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Special Live broadcast from the University of St. Thomas in downtown Minneapolis: The MPR Civic Journalism Initiative presents a Summit on "Minnesota in the Dot.Com Age." Where do we stand and where are we headed? Speakers include Ross DeVol of the Milken Institute, Randolph Court of the Progressive Policy Institute, and Jay Hare of PriceWaterhouseCoopers.

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(00:00:00) It's in Downtown Minneapolis. I'm Gary eichten. Welcome to special live coverage of a summit meeting sponsored by Minnesota Public Radio Civic journalism initiative on Minnesota in age where we stand and where we're headed as you know, we've been featuring a series of special reports and programs this week assessing Minnesota's place in the high tech World 20 30 years ago back in the days when those big mainframe computers were King. Minnesota was a king to a national and world leader, but the personal computer and the internet have taken their toll and today. We hope to find out what the future might hold for Minnesota some 100 of Minnesota's top leaders have gathered here in st. Thomas to settle on some concrete steps with should be taken to make sure that Minnesota gets its share of the 21st century high-tech pie. They'll be meeting through the day but to get things started this hour we're going to hear from three folks who've been assessing Minnesota's current status, then we'll be back at noon here on the radio for a keynote speech by a Soda woman who found high-tech fame and fortune in the world of high-tech Finance, unfortunately, like so many others. She followed the sun to California. So let's get started and who knows by the end of the day maybe all the folks here will come up with a Surefire plan to return Minnesota to its high-tech Glory where personally hoping that they'll also come up with a cure for the common cold today. Some of us are suffering to said we've been joined by three folks who've been assessing Minnesota's current strengths and weaknesses where we stand where we're going to we're going to get a few comments from each of them and then we'll be opening it up for questions and comments from those of you here in the audience. First up is roster of all director of regional studies of the Milken Institute. He's been examining how Information Technology International Trade education Labor Force training the cost of doing business and quality of life issues all affect economic activity in a given area prior to joining the Milken Institute. Mr. Duvall was a top executive with we find Incorporated for Warden economic Eco econometric forecasting roster of all joins us today with some comments and how Minnesota's metro area Compares with Metro areas around the nation. Mr. Duvall. Thank you very much Gary. It's a pleasure to be here. We released a study in July and we held a press conference. And the first question that reporters ask me is why we did this study and I answered it by saying there were all aware of the anecdotal stories around the country help high-tech is spurring superior economic growth in places like Austin Seattle even Dallas in the Washington DC area, but the truth is there's been very little systematic research that examines the role that high-tech Industries are playing in determining the relative economic success a metropolitan areas around the country and that's the reason we undertook this study. High-tech Industries are critical engaging the growth of the US economy today since the 1990 1991 recession growth in the high-tech sector has been four times as fast as the overall economy and over the past three years growth and high tech manufacturing and services has exceeded 20% lifting a GDP growth rate directly by one-and-a-half percentage Points Technology Innovation has boosted productivity growth to the two percent range honor in our estimation as well as enhancing the potential growth rate of the entire US economy the somewhere around three percent were slightly above this is why technology Industries are critical engaging the relative economic performance of metropolitan areas around the country. There were 14 different high-tech industries that we included in this study the three with the most rapid growth over the past 20 years have been electronic components. Is an office equipment and computer and data processing Services where the software much of the internet related activity gets shoved into right now over the past 20 years these industries have more than doubled their share of the national economy accounting for about eleven percent of our economic output nationally and actually high tech services are larger than high-tech manufacturing today. We looked at all 315 metropolitan areas in the United States and applied a series of statistical techniques to examine the role that high-tech was playing in determining the relative economic success and let me just say this the strength of the explanatory power of high-tech is very high across all dimensions in this analysis. We arrange them in descending order in terms of fastest growth the slowest growth that's 315 Metro areas and developed a relationship that looked at how fast high-tech was growing in each of them and the relative concentration or importance of high-tech. So if you have a lot more high-tech activity in your economy accounts for a larger share of output that gives you a better all overall growth performance, we found this that we could explain two-thirds of the overall variation in economic growth between the 315 metropolitan areas solely on the basis of how well they did in high tech growth and the That's an industry. As I said earlier the represents about 11 percent of our total economy very quickly. What are some of the factors that attract and sustain High Tech Industries, there are many factors that determine whether or not a critical mass is achieved but the key difference relates mainly to whether it's a high tech service industry or a high-tech manufacturing industry in terms of the relative importance of each of the factors. There are some preconditions that must exist. One of them is history an existing high-tech Presence by Government research facility a skilled labor pool or any other positive externality can result in further growth and other industries that might be developed locally. Traditional cost of doing business measures still matter