Thursday, February 12, 2004

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Hidden tech in rural Massachusetts

I've blogged before about how rural areas can sustain economic growth in the wake of factory shutdowns. Now, Virginia Postrel links to a fascinating Red Herring article about "hidden tech" -- self-employed techies migrating away from urban areas to places like the Pioneer Valley and the Berkshires in Western Massachusetts:

With the rapid adoption of inexpensive broadband technology, and the cost of urban living still high despite the downturn, tech communities are popping up in unlikely places. Migratory entrepreneurs have set up shop in places as diverse as Grand Forks, North Dakota, Wenatchee, Washington, Bozeman, Montana, and Amherst, Massachusetts – scrapping the rat race and cutting back on their business costs, to boot. Many of these businesses are home-based and unincorporated, literally hidden from view and flying under the radar of government statisticians. Still, these "hidden tech" communites are getting VC [venture capital] attention....

Going solo certainly has its upside, according to the study: hidden tech entrepreneurs often pull six figures, and claim clients as powerful, and diverse, as the Vatican, the Thomas Register, and Boeing....

Why does the hidden tech trend matter?

In a "jobless recovery," with the government reporting growth in self-employment nationwide, economic development experts believe that the hidden tech population may be a badly needed shot in the arm for the American economy. In some cases, with manufacturing increasingly moving offshore, these entrepreneurs may be the only growing economies in some regions, especially in rural areas....

These new communities are also fresh, fertile ground for venture capitalists, as Village Ventures of Williamstown, Massachusetts has discovered. Analysts there have identified 101 emerging tech communities nationwide – from Lexington, Kentucky to Charleston, West Virginia – and have located new funds in areas such as Tucson, Arizona, and Lexington and Worcester, Massachusetts.

For another story about this phenomenon, click here. Other reports can be found at the Hidden Tec website.

Postrel points out, "[T]his is yet another suggestion--admittedly anecdotal--that the economy may be shifting toward work that doesn't get counted in the jobs data."

Is this true? Elise Gould makes a powerful argument that the payroll survey is more reliable than the household survey on job creation (link via Brad DeLong). But on the self-employment question, she says:

A... critique of the payroll survey is that it leaves out self-employment. However, because the household survey employment reports do not distinguish between the self-employed who are gainfully employed and those who are searching for work—and because the numbers of self-employed nonearners would be expected to increase during tough economic times—the omission of self-employment numbers from the payroll survey may more accurately reflect overall employment trends.

Here's my question: what happens when economic times are improving, but payroll data about job creation remains sluggish? This could be an explanation.

A question to readers -- is hidden tech an important trend that captures job creation, or is it more of a "boutique" phenomenon?

posted by Dan on 02.12.04 at 04:14 PM


I can't speak for anyone else, but in my case, it's entirely a stop-gap measure. I'm currently a freelance web designer, living in a rural area, but I would happily move into a steady, full-time position if I could find one.

posted by: Sean on 02.12.04 at 04:14 PM [permalink]

"scrapping the rat race and cutting back on their business costs, to boot"

Perhaps more to the point, cutting back on personal costs of living, so they can get by on less income.

Personally, I think it's not that common.

posted by: Jon H on 02.12.04 at 04:14 PM [permalink]


When I was unemployed (off and on for two years post-tech-bust in San Francisco), I certainly worked as a freelancer, but working like that is incredibly spotty unless you possess a huge list of contacts and have quite a bit of experience. Trend pieces like this (and that's that these are) always based off the anecdotes of one or two individuals. Life in the trenches is much tougher, if you'd like to get an idea of how it feels on the ground, go look at the ratio of job postings to resume postings on

It's a boutique phenomenon which is being fanned by certain political types desperate to cover what for 7% of the country are really tough economic times.

posted by: andrew on 02.12.04 at 04:14 PM [permalink]

A cynical thought is that the Red Herring column was essentially PR for Village Ventures.

After the 90s, I'm inclined to take anything from Herring and its ilk with a large serving of salt.

posted by: Jon H on 02.12.04 at 04:14 PM [permalink]

Incidentally, from 1995-1997 I was a self-employed guy with my own 1-person corporation doing contract work around the Cincinati area. I knew a good number of people in similar situations.

