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Farnam Jahanian is a glass half full kind of guy, which he finds useful in his role as president of Carnegie Mellon University. But that doesn’t mean he doesn’t see challenges ahead for those who want to leverage entrepreneurship and innovation to create wealth in the Pittsburgh region.

“We’re at the center of a societal transformation that’s catalyzed by automation, by digitization of information, unprecedented access to data,” Jahanian told local dealmakers at the 2019 ASPIRE Dealmakers conference earlier this year.

“The impact of it on every sector of the economy is undeniable,” he added, “whether it’s finance, whether it’s health care, whether it’s transportation, defense, manufacturing and, of course, education.”

Jahanian noted many of these challenges were laid out in the 2017 Brookings’ report, Capturing the next economy: Pittsburgh rise as a global innovation city, which highlighted the need to be more intentional, proactive and coordinated.

“We need to be very, very intentional about investment you make in Pittsburgh to make it be a destination of choice for entrepreneurs and innovators,” he said, adding that the city’s startup culture is still only, maybe, a teenager.

Jahanian shared his insights on how talent development and the right investments can help drive Western Pennsylvania forward.

Developing the economy and talent

Amazon’s headquarters search and Pittsburgh’s role as a finalist helped highlight the region’s strengths and exposed some of its weaknesses, said Jahanian, who isn’t a fan of massive tax incentives for a single company. He doesn’t feel it benefits the community in the long run.

Pittsburgh has made great strides attracting large R&D centers of major global companies like Google, Facebook and Bosch, but one big thing that’s missing is recruiting divisions with P&L responsibilities, he said.

“We do a great job of technologists and scientists and so on, that are feeding into these companies, but we don’t necessarily have the business talent that goes along with it,” Jahanian said.

Startups in robotics and health care can get off the ground, but there isn’t enough talent at the CEO and vice president level, which Jahanian sees as a weakness for the Pittsburgh community.

One way to help with the area’s talent development is to hire more interns. Jahanian sees this firsthand with CMU students.

“Our students go out in the summer, in their sophomore or junior year, and they get offers from companies outside the area,” he said. “They lock them in.”

That’s how many of them end up in jobs in Boston, New York or California.

“You’ll be pleasantly surprised how productive these kids can be,” Jahanian said. “After one or two summers, you can just bring them in. This is a chronic issue for our community. There’s no question.”

Working together on the skills gap

The skills gap is also a concern, especially with the rise of artificial intelligence, automation and digitization.

Jahanian sees it as a worldwide issue, more than a Pittsburgh issue. He thinks reality will fall somewhere in between the dystopian model of massive unemployment, and the utopian model where we don’t need jobs — where the robots do everything.

“To be honest, if you go back to the beginning of the last century, the fear that technology would have profound impact on the economy and displace jobs is not a new phenomenon,” he said.

New jobs will be created, like data scientist, which didn’t exist 10 or 15 years ago. That’s why, Jahanian said, higher education needs to be providing foundational skills that allow students to be ready for jobs that have not yet been created.

At the same time, in the next 25 years, more than half the jobs across the economy will be impacted by automation. Jahanian believes that STEM — science, technology, engineering and math — are going to be extremely important.

In addition, the private sector needs to embrace that it is part of the solution, through the investments it makes.

“The notion that we are going to just train, essentially, the next generation and retrain the existing workforce without the direct engagement of the private sector is a fallacy,” he said. “The private sector is going to have to have a much, much more active role.”

The government also has a role to play, Jahanian said. The U.S. tax system has always been biased toward capital investment — not the human capital investment that’s becoming increasingly important.