more to manufacturers in the service firms tax structure compensation costs and the overall business climate, but there are some factors that are more specific to high-tech especially to Services. The first one of those is proximity to excellent research institutions. You can look around the country and I've drawn drawn Maps before the show the relationship to the concentration of high-tech activity and the success of the institutions universities and whether they're leading institutions are not second factor is access to venture capital and let me help set up an winblad a little later today. It's a key factor in incubating and sustaining an entrepreneurial based high tech cluster by financing new ideas Venture capitalists are instrumental in maintaining or enhancing a clusters dynamic system. They provide a means for new firms to be formed without a well-functioning capital Venture Capital infrastructure. A regions technology base is serious risk of not developing what it could be. We could look at Silicon Valley for that. We put together a map showing the leading technology production centers around the country on the basis of two factors how concentrated was high-tech activity in the local economy. And then What did that metro area represent of the national economy and by marrying the two I think we get a very good overall Viewpoint of how important a region is in the technology landscape nationally and when you do that you find that Silicon Valley Santa Clara county is three times as large in importance as the second place Metro which actually turns out to be Dallas. It was second third on that list is Los Angeles. Fourth. Boston V. Seattle sixth is the Washington DC metropolitan area including Fairfax County in Virginia Albuquerque ends up at number seven predominant because of Intel and electronic components Chicago is 8 New York is ninth in Atlanta is 10th many think of Raleigh Durham is being the high tech Capital the southeast but Atlanta has grown much more rapidly in the last few years in Raleigh-Durham. We also looked at high tech growth in the 90s as opposed to concentration and let me just say that most of the fast-growing high-tech metros in the 90s have been in the state of Texas and in the Western United States, there are only seven metros and they are all small metros in the midwest which ranked in the top 50 in high tech growth in the 1990s in Minneapolis. St. Paul is not one of them. Allow me to talk a little bit about Minnesota. I would say it's performance is the question of whether or not you view the glass being half full or half empty from 1980 to 1988. Minnesota's high tech growth exceeded national average by 15% but from 1988 to 1991. That was the bottom of the recession the combination of downsizing by the large mainframe computers companies The increased sensitivity of the computer industry to the recession and kind of the New in migration from the Mainframe to the personal computer caused a severe collapse in high-tech output in the state much more severe than the national average. But since 1991, Minnesota has matched the national performance in the growth of high-tech output. That's not employment. That's output. There's a difference between employment because you have to adjust for the value-added or productivity of each of the industries and most of this growth has been in the category of computer and data processing equipment and medical instruments. And once again, the software the web-based internet related activities in computer and data processing Services, Rochester actually has the densest concentration of high-tech activity of any metropolitan area in the United States. It exceeds Silicon Valley. Now, the difference is that it's Tech its relative technology footprint is much smaller. That's a small-sized Metro and it ranks number one overall in 16th in terms of a tech poll as We Define them but looking at Minneapolis st. Paul it's obviously much larger it employs about a hundred and twenty-five thousand in high-tech and ranked 32nd as a technology production Center on our list and the truth is that the rest of Minnesota doesn't have much high-tech the Duluth superior area ranks third, which is within the state which is a hundred twenty ninth overall nationally out of the 315 Metro areas Minneapolis. St. Paul's high-tech structure has changed significantly just in the past decade. I know the people in this room are very much aware that in 1988 computer and office equipment accounted for over two percent of local economy today that sector accounts for 0.2% That is correct. Sperry Control Data Honeywell cray, not much of its left here medical devices in the medical Ali are still important to the Metro. Have but now the good news is that high tech services has nearly doubled its share of the local economy over the past decade and accounts for about six percent of the overall economy in the metropolitan area. Most of this growth has been in computer and data processing services employment has doubled since 1993 employing about 35,000 in the Twin Cities software development web design internet related activities are in this category comparing Minneapolis st. Paul to some of the other large metros in the midwest. It ranks third in terms of the value of production of high-tech output. First is Chicago second is Detroit Minneapolis. Third. Then we go down to St. Louis, Kansas City Indianapolis, Cincinnati, Columbus, Cleveland and actually tent this, Kalamazoo, Michigan. Looking at growth in high-tech in the 1990s among the major Midwestern metros Minneapolis. St. Paul ranks fourth overall matching the national growth rate. As I said earlier the Kansas City, Missouri actually ranked first growing 30% faster than the national average in the 90s Chicago ranked second. Growing 20% faster than the national average Columbus, Ohio was third slightly faster than the national average then we get down to Minneapolis at forth. In summary, the application of Information Technology is improving productivity growth and boosting the long-run growth potential of the US economy. Although remnants of the old economy Remain. The new economy is here and these core information technology and related Industries are the fastest growing in the US economy and high-tech Industries are determining which metropolitan areas are succeeding or failing without growth and high-tech metros risk being left behind and in my opinion those