The Tech Transformation of Austin

How Computing Kept Austin Prosperous, But Not So Weird

Austin, Texas evolved over some 20 to 30 years from a sleepy backwater, hosting the state government and a state university, to a center of computing innovation. Now the city is facing the same growth pains as other tech centers such as Boston and San Francisco — along with a similar identity crisis.

Austin was for a long time the San Francisco of the South: a magnet for misfits, creative people, and non-conformists of all stripes. Like San Francisco, Austin benefitted from its unusual image. The official web page praises Austin as a “magical place.” Austin even embraced the famous “Keep Austin Weird” motto created by librarian Red Wassenich in 2000. (Since then, other US cities that stake claims to a pre-gentrification Golden Age — before the tech money arrived — started “Keep Such-and-such Weird” stickers of their own.) As in San Francisco — where the Haight-Ashbury intersection, ground zero of the hippie movement, is now dominated by a Gap store — the creative and just plain quasi-social elements that helped make Austin great are being driven out. No one quite knows how to hold back gentrification.

This report will try to uncover the origins of Austin’s entry into the tech scene, the people and institutions who have made it possible, and the current state of its technology.

Early Tech Activity

In the 1960s and 70s, Austin was the site of several semiconductor manufacturers, notably Motorola. In a pattern repeated over many years and many companies, some engineers at the University of Texas created National Instruments, still a leader in smart devices. AMD also came to Austin in the early years, while Texas Instruments put up a plant in the 1980s.

Thus, Austin mirrors the development of California’s Silicon Valley, which evolved from a few big, established companies (such as southern California’s Hewlett-Packard) to a looser, more agile start-up culture. The people to create the innovation ecosystem wouldn’t be there without the plants established by large, dominant manufacturers. New stimuli to development, such as minicomputers and microcomputers, allowed new companies to spring up on the turf of the established tech vendors.

Paco Nathan, who enjoyed being in Austin for nearly 20 years starting in 1988, says that a lot of high tech grew up around the energy sector for which Texas is well-known. But Pike Powers, who is widely acknowledged as one of the key people driving Austin’s tech success since the 1980s, says that high-tech also grew because the governor back then decided it was important for Texas to diversify out of oil and gas.

The state offered 20 million dollars in incentives to win a consortium called the Microelectronics and Computer Technology Corporation (MCC) to Austin in 1983. The SEMATECH consortium also came to Austin in 1988. These are two of the many useful facts mentioned in Powers’s report, Building the Austin Technology Cluster: The Role of Government & Community Collaboration in the Human Capital.

Austin’s historic strength in semiconductors probably helped bring MCC and SEMATECH. This industry has long since moved out of the United States, of course. MCC was officially dissolved, while SEMATECH moved to New York City. But Austin tech leader Jamie Rhodes, who served on the Greater Austin Chamber of Commerce and is now a board member of the University of Texas IC² Institute, credits Powers with bringing the city together at two critical junctures: making Austin a semiconductor center when that technology was hot in the US, and finding a new tech path when the semiconductors moved away. Powers also recently won an award from a consortium of tech leaders and politicians as “2017 Texan Of The Year” for “creating the Austin as well as Texas modern technology economic climate.”

Nathan mentions another geographic coincidence benefitting Austin. In the early to mid 1990s, the US military and intelligence community became more interested in cyberwarfare. Numerous personnel working in this area were stationed among the large air force bases in San Antonio, which is south of Austin, as well as at some big military bases north of Austin. It was convenient for them to come together in Austin to exchange ideas. Eventually, a military presence with security knowledge grew up with Austin itself. They dovetailed with Internet experts located in Austin, who for their own reasons were concerned with security.

Information security expert Dustin D. Trammell describes more initiatives in this area. The Austin Hackers Association (AHA!), which started around 2006, has become a unique community institution and holds meetings that draw 25–30 attendees every month. Some members have also revitalized the classic 2600 Magazine meeting, which draws a somewhat different crowd. To attend AHA!, each person has to speak regularly in front of the group. Puzzles and technical challenges are a central part of the association’s activities. AHA! has inspired similar associations, SAHA! in San Antonio and HAHA! in Houston. InfoSec SouthWest, an Austin information security and hacking conference, is also in its sixth year.

The University of Texas’s role in Austin’s technological development is a matter of debate among my correspondents. There is no doubt that UT, whose enrollment now exceeds 50,000 undergraduate and graduate students annually, dominates the Austin landscape in people’s minds as well as on the ground. UT has a research facility, now called the J. J. Pickle Research Campus, that has contributed to Austin’s technology scene since World War II. Powers said that as early as the 1960s and 70s, UT used federal dollars cannily to build the Austin economy and to drive new business.

