Tuesday, August 12, 2014

NYC Tech Industry - How Big Is "It"? Why Is It Important?

Roosevelt Island Campus, NYC, under construction.
A recent study estimates that the New York City workplace includes 291,000 jobs in the city's tech "ecosystem", with 150,000 of the jobs being tech positions in non-tech industries.

Within the tech industries, 58,000 jobs are tech jobs and 83,000 are non-tech jobs, a total of 141,000 jobs.

The study, The NYC Tech Ecosystem by HR&A Advisors, also concludes that 44 percent of the tech jobs do not require a bachelor's degree.

The study takes the correct position that to estimate the number of jobs in the "tech industry", we should include not just companies like Google and Facebook. It also believes that the count should go beyond occupational titles like entrepreneurs, coders, and engineers.

We took an inclusive stance toward the definition of software and IT jobs in the estimates we did for the NYC Comptroller's 1999 report on NYC's Software and IT industry, but it was not as broad as that of the HR&A report. I was the chief economist for the Comptroller at the time of the report, and Henry Etzkowitz was a consultant to the report.

Adding together the NYC and suburban job figures, the Greater NYC total was 47,000 in the software and IT NAICS codes, for the year 1997. This is one-third of the number of payroll jobs in tech firms in the HR&A estimates.

NYC is second only to Silicon Valley in number of
private tech companies acquired in 2012.
As a benchmark for assessing these estimates, Con Edison's 1999 staff for information resources was more than twice the number of software staff (293 vs. 140).

For software firms servicing Con Ed, the ratio of software staff to other information resources was slightly more than five to one (108 vs. 19).

My interview with Etzkowitz a year ago got into the question of technology as an economic development engine. It prompted some private comments to me from David Hochman that I have obtained his permission to share.

He wonders about the use of the term "tech" and "technology" in connection with the driving of economic development. Using the widest possible definition of tech jobs may not necessarily be helpful. See his blog post on this topic. The implications of his line of thinking include the following:
  • The broadest definition of technology may be less useful for economic development purposes than a narrower one. Counting too many non-tech jobs in tech industries may make it hard to focus economic-development support. 
  • Including too many non-tech jobs doesn't help the NY Tech Council, for example,  define itself as a "technology" council. Lacking a clearer boundary, it is tied down to software, web site and mobile communications functions.
  • NYCEDC could fall into a trap of competing with Silicon Valley or Route 128 on the size of the tech work force rather than the quality of its tech initiatives. The challenge should be to get all the wealth creation, job creation and distribution we can out of the assets NYC brings to the global economy.
  • NYC's universities could similarly get lost in congratulating themselves on the number of their graduates in tech industries rather than on the extent of their entrepreneurial skills and the next-generation readiness of their graduates. NYC's universities are still not obviously in the front rank in the tech field. The Roosevelt Island experiment is exciting but has as yet borne limited fruit.
The best news is that in Bloomberg's third term the startup innovation providers moved closer to the big, primary driving sectors. Hochman wrote to me:
You are right - this was resisted at first. What changed is that NYCEDC embraced the synergy/symbiosis, whatever you want to call it, and decided to make that the heart of the marketing/promotional campaign. Bloomberg asked NYCEDC to deliver marketing sizzle, and they did so brilliantly, joined by the Partnership for NYC and the NYC Investment Fund. I get at some of this here.
Hochman wasn't aware of the innovation group that met regularly at the NYC Comptroller's Office in the 1990s. However, he did know about the "New York Academic Consortium" of tech transfer officers that Etzkowitz mentioned in my interview with him. It was for many years bogged down in discussions of techniques of deal maximization, rather than on the more basic question of maximizing economic development. As Hochman says:
That's why I separately convened a group with some tech transfer officers but also many other university office directors with different titles and duties such as director of economic development or director of incubation initiatives. For a time we were the only group in the city - that I was aware of - discussing the cultural barriers to success. Only in the last few years have our institutional tech transfer offices become interested in spinoff formation at all, and it's still not the primary driver in offices that bring in so much money from drug royalties.
While I am a fan of the Cornell/Technion initiative on Roosevelt Island, Hochman has a warning about the way in which it was put together:
I am a skeptic... and I certainly disagree with your (tongue-in-cheek) conclusion that you should have tied your policy initiative to a real-estate program. I think that was a very bad outcome. Some of this I hinted at at my initial comments on the applied sciences initiative, but I haven't done the serious commentary I've been planning since Cornell was announced, though I certainly agree with you on the importance of Manhattanville and the role of engineering generally. 
These economic-development issues are not new. Stuart Leslie and Robert Kargon, professors in the History of Science program at Johns Hopkins University, wrote a paper, “Selling Silicon Valley: Frederick Terman’s Model for Regional Advantage”, Business History Review, Volume 70 (Winter 1996), 435-472. Long before Bloomberg launched his program, the paper explores the origins of the Silicon Valley model for regional economic development, and some problems with its replicability. We covered many of these issues  in Chapters IX, X and XI of the 1999 Comptroller's Report.

Leslie and Kargon show how the Silicon Valley model worked. Frederick Terman, Stanford's provost, envisioned a partnership of academia and industry, and trained students to put it into effect. He cultivated an aggressive entrepreneurial culture.

Beginning in the 1960s, business groups set out to move the model to other places, building their own versions of Silicon Valley, in some cases enlisting the help of Terman and his disciples. The authors discuss several examples, including the New Jersey Institute of Science and Technology, led by Bell Labs; the Graduate Research Center of the Southwest and the SMU Foundaton for Science and Engineering in Dallas, Texas; and the Korea Advanced Institute of Science and Technology - of which the Korean example is rated the most successful. The paper shows both the importance of the contributions of local universities and the limits to their ability to generate startups in the absence of a local tech industry that is available to nurture the environment within which startups can thrive.

More recently, in Invented Edens, Robert Kargon has moved on to write, with Arthur Molella, about models of the techno-city, i.e., a planned city developed in conjunction with large industrial or technological enterprises. The authors map the concept as applied in Norris, Tenn., home of the Tennessee Valley Authority and Disney’s Celebration, Fla.

In the early 1990s, the Disney Development Company set out to spend $2.5 billion to develop 4,900 acres in the Reedy Creek Improvement District. The plan -  prepared by Cooper, Robertson & Partners and Robert A. M. Stern - combines advanced energy and communications concepts with extensive parks and trails. Celebration is designed to be the ultimate techno-city and was named the "New Community of the Year" in 2001 by the Urban Land Institute.

The Terman model has served Silicon Valley well. We need to learn all we can from it. But it is not the only path to innovation in technology. New York City and Celebration and other communities need to explore other avenues.