Corvus Robotics is a microcosm of where the U.S. economy is headed. It makes and sells drones to warehouses, where they buzz around and keep track of stuff from auto parts to lawn mowers, cases of industrial chemicals to cases of Coca-Cola. The startup is doing its bit for American “reshoring” by assembling its complex drones at a small plant in Silicon Valley rather than China. Corvus drones help a huge range of American companies and industries across the country become more efficient at a time of supply chain rebuilding.
And the $10,000-plus devices sport “‘embodied’ AI, which means they’re completely AI-driven, with no person involved, without traditional hand-crafted computer-vision features,” says Corvus CEO Jackie Wu, whose company recently won $18 million in Series A and seed funding. “Our prediction is they’ll explode in popularity. It’s the single most exciting thing for inventory tracking that’s come about in the past 50 years.”
If Wu’s prediction sounds hyperbolic, it doesn’t seem unhinged. After the dawn of the AI revolution two years ago, which was preceded by the EV and microchip-making “revolutions,” which extended the movement to re-domesticate manufacturing, which was preceded by the geographic reshuffling of white-collar work, which was kicked off by the pandemic, U.S. business and economic progress is proceeding in ways—and places—no one predicted. And it’s going there fast.
The forces unleashed by simultaneous revolutions in technology, talent, regulation, education, markets, infrastructure, taxation and CEO expectations are redrawing the maps of growth and development in the U.S. and recasting entire pillars of the economy. Old patterns around what Americans do for work, where they settle and where industries thrive are unraveling, and new ones are being created. Call it the de-tethering of development from legacy, if you will, and recognize its power.
“The digital economy has made it possible for people to do their jobs from wherever they want to be,” says demographer Joel Kotkin. “So we’re seeing a diffusion of technology and economic power throughout the country.”
This movement is inexorably shifting economic power from the employer to the employed. “When it comes to location, the most important driver is that people who have choices are deciding where they want to live, based on their own considerations, and businesses follow,” says Cullum Clark, a demographer at Southern Methodist University. “Now, when businesses are making site decisions, HR executives are front and center: Where do the people they wish to recruit or retain want to live?”
WHERE TO?
On net, these trends decidedly favor America’s interior and politically moderate or conservative states over coastal and progressively administered ones. “The job growth in tech professions tends to be in red states now,” says Kotkin, who has studied and written extensively about the economic deconstruction of California. “Strict blue states with regulatory and cultural policies and a lack of decent infrastructure are essentially pushing those jobs and people to other areas.”
For instance, Reno, Nevada, for decades known mainly for gambling outposts and legalized prostitution, is enjoying an economic overhaul led by a continued emigration of tech companies from across the border in northern California. “The entire economic-development strategy of Reno is to poach from California,” says consultant Dennis Cuneo, who lives in Reno.
But there’s more to Reno than tweaking noses across the border. Reno has ample electricity supplied by local geothermal sources and sufficient water because of the city’s rights to Lake Tahoe and aquifers in the nearby Sierra Mountains. That has helped the area appeal to a variety of companies, from tech startups to data-center operators to companies associated with EVs.
Tesla and Panasonic operate their battery gigafactory in Reno. There are also nearby mines that supply crucial lithium for making batteries. Most recently, Tesla co-founder JB Straubel built a battery-recycling company, Redwood Materials, that is processing the equivalent of 250,000 dead EV batteries a year and extracting cathode active material, the fine black powder that’s responsible for one-third of the cost of an EV battery.
Keith Burrowes is among the executives who fled California for Reno. More than 20 years ago, the former construction company engineering manager started Sierra Integrated Systems to outfit expensive residences with capable electrical systems. “Now we’re benefiting from all the wealthy people moving here from northern California,” Burrowes says. “They’re building big estate homes. During the pandemic, they learned they could work remotely, so why pay California’s state taxes? We’re swamped with work and have more than 30 employees.”
Trends have also worked decidedly against the global financial capital of New York City. Employment in the financial sector there has stalled while, according to the Business Council of New York State, tax-friendlier places like North Carolina and Florida pick up jobs. The number of JPMorganChase employees in Dallas now outnumbers those in New York City, and Goldman Sachs is building a huge new center in Fort Worth.
“These aren’t just super-size branch offices,” says Clark, who lives in Dallas. “Major global-size activities are based in these offices, and the individuals who run the businesses are living in Dallas.”
Just two years ago, predictions were that new electric-vehicle and chip plants would power massive economic development across the inner U.S. for decades to come, lubricated by hundreds of billions of dollars of federal subsidies. But EV manufacturing has slowed as U.S. consumer demand fails to pick up, and the return of the U.S. as a chip-making capital has stalled.
