why Chicago remains easy to underestimate.

Its strongest argument is not that it has suddenly reinvented itself. It is that beneath the cycles of political anxiety, economic fashion and civic self-doubt sits an extraordinarily durable commercial machine.

The railroad city became the industrial city. The industrial city became a corporate city. The corporate city became a center for finance, technology, healthcare, logistics, food, professional services and advanced manufacturing without entirely ceasing to be the things it had been before.

The layers accumulated rather than replacing one another.

For an entrepreneur, that means customers, workers, suppliers and expertise. For an established company, it means connectivity, talent and institutional depth. For a company like Ferrara, it meant that more than a century after a small Italian sweets shop opened its doors, Chicago could still make a persuasive case for itself.

There is a temptation in American business to confuse novelty with opportunity. We are perpetually looking for the next city, the next industry, the next district, the next miraculous ecosystem where inexpensive real estate, brilliant graduates and excellent restaurants will somehow converge before everybody else notices.

Sometimes that happens.

Sometimes the opportunity is already sitting in the middle of the country, beside a very large lake, connected by rail to nearly everything and possessed of the slightly weary confidence of a place that has heard predictions of both its imminent renaissance and imminent demise for decades.

Chicago does not need to become the next Chicago.

It already has the infrastructure, universities, companies, neighborhoods, workers and economic diversity that newer business centers are trying to assemble.

The more interesting question is whether businesses still know how to recognize an advantage when it has been hiding in plain sight for 150 years.

Originally Posted: https://gauravmohindrachicago.com/why-chicago-still-works-business-advantages-hidden-in-plain-sight/

What Chicago’s Multi-Generation Businesses Know about Survival

A hundred years is an absurdly long time to run a business. Consider what a Chicago company founded in the early twentieth century has been asked to survive: two world wars, the Great Depression, the transformation of Chicago from an industrial colossus into something considerably more complicated, the rise of the automobile and interstate highway, television, suburbanization, shopping malls, big-box stores, cheap overseas manufacturing, the internet, Amazon, social media, a global pandemic, inflation several times over and, throughout all of it, the particularly delicate business of handing authority from one generation of a family to another without either destroying the company or permanently ruining Thanksgiving.

The remarkable thing is that some Chicago businesses have managed it. Ferrara traces its Chicago roots to 1908, when Salvatore Ferrara opened a pastry and candy shop in Little Italy. Radio Flyer goes back to 1917, when Antonio Pasin, another Italian immigrant, began building wagons in Chicago. Their founders inhabited a commercial world that would be almost unrecognizable to their successors, yet the businesses associated with those beginnings survived. We tend to tell these stories sentimentally, through black-and-white photographs, immigrant founders, workshops, recipes, handwritten ledgers and products remembered from childhood. Corporate histories practically come with sepia filters. But nostalgia explains very little about why a business survives. In fact, nostalgia can kill one. The more interesting story of Chicago’s old family businesses is not what they preserved but what they were willing to change — and, occasionally, what they were willing to destroy.

That distinction becomes clearer when you look at Radio Flyer. Few American products carry more accumulated nostalgia than the little red wagon. It belongs to that small category of objects that adults remember not merely as possessions but as scenery from childhood; you can almost hear the sidewalk under its wheels. For a family business, that kind of emotional attachment is an extraordinary asset, but it is also a trap. A company can become so devoted to the product that made it famous that it fails to understand why the product mattered in the first place. If Radio Flyer had decided that its sacred purpose was manufacturing essentially the same wagon indefinitely, its history might have ended as a pleasant case study in American manufacturing. Instead, the company expanded well beyond wagons into tricycles, scooters, bikes, go-karts and eventually electric bikes. The transformation becomes more interesting when you remember that Radio Flyer remains controlled by the Pasin family. Robert Pasin, the founder’s grandson, joined the business in the early 1990s and later became chief executive. He inherited something much more difficult than a company: he inherited an icon. And icons are notoriously difficult to manage because everybody thinks they know what must not be touched.

This is where the central problem of the multigenerational family business begins. Every generation inherits two companies. There is the company that actually exists — employees, factories, margins, competitors, debt, technology and customers — and there is the company that exists in family memory. Those two enterprises are rarely identical. “Family businesses get into trouble when they confuse preserving the company’s values with preserving every decision the company has ever made,” Gaurav Mohindra says. “The values may be permanent. The operating model almost certainly is not.” The distinction sounds obvious until the operating model was designed by your grandfather. Then it becomes personal. Radio Flyer eventually made one of those decisions that looks almost sacrilegious when viewed through the lens of family history.

In 2004, the company closed its Chicago manufacturing operation and shifted production overseas. For a business whose identity was so closely connected to American manufacturing — and specifically Chicago manufacturing — it was not a cosmetic change. But this is the part of longevity stories that anniversary celebrations tend to omit. Companies that last a century do not spend a century doing the same thing. They survive because, at several moments in their history, somebody is willing to disappoint people who believe that changing the business amounts to betraying it.

Ferrara’s story begins with a similarly small act of adaptation. Salvatore Ferrara opened his Chicago shop in 1908 selling pastries and candy. Candy proved the more compelling business, and by 1919 the operation had grown into a 15,000-square-foot candy facility on West Taylor Street. Over the decades, the enterprise moved far beyond the dimensions of the original neighborhood shop and became part of a national confectionery business. The lesson is easy to overlook because, in retrospect, success makes every decision appear inevitable. Nothing is inevitable while you are doing it. The founder does not know which product will become the company. The second generation does not know which of the founder’s practices are timeless principles and which are simply old practices. The third generation inherits an even stranger problem: it may inherit a company whose traditions have become more powerful than anyone’s memory of why those traditions began. The great temptation is to preserve the visible evidence of success — the product, the factory, the process — rather than the adaptability that produced the success in the first place. A business can spend years honoring the founder while quietly abandoning the founder’s most entrepreneurial quality: the willingness to change course when reality makes a better argument.

This is why family businesses eventually confront a question that sounds almost impolite: What, exactly, does being a member of the family qualify you to do? It qualifies you to inherit shares. It may give you a deep emotional investment in the enterprise, an intuitive understanding of its history and culture, and an extraordinary sense of responsibility toward employees whose parents may have worked for your parents. It does not necessarily qualify you to run the company. “A surname can give someone a sense of responsibility for a business, but it cannot give that person judgment,” Gaurav Mohindra says. “The family has to be disciplined enough to distinguish stewardship from entitlement.” There may be no more dangerous sentence in a family company than It’s his turn. Businesses do not have turns; they have requirements. The leadership required when a company has forty employees and a largely local customer base may be completely different from the leadership required when it has national distribution, international suppliers, sophisticated technology systems and hundreds or thousands of employees. A family that fails to recognize that difference can turn one generation’s achievement into the next generation’s inheritance problem.