areas that come closest to replicating the positive aspects of Silicon Valley will be the leading Technology Centers of the future. As I said Minnesota's high-tech performance. It's a question where the glass is half full or half empty. It has surrendered its position as a leading computer center, but it is establishing itself certainly as the leader in the midwest among software internet related development. And most of that is occurred in just the past three years. So in closing I would say that high-tech is not the only development strategy to pursue but it will be the key distinguishing factor of Metropolitan Vitality as we enter the early stages of the 21st century. Thank you. Thank you sir. Roster of all, who's the director of regional studies of the Milken Institute? Next up joining us from Washington is Randolph Court whose with the progressive policy Institute. He is the co-author of the institute's report the new economy index understanding America's economic transformation and the upcoming State economy index which analyzes how Minnesota and other individual states are doing in the high-tech economy, mr. Court. Miss Lee was a business reporter for Wired News in San Francisco is as we now say said with the progressive policy Institute right off court has a few comments now and how Minnesota Compares with other states in the high-tech sweepstakes. Mr. (00:14:46) Court. Thanks very much Gary and you tell me if I'm projecting well enough on this fancy system. They've got here. I'm sorry. I didn't get a chance to be there and meet Ross devault in particular in person. I think the study that he and his colleagues did at the Milken Institute was a really outstanding one what they're they really looked down at the micro level. They looked at metropolitan areas under the microscope and very effectively we try to stay more off at the 50 thousand 50 thousand foot level and looked down at so some of the broader characteristics of the new economy as a whole sort of the foundation areas of which height. Knology as a key driver, but not the only foundation area and when when you look at that level we found at Minnesota's really doing quite well, I would note that we didn't use time series data. So we aren't seeing for instance the gains or losses States has made over say the last 10 years. We're looking at this is sort of a benchmark of where the states are. Now as we stand sort of at the starting line of the race into the new economy and you know, we found that Minnesota is doing quite well and it's not just because all of your men and women are stronger and smarter and all of your children are above average. We sort of look down at the structural Foundation areas factors, like the education level of the workforce the rate of the above adoption of information Technologies and a state's capacity for Innovation. And when you look at that level what we found, is that most of the leading States in The country are sort of clustered in four main regions the Northeast The Mid Atlantic the Pacific and the Mountain West Region, literally 17 of the top 20 States in our index were in those in those areas. But Minnesota was really an exception to that rule. In fact, when you look at the map of the overall rankings in our index Minnesota looks a bit like an island. It's the only state in the central part of the country that ranks up there with those top states on the coasts and in the Rock and the Rockies its 14th overall and it sure strength in some of really the most important foundation areas the new economy particularly its orientation towards knowledge jobs. It has a very highly educated Workforce and it has a very high percentage of people working in offices in offices are really the sort of the factory floors of the new economy. It has a high percentage of managerial and professional and Good job. It's also better prepared than a lot of other states in terms of its orientation towards the digitization of the economy. It's well above average in the percentage of its population who are online and it's actually a leader in a couple of other key areas like the integration of Technology into K through 12 schools. And it's state government actually uses information Technologies to increase efficiency cut costs and improve services for citizens to a greater extent than a lot of other states and finally Minnesota's really imprinted good shape in terms of what we call Innovation capacity. It has a lot of high-tech jobs though, as others have mentioned. I understand that their that number may be flipping. It also has a very sort of strong orientation towards industry investment in research and development and has relatively strong Venture Capital activity compared to most States. All that said you know, I think when you look down a little closer at some of the numbers we were using, you know, Minnesota should by no means be complacent. I think there's room for improvement and a lot of those areas are just mentioned. For example, You know despite some otherwise High numbers on the indicators. We use to measure Innovation capacity Minnesota didn't do as well in terms of the number of scientists and engineers in the workforce this 24th in the country on that indicator and while it did well in most of the indicators we use to measure to measure Readiness for the for a more digital economy. It didn't do very well on one indicator, which was the share of the number Internet domain names registered per business in the state. It was sort of middle of the pack 23rd on that and and there's definitely room for improvement in an area of indicators We call we used to represent economic dynamism, Minnesota for instance has relatively few. Gazelle companies compared to other states gazelles are really the fastest growing companies in the economy their companies that are growing at a pace to double their revenues every four years and they're important for a number of reasons. I think one is really, you know, sort of sticks out and that is in the 1990s pizzelle companies and we're looking at the national level here gazelle companies are really responsible for creating something like three quarters of the net new jobs that have been added to the economy, you know for the more in and I think there's something that goes hand-in-hand with that that we found which is Minnesota has a somewhat static economy. There's relatively little churn and by that we mean the rate at which