Case Study: Austin after the Dell layoffs

Come to Austin and you'll hear about what a high-tech paradise it is. At least, that's the official chamber of commerce line, and the working proposition of thousands of computer programmers, electrical engineers, lawyers, and financiers. Plus, in addition to working hard, we play hard.

As you may know, we're the Live Music Capital of the World and all. We're so hip, so cool, us Austinites. We're changing the world with this high-tech stuff. And we love to talk about how much nicer it is here than in Houston or Dallas. No wonder outsiders have sensed hubris in the Texas capital.

Actually, the growth of the high-tech industry has been exciting, and Austin has been a fun place if you were into high-tech. Labor was tight in certain trades and there was a lot of money going into Internet start-up companies, and people were confident. Whenever you got in a jam, you ask: what would Willie (Nelson) do. Because Willie apparently never worries about anything and he's therefore a role model for naturally neurotic high-tech nerds.

But this confidence has been under attack during the past six months. Internet companies are dropping like flies. The money's drying up. Unemployment is on the rise. Even the big mainstays of the local economy are feeling the pinch.

A few weeks ago our two largest private employers - Dell and Motorola - reported layoffs.

Dell's always seemed a little dull and plodding, not really glamorous enough for a town that wears its hipness on its sleeve. You can't argue with its impressive success even if its employees frequently feel overworked. Motorola's even worse, stuck inside big military-looking buildings, making products that are difficult to understand and not enjoying Dell's spectacular stock performance.

Dell's amazing stock in the 1990s made many early investors and employees rich. The company's success has driven much of the region's general economic prosperity, and was a model for many start-ups: go public, everybody gets rich as the stock price skyrockets.

Layoffs by these two big employers are another blow in the recent turn-down in the high-tech industry that has largely come to represent Austin to the world, and frankly, this is getting bad for our community's collective ego.

Even more than the state capitol, high-tech has come to represent Austin to the world. High-tech suits the town because its not just about money; it's about pushing the envelope, being creative and a little rebellious - it's probably the closest engineers can come to being music stars.

Dell notwithstanding, most of the recent job growth in Austin during the past few years can be traced to the soft side of high-tech: software, multimedia, Internet, even film production. This is more fashionable than hardware manufacturing because it explicitly employs creativity and values uniqueness more than efficiency. Plus, the content/software business is tailor-made for start-up firms. And entrepreneurship is cool. Starting a software or Internet company combines the outlaw/artistic sensibility with high-tech.

The inevitable downside of fertile community for start-ups is a lot of failures. Most companies fail - always have. Start-ups are capitalism and innovation at their most raw. Individual companies may fail, but the industry grows.

On the shores of Austin's Town Lake there's a statue of the late musician Stevie Ray Vaughn. It's not too outrageous to think that someday there will be a statue of Michael Dell nearby, not so much because of Michael Dell's individual contribution, but because he represents the thousands who have built the local high-tech industry, with all its pluses and minuses.

- Daniel J. Crean is a management consultant in Austin


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