Others say that UT did little explicitly to create tech businesses, but that many students took the initiative on their own to do so — the outstanding example being Michael Dell. UT is now the cultivator of two important institutions promoting technology: the IC² Institute, founded in 1977, and the Austin Technology Incubator, founded in the late 1980s. Powers claims that the latter is regularly rated among the top five or ten incubators in the country.

By the dot-com boom of the 1990s, Austin was sprouting companies and attracting young technologists. Game companies were particularly strong there. And Austin was hard hit by the dot-com bust. Nathan, for instance, went back to academia because his company disappeared and new private sector jobs were hard to find. The Computer Science Corporation could buy up office space at cheap prices, becoming a big presence in Austin.

Even Apple Computer considered moving into Austin around 2002. According to my correspondents, the city recognized the boon such a move would bring and was very supportive. But politics interfered. The state government had arranged for progressive Austin to have little say in regional affairs, and left the job of approving new business development to a highly conservative regional body. They read that Apple Computer had recently offered family benefits to the partners of gay and lesbian employees, and rejected the company’s bid for space. Relations grew acrimonious, and Apple’s leaders decided to stay in Cupertino, but built a large campus in Austin. According to Joshua Baer, founder and executive director of the Capital Factory incubator, the Austin facility employs more people than any other Apple site.

The Roles of Games, Internet Access, and the Secret Service

Games deserve special attention in the history of Austin tech. Board games, role-playing games, and other low-tech pastimes seem to have played a role similar to the famous Tech Model Railroad and lockpicking clubs of MIT in attracting people who had the right type of thinking to develop into computer programmers. There have also historically been large communities in Austin gathering around science fiction and around lock-picking, which is practiced by the Longhorn Lockpicking Club at the University of Texas. According to Nathan, famous cyberpunk novelist Bruce Sterling was big in science fiction writing and games in Austin, participating in the historic Turkey City Workshop, and a lot of other cyberpunk fans gathered there.

So it’s not surprising that Austin became a center for computer game development. I heard more about the computer game scene from Wiley Wiggins, who has lived in Austin most of his life. After a notable acting career, he entered the tech field with little formal education and went from being a support person at Apple to developing a game for iOS and MacOS. This led to founding a non-profit called Juegos Rancheros (a pun on the popular Mexican breakfast dish) to help untrained people get tech, business, and outreach skills by involving them in the development of non-profit video games.

In the late 1980s, as Nathan remembers, a group of engineers interested in both robots and art created a set of robots for children’s art and musical shows. He calls their Robot Group a “proto-Maker movement”. Austin held its first Maker Faire at a quite early point, in 2012.

Another creative resource for many years in Austin was ACTLab at the University of Texas. It still inspires awe among the people I talk to, years after it was dismantled in 2010. ACTLab was founded by, and revolved around, the artist Allucquere Rosanne (Sandy) Stone. She was trained in engineering, worked at Bell Labs for a while and at NIH as a neurologist, received her doctorate in History of Consciousness under the supervision of cultural theorist Donna Haraway, and migrated into various art and video teaching positions in California. From there she was recruited by the Department of Radio, Television, and Film (RTF) in the College of Communications at Austin’s University of Texas in the early 1990s. They told her explicitly that they expected her “to drag the department kicking and screaming into the 21st century,” and she used that mandate in 1993 to launch a unique creative venture that benefitted both the university community and the entire city.

Stone describes ACTlab as “projects on the borders of technology, culture, and art,” or more concisely, “make stuff, take risks, and be awesome.” One of the many ways Stone departed from UT protocol was to open classes to anyone who walked in. For instance, buildings and grounds staff could put tools from their machine stop to creative use. Stone imposed few rules, although after someone built a flame-thrower and demonstrated it in the classroom, she ruled out projects that could hurt someone.

ACTLab’s influence permeated Austin and went beyond. Stone remembers that janitors would automatically turn the lab’s computer servers off at night, which inconvenienced people around the world who were checking out their projects there. Running their own servers, instead of using university IT resources, was another way that ACTLab showed its independence from UT. Paco Nathan says interesting people visited frequently, including John Perry Barlow.

Unfortunately, Stone’s department never really accepted ACTLab (Stone said “My mandate was to drag them into the twenty-first century; I actually got them as far as the nineteenth, but going further would have taken the power of gods”), and when she returned to Santa Cruz for personal reasons around 2010, the lab was shut down.