new businesses are starting up and replacing existing companies that are going out of business, which is really the sort of the process of creative destruction. That is so Central to the new economy. I think the policy implications of all this are pretty straightforward. Minnesota is doing well largely because of its strength in the importance is structural Foundation areas and the ticket to Stronger economic growth in the future. We think is going to be to invest more to build on those foundations specifically. There are a number of things stays can do to Spur long-term growth this way, but perhaps the most effective strategies are the ones that focus on the areas where there's overlaps between Foundation areas, you know the places where you get the most bang for your buck. For example, Minnesota could address several of its weaknesses that I just mentioned it once in areas of innovation and the digital economy by increasing investments in science in science and engineering at the University level and by supporting commercialization of innovation through efforts to link universities with with industry. I know that there are already a lot of moves going on in the University of there. To to do just that and we would argue that that is the right thing to be doing and that Dividends are going to be substantial over the Long Haul though. You may not see them next month or next year without I'd interested to hear what Jay Harold will say about the the you know, the specifically what's happening in Minnesota. (00:21:52) All right. Thank you. Mr. Court Randolph Court whose with the progressive policy Institute. Well, our third panelist is Jay here who is a partner with price Waterhouse Coopers in Minneapolis. Mr. Haire Works, exclusively with emerging growth technology businesses. He's focused on Minnesota's technology market for more than a decade and works with a majority of the state's Venture back internet related companies. He leads his firm's internet practice in Minnesota and is involved in price Waterhouse Coopers Money Tree survey which tracks Venture Capital activity in Minnesota and around the nation, mr. Here. Thank you. Thank you. Let me comment on it. I guess some of the material has just been presented. Which from a macro standpoint. I agree with a lot of what I heard what what I have in a few moments to share with you from a micro standpoint is with In Minnesota where do things stand? And while I agree that we do have still a strong foundation and Legacy and a lot of the elements that are needed. I don't believe that we have as many of the elements that we need to be participating to the degree that we could in this particular area. There's a saying that that I think in the Venture circles that good ideas attract good people. I would say that good symbiotic environments for growing companies attracts activity and venture capital. And so while some of the activity here in numbers that have been mentioned deal with output and have more to do with some of the larger companies that we have here. What I'm about to address deals more with what's going into the pipeline is opposed to what's coming out of it. I think. Going into the pipeline is indicative of where we're headed, especially in the the high-tech Marina in one tool that we've used in doing doing this is what we call our money tree survey, which is a venture capital survey. We've done since the mid 90s mid-90s basically 94 and if we go back and look at the first complete year that we used in this particular area, which is 95 and look at the growth rates between 95 and 98 in compare that for our area versus other areas it unfortunately puts Minnesota at the bottom a few specific numbers between 95 and 98 the two periods that I'm going to compare here nationally Venture Capital dollars Grew From 6.2 billion to fourteen point two billion, which is about a hundred twenty nine percent increase in Minnesota the dollars grew 28 percent. And I used to think personally that this was a coastal issue. We've talked about where companies and people have moved to the coast to see out their entrepreneurial dream and I'm afraid it's not a coastal issue only recently. We looked at some other what I would consider to be comparable non coastal areas to see how we fared relative to those. Yes, and we can't compare ourselves to Silicon Valley but we can't compare ourselves to Denver and Austin Houston, Illinois specifically Chicago Atlanta Dallas. Those are all non coastal areas. Essentially that that have not historically been in the Limelight and if one looks at the dollars that were raised or rather the amount of dollars that were invest in the state between 95 and 98 and look at the growth rate and granted some of these do have a smaller base that started off in 95, but Colorado had 10 times the growth rate that Minnesota did during this time period they grew more than Percent in Tyler's Austin Houston and Illinois grew by four times greater, they grew over a hundred percent roughly a hundred twenty five percent and dollars during this time period and Atlanta and Dallas grew twice as much as we did and we only grew 20% over this three-year time period so let me make sure you've got the picture here. There is a major tail wind blowing behind Venture Capital activity and dollars across the country. A hundred twenty nine percent increase in dollars and let me tell you that 99 is going to make 98 look like it's only a quarter or two in terms of venture capital activity. So it's a gale-force wind and we grew 28 percent. So there's something behind that that hopefully will be addressing today. But that's one way of looking at it a few other data points that I would offer is if you look at the number of deals rather than dollars between the two these two time periods. The situation is a much better. The number of deals in Minnesota across this time period grew by 15% There were four other markets that grew between seven and ten times more than that in terms of a growth percentage Dallas grew by a hundred eleven percent Austin hundred twenty six, Colorado hundred thirty and Georgia hundred fifty nine. And when I say these states much like Minnesota, they tend to have an island of Technology influence. And so I would I would say that the city of for example Atlanta and Georgia are kind of synonymous and in are indicative regions. So the numbers don't work much better and as a result if you look