As far as I'm aware, they've all entered full-time employment since.

posted by: Jon H on 02.12.04 at 04:14 PM [permalink]

I have been working as a self-employed tech person since 1997, since 2000 from Western Massachusetts.

I don't understand how the government would be supposed to be missing me from its stats. I'm unincorporated, but I file a Schedule C. My customers report the money they pay me on 1099s. Like just about any other small business in the tech field, I have a Federal Employment ID and a D&B number.

posted by: Rich Puchalsky on 02.12.04 at 04:14 PM [permalink]

One of my oldest & best friends, Robert Harmon, learned a bit about this after the 1995 Mount Vision fire in Marin County. See:

Bob was then a field grade reserve MP officer working for FEMA. He wrote the signals plan for interfacing the San Francisco Bay Area's reserve units with local emergency service providers (fire, police, medical, etc.) in the event of major disasters, chiefly earthquakes. He lives in Mill Valley and has been director the Marin County ACLU board of directors for years.

Bob was assigned to take visting VIP's from federal agencies on tours of the fire disaster area afterwards. He had a fine time showing them all the melted cars and the remains of the many unlicensed home businesses, which weren't just arts & crafts types. Some of the arts & crafts ones had small & quite illegal _metal foundries_ in a fire zone! There were quite a few tech shops which were not limited to telecommunications & graphics. There were full-bore printing presses, etc.

All this was on private residences along a road in a national park. More than half of the destroyed homes housed small business operations. The Small Business Administration officials were fascinated by this.

The occupants were highly competent & successful people who wanted to live in one of the most gorgeous areas of the country, with arguably the best climate. I grew up there, and return for vacation most years.

IMO the answer is "boutique", but a fair amount of those are high-income boutique.

posted by: Tom Holsinger on 02.12.04 at 04:14 PM [permalink]

I just wrote a paper about Venture Capital in that area and also worked on an economic development planning project in the area. And let me give you a word of caution.

You should not conflate the activity going on around Village Ventures and the emerging tech they are talking about with the hidden tech that Amy Zuckerman is talking about. Companies that are in a position to get VC have to be organized im a way that the government is able to track them. This is not to say there are not freelancers out there, but they are different than the Village Ventures market.

There is data that tracks this kind of thing. It is the survey of non-employee enterprises. This tracks people who file taxes for work that is done in organizations that don't have employees. This covers everything from the person selling wooden toys made in the basement to a carpenter working as sub-contractor, to the computer programmer. And having looked at the data for Western Mass on these types of jobs you will find that there are much more people involved in activities related to arts than there are related to high tech. All told it is a very small portion of the workforce.

I will leave the value judgements on this activity to others.

posted by: Rich on 02.12.04 at 04:14 PM [permalink]

That's all old news. The new trend is: the homeless entrepenuer. These fast-moving go-getters glide under the statistical radar as they form a glittering facet of the new economy.

Homeless entrepeneurs are already responsible for supplying over 75% of our nations picking-cans-out-of-the-trash-and-redeeming-them needs. (Surprisingly, large corporations account for less than 10% of cans picked out of the trash and redeemed.)

In some urban areas, homeless entrepenuers also contribute over half of the needed supply of shrieking-about-UFOs-in-the-subway and lying-in-one's-own-waste-in-an-alley.

Most homeless entrepeneurs are former high-tech workers whose jobs have been outsourced to India. They can underbid higher-priced established businesses by avoiding costly policies such as renting expensive office space, keeping redundant support staff, living indoors, and eating food.

We look forward to future developments as we forge ahead into the future.

posted by: a random person on 02.12.04 at 04:14 PM [permalink]

random, that was brilliant.

posted by: a fan on 02.12.04 at 04:14 PM [permalink]

One thing to note is that, as far as Western Mass goes, it might be a little bit of an outlier, due to the presence of Harvard and MIT, with the associated capital and connections, relatively close by.