Other drivers that have emerged in the rewiring of the American economy include:
THE COVID DIASPORA
Covid broke the reigning paradigm for white-collar jobs, and the direct consequences and knock-on effects are still being felt throughout the U.S. economy. The current push by Amazon and other big companies to get all employees back into the office full-time, underscores that many employers—and employees—see immense value in physical co-location. But the stubbornness of the hybrid model for white-collar work still means that, particularly in central cities, billions of dollars of office real estate are left empty.
“The mobility of people during and after Covid means they’re leaving expensive, urbanized locations—especially younger, well-educated talent,” says site-selection consultant Larry Gigerich. “They’ll figure out where they want to live and then figure the work part out later. So, companies have learned the lesson that they don’t have to be in the 15 biggest metro areas of the country to find tech talent and succeed. There are a lot of other markets out there where they can be successful.”
Major suburbs are benefiting more than cities proper at this point. “Young people are going to core cities, including in the Sun Belt, but the vast majority will end up in the suburbs because that’s where the action will be,” Kotkin says.
As workers relocate themselves and work follows, savvy CEOs, entrepreneurs and developers recognize a crucial principle: While digital advancements and the pandemic have freed the individual white-collar worker from office location requirements, there’s still a lot of synergy to be gained by re-clustering such workers in a place where they can physically rub shoulders with one another at Starbucks, in a gym or in night classes.
CREATING CLUSTERS
In one high-profile experiment, Tulsa, Oklahoma, started Tulsa Innovation Labs right before the pandemic and offered tech workers elsewhere $10,000 in cash to move to the city. Nearly 3,000 of them did, as of the end of last year.
“Tulsa’s economy was always dominated by oil and gas, so the big challenge over the past two decades was not to have any real innovation economy to speak of,” says Nicholas Lalla, founder of Tulsa Innovation Labs. “So, our first order of business was developing a tech ecosystem from scratch.”
That has meant not just poaching outsiders but also developing more homegrown talent, for instance, by creating a cyber skills center at Tulsa Community College. Building on historical strengths, the city’s efforts to focus on virtual health, energy technology, advanced air mobility and cyber are on track to catalyze more than $1 billion in public and private investments and attract 150 startups, according to McKinsey consultants. That will lead to the formation of at least 20,000 tech jobs in the next decade, one-third of which would be attainable without a bachelor’s degree.
Creating “innovation districts,” where developers bring together existing corporations, startups, universities and often medical institutions to create a brew for innovation and job expansion, is another increasingly popular approach. “These are clear, compact places on maps,” Clark says. “You can draw a line around them, and everyone agrees where the line is, and there is an entity typically marketing it. You typically get an instant mix of different types of organizations becoming partners who don’t have a lot of experience being partners together.”
Tech Square in Atlanta has been at this for about 20 years, leveraging the presence of Georgia Tech University to create an ecosystem of 30 physical “innovation centers” mingling entrepreneurs, faculty members, students, venture capitalists and industry executives from local corporate giants, including Home Depot, Coca-Cola and Chick-fil-A. More than 30 companies have “co-located” operations within the 1.5 million square feet of space and five buildings of Tech Square.
“In the month of August alone, we helped curate 1,600 relationships—that’s new people meeting one another,” says Technology Square chief Kevin Byrne, who says the ecosystem has improved Georgia Tech students test scores, boosted faculty research and benefited the broader Atlanta economy.
An emerging trend related to the atomization of work is the rise of “micropolitans”: metro areas with populations of up to 50,000 people where manufacturing, proximity to major cities, demand for skilled labor, outdoor recreation and tourism are leading economic revitalization. According to a recent ranking by think tank Heartland Forward, they’re led by Los Alamos, New Mexico; Jefferson, Georgia; and Jackson, Wyoming.
“If we’re going to be able to increase manufacturing capacity in the U.S. or bring back production previously done in China or Southeast Asia, most likely it will be in some of these smaller communities, where costs are lower and regulatory climates are more favorable,” says Ross DeVol, president of Heartland Forward.
POWER NEEDS
A giant sucking sound. That’s what the skyrocketing demand for the electric power being lapped up by hundreds of new data centers across America is creating. “The availability of power never used to be an issue,” Cuneo says. “It’s a big issue now.” Data centers’ share of total U.S. power demand is expected to rise to 8 percent by 2030 from 3 percent last year, according to Goldman Sachs.
