The Fall of Boston: How America's Former Tech Hub Declined
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The Fall of Boston: How America's Former Tech Hub Declined
The story of Boston illustrates what happens when negative cultural and regulatory feedback loops interact.
Navigating Web3 tides with focused insightsAuthor: Will Manidis
Translation: TechFlow
In 2004, if you asked a tech investor where the world’s best software companies were located, they would have given two answers: Boston and San Francisco.
Clearly, things are very different today. Over the past two decades, San Francisco has generated $14 trillion in enterprise value, while Boston contributed just $100 billion.
If you had told that investor back then that New York—once known more for “cocaine and gray pinstripe financial glory”—would overtake Boston as a regional tech hub, they would have thought you were insane.
So why did Boston lose its position? This question deserves serious examination.
Judging by inputs alone, the city seemed to have every advantage. Two of the world’s top universities are located here (Harvard and MIT). The famed startup accelerator Y Combinator was founded here. It is unquestionably one of America’s most beautiful cities. Mark Zuckerberg went to college here. Founders of Stripe, Cursor, and Dropbox all studied here. So what went wrong?
To understand the scale of Boston’s decline, we must remember that for decades, Boston’s Route 128 was the epicenter of the software world. Digital Equipment Corporation (DEC) was once the second-largest computer company in the world, peaking at 140,000 employees. Lotus developed applications critical to bringing enterprises into the PC era. Akamai built the foundation of the modern internet. What, then, did Boston get wrong?
This is a question worth exploring. Yet anyone attempting to answer it usually offers one of two responses:
- “Boston began to fail when Zuckerberg couldn’t raise funding here and had to go west.”
- “Who says Boston is failing? We just led the Series F round of TurboLogs at a $15 million valuation.”
Of course, neither explanation tells the full story. Understanding Boston’s real problems isn’t just about Boston’s survival—it’s a central issue for the entire U.S. tech ecosystem.
My answer is simple: Boston’s story illustrates what happens when negative cultural and regulatory feedback loops interact. As a tech ecosystem, the city’s decline stems from three simple forces:
1. A regulatory system that treats companies as sources of rent extraction for property owners
For decades, Massachusetts refused to adopt the federal Qualified Small Business Stock (QSBS) exemption. The state only began complying with this rule in 2022. That same year, however, it passed a “millionaire tax.” In Massachusetts, a founder selling their company for $10 million pays $860,000 in taxes; in Austin, the tax is zero. Moreover, Massachusetts imposes a 6.25% sales tax on SaaS revenue, while most states don’t tax software at all.
2. A Puritanical culture deeply embedded in elite institutions, unable to self-police
After 2010, Boston’s venture capital scene shifted away from helping founders grow businesses and toward exploiting them—sometimes operating like organized crime syndicates. The cultural institutions that should have checked such behavior—foundation donors, major limited partners (LPs), and society figures attending charity galas—were too closely tied to these actors and their networks to speak up. This created an invisible “trust tax” burdening Boston’s business environment.
3. An “inputs-first” mindset toward technological progress
We have the world’s best universities. We’ve built vast amounts of lab space (though 40% now sits vacant). We’ve gathered some of the brightest talent on Earth. So why isn’t it working? Can’t we rebuild an innovation hub? Is our soil simply not magical?
If these three explanations sound overly simplistic—or uncomfortably familiar—it’s because they are. These are precisely the challenges facing the broader U.S. tech industry, and I suspect they could lead to equally fatal consequences.
Tech ecosystems are inherently fragile networks. They generate trillions in tax revenue for their regions, yet the host governments cannot resist killing the goose that lays the golden eggs every few decades.
Imagine what happens when the host rejects the ecosystem:
First, talent networks begin to unravel. Need a VP of Engineering who scaled a company from 25 to 500 people? In San Francisco, there are 600 candidates. In Boston, maybe five—and even those will soon leave for San Francisco, where they can command higher pay and better odds of success. For junior talent, new graduates no longer stay; each summer, they board the first flight out.