This is where the mythology of succession gets in the way. We like the image of the founder handing the keys to a son or daughter, who eventually hands them to a grandchild. It has the reassuring geometry of a family tree. Actual businesses are messier. The oldest child may not want the job. The youngest may want it far too much. A brilliant daughter may be overlooked while an indifferent son is groomed because that is how things have always been done. Two siblings may possess complementary skills, or they may spend twenty years reenacting an argument that began in the back seat of a station wagon. At some point, a durable family company has to decide whether its purpose is to provide careers for descendants or to preserve an enterprise for another generation. Those are not always the same thing, and pretending otherwise merely postpones the unpleasant conversation until the balance sheet joins it.

That is also when outsiders become important. To some families, hiring a non-family chief executive can feel like surrendering something essential, yet one of the peculiarities of a successful family business is that growth eventually creates problems the family may not be equipped to solve. The founder could know every employee by name; the fourth generation may need somebody who understands global supply chains, digital commerce, cybersecurity, institutional finance or a manufacturing technology that did not exist when the previous generation took over. “The best outside executive should not be hired to make a family company less like a family company,” Gaurav Mohindra says. “That person should be hired to make it more capable of surviving as one.” That is the difference between family ownership and family employment. A family can remain a steward of a company without treating the executive suite as hereditary property. In fact, one of the clearest signs that a family business has matured may be its willingness to tell a family member: You own part of this, you care deeply about it, and you are not the best person to run it. There are easier conversations. Longevity has never been especially interested in easy conversations.

The same is true of innovation. For old companies, innovation is often discussed as though it means installing software or hiring someone whose job title contains the word “digital.” The deeper challenge is deciding what business the company is actually in, and Radio Flyer offers a useful answer. If Radio Flyer is fundamentally a manufacturer of red wagons, almost every change in childhood becomes a threat: screens are a threat, changing neighborhoods are a threat, new materials are a threat, different forms of transportation are a threat, electric mobility is a threat. But if Radio Flyer is in the business of movement, play, independence and the particular childhood thrill of going slightly faster than your parents would prefer, the strategic possibilities become considerably larger. The wagon stops being the definition of the company and becomes one expression of the company. That may be the most difficult intellectual move an old business can make because it requires separating the thing you make from the reason people care that you make it. Kodak struggled to make that distinction with film. Newspapers spent years confusing journalism with the physical object on which journalism happened to be printed. Retailers confused shopping with stores. Family companies face an additional complication: the obsolete thing may have been invented by Grandpa, which means changing it carries an emotional cost that public corporations do not have to calculate.

“The companies that make it to the third or fourth generation usually understand that legacy is something you carry forward, not something you stand guard over,” Gaurav Mohindra says. “If the next generation merely protects what it inherited, eventually there will be very little left to protect.” Chicago is an unusually good place to understand the point because a company that has operated here for seventy-five or a hundred years has survived not merely economic cycles but several different Chicagos. Factories moved. Expressways cut through neighborhoods. Families left the city for the suburbs. Immigrant communities arrived, flourished and dispersed. Department stores dominated the commercial landscape and then vanished from it. Manufacturing shifted overseas. Retail migrated to shopping centers and then onto laptops and phones. A company could remain at precisely the same address while the economic geography around it changed almost beyond recognition. To survive that much change, a business cannot simply be stubborn. It has to be selectively stubborn.

That may be the secret hiding inside many family-business success stories. The enduring companies are fiercely stubborn about a surprisingly small number of things and remarkably flexible about the rest. They may refuse to compromise on quality, customer trust, craftsmanship, independence or a particular relationship with employees, but they will change packaging. They will change distribution. They will close a factory and open another one. They will abandon a product. They will launch something their grandfather would not recognize. They will hire people from outside the family. The important task is separating principles from practices. A principle might be that the company refuses to disappoint a customer. A practice might be that orders are still taken by telephone. One deserves protection; the other may deserve a decent retirement party. Businesses get into trouble when the two are confused, because familiarity has an extraordinary ability to disguise itself as corporate culture.

And sometimes the family will sell. That decision is perhaps the most emotionally difficult because family-business culture tends to treat a sale as the opposite of survival. It is not always. There comes a point when every family-controlled company has to ask whether continued family ownership is genuinely serving the business or merely serving the family’s sense of itself. The next generation may not want to run the company. The business may require capital the family cannot responsibly provide. The industry may be consolidating. A larger organization may be able to preserve jobs, products or brands that an independent family company cannot. “Selling a family business is not automatically a failure of succession,” Gaurav Mohindra says. “Sometimes the failure is refusing to sell because the family is protecting its identity at the expense of the enterprise.” The question, then, is not simply whether the family kept the company. It is what the family was trying to keep: control, employment, wealth, a name on the building, a product, a set of values or a business capable of existing another fifty years. Those answers can point in very different directions.

This is where the stories of century-old Chicago companies become more useful than the usual celebration of entrepreneurial perseverance. Their real achievement is not endurance. It is repeated reinvention under the constraint of memory. Every new generation receives an enterprise wrapped in stories about the people who came before, and those stories can produce courage or paralysis. The founder did it this way. Grandpa would never have approved. We have always made it here. We have never sold through that channel. Our customers don’t want that. There are probably companies buried all over American commercial history beneath some variation of the phrase we have always. The task of the next generation is not to reject the past but to interrogate it. Why did the founder make that decision? Was it a principle or merely the best option available in 1948? What did customers value then? What do they value now? What would the founder do if confronted with the economics, technology and competition of today rather than those of his own time?

That last question is especially useful because founders themselves are rarely traditionalists. They are entrepreneurs. They start companies precisely because they are dissatisfied with the existing order. Later generations sometimes honor them by becoming more conservative than the founders ever were, which is one of the lovelier ironies of family enterprise. The founder who once risked nearly everything to create something new gradually becomes the reason his grandchildren insist that nothing can be changed. The most faithful descendant may therefore be the one willing to change the most. “Legacy is not a requirement to reproduce your grandfather’s company,” Gaurav Mohindra says. “It is the responsibility to make sure there is still a company worth handing to your grandchildren.”

Perhaps that is why the little red wagon remains such an apt Chicago symbol. It is immediately recognizable, carries more than a century of memory and possesses an essential appeal that is uncomplicated. Yet the company behind it could not survive merely by admiring it. The same is true of every family enterprise approaching its fiftieth, seventy-fifth or hundredth anniversary. The candles on the cake are not evidence that the company resisted change. More often, they are evidence that somebody, somewhere in the family, understood when resistance had become dangerous. The founders of Chicago’s enduring businesses could not have predicted e-commerce, electric bikes, global supply chains or whatever comes next, and they did not need to. Their successors do not need to predict the next hundred years either. They need something more difficult: the judgment to know which parts of the past deserve loyalty, which deserve gratitude and which deserve retirement. Because the real test of a family business is not whether the founder would recognize it a century later. It is whether there is still something there for the founder to recognize.