When looking at all these technological experiments, one should add the context of Internet access, which was much better in Austin than most places in the 1990s. Nathan said that a fiber ring was installed downtown at that time. Powers’s report says, “The Austin Wireless City works to improve the availability and quality of public, free Wi-Fi in Austin.”

Communication and collaboration on all sorts of cultural and political projects were enhanced by the relatively high-speed Internet access. John Quarterman and Carl Mitchell, two important members of the Internet Society, were located in Austin.

Austin’s South by Southwest conference, originally founded as a music festival, added a generic-sounding multimedia component along with film in 1994. The multimedia sessions blossomed into the intense tech side for which the conference has come to be known — particularly since 2004, according to SXSW director Hugh Forrest. Nathan remembers that two young people from Dallas introduced the Doom game there. After it took off and online gaming became a big part of tech scene in Austin, Electronic Arts opened a facility in Austin.

Games, Internet access, and Austin weirdness converged in the case of Steve Jackson Games, which was on the lips of every computer staffer in the mid-1990s. I will summarize my own memory of the incident, drawing as well on the company’s own description and other Internet sources.

Based on vague rumor, the Secret Service raided Steve Jackson and seized his computer assets, creating one of the first controversial intrusions of government into the rights of computer users. The young Electronic Frontier Foundation took up Jackson’s defense, enhancing their own reputation in the process. Jackson successfully sued, the federal government took a drubbing and emerged with more respect for the power of the computing and Internet communities, and an independently-minded branch of EFF called EFF-Austin was formed. According to Nathan, one of the most important impacts of the settlement was an ISP that Steve Jackson launched in 1993 with the money he won suing the Secret Service.

Austin’s Appeal and the Risk of Losing It

The fundamentals that attract tech staff to Austin include weather, nature, livability (a quality that, as we’ve seen, is being challenged), and a culture that merges intellectual stimulation with tolerance and the stimulation of music and other activities. Pike Powers identifies the four drivers of prosperity in Austin as education, jobs, sports, and music. Baer says that Austin has been the fastest-growing city in the United States for several years, is commonly rated as highly livable, and shares both its growth and its popularity with several other Texan cities.

Developer Hunter Ellinger adds that Austin respects intellectual achievement, but — unlike many East Coast centers of intellectual activity — is more collaborative than competitive. People are happy to share ideas that may make the region more successful.

Residents describe the city as pleasant (although hot in the summer) and bike-friendly. Right outside the town is a large lake and many other recreational opportunities. The downtown used to teem with cheap tacos and good beer. In recent years, consistent with the city’s gentrification, the cheap taco joints have been joined by some high-class restaurants, along with affordable food trucks. Silona Bonewald compares the entrepreneurship of food truck vendors with that of computer startups.

Music’s role in Austin is fraught with complications. Huge numbers of amateur musicians come to town, including entrepreneurs who play in bands at night. Walking down parts of Sixth Street in the evening becomes an audio experiment in moving from the sound envelope of one live club to another. But while the rock and country enhance night life, they hasn’t become an economic force in the way many city leaders would like. Wiggins mentions city-backed music festivals that lead outsiders to come to town, get drunk, and treat Austin like a Las Vegas where anything goes — an annoyance to residents. In any case, Austin has not become Nashville West.

Nathan highlights the importance of film in Austin, saying it has even more exclusive and renowned content than the music scene there. Austin is much cheaper than Hollywood, and its computer gaming expertise offers a knowledge of graphics that is useful for movies as well.

Jake Goodman, a designer who recently moved to the city, mentioned the boost given by Google’s high-speed Internet offering. Other companies soon followed to be competitive, leading to a good bandwidth situation for developers. He also mentioned Austin’s open arms for Google’s experiments in self-driving cars as a sign of its tech-friendly culture. Google claimed Austin to be the site of “the world’s first fully self-driven ride on public roads”. (Balancing this is the 2015 vote against measures that would have made it easy for ride-sharing companies such as Uber to operate in Austin. The citizens apparently worried about the impact of this recent tech disruption — although Austin is notoriously short of taxis during major conferences.)

As in other tech centers, lots of people seek education, some of them to enter the tech sector and others to sharpen their existing skills and ready them for whatever their next job may be. The large University of Texas campus serves as a source of graduates in the sciences, computing, and engineering — and many of them are smitten by the Austin life style by the time they finish school, so they stay around. Many people looking for individual courses attend local community colleges, which Powers said were guided by local businesses to offer job-related courses in the 1980s. But Ellinger, who served two terms on the local community-college board in the 1990s, thinks that the University of Texas and community colleges taught old-fashioned computer technologies for a long time. Stone says the courses have become more relevant as the first wave of administrators, who saw computers as trade-school tools — 21st-century versions of lathes and sewing machines — were succeeded by more visionary individuals who perceived cybertechnologies’ disruptive potential.

