Boston's Past: How Did America's Former Tech Hub Decline?
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Boston's Past: How Did America's Former Tech Hub Decline?
Boston's story illustrates what happens when negative culture and regulatory feedback loops interact.
Chuyên sâu báo cáo Web3Author: Will Manidis
Compiled by: TechFlow
In 2004, if you asked a tech investor where the world's best software companies were, they would give two answers: Boston and San Francisco.
Obviously, things are very different today. Over the past two decades, San Francisco has created $14 trillion in enterprise value, while Boston has contributed a mere $100 billion.
If you had told that investor back then that New York, once known for its "cocaine and pinstripe financial glory," would replace Boston as the regional tech hub, they would have thought you were crazy.
So, why did Boston lose its position? This question is worth delving into.
From an input perspective, the city seems to have all the advantages. Two of the world's top universities are located here (referring to Harvard University and MIT). The renowned startup incubator Y Combinator was also founded here. It is undoubtedly one of the most beautiful cities in the United States. Mark Zuckerberg attended college here. The founders of Stripe, the founders of Cursor, and the founders of Dropbox also 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 center of the software world. Digital Equipment Corporation (DEC) was once the world's second-largest computer company, employing 140,000 people at its peak. Lotus developed applications that were key to bringing businesses into the PC era. Akamai built the foundation of the modern internet. So, what exactly did Boston do wrong?
This is a question worth exploring. However, anyone attempting to answer it usually gives one of two answers:
- "Boston's decline began when Zuckerberg couldn't raise funds here and had to go to the West Coast."
- "Who says Boston is failing? We just led a Series F round for TurboLogs at a $15 million valuation."
Of course, neither of these explanations is sufficient to tell the full story. Figuring out Boston's real problem is not just a matter of survival for Boston; it is a key issue for the entire U.S. tech ecosystem.
My answer is simple: Boston's story shows what happens when negative cultural and regulatory feedback loops interact. As a tech ecosystem, the city's decline stems from three simple forces:
- A progressive regulatory system that treats companies as assets for property owners to extract value from
For decades, Massachusetts refused to comply with the federal Qualified Small Business Stock (QSBS) exemption rules. The state only began complying in 2022. However, that same year, they passed the "Millionaires Tax." In Massachusetts, a founder selling a company for $10 million pays $860,000 in taxes; in Austin, a founder pays nothing. Additionally, Massachusetts imposes a 6.25% sales tax on SaaS (Software as a Service) revenue, while most states levy no tax on software at all.
- A Puritan culture deeply embedded in elite institutions, making self-policing difficult
After 2010, the primary activity of Boston's venture capital was no longer helping companies grow but rather squeezing founders, operating almost like organized crime. The culture that should have policed this behavior—including foundation donors, large limited partners (LPs), and the celebrities attending charity galas—was too closely tied to these perpetrators and their networks for anyone to speak out. This phenomenon has led to Boston's business environment always facing an invisible "trust tax."
- An "input-first" perspective on technological progress
We have the world's top universities, we've built vast amounts of lab space (though 40% is now vacant), and we've gathered the world's best talent. So why isn't this working? Can't we build another innovation hub? Is our soil inherently not "magical"?
If these three explanations sound overly simplistic or even familiar, that's because they are. This is precisely the common problem facing the entire U.S. tech industry, and I suspect it could have equally fatal consequences.
Tech ecosystems are inherently fragile networks that generate trillions in tax revenue for their regions, but the parasitic host (referring to the government) cannot resist killing the "golden goose" every few decades.
Let's imagine what happens when the host rejects the ecosystem:
First, the talent network begins to disintegrate. Need to hire a VP of Engineering who has scaled a company from 25 to 500 people? In San Francisco, there are 600 candidates; in Boston, there are only 5, and soon those 5 will also leave Boston for San Francisco, where they can demand higher salaries and have a higher chance of success. As for junior talent, new graduates no longer stay locally; they take the first flight out every summer.