The same isn't likely to be true in Montana. Western Mass is rural, but it's not *that* far away from population centers. It's only a couple hours' drive from Boston.

posted by: Jon H on 02.12.04 at 04:14 PM [permalink]

Jon H stole the words from my mouth.

How rural is it, if relies on the presence of a large metropolitan area with a big high tech sector and research powerhouses accessible in 1-2 hours by car ?

posted by: ch2 on 02.12.04 at 04:14 PM [permalink]

grasping at straws for a thatched roof.

thelrd in TEXAS

posted by: larry davis on 02.12.04 at 04:14 PM [permalink]

Self employment may be growing but some of the growth is by choice and some is not. I think the real cause of the lack of employment growth post recovery is the direct result of 10 years of investment in technology and especially the growth and maturity of the Internet. Think about all the things you now do on the Internet compared to even 5 years ago and this change is just now penetrating a significant portion of the population. For example, here are some of the things I used humans for 5 years ago yet now do exclusively on the web.

1. Travel reservations
2. Pay my bills (All bills)
3. Look up vendors including directions, prices, features, menus, hours, availability etc.
4. Research solutions to problems
5. Customer service for common problems
6. Technical support
7. User's manuals for products
8. Some percentage of general and holiday shopping and this percent is growing
9. Taxes

I could go on, but all these things reduce the number of:

1. Call center agents
2. Order takers
3. Receptionists
4. Tech support personnel
5. Travel agents
6. Retail sales personnel
7. Paper production, postage and creative talent
8. Telecom revenue
9. Tax preparers

Again, I could go on. Why we have not seen more discussion on this obvious change in all of our habits confuses me and the hard part it is just getting started. Even Government agencies are automating certain things which only says that we have a structural change. This change will continue but is it bad? I do not know but we have survived rather admerably thus far and only hope that worries of losing jobs to foriegn workers and the like doesn't cause our government to make irrational changes. Cheers.

posted by: Observer on 02.12.04 at 04:14 PM [permalink]

if your argument was true, then you'd expect quite a rise in jobs in the following sectors

server maintenance
internet maintenance
(not to mention continued manufacturing of computers/internet components)

that is not what is hapenning. So I doubt that your theory explains the bleeding of jobs in the last few years.

PS: I agree with you that there were job losses in the sector you mentioned, but I don't think that they were of a magnitude to explain the job loss numbers we're seeing now.

posted by: ch2 on 02.12.04 at 04:14 PM [permalink]

Hey Ch2,

All those jobs increased during the bubble and are growing. Look at the want ads. The real issue is that companies can grow without added people as in the past.


posted by: Observer on 02.12.04 at 04:14 PM [permalink]

Observer writes: "All those jobs increased during the bubble and are growing. Look at the want ads."

I do. Often. There ain't much there.

posted by: Jon H on 02.12.04 at 04:14 PM [permalink]

In response to the point made by Jon H about proximity to research centers. Yes, that is a partial factor in Western Mass, but you should not confuse it with close. People in Western Mass are close enough to easily attend a meeting in NY or Boston, but they are not having daily meetings. The time from Western Mass to Boston or New York is similar to a 500 mile plane ride.

And while most space is farther from large research centers, most population is not. I would even guess that most "rural" population is close enough to an urban center to allow a single contractor to be in contact with people. In any event, most of these people who are "hidden tech" established contacts with business partners earlier in careers and then chose to move away. They really could live anywhere and maintain their business, but they are choosing to be in places where they are not too far from their past life.

And to the point that we should see more server/internet technicians. I think we are. These jobs didn't exist 20 years ago. But of course there are less of them than the old jobs. Otherwise the investment in new technology would not be made. Companies are not spending money on IT because they would rather employ 100 programers than 100 clerks. The investment is made because they would rather employ 1 programmer, buy $500,000 of hardware, and employ 2 clerks than the 100 clerks.

posted by: Rich on 02.12.04 at 04:14 PM [permalink]


I live in Connecticut, so I'm acquainted with the distances involved. It's close enough to meet with a big-city VC, do presentations to clients or investors or user groups, etc.

I've also worked with a guy who telecommuted from Maui to San Diego. But people who can get that kind of deal are rare.