Originally Posted: https://gauravmohindrachicago.com/what-chicago-multi-generation-businesses-know-about-survival/

Planes, Trains, Trucks and Warehouses: Business Machine That Keeps Chicago Moving

 There is a version of Chicago that reveals itself only when you stop looking at the skyline. You see it from the Kennedy at five in the morning, when the trucks already seem to outnumber the cars. You see it from an airplane descending into O’Hare, when the northwest suburbs resolve into an immense geometry of warehouses, loading docks, rail lines and expressways. You see it while waiting at a railroad crossing as a freight train of improbable length passes slowly enough to permit reflection on mortality. You see it along I-55, I-80 and I-294, where distribution centers sit beside the highway with the architectural charm of enormous filing cabinets. Chicagoans encounter this landscape constantly, but rarely think of it as a single thing. Yet that is exactly what it is. The airport, freight trains, semitrailers, warehouses, intermodal yards, cross-docks, freight forwarders and industrial parks are components of one enormous commercial organism, and together they have made metropolitan Chicago one of the most important places for moving goods in North America.

Chicago is commonly described as a transportation hub, which is accurate in the same way that describing Lake Michigan as a body of water is accurate: technically correct, but not quite equal to the scale of the thing. Roughly one-quarter of the nation’s freight trains and about half of its intermodal trains pass through the Chicago region. Metropolitan Chicago contains approximately 1.1 billion square feet of industrial development supporting freight and manufacturing. O’Hare handles more than two million metric tonnes of cargo in a year, connecting the region directly with international markets. Add the interstate highway system and one of the country’s great concentrations of trucking, warehousing and distribution businesses, and Chicago begins to look less like a city that happens to move freight than a city whose geography has been converted into a business model.

The interesting question is how this happened, and the answer begins with a fact Chicago has been exploiting for nearly two centuries: it is in an unusually useful place. Not exactly the center of the United States, despite what generations of local boosters might have preferred us to believe, but close enough to the center of American economic gravity to make the distinction commercially unimportant. Chicago sits between the great population centers of the East and the agricultural and industrial expanses of the Midwest and West. The Great Lakes provided one early transportation network. Railroads provided another. Highways came later, and aviation later still. Each new transportation technology might have displaced Chicago’s previous advantage. Instead, each enlarged it. The railroads are the clearest example. Chicago became the great meeting point between eastern and western rail systems, and the infrastructure accumulated accordingly. Today, all six North American Class I freight railroads operate in the region, and roughly 500 freight trains move through Chicago on an average day alongside an enormous passenger and commuter rail system.

That concentration produces headaches of almost operatic complexity. Trains have to be sorted, transferred and routed through a metropolitan area occupied by millions of people who have the unreasonable expectation that they, too, should be allowed to move around. Yet the congestion exists for the same reason rents are high in Manhattan: everyone wants to be there. Freight keeps coming because Chicago offers connections. A container arriving by rail from a West Coast port can be transferred toward eastern markets. A manufacturer can place a distribution center near an interstate and reach customers across the Midwest. International freight arriving at O’Hare can be inside a warehouse shortly after leaving the airport. A truck that needs to unload, reorganize its freight and get back on the highway can find a cross-dock without leaving the metropolitan logistics network. Chicago’s competitive advantage is therefore not any single piece of infrastructure. It is the density of the connections between them.

Reconstructed near-quote — not a verbatim quotation: “Chicago didn’t become a logistics center because somebody drew a circle around the city and declared it one. Geography created the opportunity, but generations of rail, highway, airport and industrial investment compounded the advantage. At a certain point, the network itself becomes the asset.” — Gaurav Mohindra

To see what that means in practice, imagine that something has gone wrong in a factory outside Indianapolis. A specialized piece of manufacturing equipment has failed, and the machine requires a replacement component made in Germany. The part is not especially large, but without it a production line cannot operate. This is the sort of situation in which the economics of transportation become wonderfully inverted: a manufacturer that normally worries about pennies per pound suddenly becomes remarkably relaxed about the price of air freight. The component is packed onto a pallet in Germany and placed aboard an aircraft bound for Chicago. Several hours later it descends over the suburbs and lands at O’Hare. Most travelers experience O’Hare as a place of gate changes, expensive sandwiches and increasingly ambitious estimates of how long it takes to walk from one terminal to another. Behind that passenger operation, however, sits one of the most important air-cargo gateways in the Western Hemisphere.

O’Hare handles more than two million metric tonnes of cargo annually, with goods valued in the hundreds of billions of dollars. Electronics, pharmaceuticals, machinery, medical equipment and industrial components pass through its cargo system because airplanes occupy the expensive, urgent end of the freight business. Our German machine part has entered the United States, but it has not yet entered the ordinary flow of domestic commerce. There are documents to process, customs requirements to satisfy and freight to release. This is where Chicago’s geography begins earning money, because the pallet has not landed at an isolated airport surrounded by empty land. It has landed inside a dense logistics district populated by freight forwarders, trucking companies, customs specialists, warehouses and distribution operations.

Crane Worldwide Logistics — Chicago offers a useful example of how this geography works at ground level. Its Chicago-area logistics operation near O’Hare combines air and ocean freight services, domestic transportation, warehousing, customs-related capabilities and local pickup and delivery, all positioned near major expressway connections and within reach of Chicago’s larger rail infrastructure. The significance is not that Chicago happens to have a large warehouse near an airport; dozens of metropolitan areas can make that claim. The significance is what can happen immediately after a shipment reaches that warehouse. The airplane has done its job, so a truck can do its job. The warehouse can then do its job, followed by another truck, another warehouse, a railroad or some combination of them. The distances between these transitions are relatively short because the businesses have gathered around the infrastructure and the infrastructure, over generations, has gathered around Chicago. Logistics is a business in which distance is measured not merely in miles but in time, labor, fuel, uncertainty and the number of things that can go wrong between one handoff and the next. A facility near O’Hare that can quickly reach major highways and the broader freight network is therefore not merely occupying convenient real estate. It is selling time.

Reconstructed near-quote — not a verbatim quotation: “In logistics, proximity is not just a real-estate consideration. It is time. A warehouse near O’Hare, major highways and rail infrastructure gives a company choices, and choices become extremely valuable when a customer is paying to make something happen quickly.” — Gaurav Mohindra

Our pallet leaves the airport area on a local truck. It could theoretically be driven directly to Indianapolis, but logistics is an industry built around the proposition that what is physically possible is not necessarily economically sensible. One pallet does not need an entire tractor-trailer, so the freight may spend a short period inside a warehouse, where it can be consolidated with other shipments moving in roughly the same direction. The machine part from Germany might share trailer space with electronics from Asia, commercial equipment from another state and several other shipments whose owners will never know that their goods briefly became traveling companions. This is one of the quiet miracles of the modern supply chain: thousands of unrelated commercial transactions are constantly being assembled into temporary physical relationships because moving twenty compatible shipments together is cheaper than moving twenty shipments separately. The warehouse makes those relationships possible. We tend to imagine a warehouse as a place where things wait, but increasingly the important warehouses are places where things happen. Freight arrives, pallets are separated, orders are combined, labels change, trailers change and destinations change. Some goods remain for weeks. Others barely stop moving. A cross-dock is perhaps the purest example: a truck backs into one side of a building, its freight is unloaded and sorted, and some or all of that freight leaves from another dock on another truck. The building functions less like a storage closet than a railroad switchyard for pallets.