nationally it what Minnesota's share a venture capital has been it was just under three percent of all national dollars in 95. In its now 98 it was one point three percent. So as to the question, are we slipping or gaining right now from my perspective? Unfortunately, we're slipping. The two other points that I would mention in terms of the data that we looked at if one were to pick our strongest suit historically that would be medical device or med tech companies. And so an interesting process is to look and see how do we do in the med tech area over this time period compared to these other markets in clearly some of these other markets are not known as Medtech environments and unfortunately in this area of Medtech, if you look at growth and number of deals, we were only able to beat two markets, Colorado and Houston in terms of growth of deals in the med tech area. That's that that's not saying a lot and so the the other markets, Illinois Chicago again Atlanta Austin in Dallas grew a greater number of Medtech Investments, and yes, some of those did have a smaller base and yes, Minnesota still has a number one position in number of Medtech investments in the state, but Is about to overtake it and the other the other areas basically grew between a hundred and four hundred percent in terms of number of deals, Minnesota grew by 39% So I think that's that's indicative of what we're here talking about today. And if one looks beyond Minnesota's strong suit of Medtech and looks at two of the categories that have dominated the National Field in terms of strongest sectors of in aventis trees, which is software and Communications Communications essentially is non-existent the state in software. We've actually slipped in terms of activity over this time period the the number of deals in software across these other markets grew between 50% and three hundred twenty nine percent. Minnesota is shrunk by seven percent during this time period so in summary, how do we get here as a state? This is a very complex question and there is no easy answer. I think it's a combination of things and having not the the optimal supply of financial Capital human capital technology capital in what I call success capital. Thank you. Make sure Jay here who is with the price Waterhouse Coopers in Minneapolis. If you're just tuning in we're broadcasting live from the University of st. Thomas this hour, this is Minnesota Public Radio Civic journalism initiatives Summit meeting on Minnesota in age. Where does Minnesota stand and what might the future hold over the noon hour? We'll have a keynote address by Venture capitalists and winblad who made her Mark here in Minnesota and then headed west for California the rest of this hour we're going to open up our panel discussion now for questions and comments from those of you here in the audience at st. Thomas if you could would appreciate it if you could identify By yourself and what organization you're with got a question to start off Mike. Hi, my name is Michael Connor. I'm one of folks here today and I have a sort of an amplifying comment my comment about the state when folks ask me sort of how we're doing in Revolution is that We have watched the train leave the station the train is left and we're essentially looking at a departing issue. It would be very hard to play catch-up and I think especially the last presenter J here when he's talking about sort of that tail win in Arena is right on the button. So I think that from a policy perspective one of the things we need to do is focus on what's next and what so that we can be well mission to catch the next I guess the question I would propose to all three of the panelists is as you reviewed that not so encouraging day. And you were sort of fantasizing about what would if you had Limitless Powers. What would you do? What what what should we do as a state to make sure we don't miss the next train? Once you start I'll take a first stab at that. I would suggest that one of the first things that could be done. And I know there's been progress made in this area, but it's to encourage the commercialization of the research is taking place at the universities because a lot of the new innovative ideas show up there first, but they remain in stealth mode and it many times never get out into the real world and you'll find researchers who are working in some very interesting things that could be applied in the real business world that could be a business plan can be developed. But many of them not only aren't encouraged to speak to people with money and ideas on how to run a business. They are discouraged by the universities and as I travel around the country and I do a lot of these I see one of the main differences between what's coming in the pipeline and kind of the established. Core of the technology in the areas as being related to what the leading universities are doing locally and what are they doing to encourage the commercialization of those ideas and innovations that are occurring. Is that a proper role for a university? This is a question that you know, the universities have been dealing with I used to work for a major university pain Wharton and they still wrestle with it. There's there's other places to do obviously their primary objective is to educate young people but I feel they also have a responsibility to the state to the local area that they reside in to try and Foster the commercialization of the research that takes place there. There's no reason why professors who want to be involved with the local community are dis encouraged to do so. Okay the question comment from the audience (00:33:30) seems to me that that's absolutely right, you know, Jay Hair mentioned the sort of when he was talking about symbiosis mean a mentioned the Tailwind of blowing behind VC. I think that it's important understand that science and engineering research at the University level can have that same sort of ripple effect venture capital is critically important not for the because of this the actual dollar amount, but because of the Ripple effects Venture capitalists are you know, very Active investors who get involved they help the board's get shape. They help companies find the relationships. They're going to need you know, similarly similarly good ideas that come out of universities can really have a profound impact on the local economy as you well know from Medical Technology history in