In the late 1800s, the “Windy City” hadn’t even been given its nickname yet, but it was already booming—the fifth-largest metropolis in the U.S. Located smack in the middle of the Midwest’s fertile farm country, agriculture was Chicago’s lifeline, and when grain elevators came along and wheat grading standards were established, Chicago shifting along with it. However, the true winds of change were coming. Though Chicago would remain to this day the undisputed hub of America’s “breadbasket,” the city’s economic footprint was about to change drastically.
On October 8, 1871, Chicago was set ablaze. The drought-stricken landscape and the city built mostly of wood were no match when flames and Lake Michigan’s indefatigable winds sparked the Great Chicago Fire. No one knows the exact cause, but the results were devastating: hundreds killed, thousands homeless, and a 3.3-mile swath of the city was burned to the ground. Just about the only parts of the city left relatively unscathed were the railyards and the city’s factories. What emerged from the ashes was a city still tied to its agricultural roots, but one that has grown ever more diverse with each decade.
Illinois universities conduct $2.5 billion worth of academic research each year. Between 2014 and 2018, the state produced 978 university-supported startups; four out of five of those startups that remain active have chosen to stay in Illinois.
Transformation After Devastation
The rebuilding of Chicago happened almost as quickly as the fire had swept through the city. Within a year, $50 million worth of new real estate had been built, and by the end of the decade, some 10,000 building permits had been issued. In the decades since, the city has grown into the economic heart of the Midwest, and an indispensable part of the footprint of some of the world’s largest companies.
Perhaps the city’s experience with rebirth after the fire enabled it to make the shift from a hub of old-fashioned industry to a 21st century knowledge economy hub. However, the city’s agricultural background also played a major role, according to Saskia Sassen, a professor at Columbia University and a member of its Committee on Global Thought.
“The complexity, scale and international character of Chicago’s historical agro-industrial complex required highly specialized financial, accounting, and legal expertise, quite different from the expertise required to handle the sectors New York specialized in–service exports, finance on trade, and finance on finance,” noted Sassen. “Chicago’s past as a massive agro-industrial complex gave the city some of its core and distinctive knowledge economy components.”
Chicago Today
Just as in the 19th century, a central part of Illinois’ elevator pitch is its central location.
It all starts with a transportation infrastructure that is second to none in global connectivity, including Chicago O’Hare international Airport, the busiest international airport this year in the U.S. and third busiest in the world, and Chicago Midway International Airport.
“A lot of people like to move here because they want to be able to access a flight anywhere in the world, and so they want the convenience as they’re pursuing customers, business, or talent,” said Gery Chico, partner atChico & Nunes.
What Chicago has to offer has attracted a lot of people and businesses already. Chicago-based companies have more than 8,000 locations in 170 countries and territories, and 1,800 foreign-based companies call Chicago home.
Illinois workers are employed by more than foreign companies doing business in the Land of Lincoln. Some want to operate in one of the state’s eight Foreign Trade Zones, from those in Chicago and Rockford in the north to Granite City and Lawrenceville in the south. Some want proximity to O’Hare Airport and its global connectivity. Others need the rail, river, and interstate mobility found in other parts of Illinois. The state’s biggest foreign-owned company, United Kingdom-based reinsurance giant Aon plc, employs nearly 16,000, mostly at its Aon Center skyscraper in the Chicago Loop.
If its transportation assets are unrivaled, one challenge the state does have is the perception that it’s a high-tax state. In its 2020 State Business Tax Climate Index, the nonpartisan Tax Foundation ranked Illinois 35th overall, well behind many of its neighbors (though still ahead of many of Illinois’ chief competitors, including New York, California, and Massachusetts). For corporate taxes, Illinois came in 36th place. The state fared better when it came to income taxes, where it ranked 13th.
Still, Illinois remains competitive in part because when compared with other cities of similar size, Chicago has a relatively lower cost of living and lower cost of labor. For international companies looking to establish a beachhead in North America, Illinois remains one of the best bargains anywhere in North America. Costs are a big reason why large numbers of Big Ten graduates choose to move to Chicago each year, far ahead of New York, the West Coast and other U.S. cities.