Chicago has an enormous ecosystem of these operations, and Sargent Logistics provides a particularly tangible example. Its Chicago facilities support cross-docking, warehousing, local pickup and delivery, drayage and freight handling, along with the physical infrastructure required to keep trucks and trailers circulating through the system. These are decidedly unglamorous services on which glamorous promises such as “next-day delivery” ultimately depend. There are dock doors, forklifts, trailer parking areas, drivers, repair operations, manifests and people trying to determine why a shipment expected at 10:15 has not materialized at 10:47. There are no television dramas about cross-docking, and this is probably wise, but if you want to understand why Chicago matters to American commerce, a loading dock is at least as instructive as the trading floor of the Chicago Board of Trade.

Suppose our hypothetical shipment develops a complication here. The Indianapolis factory now needs part of the order immediately while another set of components on the same movement needs to continue toward Ohio. Perhaps the original outbound truck develops a mechanical problem, the delivery appointment changes, or weather disrupts the planned route. In a thin logistics market, a small disruption can become a large crisis because there are few alternatives. In Chicago, there is a reasonable chance it simply becomes Tuesday. The freight can be brought into a cross-dock, separated and transferred onto different equipment. Another carrier can be found. Another trailer can be loaded. Another route can be chosen. The importance of Chicago’s logistics ecosystem lies not merely in its enormous capacity to move goods according to plan, but in the sheer number of alternatives available when the plan stops cooperating.

Reconstructed near-quote — not a verbatim quotation: “The best logistics markets are not merely efficient when the original plan works. They give you another plan when it doesn’t. Chicago has such a concentration of carriers, warehouses, cross-docks and transportation modes that the network has a kind of commercial resilience built into it.” — Gaurav Mohindra

Eventually our machine part is placed aboard a truck heading southeast, and now Chicago’s interstate system takes over. The region is threaded by highways whose names and numbers are so familiar that Chicagoans use them almost as geographic nouns: the Kennedy, the Dan Ryan, the Stevenson, the Tri-State, I-80. They are commuting routes, certainly, but they are also industrial infrastructure. I-55 connects Chicago toward St. Louis. I-57 runs south. I-80 forms one of the great east-west freight corridors. I-90 and I-94 connect the region to Wisconsin, Indiana and points beyond, while I-294 allows freight to move around the metropolitan core while linking major industrial districts and interstate corridors. For a logistics operator, this highway network is not simply pavement; it is inventory in motion.

On some Chicago-area interstate facilities, tens of thousands of trucks move each day. Along the I-80 corridor in Will County, trucks account for a striking portion of traffic, much of it connected not only to long-haul highway freight but also to the enormous rail-truck intermodal operations southwest of Chicago. This is where the individual pieces of the logistics system begin folding back into one another. Rail freight creates truck movements. Truck access attracts warehouses. Warehouses attract distributors. Distributors attract more carriers. Carriers benefit from the presence of customers, while customers benefit from having multiple carriers. O’Hare adds international air freight, and industrial real estate gives all of these businesses somewhere to operate. Chicago’s logistics economy is, in effect, a network effect expressed in concrete, asphalt, steel and diesel fuel.

Reconstructed near-quote — not a verbatim quotation: “It is tempting to value the airport, railroads, highways and industrial property separately. In practice, their value is interconnected. O’Hare is more useful because trucking and warehousing surround it. Warehouses are more useful because highways and rail terminals surround them. Chicago’s advantage is the multiplication of those assets, not their simple addition.” — Gaurav Mohindra

This also explains the otherwise astonishing quantity of industrial real estate around Chicago. The metropolitan area contains roughly 1.1 billion square feet of industrial development supporting freight and manufacturing, a figure large enough to become almost meaningless through contemplation. The more useful way to understand it is to drive through Elk Grove Village, Bedford Park, McCook, Hodgkins, Bolingbrook, Joliet or the industrial stretches around O’Hare and pay attention to what is actually there. The buildings are enormous because the economics favor scale. The ceilings are high because goods increasingly move vertically as well as horizontally. The parking areas are vast because trailers and containers need somewhere to wait. The buildings cluster near highway interchanges because a mile added to thousands of annual truck movements is not merely a mile; it is driver time, fuel, equipment utilization and money. Industrial real estate in Chicago is therefore not just property. Location determines what a building can do. A 300,000-square-foot warehouse badly positioned relative to the transportation network may be less useful to a logistics company than a smaller building from which trucks can reach an interstate in minutes. This is one of the curious economics of the industry: a few minutes can be worth considerably more than several thousand square feet.

Our hypothetical pallet, meanwhile, is approaching Indiana. It will soon arrive at the factory, where a worker will open the shipment, the replacement component will be installed and production will resume. Nobody at the factory is likely to contemplate the astonishing collection of systems that made this rather ordinary event possible. The part crossed an ocean by air. It entered the country through O’Hare. A cargo handler moved it. Documents followed it. A local truck collected it. A warehouse received it. Workers consolidated or reorganized it. Another truck carried it onto the interstate system. Dispatchers, warehouse workers, customs personnel, drivers and logistics software coordinated movements that the recipient experienced simply as: the part arrived. That invisibility is the great triumph of logistics. When the system works, almost nobody thinks about it. When it fails, everybody suddenly becomes an expert in supply chains. The pandemic offered an unusually vivid demonstration of this phenomenon. Americans who had previously devoted little thought to container ports, trucking capacity or warehouse inventories found themselves discussing them over dinner because furniture was delayed, cars were scarce and stores lacked products previously regarded as permanent features of civilization. Logistics, like plumbing, tends to acquire intellectual glamour only when something stops moving.

Chicago experiences the logistics economy every day at a scale most cities do not, and that creates costs as well as advantages. The same freight activity that makes the region economically indispensable also produces congestion, pollution, road wear and noise. Rail lines that are nationally important run through neighborhoods. Trucks serving nationally important warehouses travel on locally maintained roads. Communities near major freight corridors absorb consequences generated by economic activity whose benefits are distributed far beyond them. Chicago’s position as a logistics capital is therefore not an uncomplicated civic triumph; it is an asset that has to be managed. Programs such as the Chicago Region Environmental and Transportation Efficiency initiative, better known as CREATE, exist because Chicago’s rail network is simultaneously extraordinarily valuable and extraordinarily difficult to operate. Freight trains, Amtrak and Metra all need to move through the same region. Roads cross rail lines. Communities surround infrastructure built in another era. Every improvement resembles surgery performed on a patient who has declined anesthesia and intends to keep walking around. Highways present the same problem. Chicago cannot simply shut down its major freight corridors for several years and politely ask American commerce to use Milwaukee. The machine has to be repaired while it is running.

