Note: this post appeared originally on the Sonya Labs blog.

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Of all places, I never would've expected to build my startup in Pittsburgh. I moved to the 'burgh from Chicago when Sonya Labs got a seed-stage investment from AlphaLab. It is not so unfathomable that I'm here, though, it actually makes quite a bit of sense. Even Paul Graham, a Pittsburgh native, who is famous for advising that startups go to Boston or Sillicon Valley says so!

Pittsburgh has the opposite problem: plenty of nerds, but no rich people. The top US Computer Science departments are said to be MIT, Stanford, Berkeley, and Carnegie-Mellon. MIT yielded Route 128. Stanford and Berkeley yielded Silicon Valley. But Carnegie-Mellon? The record skips at that point. Lower down the list, the University of Washington yielded a high-tech community in Seattle, and the University of Texas at Austin yielded one in Austin. But what happened in Pittsburgh? And in Ithaca, home of Cornell, which is also high on the list?

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Rich people don't want to live in Pittsburgh or Ithaca. So while there are plenty of hackers who could start startups, there's no one to invest in them.

Well, maybe Paul doesn't quite say so, but he does try to explain why there isn't a startup hub here. It simply makes sense for one of the top CS programs in the country to turn its home into one. His explanation is a bit flawed, though, no rich people in one of the steel capitals of the past century? Maybe there is no young money, but there has got to be money somewhere. Not only that, but Pittsburgh is close to all of that east coast money.

On the other hand, if all the hackers that study here are happy to leave and there is nothing to attract hackers to come, money doesn't count for much. Pittsburgh seems to have more of that problem than a lack of money.

The puzzle goes a bit deeper. For a web startup made of cheap servers, ramen and young people, the main expenses to get started are rent and food. Pittsburgh then, being a lot cheaper than Boston or the Valley, makes even more sense. Here our AlphaLab money will last us at least six months and possibly even eight, whereas it would only last three or four in the other places.

Of course, this puzzle is a lot more complex than solvable with a single answer, but if I was a CMU hacker working on something startup worthy, there are just about enough incentives to stay in Pittsburgh; and if I was a mere mortal hacker there even seem to be enough incentives to come here.

Mike Madison hits closer to what I think is one of the main problems:

This puts the lie, I think, to the most famous and durable of Pittsburgh stereotypes, that this town and region are noteworthy for their honesty and work ethic. If you have a job, that stereotype certainly seems to fit -- but a big part of that job seems to be keeping it intact, and keeping others at arms' length. Is there a "Not Welcome" sign posted in the region's employment markets? It sure seems that way.

I think that more than a "Not Welcome" sign, Pittsburgh has no sign at all. At least when it comes to startup founders. Since landing here, I've noticed the vibe of reinvention just about everywhere I've set foot. The city is and has been trying to renew itself into being a startup hub among other things.

Whereas I could always feel the academic attitude of Boston, the entrepreneurial one of the bay area and the alterno-hipster culture of Portland from afar, it was only after a few weeks here that I felt anything about Pittsburgh. I've been thinking about startups for the last three years and never once had Pittsburgh crossed my mind as a potential place, but places like Austin, Seattle, Chicago (before I moved there) and even Portland had. There isn't enough noise!

How to go about hanging the right sign at the door is also tricky business. The first part would be a bit of a media campaign in the adequate parts of the blogosphere. I mean nerds and hackers blogging to nerds and hackers about nerdiness, hackery, and Pittsburgh. A bit of a catch-22, if they aren't coming or staying here in the first place, though. Maybe we can help. We're nerdy looking and we mumble "linux", "open source" and "python" enough to pass for hackers.

Programs like AlphaLab are also a good start. If the program is successful in a couple of years there will be a solid network of alumni founders in the city which will make their noise and attract more people in turn. Even more important than helping founders start is helping people who are already here continue, though. Ahem.

Self interest aside, another important piece to attracting founders is getting VCs to invest smaller amounts in more companies. Convincing VCs to invest angel-like amounts and angels to behave like VCs will be part of the next wave of web startups wherever it happens. The trend about the costs of startups are clear by now, so I won't go into why most startups that are a few months old don't need several million, but only several hundred thousand to move forward. If you want to give us a few million at the right valuation we won't object, though.

Finally whatever "Not Welcome" sign needs to be done away with. Duh. There is no room for anti-immigration attitudes. Letting Mike make my point:

Moreover, there are sizable communities in the Pittsburgh region that see potential increases in immigration rates as undesirable -- either because immigration of lower-skilled workers threatens existing blue-collar employment and depresses wages, or because in-bound higher-skilled workers compete for positions with people who already live here, or both. Somewhere in Pittsburgh, someone is asking why Sycor wants to raise the H1-B visa cap rather than hire skilled people who already live in Pittsburgh.