‘Rebuilding’ with Pro-Business Focus
Gov. J.B. Pritzker, who took office in 2019, has worked with lawmakers in both parties to combat the state’s reputation head-on. They hope to send a signal to the business community that Illinois is eager to do what it takes to improve the business climate and solidify the state’s place as the economic hub of the region.
Last year, Pritzker signed a landmark investment and revitalization package, dubbed Rebuild Illinois, which he expects will lead to more than half a million new jobs in the state over the life of the plan.
“With this historic $45 billion capital plan, we’re fixing decades-long problems, creating good jobs, improving communities for the next generation — and doing it together, across party lines,” the governor said.
The headline of the plan is $14 billion in new roads and bridges, and $11 billion to fund the state Department of Transportation’s multi-year road and bridge plan. Another nearly $7 billion will be spent on mass transit, rail, ports, aeronautics, and transportation efficiency projects.
“We’re here in a hotbed of entrepreneurship. Illinois is consistently named as one of the best states to start a business. There is a thriving community of entrepreneurs driving the Chicago economy. Chicago understands what it means to nurture and support small businesses.”
Stephen Kelly, CEO of Sage
Pritzker said jobs are the ultimate priority. Initially, the package will help create jobs directly through construction work. In the longer-term, though, the plan is built around the goal of providing infrastructure for a 21st century economy, including $420 million to deploy and expand broadband access across the state.
“We must also grow jobs,” Pritzker said. “We can do that by fostering a business environment in Illinois that will attract talent and entrepreneurs from all over the country.”Another area of focus for the Pritzker administration is manufacturing. Nearly one in 10 workers in the state works in sectors like food processing, automotive manufacturing, petroleum refining, and pharmaceutical manufacturing.
David Doig, president of Chicago Neighborhood Initiatives, believes young talent is attracted to Chicago, thanks to everything mentioned—location, affordability, world-class universities, transportation, and other amenities. “We’ve got some of the most talented young people that are moving here,” he said. “The talent pool is unbelievable. Diversified.”
Still, there is one more thing that Chicago has going for it that businesses like, and that’s its famous midwestern values and ethics that companies are craving.
“That’s the secret sauce—the culture here,” said Paul Marushka, CEO of Sphera. “The Midwestern culture is very collaborative.”
Knowledge Economy
Amid such changes, Illinois is earning a reputation as an innovation hub–a midwestern version of Silicon Valley. Big names like Facebook and Google have offices here, and Salesforce, the maker of a popular customer relations management platform, is building an office tower as part of its expansion in the city. Few realize it, but Illinois produces nearly 10 percent of the nation’s computer scientists and annually graduates more engineers than MIT, Stanford and Cal-Tech combined.
Those are among the reasons Chicago ranked as the 13th best “innovation hub outside of Silicon Valley” in KPMG’s 2020 “Technology Innovation Hubs” report.
In fact, new Chicago Mayor Lori Lightfoot lamented that many people don’t realize how much the city has grown in terms of becoming a technology hub. “We have a very thriving tech industry, but frankly a lot of people don’t know about it,” Lightfoot said. “And what I worry about is that a lot of young people are leaving the city because they think they must go to California or New York or elsewhere to be a part of a thriving tech community.”
For the tech talent that comes to Chicago, however, they notice the culture is different here. By and large, it’s less competitive, and talent tends to stay put rather than hop over to the next hottest thing. “There is a sense of loyalty,” according to Marushka, CEO of Sphera.
Another difference is that in Silicon Valley, there is an ecosystem for risk-taking. Not so in Chicago, where they tread more cautiously, according to Robert Blackwell Jr., founder and CEO of EKI-Digital. “People here will buy performing assets. Silicon Valley is about invention. It’s not about buying performing assets,” Blackwell said.
So far, one of the most prominent and promising sectors of the city’s tech ecosystem is FinTech. Deloitte Services LP has named the city one of the Top 10 cities in the world for FinTech, and the more than 260 FinTech companies in Chicago have raised more than $3.3 billion in venture capital.