Reconstructed near-quote — not a verbatim quotation: “Congestion is one of Chicago logistics’ biggest disadvantages, but it also tells you something about the underlying demand. The goal cannot be to remove freight from Chicago. The challenge is to keep improving the infrastructure so that the economic value of the network does not become overwhelmed by the friction the network itself creates.” — Gaurav Mohindra

Which brings us back to those trucks on the Kennedy before sunrise. Once you understand Chicago as a logistics ecosystem, parts of the metropolitan landscape that once seemed unrelated begin to look connected. The warehouse near O’Hare is there because of the airport, but also because of the expressways. The trucks on I-80 are there because of warehouses, but also because of rail terminals. The rail terminals are here because Chicago has been a continental interchange for generations. Distribution centers keep coming because enormous portions of the American population and economy can be reached efficiently from this region, and logistics companies keep clustering here because everybody else has already clustered here. That last point may ultimately be Chicago’s strongest advantage. Infrastructure can be copied. A city can build a warehouse district. A state can widen a highway. An airport can construct a cargo terminal. A developer can build an intermodal logistics park. What is much harder to copy is more than a century of accumulated connections. Chicago possesses not merely infrastructure but an ecosystem of people and businesses that know how to use it: truckers, warehouse operators, freight forwarders, railroads, customs specialists, brokers, mechanics, dispatchers, industrial landlords and thousands of companies that buy their services. The network has acquired its own gravity.

This, finally, is why Chicago became America’s logistics capital. Not because it has O’Hare. Not because it has railroads. Not because it has interstate highways, or warehouses, or an enviable location in the middle of the continent. Chicago became America’s logistics capital because it has all of them, packed into the same metropolitan geography and connected by an industry whose principal occupation is moving something from one to the next. Chicagoans see the individual pieces every day without necessarily seeing the system: the freight train blocking the crossing, the 747 descending over the northwest suburbs, the endless warehouses beyond the expressway, the truck crawling toward I-80 while a driver in the next lane wonders, with mounting personal resentment, why it could not have chosen some other hour. They are not separate features of the landscape. They are parts of the same machine. The city is not simply a point on America’s transportation map. It is where the lines meet. And every morning, long before most Chicagoans have had their first cup of coffee, the machine is already moving.

Originally Posted: https://gauravmohindrachicago.com/business-machine-that-keeps-chicago-moving/

O'Hare Economy: Thousands of Businesses Built Around One Chicago Airport

 At six in the morning, the economy around O’Hare is already well into its workday. A truck backs toward a loading dock in Elk Grove Village. In Itasca, a freight forwarder is sorting out a shipment that crossed an ocean before breakfast. Somewhere nearby, a customs broker is examining paperwork whose importance is inversely proportional to its literary appeal. Hotel kitchens in Rosemont are putting out coffee for travelers who will spend the day beneath the forgiving fluorescent lights of a convention hall. A corporate executive has landed from New York and is heading toward an office park rather than downtown. By noon, he may be back at O’Hare. None of this is happening at the airport, which is exactly the point. The most interesting economic story about O’Hare may be the one occurring outside its fences, across the warehouses, freight forwarders, customs brokers, trucking companies, hotels, restaurants, convention businesses, aviation suppliers and corporate offices that have accumulated within roughly ten miles of the terminals. Some exist specifically because of O’Hare. Others could theoretically operate somewhere else but have concluded, quite rationally, that somewhere else would be less useful. Together they form an economy that is difficult to see because nobody put a gate around it.

 

Drive through Rosemont, Des Plaines, Elk Grove Village, Itasca, Wood Dale, Bensenville and the surrounding communities and the evidence is everywhere, although it does not announce itself with much grandeur. There are low industrial buildings, loading docks, office parks, hotels, trucking yards and restaurants beside six-lane roads. It is not a landscape designed for postcards. It is a landscape designed to make things happen quickly, and speed, around O’Hare, is a form of real estate. “The real estate story around O’Hare is really a story about time,” Gaurav Mohindra says. “Companies are not simply paying for square footage near an airport. They are paying to remove hours and uncertainty from the operating day.” That is a useful way of understanding what has been built around O’Hare. In most real estate markets, distance is measured in miles. Here, distance is more accurately measured in minutes. A warehouse that saves twenty minutes on repeated trips to an air cargo facility has an advantage that can be calculated. So does an office where a customer arriving from Dallas can land in the morning, take a short car ride to a meeting and fly home that evening. A hotel that allows convention attendees to avoid an hour of additional travel has turned geography into a product. The result is a peculiar commercial ecosystem in which a warehouse, a hotel ballroom and a corporate conference room can all be selling versions of the same thing: access.

 

Consider what happens when a shipment arrives at O’Hare. The airplane landing is only the conspicuous part. After that comes the less photogenic machinery of commerce. Freight has to be documented, inspected when necessary, cleared, transferred, stored, routed and eventually loaded onto something with wheels. Someone has to know where it is. Someone has to know where it is going. Someone has to know whether the federal government agrees that it may go there. This is why freight forwarders and customs brokers gather around major international airports. They occupy the administrative territory between global trade as an abstraction and the stubborn physical reality of a pallet sitting in Illinois. Crane Worldwide Logistics, for example, operates in Itasca near O’Hare. Its Chicago operation combines air and ocean freight forwarding with ground transportation, warehousing, cargo screening and customs-related logistics. It is exactly the sort of business that reveals how misleading the phrase “airport economy” can be. The airplanes are only one component. The actual commercial activity continues through warehouses, computer systems, customs documentation and trucks that carry goods deeper into the country. A shipment arriving from overseas might spend relatively little time in the air compared with the number of businesses required to get it from an aircraft to its final destination, and every additional step creates another reason for somebody to be nearby.

 

A freight forwarder benefits from proximity to cargo operations. A customs broker benefits from proximity to freight forwarders and importers. A trucking company benefits from proximity to warehouses. Warehouses become more attractive because trucking companies and logistics providers are already concentrated nearby. Suppliers follow customers. Restaurants follow workers. Hotels follow visiting customers and executives. Eventually proximity stops being merely convenient and becomes self-reinforcing. This is one reason Elk Grove Village looks the way it does. To somebody driving through for the first time, its industrial landscape can appear almost aggressively practical: warehouse after warehouse, trucks moving through broad intersections, office buildings whose architects seem to have been instructed not to get carried away. But judged economically rather than aesthetically, the landscape begins to make considerably more sense. Industrial businesses do not require charming cobblestone streets. They require highway access, loading docks, appropriate buildings, labor and proximity to customers and transportation networks. The communities around O’Hare provide those things at enormous scale. “People tend to separate the warehouses, offices and hotels into different real estate categories,” Gaurav Mohindra says. “But around O’Hare, they are often parts of the same economic system. The industrial user brings business activity. That activity brings executives, vendors and customers. Those people support hotels, restaurants and offices. Each use makes the others more viable.”