There are also lots of meetups, and incubators such as Capital Factory offer classes. Wiggins also points to Women Who Code and other volunteer or non-profit organizations that help people learn computer skills. Trammell mentions a recent innovation, BodyHacking Con, which features a lot of body modification and self improvement technology; projects range from colored hair to implants. The conference features a wide age range.

Low costs of living are critical to developing a diverse and creative population. Austin offered low costs for many years: housing, utilities, and food were easy to come by. If one had any trouble making it in the city, one could move just outside for even lower costs. This helped make Austin a center for music, video, and just hanging out in interesting ways. Nathan remembers many group houses, communes, and people happily sleeping on friends’ couches.

Everyone I talked to has witnessed a change. The key factor, of course, is housing prices. Growth has skyrocketed in the city, whose population in 2016 was estimated at 931,830, part of five-county metropolitan area with an estimated population of over 2 million. The rising skyline downtown is witness to the growth, yet construction has not kept up with the influx of tech people.

Rhodes points to one Austin house that went up in price $35,000 to $750,000 — and probably would sell now for even more. Wiggins says that racial segregation has gotten worse as housing gets more expensive in popular areas.

Baer cautioned me not to exaggerate the pressure of rising costs of living. Austin remains a city where people can buy a house and raise a family affordably. Stone points out that, unlike San Francisco and Silicon Valley, Austin’s terrain is relatively flat in all directions, which means that urban sprawl has plenty of room to expand, causing housing costs to drop (excluding pockets of affluence) and transportation costs to rise in an almost linear relationship to distance from Town Lake. The gap between Austin’s costs and the higher ones of other tech centers create a kind of dividend that is shared by companies and the people they hire: companies flock to Austin because they can get good programmers more cheaply, but the programmers’ salaries go farther.

Tech Funding

Several of my correspondents stressed that state policies made a big contribution to Austin’s success. Although Austin is politically progressive, its tech sector benefits from the same tax incentives and low regulatory climate that the politically conservative Texas state government offers everyone. Stone focused on the state investment in freeways around Austin, which opened in the late 1990s and facilitated the growth of suburban tech facilities.

When it comes to local funding for new businesses, although Austin lags far behind the Silicon Valley, and even behind New York or Boston, it does have good sources of venture capital. Austin Ventures has been providing venture capital for more then 30 years. Rhodes says that an Emerging Tech Fund was successful for a while but was brought down by political maneuvering.

Series A, angel capital, is available to those whose business ideas seem to deserve it. For Series B or C, most people have to go out of town, to California or other centers of tech capital.

Today’s Tech Trends

The industries mentioned to me by respondents as up-and-coming in Austin are typical of other high tech areas of the world: artificial intelligence, robots, virtual reality, and life sciences. IBM, which had a manufacturing facility in Austin for a long time, now places a big Watson team there. A new medical school has just opened at the University of Texas, hoping to be collaborative and work in tandem with others in the community. Virtual reality absorbs the time of a lot of game developers, who can take VR technology into other areas.

Some respondents mentioned the importance of design firms such as projekt202. They support both the tech scene and art scene.

The large Internet companies have big facilities in Austin, which bolsters the tech scene in several ways. First, it creates a large pool of experts who create a social life and a community. Second, some of these engineers leave the established companies to staff start-ups. And the large companies have the funds to support conferences and other tech-related amenities.

There are lots of startups, and one ranking puts Austin first in start-up activity. According to Rhodes, the community has worked hard to educate and mentor entrepreneurs, and it’s paying off. He thinks that the rise in valuations of Austin startups over the past few years is the result of improving deal quality, not a bubble resulting from overvaluations. Baer ‘s incubator is finding many promising startups. Baer says that the difference between Austin and the Silicon Valley is one of scale: a computer company is considered a success in Austin if it reaches five billion dollars in value, whereas a corresponding Silicon Valley company would reach a hundred billion. “It remains to be seen whether Austin companies can think big,” Baer told me.

Austin still has many advantages over the coasts. (Some boosters like to call it the “Third Coast”, even though it more than a three-hour drive from the Gulf of Mexico.) Costs are still lower, life style tends to be more relaxed, and morale is high. It has to act fast to counter the economic strains that every successful city faces. But unless it is overrun by crazy ants or suffers economic fallout from larger state-wide or national political trends, Austin has a good chance of building on its formidable strengths as a tech town.