Minnesota. So I just I was just concur that the role for University is very important and you know one metro area that hasn't gotten mentioned yet is San Diego, which is very very effectively used to have a program called UCSD connect which literally brings together researchers in the at the University level with Venture capitalists on an annual basis and it gives the the similar to the way the MIT does it give the people with the idea that chance of you know, they're 15 minutes with the people who can put some money behind it and they could those kinds of models can Pay huge dividends. Go ahead. (00:35:08) Yes. I'm John roll wagon. I have been a beneficiary of Minnesota's high-tech economy. I was the former CEO of cray research, which was a key part of the growth during the 1980s and for the last six years. I've also been a beneficiary as Venture partner affiliated with st. Paul Venture Capital. So I've kind of seen it from both the both sides and I certainly wouldn't dispute Jay Harris statistics. They're they're accurate. I'm sure on the other hand there is still a significant amount of entrepreneurial activity in Minnesota. And st. Paul Venture Capital has been at the heart of that along with other Venture Capital firms. I know that Mac Lewis is here and he's like me been on both sides of that of that train, but things have changed there's no question. The technology has moved on from what we were really tops at in terms of the Big Iron computers and so forth into software and services and While we haven't lost all together, we haven't played the same leadership role in the last five or six years that we did in the past. But some things have stayed the same and and I guess I'm echoing to some extent the comments that were just being made about the university among other things that the constant in all of this in my opinion is people and talent and energy and intelligence and creativity. And in my view we need to focus heavily on that and providing an environment that encourages that in this state. I think the university is an absolutely key part of that. It was true 20 years ago. It's true now, I think the university is is behind and needs to gather its resources. I think our new president is doing that and I also believe I wanted to mention the activity at the Carlson school Under David kill kidwell's leadership. There is a new entrepreneurial Institute run by a former venture capitalist named Johnson I don't know if he's here today. It's probably too busy with this his activities at the University but investing in people is what we have is what we have to do both from the technology side and from the managerial side and in order to develop the entrepreneurs to to lead the new firms and I want to Echo two that it is new firms. It's an entrepreneurial activity. It isn't just large corporations growing. We really need the stimulation of those new firms. One of the other things I notice is that this activity and services has a low barrier to entry and is also dominated by much younger people. I think that we have we have a little stodgy maybe in Minnesota and we need to recognize that these new firms are being started and developed by people in their 20s not even in their 30s and they're having tremendous success early on and we need to build an environment around here that's attractive to them where they can get the support. They need really And they can find each other and and enjoy that enjoy that process and finally I would say that it also comes down to a quality of life. And that's one thing that we've had in Minnesota that that we've been very fortunate with and that we need to keep an eye on not just on developing research at the University not just on developing managerial talent, but maintaining the environment here one of the great things that we had at. Krei is that we could get people to come here because it's a great place to live and we shouldn't lose sight of that. In fact, it's kind of interesting. I sat down this morning next to Gentleman on my right PJ. And Orion who is a new immigrated to Minnesota for ATC one of our telecommunications firms, and I guess it's I guess it still works. So I'm a bit more on the glass as half-full side. But let's fill it all the way we have another question here. Go ahead. This is Mac Louis involved with early-stage companies with a firm called Sherpa partners. And we invest in and help early stage companies get going. And there's no question as Jays data reflected that it we've gone through a period where it's been very hard to get money into Minnesota for various reasons and startup companies have to compete on a national stage for the money. So it wasn't that there was a lack of money. I think Minnesota early stage companies were not competing effectively for the money and we saw in 97-98 leaders of local Venture Capital firms moving out of state and that was not an encouraging Trend. I think that's turning around the company's I'm involved with are seeing more money coming in. And in fact non Minnesota Venture firms are looking in Minnesota as a place to invest and I think that's an encouraging Trend. I like the well the reason I think that's Seeing is we're seeing very high caliber high energy people with good ideas. And that's what it takes to attract the money and to build a companies and we all want to do what we can to encourage and support the people with good ideas. And with the energy level to make them happen the university I think will be an important part of that ingredient. Somebody told me recently there. There are some examples of companies that have come out of the University. But only three that that person could think of and I'm aware of all three cyber Optics a while ago was based on Laser Technology net perceptions recently is a high flyer and an with Blatz an investor in that company and cognition T recently, which I'm involved with is doing very well and I think was on the NPR radio this past week, but only three that have come out in the high tech area and I've probably missed some but that's not a tremendous track record. So we went need to help the university do better and do more Good companies going on money coming in. But I like the term gazelle companies having some pretty good companies is okay having a couple of gazelle companies would be terrific in this area. So let's get some Microsoft's and here as well. Let's think big quick question state coffers