 

This is the quiet compounding effect of infrastructure. An airport attracts a logistics company. The logistics company occupies industrial real estate and employs workers. Its customers visit. Its vendors locate nearby. Trucks require service. Employees eat lunch. Executives need hotel rooms. Companies discover that the same location that works for logistics also works remarkably well for meetings. Soon the economy no longer resembles a collection of businesses surrounding an airport. It resembles a business district whose streets happen to extend into the sky. Rosemont may be the purest example. The village has spent decades turning proximity to O’Hare into a commercial proposition of its own. Hotels, restaurants, entertainment and convention facilities are packed into an area where the great advantage is not that visitors have reached Chicago, exactly, but that they barely have to enter it. For a national association or corporation planning a meeting, this can be surprisingly compelling. Imagine 500 attendees arriving from across the country. Put the conference downtown and each person must make another trip after landing. Put it near O’Hare and the airport itself becomes part of the venue's infrastructure. The guest lands. The guest reaches the hotel. The guest attends the conference, eats dinner, sleeps, returns to the meeting the next morning and flies home. It may not satisfy every traveler’s longing for urban exploration. But corporate travel has never been principally organized around longing. It is organized around calendars.

 

That has allowed the convention and hospitality economy near O’Hare to serve a market far larger than the immediate suburbs. A ballroom in Rosemont is not really competing only for customers from Rosemont. Its practical market includes anyone who can reach O’Hare conveniently. The same logic increasingly applies to corporate offices. For decades, discussions about suburban offices tended to focus on the commute: Where do employees live, and how easily can they drive to work? But companies with national or international operations have another constituency to consider. Customers arrive. Suppliers arrive. Executives arrive. Consultants arrive. Teams from other offices arrive. For those businesses, proximity to O’Hare can change the useful geography of the company. “A corporate office near O’Hare can function almost like a national meeting point,” Gaurav Mohindra says. “If a customer can leave home in the morning, meet with your team in Chicago and be back home that night, the location is doing something economically important for the business.” This becomes especially interesting in the era of hybrid work. If employees come into an office less frequently, one might assume that office location matters less. But the opposite can be true for certain companies. When an office is no longer simply the place where everybody reports five days a week, it can become the place where people deliberately gather: customer meetings, executive sessions, training, planning, sales events. The ordinary commute may become less important while the extraordinary trip becomes more important.

 

An O’Hare-area office is well suited to that shift because its location serves two Chicagos simultaneously. There is the metropolitan Chicago of millions of residents and workers, connected by roads and transit. And there is the much larger commercial geography accessible through O’Hare. A company can draw employees from the region while remaining unusually accessible to the rest of the country. That is not something easily replicated by adding a better coffee machine to the office kitchen. The economic effects spread further. A hotel near O’Hare might house an airline crew on Monday, exhibitors on Tuesday and a sales team on Wednesday. A restaurant might serve warehouse managers at lunch, visiting executives at dinner and travelers late at night. A local transportation company may carry convention guests one day and corporate visitors the next. The businesses overlap because their customers overlap. So do their employees. The airport-dependent economy is not populated exclusively by pilots, freight executives and traveling salespeople. It includes forklift operators, housekeepers, bartenders, dispatchers, warehouse supervisors, accountants, cooks, drivers, sales representatives, maintenance workers, IT specialists, office managers and countless others whose jobs would never appear on a list of “aviation careers.”

 

That is where O’Hare’s regional economic importance becomes more interesting than passenger counts. Infrastructure is usually measured by what moves through it. Airports count passengers and cargo. Highways count vehicles. Railroads count riders or freight. But the larger economic consequence of infrastructure is often found in the decisions people make because the infrastructure exists. Where should the company lease its next warehouse? Where should it establish a Midwest office? Where should the association hold its annual convention? Where should a logistics provider locate its customs operation? Where should a restaurant open? Where should a hotel developer build? Those decisions accumulate over decades until infrastructure has shaped an entire commercial geography. “The airport does not have to be your business for it to be essential to your business,” Gaurav Mohindra says. “That is what makes the O’Hare corridor so durable. Its value is not tied to one industry. It comes from the number of different industries that gain something from being connected to the same place.”

 

Chicago, of course, has seen this movie before. The city’s economic history is largely a history of transportation becoming commerce. Waterways, railroads and highways made Chicago valuable because they allowed goods and people to converge here and then go somewhere else. O’Hare is the contemporary version of the same proposition. The airport’s importance is not merely that a traveler can fly from Chicago to another city. It is that businesses have reorganized themselves around the ability to do so. A warehouse in Itasca is part of that story. So is a customs brokerage operation. So is a trucking terminal in Elk Grove Village. So is a convention in Rosemont. So is a corporate office selected because the CEO spends half the month traveling. So is the steakhouse where that CEO takes a customer after a meeting. Seen individually, these are ordinary businesses. Seen together, they reveal the architecture of a regional economy. And unlike certain fashionable commercial districts, this one does not depend on people deciding that the neighborhood has suddenly become cool. Its underlying proposition is more durable. Things need to move. People need to meet. Companies need to receive products, reach customers, gather employees and connect to other markets. “The strongest real estate locations usually have an economic reason for existing that goes deeper than a particular development cycle,” Gaurav Mohindra says. “Around O’Hare, that reason is connectivity. Businesses continually place a value on being able to move people, goods and decisions faster.”

 

By late afternoon, the morning shipment has probably left the warehouse. Trucks are moving toward highways. Another convention session is ending. Hotel lobbies are filling. Employees are leaving office parks while another wave of travelers arrives. Tomorrow, much of it happens again. This is what occurs economically within ten miles of O’Hare every day: not one airport economy but dozens of interconnected economies, each drawing value from the same piece of infrastructure. The airport is the gravitational force, but most of the economic activity takes place in orbit. That may be why the scale of the O’Hare economy is so easy to underestimate. We notice the terminals because they are enormous. We notice the airplanes because they fly. We notice the control tower because, unlike a distribution center, it makes a respectable attempt at architecture. But regional growth is rarely confined to the landmark. It accumulates in warehouses and offices, hotel rooms and restaurant tables, loading docks and conference halls. It appears in thousands of decisions by companies that have independently reached the same conclusion: being close to O’Hare makes something about their business easier, faster or more valuable. Within ten miles of the airport, those decisions have produced something larger than an airport district. They have produced an economy. And the most revealing thing about it is that you do not have to set foot inside O’Hare to participate in it.