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The problem, in other words, is that immigration is perceived by many as a threat to the pie that we already have, rather than as part of a process of growing the pie.

That one is much more difficult so I'll let people like Mike work on that problem.

At least for a good while. I guess life is what happens to you while you make (or execute?) plans.

My spirits are similar to those experienced by fellow physics-grad-school-drop-out turned entrepreneur Andres from octopart when embarking in his new endeavor. Main difference is that I don't see my life as languishing in mediocrity because of being in grad school. In fact, I'm leaving with a heavy heart and a great deal of nostalgia to pursue what is obviously a better path for me for the immediate future.

I'll come back one day.

Startuping has been on my mind a lot as of late and as a result there were over 600 unread items on my google reader. So, I finally sat down and started marking things as read without reading them, un-marking the ones that seemed more interesting, starring, reading the ones that were short enough to be quick, and that sort of a thing. Annoying. Why doesn't the reader do this for me? It should know by now what I like. It is a good friend of mine. I go see it every day. But wait, this is a meta-problem: why doesn't do this? It should know how I use it and organize my data accordingly.

The web 2.0 bubblevolution seems to be about two things: putting applications on the web so that they are accessible from anywhere and put users' data on the web and organize it in some naive way. Continuing with my reader example, this is exactly what it does: keeps me from having to download and install a news reader and it is available anywhere I go. Secondly, it organizes my feeds into categories of my choosing (I have to tell it which feed goes where when I subscribe to it) and it presents my data to me in some naive ways: organized by date and by feed or by date in the "river of news" format. The web 2.0 has been a good thing, but it seems that it is largely done. It is difficult to come up with truly new products that aren't just mashups of variations of existing ones.

Introducing web 2.1. The name of the game is not to figure which applications and data to move to the web, but rather to drastically improve the services that already exist. Come to think of it, that is what gmail did. When gmail launched in 2004 everyone, their mothers and grandmothers were using hotmail, yahoo mail and handful of other web-based email services. M$ had been the owner of hotmail for seven years! And in came gmail and taught everybody how email should be done: search, conversations by subject, lots of space, filters & tags and spam block. Bingo.

In a nutshell, dramatically improving a service means keeping more data about the user and the ways she uses the product, and do intelligent, non-evil things with it. Make smarter things, not new things. Automatic and dynamic customization. Oh yeah, and web 2.1 is never beta.

Most of what is in this post came from a conversation with Walter, but I had already posted in that style. Sorry dude.

An interesting article on obtaining a pool of 'experts' making predictions for you. See related post here. It seems that ProbabilityFootball has successfully done what I was talking about in that old post. The most remarkable thing:

Even when we average together the very worst participants -- those participants who actually scored below zero in the contest -- the resulting predictions are amazingly good.

It seems that it would be worthwhile to try something like this on the stock market. However, it would probably be a lot harder to get people making predictions about the stock market since not so many would care. Also, I keep thinking that with football it is more reasonable that people do well because they can make educated guesses which is harder to do for the stock market. I wonder how educated the pool of 'experts' needs to be in order to produce decent results. Heck... I might even try to do it...

TradeSports is a brilliant idea. I had thought about making a site of this nature as a startup idea and even tried a very naive implementation of it for my cis422 project (which failed miserably, btw). This was right after I read about Nassim Taleb (thanks to Prof. Hsu's blog). Taleb proposes that being an 'expert' isn't (perhaps shouldn't be) worth that much because even experts get dominated by statistics when it comes to making predictions and do no better and even worse than non-experts. (this is a good talk on the subject). After having listened/read what Taleb has to say, it seems that he is very right. So, what better than a site which allows everyone to trade on predictions? Not only does it allow to test what Taleb says, but it has other possible implications.

First, if the site becomes popular the people running it get a large database of 'experts' (common people) predicting. They can then use the crowd's wisdom to make their own predictions and do better than the best of their 'experts'. See this recent entry on Prof. Dave Bacon's blog, for example.

Second, imagine having a track record of all the times you've been right about something. If you are usually right this is the kind of thing you'd like to show to a potential employer or admissions committee. If nothing else it may give you some bragging rights. Such a record would also be desirable from an employer's perspective: in addition to comparing people based on how perfect they say they are compare them on how often they are right. Selling prediction reports could be a viable business plan if the site was popular. Of course, they already make money on each transaction so perhaps this would be unnecessary, but still.

For now, though, TradeSports seems to be a little too focused of sports betting. This probably because that is the easiest to implement/automate and has a large potential user-base already. Also, I am yet to make sure I understand exactly how TradeSports decides the outcomes of events. For things like sports or stock market predictions this is straight forward. For things like current events, not so much. Probably more on this topic as I look into it. It may be a TradeSports' trade secret, though.