At least two trends are contributing. “There’s the ongoing growth of cloud computing that has been trending upward for years, and now the layer of AI compute capacity on top of that,” says Giordano Albertazzi, CEO of Vertiv, a Columbus, Ohio-based manufacturer that supplies energy-management equipment is to the data-center market. “So compute demand will continue to grow at a rapid pace while also increasing demand for the higher-density compute required by AI.”
Vertiv now is working with “hyperscalers” such as Google and chip manufactures such as Nvidia to accelerate adoption of an AI-ready infrastructure. Albertazzi has also escalated the company’s capex timeline so it can expand globally.
never used to be an issue.
It’s a big issue now.”
—Dennis Cuneo,
Consultant
Data-center expansion is a “game changer,” says Linda Apsey, CEO of ITC Holdings, which operates an electricity-transmission network in the Upper Midwest, “because they have unique energy requirements and needs. The future AI data centers, the ones everyone is talking about, could end up being three times more energy-intensive than current data centers.”
Indeed, data centers can thrive wherever electricity is plentiful and reasonably priced. Once opened, their low manpower counts mean that data centers don’t need to operate in talent-plentiful locations. In fact, a relative paucity of long-term jobs at data centers, along with their vast electricity demands, are why “you’re starting to see some places say no to new data centers,” Gigerich says. “They place too much pressure on the grid and telecommunications infrastructure, and some places are sick of seeing their remaining farmland and open green spaces gobbled up for data centers.”
In Indiana, for instance, legislators enacted a data center-equipment-specific 7 percent sales-tax exemption five years ago. That helped bring seven data centers to the state, but now some groups are calling for a moratorium on hyperscale builders. Activists say a single 1,000-megawatt hyperscale data center would use 52 percent more electricity than just 420,000 Indiana residential consumers combined used in 2023.
The effects on economic infrastructure of the gen AI boom have already been profound. Not only has Microsoft agreed to reopen the infamous Three Mile Island nuclear power facility, but Google will back the construction of seven small reactors in the U.S. that will add 500 megawatts of electric power starting at the end of the decade.
Startups such as AmberSemi are leaning into the data-center phenomenon. The company’s technology seeks to prevent the 19 percent loss in efficiency experienced by data centers as electricity works its way down through the levels of infrastructure, says CEO Thar Casey. “Instead of feeding the dragon with more electricity, we’re going at it now to have the dragon not eat so much—to bring more power with higher efficiency and density.”
CLIMATE CHANGE
The vagaries of weather and climate that brought two killer hurricanes to the Southeast last fall are only expected to increase, along with a general warming that is changing economic dynamics in predictable and unpredictable ways. “It’s a giant unknown,” Clark says. “There’s too much water in Houston and too little in Phoenix. And the increase in temperatures makes summers that much more unbearable in the South and winters more bearable in the North. At the margins, it’s bound to push people a little more northward than would be the case absent climate change.”
Climate change remains a major force behind a green-energy industry still seeking its way. Taking advantage of federal largess, for instance, southern West Virginia is attempting to transition from a dependence on coal power to a major producer of natural-gas liquids from shale gas. The state is also leveraging a federal grant to create a projected 50 megawatts of solar generation into its power grid over the next several years.
Some industries are tapping into fears of accelerating climate change that rile existing business models. Indoor agriculture is one. Aimed at cutting costs, environmental implications and weather risks, “controlled environment agriculture” (CEA) facilities have been attracting interest from many of the same venture capitalists who got behind digital tech.
There have been a few spectacular CEA failures, notably AppHarvest, which was supposed to transform Appalachia with a three-million-square-foot facility in Morehead, Kentucky, after backing from celebrities including Martha Stewart and J.D. Vance. “But we need to emphasize the long term, not the short term, because this is needed technology,” says Omar Asali, a board member and investor in CEA pioneer Plenty Unlimited, who is also CEO of packaging manufacturer Ranpak. CEA “will be an area that augments existing supply. It’s not an area to replace traditional farming and greenhouses. The world needs ‘all of the above.’”
To that end, CEA survivors are trying to learn from others’ mistakes. Eden Green Technology, for instance, is pivoting to producing herbs rather than leafy greens, tomatoes and strawberries in its facility near Dallas, where it has also broken ground on a $40 million expansion. “Our technology is highly flexible,” says CEO Eddy Badrina. “We can grow what others can’t. We discovered herbs are high volume, and there’s a high barrier to entry because of the difficulty customers have in sourcing even common herbs, which come from 12 countries and are shipped into four U.S. ports.”
Indoor ag is yet another example of the move of people and businesses away from the metro areas of the coasts, Clark says, “and toward the big metro areas of the Sun Belt and Mountain States. That’s very much intact.”