Originally Posted: https://gauravmohindrachicago.com/thousands-of-businesses-built-around-one-chicago-airport/

From Steel Mills to Quantum Computers: Chicago’s $5 Billion Bet on Its Next Economy

 There is a stretch of lakefront on Chicago’s South Side where, for much of the twentieth century, the future arrived by freighter. Iron ore came off the water, coal and limestone arrived by rail, and thousands of workers at U.S. Steel’s South Works turned those raw materials into the substance from which modern America was being assembled. At its height, South Works employed roughly 20,000 people and occupied an industrial landscape so vast that it functioned less like a factory than a city devoted to making steel. Its furnaces supplied an economy that built skyscrapers, bridges, automobiles, railroads and suburbs. Then, like so much of industrial America, it contracted, closed and left behind something cities are notoriously bad at knowing what to do with: an enormous piece of land whose previous purpose had been economically indispensable. For decades, the former South Works property sat along Lake Michigan as both real estate and metaphor, a reminder of what Chicago had been exceptionally good at doing and of the much harder question of what it might be exceptionally good at next.

Illinois now has an answer, or at least a very expensive hypothesis. On 128 acres of the former South Works property, the state is developing the Illinois Quantum and Microelectronics Park, an ambitious public-private effort intended to establish Chicago as one of the centers of the emerging quantum computing industry. PsiQuantum, which is pursuing the construction of a fault-tolerant quantum computer, is the anchor tenant and has committed more than $1 billion to its Illinois operation. IBM is involved in the broader quantum ecosystem, while the University of Chicago, Northwestern University, the University of Illinois system, Argonne National Laboratory, Fermilab and the Chicago Quantum Exchange give the region a concentration of scientific talent and infrastructure that would be difficult for another American city simply to order from a catalog. Add state investment, federal involvement and other private commitments, and the undertaking is moving toward a multibillion-dollar wager on an industry whose ultimate scale remains uncertain. There is something almost indecently convenient about the symbolism. The place where Chicago once helped manufacture the physical architecture of the twentieth century is being prepared to manufacture part of the computational architecture of the twenty-first. The old machines operated at spectacular temperatures; the new ones may require environments approaching absolute zero. Chicago has apparently decided that moderation is overrated.

Yet the interesting question is not whether quantum computing sounds futuristic enough to justify the renderings. Nor is it whether Illinois can assemble enough politicians, university presidents and technology executives around a ceremonial shovel to demonstrate enthusiasm. Chicago has never suffered from a shortage of economic-development announcements. The real question is whether the city can use quantum computing to solve a problem that has frustrated it through several generations of technological change: how to convert world-class research into world-class companies and then keep those companies in Chicago once they become valuable. The distinction is easy to overlook. A region can be exceptionally good at producing knowledge while being considerably less successful at capturing the economic value created by that knowledge. Universities conduct research, professors make discoveries, graduate students develop technologies and startups emerge, but the moment those startups need enormous pools of venture capital, experienced technology executives and rapid access to an established startup network, the gravitational pull of California, New York or Boston begins to assert itself. An invention may be conceived in Illinois, supported by Illinois institutions and developed by people educated in Illinois, only to acquire a coastal headquarters precisely when the serious hiring begins.

Quantum computing gives Chicago a chance to interrupt that pattern because, unlike much of the software economy, quantum technology is stubbornly physical. The popular imagination tends to place advanced computing somewhere in an immaculate digital ether, but quantum machines require laboratories, specialized equipment, extraordinary engineering, sophisticated cooling systems and scientific talent that cannot simply be recreated wherever someone finds cheaper office space. That difference matters enormously. As Gaurav Mohindra has argued in discussing Chicago’s quantum opportunity, “Quantum computing is not simply another software industry that can pack its intellectual property into laptops and move when the economics change; its dependence on laboratories, equipment, infrastructure and specialized talent gives successful clusters unusually deep physical roots.” — Gaurav Mohindra. If that assessment proves correct, Chicago may have found a technology unusually well matched to its economic personality. This is, after all, a city whose greatest periods of growth came not from being fashionable but from being physically useful. Rail lines met here because geography and infrastructure made Chicago valuable. Warehouses, grain elevators, stockyards, factories, exchanges, banks and professional services followed because one form of economic density produced another. Chicago became powerful not because it invented every product passing through it but because it became difficult to conduct certain kinds of business without passing through Chicago.

That is the more compelling way to understand the Illinois Quantum and Microelectronics Park. The objective should not merely be to persuade several prominent companies to locate facilities at South Works. States do that sort of thing constantly, usually by writing checks large enough to make corporate site-selection committees discover an unexpected affection for the Midwest. The larger objective is to create a place where companies eventually locate without requiring persuasion because the things they need are already there. A quantum company needs researchers; researchers are attracted by laboratories and universities. Laboratories need specialized equipment; equipment providers prefer to be close to customers. Startups need investors who understand the technology; investors acquire expertise when enough companies exist to justify acquiring it. Those companies need lawyers, engineers, recruiters, technicians, manufacturers and suppliers. Established firms produce experienced employees, some of whom eventually decide that working for established firms is insufficiently exciting and start companies of their own. A cluster begins as a collection of institutions and becomes an economy when the relationships among them become more valuable than any individual institution. Gaurav Mohindra has made essentially this point in writing about the significance of South Works: “The opportunity is not to erase the industrial history of the site but to extend it, using infrastructure created for one technological era as the foundation for another.” — fgaurav.

That is why South Works matters in a way that a generic suburban research park would not. Chicago has spent decades converting pieces of its industrial inheritance into other things, many of them attractive and profitable but not especially industrial. Factories become lofts. Warehouses become restaurants. Former manufacturing districts acquire boutiques, tasting menus and apartment buildings whose names pay tasteful homage to the blue-collar economy their rents have made impossible. Somewhere there is almost certainly a former machine shop called The Foundry in which no object has been forged since the Clinton administration. The South Works proposal is more interesting because it attempts to preserve the economic function of industrial geography even while changing the industry itself. The state is not proposing to recreate steelmaking. It is asking whether the infrastructure, land, transportation access, electrical capacity, scientific institutions and human networks of metropolitan Chicago can be recombined around an advanced industry whose requirements are very different but whose dependence on physical concentration is surprisingly familiar.

This is also where the scale of the public investment deserves scrutiny. Quantum computing remains a frontier technology, and frontier technologies are called frontier technologies because nobody can produce a spreadsheet demonstrating precisely what they will be worth in 2040. Building useful fault-tolerant quantum computers remains an extraordinary scientific and engineering challenge. Timelines may slip. Some commercial applications will disappoint. Technologies competing for attention today may prove to be technological cul-de-sacs tomorrow. Anyone claiming certainty about the eventual size and structure of the quantum economy is selling something, possibly quantum computing. Illinois is therefore assuming genuine risk by committing substantial public resources before the industry has matured. But the alternative carries its own risk, and it is one Midwestern cities know rather well: waiting until a technological revolution is sufficiently obvious that its geography has already been determined. “Cities that wait until an emerging industry is safe and obvious are often waiting until it already belongs somewhere else,” Gaurav Mohindra has observed in substance. “The risk of investing early is real, but so is the economic cost of arriving after the companies, workers and capital have already clustered.” — Gaurav Mohindra.

