HOW MANY CRISES DOES IT TAKE?

[Bill Spencer]

Reposted from HVCA web site. Why I think we need to make sure a con-con bakes in support for Hawaii's economic diversification with a strong tech sector.

HOW MANY CRISES DOES IT TAKE?
by Bill Spencer 4/9/2008

With the closure of Aloha Airlines, ATA Weyerhauser and Molokai ranch, Hawaii’s tourism industry has suffered another major blow. The loss of 2,000 jobs and half a million airline seats to Hawaii is not fatal, but surely it is yet another sign that Hawaii tourism is not immune to the global stresses caused by high oil prices. It is not as bad as the impact of the first Gulf War or 9/11, but it is significant to our tourism based economy. Editorial writers in both papers are calling on leaders to revisit ways to diversify the economy. As usual, such concerns seem to be forgotten when tourism is strong and the economy is booming. It takes a crisis to remind leaders that something needs to be done. It is like a bad intersection where once in a while there will be a terrible crash and neighbors will start crying out for a stop light. How many economic fatalities in the tourism industry must Hawaii endure before we sustain an effort to buttress our teetering economy with a strong tech sector?

There is evidence of organic growth in technology employment. According to a recent survey conducted by the American Electronics Association, Hawaii ranked fourth nationwide with 6.3 percent growth in tech-industry jobs between 2005 and 2006. Hawaii ranked in the top five states with the fastest growth rate in tech wages since 2001. The average wage for a high-tech worker in Hawaii in 2006 was at $68,363 compared to $35,908 in the non-tech sector. Unfortunately, tech is still a small percent of the economy with Hawaii ranking 46 in tech employment overall with only 30 out of every 1,000 employees employed by technology firms. There are almost 15,000 tech jobs in 1,400 firms statewide with a total payroll of $1 billion.

The Hawaii Venture Capital Association Innovation survey with 106 companies (8% of all tech companies) reporting supplies us with some interesting information. Almost half of the companies reporting are not seeking investment capital from outside sources. The remainder have raised almost $75 million of venture capital in 2006 through 2007 and are presently seeking more than $60 million in additional financing for mostly later stage rounds. These companies employ almost 600 tech workers with a monthly payroll of just over $1 million. Almost 300 new hires are planned within the next 12 months. Among these companies, 48% of their revenue comes from Hawaii sources and 61% of their annual budgets are spent in Hawaii. Sixty percent of employees in these firms are from Hawaii. These 106 companies report 84 patents granted, 80 provisional patents and 32 patent applications in process. Of all companies reporting, 21% are in the dual use sector and have obtained $18.5 million in federal grants and contracts.

There clearly is progress and growth in the tech sector and tech entrepreneurs are forging ahead, but we are fast approaching another dangerous intersection. Companies seeking to expand, commercialize intellectual property and execute business plans need more venture capital than is presently available in Hawaii. If our own survey of 106 companies is any indication, Hawaii is woefully lacking the kind of venture capital it will take to sustain and grow technology entrepreneurship. Act 221/215 is headed toward sunset by the end of 2010 and there are still only a handful of professional venture capital firms struggling to get Hawaii institutions to invest with them. Are we going to wait for more fatalities at the diversification intersection of our economy, or are we going to get serious and start investing in our growing tech sector before it’s too late?

[Peter Kay]

Thank you Bill for donating this piece to the site. I created a topic in the High Tech group: "Does High Tech need constitutional representation" that I'd love to hear your ideas on.

Personally, I think intellectual capital must be our #1 asset and that means a second-to-none public education system. But right now that's such a remote vision that it almost feels silly to say it.

[tom macdonald]

Biil: A suggestion. Don't assume everyone knows what HVCA is. Spell it out
I had no idea what HVCA is. I thought it was the Hawaii Visitor/Convention Association when I saw the HVCA photos.
Aloha,
Tom

[Bill Spencer]

Thanks Tom...

HVCA - Hawaii Venture Capital Association, one of Hawaii's oldest non-profit economic development organizations (founded in 1988) devoted to entrepreneurship, capital formation and diversifying Hawaii's economy with a robust technology and innovation sector. For more info, visit http://www.hvca.org

[Bill Spencer]

Thanks for saying it anyway.

It would be great to have tech represented by someone at the ConCon. Even better would be to figure out a way to make sure Hawaii creates an envrionment that nurtures tech, entrepreneurship and funding for tech enterprises. I'm not saying the government should provide the funds, but it needs to create the space for a thriving tech community to grow in.

[Dan L.]

Peter, you’re right about the vision of a good school system being so far in the distance as to be virtually invisible. Right now, our public schools are a disgrace, and every Hawai‘ian should be ashamed that we have allowed our schools to be so dreadfully bad.

The perfect industry for Hawai‘i is high-tech. It does not require mineral resources or energy in large quantities; it can locate wherever its people would like to live. The only requirement is that there be a well-educated pool of potential employees -- and that is something which Hawai‘i cannot offer at this time.

Advocates of good education point out that there are great economic benefits to having well-educated citizens. They’re right, and Hawai‘i’s current economic plight is a perfect example.

[Rick M.]

The first thing we need to do is get rid of the Water Rights section of the constitution.

Water should belong to the owner of the land. Right now, developers are stymied by Counties who refuse to give them building permits and zoning permits because of water. If the land owner owned the water rights, this would no longer be an excuse to prevent us from maximizing the profit on our property.

This idea of the "people" owning the water is almost communist. This is standing in the way of progress and business.

[Rick M.]

Much as I am in favor of the ConCon, I don't think that it will help our educational problems.

What is killing us is federal mandates and school fads and we don't control that at the state level.

Of course, becoming a Right to Work state and breaking the hold of the teachers union will help a little. But realistically, not as much as we need.

[Peter Kay]

Good post, Elizabeth. I don't disagree with anything you said. Those are all valid externalized elements that are part of the picture. I'd like to consider both sides of the story in terms of the external reasons (many of which you've stated) but also the internal reasons (i.e. what is is about the way our public school system runs that can be improved).

The world is filled with excellent examples of public school systems that face the same external problems as ours, yet have a far higher performance output. I think there's a lot that can be learned from other folks successes and apply them here.

I think most people would agree that our public school system could be vastly improved by identifying globally recognized best practices and implementing them here.

[Peter Kay]

Rick,

There's a lot in the Constitution about education. Read Article X.

[Rick M.]

Punahou and Seabury take only the top students. They are not faced with kids born of crack mothers whose very brains are damaged. Kids who misbehave are out of there. And we can assume that someone who is willing to pay about $20,000 a year for education is going to be heavily involved with their child at home too.

I'll go along with you on certification. It doesn't appear to contribute much to teaching ability. What I'd like to see is a college education for elementary teachers and a masters in the subject for middle and high school teachers.

We are obliged to keep trouble makers in school. This has to be changed.

Of course none of this can be accomplished by a Constitutional Convention. Most of it is mandated at the federal level.

Unless we could implement school vouchers.

But I pity the poor teachers stuck in the public schools with all the kids who have been rejected by the private schools because they are behavior problems.

[Auhea]

I guess this is the chance you take to be in business. Employment is iffy too