In fact, between the Chicago Board of Trade, the Chicago Mercantile Exchange, and the Options Clearing Corp., one-fifth of the world’s futures trading volume takes place in the Windy City. Big-name banks like BMO Harris Bank, Northern Trust, and CIBC Bank U.S.A have their headquarters in Chicago, and other mega-banks like Bank of America and JP Morgan Chase employ thousands in the metro.
Elsewhere in the state, nearly one-quarter (22 percent) of workers in Bloomington (population 188,000) work in finance, including for the insurer State Farm, which is headquartered there.
Top-Tier Institutions, Top-Notch Entertainment
Chicago’s emerging knowledge economy would not be possible without its robust academic infrastructure. Two Top-10 universities, Northwestern University and the University of Chicago, call the Chicago area home. And they are not alone. According to World Business Chicago, 138 degree-granting colleges and universities are located in Chicagoland, yielding 148,000 graduates.
With its top-tier universities and growing companies, it’s perhaps no surprise that Chicago is also the arts and culture center of the Midwest. More than 250 live music venues, 200 professional dance companies, 200 theatres, and some 40 film festivals are located in Chicago. One of the city’s biggest draws is its Second City improv comedy troupe, which launched the careers of big-name comics like Joan Rivers, John Belushi, and Dan Akroyd.
“We are the most productive state in the Midwest, and we rival leading states like Washington and Massachusetts in productivity.” —Erin Guthrie, acting director of Illinois Department of Commerce & Economic Opportunity (DCEO)
“Chicago has a deep and rich cultural life with art, music, and museums,” said Ambassador Fay Hartog Levin, Distinguished Fellow of The Chicago Council on Global Affairs. “It’s part of the fabric. It has an enormous wealth of research and academic resources.”
Chicago is also a great town for foodies. Of Chicago’s 7,300 restaurants, 26 have earned Michelin stars, 40 have earned James Beard awards, and seven have earned diamond ratings from AAA.
For those who prefer hot dogs and ballparks to fine dining and theatre, Chicago is home to some of the most storied–if not always winningest–sports franchises in the country. The city boasts teams from all of the country’s major professional sports leagues, including the Chicago Bulls, who won six National Basketball Association championships in the 1990s with superstar Michael Jordan, and the Chicago Cubs, who in 2016 broke a 108-year championship drought by winning Major League Baseball’s World Series.
In a country known for its love of the open road, Chicago is part of a small group of American cities that can be navigated easily and inexpensively via public transportation. Chicago’s elevated “L” trains service more than 140 stations around the metropolitan area, offering a convenient escape from the traffic of a major metro area.
No matter how one gets around Chicago, however, the city they will see is vastly different from the Chicago made famous by the great fire back in 1871. It’s not just a rail and agricultural hub anymore (though it is still both of those things), nor does it fit the common stereotype of a midwestern city full of rusted-out factories and surrounded by cornfields. Rather, it’s a city of innovation surrounded by a state reinvesting in infrastructure and re-thinking how it can boost its stature as a business-friendly state. It’s a city of commodities exchanges surrounded by rural windfarms. It’s an outpost for Silicon Valley’s biggest companies, and it may well be the launchpad for the next wave of tech disruptors. Indeed, Chicago is no longer a city built of wood. It’s a city built of innovation.
As one of the biggest intersections for fiber optic infrastructure in the country, Chicago has the foundational makings of becoming what’s known as a “mega smart city” in probably less than 10 years, according to Thomas D. McElroy, II, principal and CEO of Level-1 Global Solutions. “There are more tools and options right now to do an economically smart city that is interconnected and has standards, so that every new thing that comes along can in a modular fashion get added,” McElroy explained. “That kind of infrastructure didn’t exist years ago, and now, you have an opportunity to turn it from a myth into something that is actually practical and real.”
That will further secure the city’s stance as a technology and telecommunications powerhouse in the country. Looking to the future, McElroy thinks Chicago must impress its global city aspects on to the entire world. “Now it is about bridging continents,” he said. “Now it’s about the further establishment of Chicago’s place in the world. And does the world understand Chicago is here to play on the global stage, seriously?” In time, the city will tell, and the world will know.