Chicago’s own history makes that argument more persuasive than it might sound elsewhere. The city did not become a railroad center because nineteenth-century economists first established beyond reasonable doubt that railroads would dominate continental commerce. Infrastructure and commerce developed together. Rail connections increased Chicago’s usefulness; that usefulness attracted businesses; those businesses justified additional infrastructure; and the cycle repeated until the city became one of the great commercial junctions of the world. Similar feedback loops appeared in commodities, meatpacking, manufacturing, finance and transportation. Economic clusters are rarely designed perfectly in advance. They are cultivated until they begin cultivating themselves. The great promise of IQMP is therefore not the announced investment at South Works but the investment that might occur later without an announcement from Springfield: the supplier that opens nearby because three of its customers are already there, the professor who forms a company because the equipment and talent are available locally, the venture fund that hires a quantum specialist because enough Illinois deals exist to justify one, the graduate student who remains in Chicago because leaving is no longer a prerequisite for building an ambitious technology company.

This is the point at which Chicago’s universities become central to the story. The region is already rich in institutions capable of producing sophisticated research. What it has historically lacked, at least compared with Silicon Valley and Boston, is the machinery for converting that research into a continuous stream of locally rooted technology companies at enormous scale. Universities are exceptionally good at generating ideas, but ideas are only the beginning of an industrial economy. Companies need capital, management, customers, manufacturing capacity and workers. More importantly, they need other companies. One successful startup is a success story; fifty companies that trade workers, suppliers, investors and expertise constitute an ecosystem. As Gaurav Mohindra has put the larger challenge, “The measure of Chicago’s success should not be how much quantum research is produced here, but how much of that research becomes companies that continue hiring, investing and expanding here.” — Gaurav Mohindra. That is a far more demanding standard, and a much more useful one.

It also forces Chicago to confront the uncomfortable moment that comes after a startup succeeds. Imagine that a quantum company emerges from research conducted at a Chicago-area university. Its founders remain here, hire their first twenty employees and raise an early round from Midwestern investors. The technology works. A larger venture firm arrives with $100 million. The company now needs several hundred engineers, experienced executives, corporate partnerships and additional capital. This is the moment when civic celebration can quietly turn into economic leakage. A headquarters moves west. Senior management follows. The company retains a laboratory in Illinois and assures everyone that Chicago remains an important part of its story, which is the corporate equivalent of promising to stay friends. Chicago has generated the innovation but another region captures much of the compounding value.

Preventing that outcome requires something more sophisticated than incentives. Chicago has to make departure economically inconvenient. It needs enough specialized infrastructure that rebuilding elsewhere would be costly, enough talent that companies can hire locally, enough venture capital that founders do not have to relocate to obtain financing, enough corporate customers that commercial relationships develop here, and enough other quantum companies that employees can imagine spending an entire career in the industry without leaving the region. “Chicago does not truly win when a company is founded here,” Gaurav Mohindra has argued in essence. “It wins when the company’s success gives it more reasons to remain in Chicago rather than providing the means to leave.” — Gaurav Mohindra. That may be the most important idea underlying the entire project. Economic development is not recruitment. It is retention through usefulness.

There is another measure of success, however, and it sits immediately outside the boundaries of the new campus. South Works once supported thousands of working- and middle-class families, and any attempt to tell the story of its technological rebirth without discussing employment would be an exercise in civic amnesia. Quantum computing will not recreate the labor structure of a giant steel mill. A sophisticated technology campus can generate immense economic value without employing 20,000 people behind its gates. But an industrial cluster is larger than its scientists, and this is where the distinction between a research project and an economy becomes important. Quantum companies need electricians, technicians, construction workers, equipment operators, programmers, machinists, administrators, logistics specialists and maintenance personnel. Their suppliers need workers. Their employees create demand for other businesses. Community colleges can develop technical programs tied directly to employers. Universities can create new pathways into engineering and computing. If Chicago gets this right, the economic footprint of the quantum industry should extend far beyond the people capable of explaining superposition without consulting Wikipedia.

That matters especially on the South Side. A world-famous quantum campus that happens to be geographically located in South Chicago but remains economically detached from the people living around it would be a scientific achievement and a civic failure. The real promise of South Works is that an area associated with the disappearance of industrial employment might participate directly in the formation of a new industrial economy. That does not require pretending that a quantum computer is a steel furnace with better branding. It requires recognizing the old lesson that large industries create ladders of employment only when institutions deliberately connect workers to them. Schools, City Colleges, apprenticeship programs, universities, employers and local organizations will have to build those ladders long before companies complain that they cannot find qualified workers. Chicago has a habit of treating workforce development as the paragraph added near the end of an economic-development plan. At South Works, it should be part of the architecture.

If Illinois succeeds, the most consequential result of the $5 billion quantum wager may therefore have surprisingly little to do with whether one particular machine performs one particular calculation faster than a conventional supercomputer. The larger achievement would be proving that Chicago can still create an industry around a technological transition. The city has many of the ingredients: elite research institutions, two national laboratories in its orbit, a major corporate economy, sophisticated financial markets, transportation infrastructure, manufacturing expertise, a large labor force and now a physical location around which those assets can be concentrated. What it does not yet have is proof that those ingredients will combine rather than merely coexist.

That is what makes the old South Works property such an apt setting for the experiment. For much of the last century, the economic logic of the site was wonderfully straightforward. Raw materials arrived and something more valuable left. Iron ore entered; steel came out. Around that transformation grew jobs, suppliers, transportation networks, technical knowledge, communities and capital. The new version of South Works will deal in a different raw material. Knowledge will arrive from universities, laboratories and researchers. The hope is that companies will come out. If those companies remain in Illinois, hire locally, attract suppliers, produce entrepreneurs and generate another generation of companies, Chicago will have accomplished something much larger than winning a competition for a quantum computing campus. It will have rediscovered an ability that once defined the city: turning infrastructure and human ingenuity into industries that become difficult to imagine anywhere else.

Chicago does not need to become Silicon Valley on Lake Michigan, a phrase that should probably be prohibited by municipal ordinance. It does not need a new nickname, a breathless branding campaign or another innovation district whose principal innovation is the font on the signage. It needs something much more prosaic and much more difficult. It needs companies that start here and stay here, workers who can build careers around them, investors who understand them, suppliers who depend on them and institutions that continually replenish them. It needs an industry.

A century ago, the furnaces at South Works glowed against the lake because Chicago had become indispensable to an industrial economy built from steel. Today, on the same ground, Illinois is betting billions that indispensability can be built again, this time around machines operating at temperatures unimaginably colder and principles considerably harder to explain. Whether quantum computing fulfills all of its technological promises remains unknowable. Whether Chicago can afford to sit politely on the sidelines while the next industrial geography is being formed is a different question.

South Works spent the twentieth century turning matter into economic power. Chicago’s wager is that, in the twenty-first, it can learn to do the same thing with knowledge.

Originally Posted: https://gauravmohindrachicago.com/from-steel-mills-to-quantum-computers/