As the network dissolves, the state clamps down harder, trying to extract the same level of returns from fewer remaining players. With the ecosystem collapsing, bad actors increasingly exploit founders—through favorable pricing (“Who’d fly to Boston for a seed round? Fine, we’ll take a $10M valuation”), or worse, through non-market or even illegal means of coercion (see stories shared publicly on Twitter by people like Nikita). Even some companies that originated in Boston but moved west retain traces of this “organized crime” mentality (except Matrix—they’re good people).
These issues are complex, rooted in human nature and reality. They destroy cities and lives, and have already cost the U.S. trillions in lost enterprise value—all due to short-sighted government policies.
Worst of all: this loss is irreversible.
Though I sympathize deeply with those calling to revive Boston as a great tech ecosystem—and personally, I’d love to move back and escape New York’s chaos—I struggle to imagine the remaining ecosystem avoiding total collapse.
You cannot legislate a collapsing network back to life, nor restart one that has already imploded.
Yet both San Francisco and the broader U.S. tech ecosystem appear headed down the same path: a regulatory regime that sees technology as a cash cow. Consider Prop M (limiting commercial real estate development), office vacancy taxes, and similar measures.
Meanwhile, a culture entrenched in elite networks struggles to self-regulate. AI has attracted many bad actors into the ecosystem, and the same rigidities that Boston failed to purge are now taking root here.
Add to this the “inputs-first” theory of progress: We have the best AI labs, the most GPUs—even the president bought us some. We have cutting-edge models. So what could possibly go wrong?
The difference lies in the stakes. Boston’s collapse cost the U.S. hundreds of billions in enterprise value. San Francisco’s decline could erase a third of America’s GDP growth over the past decade.
But the problem isn’t merely economic failure. It’s an existential failure.
Our tech industry has failed to articulate, at a national level, a clear rationale for its existence. If this remains unresolved, 2028 may bring a nationwide referendum on “imprisoning, destroying, and plundering the tech industry,” triggered by accusations over water and energy use.
Today, public perception of the AI boom is far from positive. Recent polls show that average Americans view artificial intelligence as a wasteful consumer of water and energy—one that delivers little beyond scamming the elderly, exposing children to harmful sexual content, promoting sports gambling, and other societal ills.
If our best response to “Why shouldn’t we imprison tech executives, burn down data centers, and destroy the American tech industry?” is “So we can build better chatbots for your sports betting,” voters will support those actions without hesitation.
In a zero-sum world, voters don’t think long-term; they feel envy first, then they loot. We don’t loot sewage systems or power grids because we know they’re barriers against chaos. We accept their costs because they prevent disorder from spreading. Do ordinary voters see technology playing the same role?
Technology is our only way out of the Malthusian trap. But because we’ve been too timid to state this clearly—because we’ve replaced a coherent theory of progress with “rationalism” and “artificial general intelligence” (AGI)—the nation now views the tech industry as a parasite to be drained dry.
If we cannot explain why innovation is a moral imperative, we will watch helplessly as the entire tech sector follows Boston’s fate: first taxed, then looted, finally exhausted. And then we’ll be left wondering: where did it all go?
In a zero-sum world, voters don’t look ahead; they feel envy first, then they loot. We don’t loot sewage systems or power grids because we understand they are shields against chaos. We bear their costs because they hold back disorder. Do ordinary voters believe technology serves the same function?
Technology is our only escape from the Malthusian trap. But because we’ve been too cowardly to articulate this clearly—because we’ve substituted “rationalism” and “artificial general intelligence” (AGI) for a coherent vision of progress—the nation now sees the tech industry as a parasite to be bled dry.
If we cannot make the case that innovation is a moral necessity, we will stand by as the entire tech industry repeats Boston’s trajectory: first taxed, then plundered, ultimately depleted. And we will be left asking, bewildered: where did it all go?
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@WillManidis
