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HOW MANY CRISES DOES IT TAKE?
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?
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?
Tags: data, diversification, tech
Replies to This Discussion
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Permalink Reply by Peter Kay on -
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.
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Permalink Reply by tom macdonald on -
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
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Permalink Reply by Bill Spencer on
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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
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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.
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Permalink Reply by Dan L. on -
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.
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Permalink Reply by Rick M. on -
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.
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Permalink Reply by Rick M. on
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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.
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Permalink Reply by Elizabeth Blake on -
Firstly I would like to just approach your statement about public education by saying that I agree wholeheartedly that we need a "second-to-none public education system," but what does that really mean in the context of developing high tech as a dominant sector of growth in Hawaii?
We have a public school system that has seen much improvement and progress under the leadership of Superintendent Patricia Hamamoto. She has had to steer a the DOE vessel carefully through rough seas when she took office. She has done more in her term than most CEO's who run a corporation with thousands of employees and around 180,000 clients. I wanted to acknowledge her work because in order for us to reform our educational system, we need to first reform how the funding is fiscally managed because education reform is not free.
Here are some the reasons why our school system is where it is:
- We have many immigrant students attending our schools with English as a distant second language.
- Many parents work long hours, some work in 2nd, sometimes 3rd jobs to make ends meet which leaves kids at home without parental interaction in their school work.
- Our schools hold on to their failing students because there are very few alternatives to send them to even though we can identify them as early as middle school grades as to whether or not they are headed to college. We can not offer them an alternative because we do not have them available.
- There are very few trade schools for students to learn various skills.
- Industry is not as involved with the high schools as they can be. Some companies go out of their way to support schools but those are few and far between not because they do not want to but they just do not have the resources to dedicate to supporting such an involvement. The DOE requirements alone to entertain internships are so stringent, it is not feasible.
The only way to build Hawaii up on a technology pedestal is other than offering wonderful tax credits, we need to raise the intellectual capital in our state.
How do we do it? Through industry involvement in our schools. The public sector can not go this road alone, it needs the private sector to join in the effort. Work with schools to expose students to the technology industry whether it is in programming an application, discovering a cure or developing a product using nanotechnology, whatever it is they need the support of the industry.
Should the technology have representation at the ConCon? Sure but that representative must have the entire picture.
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Permalink Reply by Peter Kay on
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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.
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Permalink Reply by Elizabeth Blake on
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Thank you, Peter.
I am trying to point out that when we say our public schools are not working, we need to also be aware that there are numerous layers to look at from our economy to the DOE budget and the laws that have been passed to guide the DOE both federal and state. Personally, these laws push micromanagement to the limit.
I know personally that not only the DOE but its principals travel the country on their own time and dime as well as attend conferences whenever possible to glean from some the country's most successful schools. Talking with other principals, teachers, etc. to see what part of their programs can be implemented in our fine state. Whenever the budget allows and the scheduling works, they also send teachers to mix and mingle with teachers abroad.
Schools like the DODEA (military public schools located on the bases) are some of the most successful schools in the country. Why? Because in order for you to enroll your child you must volunteer 200 hours at the school. They closely track these hours and if you do not show up, the school can call your commanding officer. Nice, right! It gets better, you can spend some of your volunteer hours working with children other than your own. Most of these schools are Title I meaning that a high percentage of their enrollment is children on the free and reduced lunch program. (A federal program that subsidizes meals according to the household income).
Parental involvement is a great part of a child's education but most of our parents work more than one job. The issue of the public school system needs to be looked at very carefully because there are extenuating circumstances that contribute to the problems we are seeing.
Here are some pointers that can be considered:
- Best practices cost money and some schools barely have enough to make it to the end of the school year. How can we pay for the professional development of teachers to replicate other successful programs, buy the necessary equipment or curriculum materials, etc?
- Build more accountability with parents as much as it is required of teachers.
- Introduce legislation that allows the DOE to charge parents a percentage of the costs required to implement the "globally recognized best practices" we find.
- Should the BOE members be elected? Personally, it does not make a difference to me whether they are appointed or elected as long as they are at the very least educators. Can we say that they need to have certain qualifications in the world of education, public or private? They carry such a huge responsibility and they make important decisions in the education of our children.
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Permalink Reply by Elizabeth Blake on
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You are absolutely correct when you say that the federal mandates are killing us. I believe that we need something in place that drives accountability through every layer of the system and into the classroom. I do not believe that NCLB was the right way to go but we need something. The fact that NCLB is not something that we can control at the state level makes education part of a machine that once in motion is difficult to reverse. Children are being forced to take assessments at almost every single year of schooling. Teachers are mandated to become certified in their subject area. What does that mean? Test-taking...three total to be exact at $100 a pop if you are a high school teacher. Standards are poured on everything that is being taught in the classroom.
We are building a society of test-takers. Is that what we are after? Now, swing you sights over to our private schools. Earlier Peter Kay spoke of "globally recognized best practices" - Right here at home, there is Iolani and Punahou here on Oahu and Seabury on Maui. Their teachers do not have to become certified, there are no constant penciled-in assessments, etc. but they are performing amazingly on their SAT's, ACT's and other important exams.
The Right to Work is a decision that teachers have to collectively decide on whether they need to have representation as a unit or not. If we raise their salary and gave amazing benefits, they would not need their Union. If we wrote legislation to make parents as accountable to their child's education as teachers are in the classroom, they would not need their Union. If there was fair practice in the hiring process by all of DOE including principals, they would not need their Union.
Unfortunately, we have not given them what they wanted. Instead we have forced them into random drug testing for the behavior of a small number of irresponsible people who called themselves teachers. I imagine my niece sitting in a classroom and her teacher has been pulled out from a random selection for a drug test. What does that do for the teacher's credibility in the classroom?
This is a tough one, Rick. A discussion that need the input of educators.
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