The Entrepreneurs Who Saved Seattle

Once dubbed a "City Of Despair," Seattle made a comeback that's putting it on par with the most innovative cities in the U.S., all thanks to a few entrepreneurs who brought their businesses back home.

Today, Seattle is considered one of the most desirable places to live and work in the U.S. Amazon, Starbucks, Expedia, and other leading companies make their homes there.

But in 1979, Seattle was the last place you’d think to find a growth business. It had more in common with today’s Rust Belt than Silicon Valley—its economy centered on a declining manufacturing base and the lumber industry, both of which were shedding jobs. Starbucks was just a tiny local company with three stores serving standard-issue coffee. The Economist had labeled Seattle the "city of despair" and a billboard appeared saying “Will the last person leaving Seattle—turn off the lights.’

So what changed? Two Seattle natives decided to move their 13-employee company there in 1979 from Albuquerque. The two natives were Bill Gates and Paul Allen. And the company was Microsoft.

Is it possible to ascribe Seattle’s entire economic trajectory to just one company? Well, today over 40,000 people work at Microsoft in the region, and 28,000 of them are highly paid engineers. Approximately 4,000 businesses have been started by Microsoft alumni, many of which are in the region. Just one of these companies, RealNetworks, employs 1,500 people. Expedia, originally a Microsoft spinoff, employs another 14,000. The Gates Foundation itself has another several hundred employees. The economist Enrico Moretti* estimates that Microsoft’s growth has directly created 120,000 regional jobs for services workers with limited educations (cleaners, taxi drivers, carpenters, hairdressers, real estate agents, etc.) and another 80,000 jobs for workers with college degrees (teachers, nurses, doctors, architects).

The growth of Microsoft also influenced Jeff Bezos to locate Amazon there in 1994 when he was looking for a city with ample tech talent to build an e-commerce company. Today, about 17,000 of Amazon’s 51,000 employees live and work in the Seattle region. If Microsoft had not been there, Bezos could easily have migrated elsewhere. The day-to-day needs of these 17,000 Amazon employees have given rise to another 85,000 skilled and unskilled service jobs locally. That’s another 100,000 jobs.

It’s hard to imagine that two people transplanting their then-tiny firm to their hometown could change a city’s economic history for decades to come. Yet this phenomenon isn’t uncommon. You can see similar impacts with Dan Gilbert relocating Quicken Loans to downtown Detroit and Tony Hsieh moving Zappos to downtown Las Vegas—these effects are simply easier to see because these firms already have thousands of employees. In Microsoft’s case the company had yet to grow and mature.

It’s worth noting that Gates and Allen weren’t responding to any tax break or public entreaty. They were far too small to attract that sort of attention. Their decision wasn’t born of any particular policy. They just wanted to go home.

Microsoft is one of the great business success stories in American history, and 99.999% of companies are not going to have near the same impact. But it’s pretty amazing to see how an entire region’s economic course can be changed by a largely personal decision by a couple of young entrepreneurs. Imagine if Microsoft had stayed in Albuquerque? It turns out that Jeff Bezos is an Albuquerque native; he might have had a great excuse to return home 15 years later, and we all might think of Seattle today solely as the birthplace of grunge and flannel.

It’s also food for thought as to what will make a difference for today’s cities that are trying to rejuvenate themselves. It’s tempting to think big, but a dozen incredibly smart and talented people on top of a high-growth business can eventually make all the difference in the world.

Andrew Yang is the founder and CEO of Venture for America and the author of Smart People Should Build Things (HarperBusiness, an imprint of HarperCollins).

[Image: Flickr user Benson Kua]

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4 Comments

  • andrewyang

    Hello this is Andrew Yang (the author of the article). The Seattle discussion is based on a chapter in Enrico Moretti's "The New Geography of Jobs" which is a great read for anyone interested in economic development. The asterisk next to his name is meant to refer to his book but the reference didn't make it into the article. Giving credit where it's due!