are overflowing and other billion dollar Surplus. Is there something that government in Minnesota should be doing that. It's not doing to try to Spur development of high-tech companies. Let me take a stab at that. I think one of the things that could be done is for the government to get more actively involved in these government industry Partnerships, and you see this in Silicon Valley. There's Silicon Valley joint ventures San Diego. I can name lots of others around the country and it's played a vital role in getting all the key players together and communicating what their needs are so that entrepreneurs can tell government. What is lacking in the state? What can the state do to help me? Is it a regulatory burden some licensing problem? And I'm having and it's a way to Foster communication through more informal channels. And I think that's something that the state could certainly help out in and local government can as well I would add to that and say that the multiplier effect of what well-placed investments can do in a state can be pretty phenomenal one only needs to look at some of the companies that received Financial backing that have grown up to be gazelles to be able to point to that and one concept extend upon the partnership Arrangement is whether the the government should have a funds perhaps professionally managed and deployed for Minnesota based companies or for example, the bridge the technology Capital issue, perhaps provide funding for technology that comes out of universities or He that comes out of it comes out of Corporations success breeds success and right now and recently we haven't had a lot of high-tech success in terms of either Acquisitions or IPOs that reseed the market. Well, you can't buy success but you can focus on human capital technology capital and financial capital in the question goes to financial capital and what can be done there, but it's also technology capital in human capital and on the technology capital and if you look at the Venture dollars went into the state 98 alone. It's roughly 200 million dollars. If one were to generously assume that a third of that went into basic research. That's a mere 70 million dollars is compared to billions that gets spent by the institutions the academic institutions major corporations. And so there's not a lot of tech transfer going on in the state that's an element of it and finally is we're dealing with the environment. We've got a good environment, but it could be better in my view. What are we doing about fostering the human capital and unfortunately a lot of Executives at work for larger companies. Who haven't seen the success to draw them out think in entrepreneurial risk is going to work for a hundred million dollar business. Well, let me tell you that's not an entrepreneurial risk in until there are people that take the leap and go out and build something great. And okay, they become a billionaire but that tends to draw people out and we haven't had a lot of that nor have we had a lot of coordination and communication and visibility to that to get the environment going. So (00:44:25) helpful in the you at you originally asked if you've got a bunch of extra money to invest in your in your economic future, how do you do it? I think it's helpful to think in terms, you know, breaking not necessarily in half, but in two parts short and long-term Investments and you know, I think Ross J of just, you know, introduced a number of you know, very very important ideas. Most of which are going to pay dividends in the short term, you know, things like text organizations for technology transfer and investments in hi. And I'm in Tech capital and the on the longer term side. It's are the investments in human capital and just to pick up on a comment made by someone in the audience a short while ago the constant is people and I think one of the Striking fines for us, I mean, we've there have been lots of research they're showing this but one of the Striking fines for us in our study was when we look at the education level of the workforce. It's a really Stark line drawn with the states in the west showing the higher higher average educational attainment in the adult Workforce and then the states in the Central Center part of the country and the southeast much less. So and the reason for that their number reasons, but one of the primary ones is that the most highly educated people and Society are the most geographically mobile and one of the reasons people move for both for Economic Opportunity and quality of life. So just to concur with what has been said before I think as a public Our public policy and investing in your future quality of life is right up there. It's what helps you attract good people that, you know create the groundwork for a vibrant economic growth. Not a lot of time left, but let's get (00:46:09) some more couple more quick questions and Steve Kelly state senator from Hopkins comment on the role of government one your question Gary I think was really an interesting one about whether there's a quick weather. We have a question about the the propriety of University cooperating with businesses. We take that for granted with respect to agriculture where the extension service has scientists working one-on-one with family Farmers where we don't have the similar kind of system available for high tech entrepreneurs or not in agriculture. I think we ought to get over some of that queasiness about those connections and we can do that. I think by looking at what we've done in the past and in agriculture, the second thing is Cargill. Challenge the state by making a donation to The you to match its contribution. I think the state ought to be turning that around and challenge putting up some money of its own so that we challenge businesses to match an investment in the university and contributions to research and development in the state. I think that would be one of the steps that we could take with the Surplus that's available. Yes your kind of warning. My name is Carl Braun. I'm a president of higher hir e - and a principal in diversity and my question to you gentlemen this morning is the fastest growing demographic on the web right now is women and people of color what trends do you see an investment in minority-owned organizations and Multicultural organizations right now across the country who wants to go first? Well, let me go first on that one, since I