"And to the point that we should see more server/internet technicians. I think we are."

I disagree. I've been working in software since 1994, and while things are not as bad as at the worst of the bubble burst, there aren't even as many jobs as in 1996, before the bubble really took off.

Once upon a time, there were help-wanted sections with pages and pages of tech jobs. Now, there might be a partial column on one page, with half a dozen, tops.

posted by: Jon H on 02.12.04 at 04:14 PM [permalink]


You are right about the occasional meeting, but the big city VC is not going to invest in a company in Western Mass without the idea being pretty phenomenal. They are not going to want to waste days for every meeting, so they will do some real arm twisting to get the company to move. The company that started the VC phenomenon in Williamstown, Tripod, was extremely lucky to get VC money and it was a significant challenge for them to convince companies that staying in Williamstown was the right move.

Also, I think if you look at most of the cities that are mentioned by Village Ventures as target markets, they are not really rural areas, but rather they are cities that are simply underserved by venture capital.

Regarding the point about tech jobs. I did say that there are less jobs than 20 years ago, because I was not sure when hiring started in earnest, and I was not meaning to imply that there has not been a decline in tech jobs in the last few years. I would caution you against associating jobs with employment ads. Employment ads are indicative of rates of change, not employment levels. That said, I would certainly beleive that there are less jobs in certain tech sectors today than a few years ago. After all tech jobs are about designing and building an infrastructure. Once that infrastructure is built there are fewer jobs needed to maintain it (and less interesting jobs).

I think the reason there is so much debate about these tech jobs is that they are not tracked very well. The goverment's data does not class people by employment category except at Census time, most of the data tracks what industry people work in, so a programmer for American Airlines is classified the same way as a flight attendent. You can speculate if this will over or under-estimate the decline in tech jobs, but only looking at companies dedicated to technology development.

posted by: Rich on 02.12.04 at 04:14 PM [permalink]

I don't see what being near to Boston or New York has to do with working at a tech job from Western Mass. People come here because they don't have to deal with the either the conservatives of Red America or the prices of NY, LA, SF etc., and the tech jobs are those that can be done remotely. I've worked here for years and never bothered to visit Boston.

Being near Umass Amherst is useful, however.

posted by: Rich Puchalsky on 02.12.04 at 04:14 PM [permalink]

"People in Western Mass are close enough to easily attend a meeting in NY or Boston, but they are not having daily meetings. The time from Western Mass to Boston or New York is similar to a 500 mile plane ride."

Untrue. Traveling by air is more expensive, AND you have to arrive 1-2 hours ahead of departure.

Rich Puchalsky,
"I don't see what being near to Boston or New York has to do with working at a tech job from Western Mass."

People-to-people contacts are crucial for high-tech private sector. It has everything to do with it. I don't hear much about the Duboise high-tech sector. And your comment about UMass just confirm it. UMass Amherst is pretty good because it, itself, can link to Boston.

posted by: ch2 on 02.12.04 at 04:14 PM [permalink]

Rich P.,

Most bucolic college towns aren't that cheap. Hanover, NH is almost as bad as New York City.

Also, regarding your earlier point, the most commonly cited unemployment statistic is the institutional survey, where they call up a bunch of companies and look at their payrolls. There is a household survey too, which is harder to track, but it estimates that the economy added 496,000 jobs last month.

posted by: John A. Kalb on 02.12.04 at 04:14 PM [permalink]

Some thoughts from someone who lived last year in Amherst, MA before moving to Chapel Hill, NC. a) Insuring a family of four in WMass now costs $900+ a month, versus $450 in NC. b) The study mentioned in the Red Herring story was funded by the local electrical company -- who'd love to see entrepreneurship boom in the area. c) Many of the people counted in that study as tech entrepreneurs are actually writers and consultants who happen to use computers. Isn't an entrepreneur classically defined as someone who plans to scale and employ people? d) There ARE many smart & ambitious people in that gorgeous area, but I'm not sure there are more entrepreneurs than around most average college towns. There's a big difference between a sprinkling and a critical mass.

posted by: henry on 02.12.04 at 04:14 PM [permalink]

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