Ted Simons: Good evening. Welcome to "Arizona Horizon." I'm Ted Simons. In our continuing coverage of Arizona technology and innovation, we consider what the valley has and if it has what it takes to become a hub for high-tech technology. Joining us in our discussion is Barry Broome, president and CEO of the greater Phoenix economic council. Thanks for joining us.
Barry Broome: Thank you.
Ted Simons: Where do we stand in terms of high-tech, in terms of high-tech growth?
Barry Broome: It's a mixed bag story. We're a major player in R. and D. growth in the mountain west region tied primarily to defense spending. Our defense contractor position is one of the top five in the country. We do a great job at new venture creation. We're from one of the top five in the country. The launching of new firms and jobs from new firms, but basically what we're missing is the ability to leverage a real platform technology position in the marketplace. We're missing being a deeper player in venture capital. The mechanics are all in place for the valley to be a major player in the high-tech sector, and in many ways we are, but when you look at our high-tech sector it's held by three companies. Intel, Boeing and Honeywell drive our high-tech position. We have a very strong high-tech ranking in many places, in the hands of three companies. You want that to be in the hands of Arizona state and University of Arizona more so than in the hands of two or three companies, two potentially under threat by sequestration.
Ted Simons: You want a broader base, don’t you?
Barry Broome: Right. You want to create an eco-system. If you look at Silicon Valley, which is the most commonly referred to market in the U.S., Silicon Valley, it was really named Silicon Valley out of chip manufacturing and the semiconductor sector. It's been a long time since that market was a chip-making haven for semiconductor. It went through Apple; it went through TEL-com, bio Tech, solenoid renewables. It's about being able to transfer technology as it changes through your eco-system while the infrastructure can evolve with that technology. It's more about creating a system than a technology position.
Ted Simons: I want to get back to that because I know Richard Florida, the city designer and the city theorist regarding eco-systems and the like. Proximity to California, labor costs, these sorts of things?
Barry Broome: There's a couple of things that work in our favor. One is culture. I'm an Ohio, Michigan guy. All of the mechanics are in Michigan for them to be an innovative, high-tech corridor, but culturally it's a corporate union town. Same with Chicago. Chicago is a corporate union town. Arizona is not a corporate union town. Arizona is a small business community. So I think culture is the biggest strength that we have going for us. In some technology sectors like digital platforms, very hard to measure but we have tracked over 300 digital companies just in Scottsdale, Arizona. So we have a big digital platform. This natural inclination to start companies, natural inclination to try new things, the legislature has done a great job keeping workers' comp and unemployment rates low. Some of the lowest in the nation. We're a highly deregulated environment. It's easy to start a company here.
Ted Simons: All that said, why aren't more companies doing that here?
Barry Broome: Well, what we don't have is an intentionally planned, is a prescribed science and technology strategy in the region. It's very difficult for get traction on that in a transient community. We don't have the forefathers that dig their heels in. The Hewlett Packard families are still driving a lot of activity in Silicon Valley. Hewlett Packard was the first company that memorialized the capabilities of Stanford innovation. We're still a young community that's somewhat transient. We have never made the right commitments in science and technology.
Ted Simons: Sounds like that answer contradicts what you said regarding corporate culture. It might be good to have a corporate umbrella here or someone that can shield, help these upstarts and others going. Seems like it's the Wild West, maybe too much Wild West.
Barry Broome: When I talk about corporate culture, you think of Chicago or New York City, those personify corporate culture. It's not necessarily a culture that produces innovation. If you go into north San Francisco, who is the big corporate player now in north San Francisco? It's Facebook. It's a company that's five or six years old. So that's the new guy. Zuckerman is the new guy that everyone is paying attention to. He wasn't even around seven years ago. When I talk about these institutional leaders, there's very few Hewlett Packards. Even Cisco and E-bay-PayPal, they are 15-year-old companies. At the end of the day it's still about the ability to invent. Intel was invented in northern California. As exciting as Intel is I think it was essentially formed in 1968. It's not that old of a company.
Ted Simons: You mentioned university access and how important that is. Are we doing enough when you consider the spinout companies coming from this collaboration?
Barry Broome: Right now we're looking at some of the data we have, 75% of University of Arizona graduates are leaving the state. Half the Arizona State University graduates are leaving the state. So we're producing these two very fine universities, northern Arizona university as well, but we track the big two because of the market we're in, and there's some very exciting technology that's coming out of the University of Arizona and the announcement today in the paper about the algae program being created by Gary Dirks, there's a lot of exciting things coming from our universities but we have to have a more dedicated sponsored research initiative in Arizona to back these universities. Then concurrently, we need to develop and build the capital markets in the venture capital space that will help develop those universities. What happens when you start to stick a Hewlett Packard or Intel or Apple or Facebook is it perpetuates that culture in the community. One problem in Arizona is our angel investment company are real estate professionals. What happens when your angel investors are real estate investors, the only thing they are contributing to the companies is money. When you look at the angel investment network in San Francisco or Michigan, where I was before I came here, when I launched a life science company in Michigan the angel investors were the founders of pharmacia and striker. Not only could they write a two, three, $500,000 investment in angel company, they had a rolodex and a network on how to introduce customers, how to help them develop their technology. You have to have enough money but smart money too.
Ted Simons: And I want to get back to Richard Florida. The eco-system I think is fascinating. He came out with a Tech index of major metropolitan places in the country. Phoenix is not in the top twenty. Tucson, Boulder, Colorado is. Raleigh, North Carolina. He talks about how regions need talent, they need technology and they need what he describes as tolerance, which is more of a cultural sort of a thing. Are we capable of getting there the way he sees that?
Barry Broome: I think we do. I think we're -- I don't believe we're that far away. I caught a little bit of heat because I said within five or six years I thought we could replace Silicon Valley. I believe we can do that. If you look now in the United States and these Tech corridors, they are beat up and tired. Boulder's is not, by the way. I just came back from there. They had 140,000 technology jobs. They’re trying to figure out where to put all their technology jobs. They can't host all of them. So Boulder is meeting with other cities in Colorado to see if they can take some of their technology jobs. We don't have that problem. Places like Austin, Silicon Valley in my opinion are a little bit tired. Here in Arizona we're going to settle back to the way with were five, six, seven years ago where I think we'll do a lot better job working together, a lot more optimistic about our future, but we cannot defund higher education. We cannot start the science foundation of Arizona then not back it up. We cannot afford to continue to muddle through an unplanned future for science and technology and get there. If we hit those marks we will get there. If you look at the success we're having now you can trace it back to the governor's leadership and the legislator’s leadership. These economic indicators that we are talking about that are very good are tied back to policy achievements of the last few years.
Ted Simons: Policy achievements of the last two years but also education cuts in the last two years.
Barry Broome: That’s got to be fixed. We have to stop saying funding doesn't matter to education. It does matter to education. You can look at the Chicago public schools or Cleveland public schools, you can go to 12,000 per pupil and fail but you'll fail at 3,000 per pupil too. You can't trade against that by saying funding doesn't matter. Funding does matter. Access to higher education does matter. The price of education at our universities really matter. The ability to sponsor science and technology so these innovators at the university can lay out five and ten-year plans and they know for certain they will be in a state that respects their work. That's how Dr. Crow has attracted people here. It's hard to hold on to that talent if all they see is potential. We have to evolve from potential to realizing that potential and we have to get serious about science and technology and we need to do that now.
Ted Simons: Alright, good stuff, Barry. Good to see you.
Barry Broome: Thank you