live in Los Angeles, which is the 21st century, Ellis Island. I don't think anybody's been there lately. I am a minority in Los Angeles white Caucasian and I have been for almost a decade Hispanic population is larger than the cockade the white Caucasian population in the Los Angeles area and we're seeing a lot of very interesting things happening in Los Angeles, especially on the West Side even in minority businesses Henry Cisneros spoke at a conference that I ran three weeks ago and he's very active locally and there's some amazing things going on in internet related activities among minority groups, you know business to business selling business to Consumer selling and it's out there. It's in the pipeline. It's taking place first in places like Los Angeles, Miami a lot of this is taking place. Well, so I think there are a lot of things happening out there and these internet communities are forming and I think it's it. It's going to increasingly be important in the future. Obviously you look at the changing demographics nationally and especially among some of the major metros and we can't succeed without minorities being part of the whole picture Okay real brief comment or question before we wrap up Roger hail chair of the governor's Workforce Development Council. I have a question of the panelists particularly. Mr. Haire does the number of deals or the number of the amount of new money? Tell the whole story if you have a highly profitable big medical services medical technology company and they grow at the rate of 10% Let's say there are billion dollar company that's a hundred million dollars of growth whereas you could have 50 startup deals at five million dollars each that would be about 25 million and I just wonder if if you're telling the whole Story on the number of startup deals. It's a fair point. You're not telling the whole story but I think it's indicative of where things are headed in the point here is of diversity both in terms of larger companies as well as smaller companies Medtronic and st. Jude could go away tomorrow. They could be acquired just as we've seen Honeywell and some other companies be acquired recently. So we can't rest on our Laurels just on the large companies if the pipeline isn't full and believe we've got some some air bubbles in the pipeline that will manifest in issues right off Court quick question for you before we wrap up. Why should the average Minnesotan care about this everybody? Here's got a job mostly wages going up state coffers of we said bulging who cares. (00:50:41) Well, I think You know, I think the simple answer to that is everyone has a job now, but over time people will begin changing jobs more and more frequently and you know as a matter of public policy. I think that's important to keep in mind lifelong learning resources for lifelong learning are ever more important and you know, similarly things like portable pensions, you know benefits that will travel with you ways that you can survive and actually prosper in transition, you know, I think all of those are things that need to be kept top of Mind in terms of public policy. (00:51:24) Well, we're unfortunately out of time for this first hour of our live coverage from Minnesota Public Radio Civic journalism initiative Summit on Minnesota in age like to thank our panelists this hour for leading the discussion roster of all of the Milken Institute Randolph Court with Progressive policy Institute and Jay Hair who is with pricewaterhousecoopers. Now we're going to be back at noon with live coverage of a keynote address from Venture capitalists and winblad to get her impressions of just where Minnesota is and where Minnesota is headed in the world of high-tech. That should be very interesting. And of course, I'll be some more questions from the audience. Meanwhile Summit participants here at st. Thomas have their work cut out for them. There be they'll be heading off to small group meetings to work on an action plan of sorts those of you listening in on the radio Catherine Lanford joins us now from our Studios back in st. Paul to carry along for the next two hours and Catherine what's on the docket. We have a good show here Gary we have in the first half of mid morning. We're going to be talking about the World Trade Organization meeting. Of course, you got everyone off to a rolling start yesterday on midday with sort of a primer on the WTO. We're going to be talking today about those continued protests the heightened awareness that Americans have of these (00:52:42) Susan we'll have our own little (00:52:43) debate here on mid-morning in the second half of mid morning. We're going to be talking to Steven Pinker. He's a very popular linguist at MIT and he's written a book called words and rules. The ingredients of language will be talking to him about how the study of verbs actually tells us something about how the human mind works now Gary. That's what we have. I got it. We got it. We got to make sure that everyone's up on this new one day only schedule. So that's between 10:00 and noon is mid-morning. And then we're going to go back to you. And what do we have again at noon and winblad who was a venture capitalist well-known National venture capitalist, and she actually got she's a Minnesota native got her start here went off to California and she's going to be telling her story and talking about where Minnesota stands a pretty interesting. And so we'll have that at noon. Now. What small group session are you assigned to the coffee coffee? Question, (00:53:43) I think that you will acquit (00:53:46) yourself honorably, sir. All right. Thanks a lot Gary eichten and just want to remind folks that programming on NPR as supported by the Science Museum of Minnesota opening December 11th on the Mississippi River Front. You called (00:54:01) 65122194444 (00:54:06) details again, this is especially scheduled edition of mid morning. We will start with a discussion about the WTO and then we'll go on to link with Steven Pinker. it is cloudy 41 degrees here in the Twin Cities it KN o WF M and 91.1 you are listening to Minnesota Public Radio. Cloudy 41 degrees at knoo wfm 91.1 Minneapolis st. Paul Twin Cities weather for today cloudy with areas of fog. Looks like we have a low in the mid to upper 30s Thursday cloudy a high in the low 40s Thursday night drizzle and fog a low in the upper 30s.


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