As the network dissipates, the state government "tightens its grip," trying to extract the same amount of value from those who remain. And as the ecosystem collapses, some bad actors begin to profit through various means: for example, through preferential pricing ("Who would fly to Boston for a seed round? Fine, we'll accept a $10 million valuation"), or through more unscrupulous methods, such as extorting founders in non-market or even illegal ways (refer to some legally shareable stories shared by Nikita and others on Twitter). Even some companies that started in Boston, after moving to the West Coast, retained a degree of "organized crime" behavior (except for Matrix, they're good people).
These issues are complex, involving human nature and reality. They not only destroy cities and people's lives but also lead to the loss of trillions in enterprise value, all stemming from the state government's short-sighted actions.
The worst part: this loss is irreversible.
Although I deeply sympathize with those calling for Boston's revival as a great tech ecosystem—I myself would love to move back and avoid New York's chaos—I find it hard to imagine that the remaining ecosystem won't fall into complete collapse.
You cannot legislate your way out of a collapsing network, nor can you restart one that has already imploded.
However, both San Francisco and the broader U.S. tech ecosystem seem to be heading toward the same fate: a regulatory system that treats tech as a "cash cow." Examples include Proposition M (Prop M, referring to the measure limiting commercial real estate development) and office vacancy taxes.
Meanwhile, a culture deeply embedded in elite networks also struggles to police itself. Artificial intelligence (AI) has attracted many bad actors into the ecosystem, and the kind of rigidity that Boston once found difficult to clean up is now taking root here as well.
Add to this the progressive notion of "input-first": We have the best AI labs, we have the most GPUs (Graphics Processing Units), even the President bought some for us. We have the most advanced models. So, what could go wrong?
The difference lies in the cost. Boston's collapse cost the U.S. hundreds of billions in enterprise value, while San Francisco's decline would erase one-third of the U.S. GDP growth over the past decade.
But the problem isn't just economic failure. It's a failure of survival.
Our tech industry has failed to provide a clear rationale for its existence at the national level. If this issue isn't addressed, 2028 will become a referendum on "imprisoning, destroying, and plundering the tech industry," with accusations about water and energy as the trigger.
Today, the public perception of the AI boom is not ambiguous. Recent polls show that the average American believes AI is something that wastes water, drives up energy costs, and in return provides tools to scam the elderly, expose children to inappropriate sexual content, promote sports gambling, and various other evils.
If our best answer to "why we shouldn't imprison tech executives, burn data centers, and destroy the U.S. tech industry" is: "So we can build better chatbots for your sports betting," then voters will not hesitate to vote for these actions.
In a zero-sum world, voters don't think long-term; they feel envy first, then start plundering. We don't plunder sewage systems or power grids because we know they are defenses against chaos. We accept their costs because they prevent chaos from spreading. So, does the average voter also see tech playing the same role?
Technology is our only means of escaping the Malthusian trap. However, because we are too cowardly to articulate this clearly, because we've replaced a clear theory of progress with "rationalism" and "Artificial General Intelligence (AGI)," the state views the tech industry as a parasite to be squeezed dry.
If we cannot clearly express why innovation is a moral necessity, we can only watch the entire tech industry follow in Boston's footsteps: first taxed, then plundered, and finally exhausted. By then, we'll only be left wondering: Where did it all go?
In a zero-sum world, voters don't look to the long term; they feel envy first, then start plundering. We don't plunder sewage systems or power grids because we understand they are barriers against chaos. We accept their costs because they block the spread of chaos. So, does the average voter also believe technology serves the same purpose for society?
Technology is our only way out of the Malthusian trap. However, because we are too timid to state this clearly, because we've replaced a coherent idea of "progress" with "rationalism" and "Artificial General Intelligence (AGI)," the state sees the tech industry as a parasite that can be drained.
If we cannot articulate why innovation is a moral imperative, we can only watch the entire tech industry repeat Boston's fate: first taxed, then plundered, and finally depleted. And we will be left wondering: Where did it all go?
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@WillManidis
