NYC | Universities and City Invest in Tech

March 22, 2017—David W. Chen writes wide-ranging stories that put New York City in a global economic context. 

He interviewed me in 2008 during the fiscal meltdown and again this month in a story about university technology centers in New York City. 

The new story appears in The New York Times online today and will be in the printed edition tomorrow, Thursday.

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.

NYC as a Potential #1 Global Tech Leader

L to R: John Tepper Marlin, Helen Keller, Henry Etzkowitz.

Last month I met with my friend Henry Etzkowitz for breakfast. There he is with the hat in the photo at left. I am taking the picture (a "selfie") with my right hand. Behind us is a portrait of Helen Keller that reminds me of the thought, “None so blind as cannot see,” an idea dating back before Oedipus to Jeremiah 5:21.

On the appropriate policies for encouraging technology, Etzkowitz is my guru. He travels around the country and the world picking up honors for his documentation of policy successes, and I update him on recent developments in NY State and NY City, the most interesting of which is the Cornell-Technion Center on Roosevelt Island.

Over the last two decades we have often shaken our heads together at the failures of NYC policy-making to encourage technology as an engine of local economic development.

Tech Policy, NYC, 1995-1999 

Our shared interest in tech policy goes back to the 1990s when I was serving as chief economist for the second of the three NY City Comptrollers, between 1992 and 2006. The chief economist function was created by new responsibilities conferred by the 1990 NYC Charter Revision on the Office of the NY City Comptroller.

(The Comptroller, an elected official, is currently John Liu. Eliot Spitzer has just thrown his hat in the ring to succeed Liu. Outgoing Borough President Scott Stringer has for months been considered the most likely to be elected.)

The City Comptroller's office has been included in economic-development planning - for example, in a 1995 conference organized by the President of the Federal Reserve Bank of New York, Bill McDonough. The NY Fed called together leading institutions in the region to explore New York’s potential for transition to a knowledge economy, imitating the initiative taken before and after World War II by the Federal Reserve Bank of Boston, and leading to the expansion of tech startups along Route 128. The Lower Manhattan Association provided administrative support for the NY Fed’s conference, and a young science-policy graduate, Michael Salvato, worked on the program. Etzkowitz was a key participant, as the then-director of SUNY’s Science Policy Institute.

Magnificent it was, but not sustained. Few participating institutions signed up for the follow-up phase. Contrast this with the New England Council, a decades-long effort from the 1920s that sought to follow the model that led to Silicon Valley, by systematizing the high-tech spinning-off fostered at Harvard and MIT.

The New England Council sustained its effort first in scientific instruments at the turn of the 20th century, then in radio in the 1920s. Their work helped create Small Business Investment Companies and the entire venture capital industry after World War II. When I was at the Small Business Administration in the 1960s, I was able to study at close quarters the successes of the SBIC program. The American Research and Development Corporation was founded in 1946 as a pro bono regional development effort. A decade later it founded the Digital Equipment Projects, which was intended to create better aircraft training simulators but engineered the mini-computer along the way.

Why Did the NYC Regional Effort Fail? 

So why was the effort not sustained in New York City, in contrast to the Bay Area and Route 128?

Maybe

• Silicon Alley was considered to be doing okay by itself and the involvement of government and universities wasn't seen as necessary. 
• NYC software firms that were competing with the Bay Area and Route 128 by supporting Wall Street's highly proprietary electronification projects did not see any value in regional cooperation. 
• Their growth was resisted by traditional parts of the advertising industry, which felt that it was being cannibalized. (The AOL merger with Time Warner did not seem to be good for the traditional information and communication businesses.)
• Some knowledgable tech people felt that NYC was too far behind Stanford and MIT both on the entrepreneurial front and in the sophistication of its programming to begin to compete. 
• Others decided that nothing more was needed than a professional association - first the NY New Media Association, then the NY Software Industry Association (which evolved into an incubator that depended too much on its real estate viability) and the putatively broader-based Tech Council.)

The NYC Software/IT Industry Report, 1999 

In this environment, the NYC Comptroller’s Office published a report, under my direction, on the “NYC Software/IT Industry” in April 1999 (summary and links to pdf files here). The NY Times covered it well, including with its summary of the report a photo of the Comptroller. The Chancellor of CUNY, Professor Harry Markowitz, told the Comptroller he loved the report. The Comptroller was pleased and generously said so. Etzkowitz played a key role in helping us define the history of tech policy and an appropriate path forward for NYC, as reflected in the last few chapters of the report.

The Report showed that New York had most of the elements required for a world-class technology center:

• A public-school system that provides a steady supply of well-trained high school graduates who are ready to grapple with technology issues at the university level.
• Close cooperation among regional universities, private and state-run (and definitely including community colleges), to ensure strong support for entrepreneurs seeking high-quality technical staff.
• Centers of technology excellence among the universities, especially schools of engineering, and supportive faculty at business and law schools.
• Training for technology experts in tech transfer and entrepreneurship.
• University-based incubator labs and university support for policies that reward labs and centers and individuals within them for innovation. 
• Business interest in, and support for, bringing university-based ideas to market in a collaborative environment.
• Government support for technology to encourage university-business cooperation.

The big missing tooth in this dazzling smile was the entrepreneurial skills created by the open communication between universities and business in Silicon Valley and Cambridge, Mass.  NYU and Columbia around that time announced they were going to work more closely together on research and technology initiatives.

The Dot-Com Bust and Mayor Bloomberg’s First Two Terms 

However, in fact technology took a back seat after the sharp drop in dot-com share values in spring and fall 2000. The NY Academy of Sciences won a million-dollar grant from the STARR foundation, but the large universities were not impressed and most of the funds went to support publications drawing attention to the tech assets of the region. A seminar series drew second-tier administrators and junior faculty, with the notable exception of the President of New York Poly in Brooklyn.

One practical result was the creation of a network of area university technology officers who spun off their own support network. After 9/11, and the election of a mayor who had made his fortune by selling technology services in the form of Bloomberg machines, Etzkowitz and I expected the new mayor to lead a major tech initiative that would make the City of New York into a tech center that might eclipse both Silicon Valley and Route 128.

We were disappointed. The new mayor made clear he was a businessman first and techie second, and he did not undertake any major tech initiatives in his first two terms. He made up for that in his third term with the competition that led to the Cornell-Technion project, but if he had stuck to the term limits in City Charter he would not have left much of a tech legacy.

For the ten years after the Comptroller's Software Report, Etzkowitz and did what we could to keep the recommendations of the software report in front of people who might implement them. Etzkowitz organized the NY Inter-University Seminar on Innovation, bringing researchers and practitioners together from across the region. We had monthly meetings with guest speakers who discussed the recommendations for inter-university cooperation for technology development. We deliberately did not meet at universities, but mostly in the Comptroller’s Office and sometimes the conference rooms of law and business offices.

In 2001 I wrote to the Mayor about creating a technology-transfer office comparable to the Mayor’s film and broadcasting office. In 2002 I met with Deputy Mayor Dan Doctoroff on the subject.  Etzkowitz also tried to get some interest from the new Mayor.

While the NYC Economic Development Corporation did some good things to assist firms involved in the knowledge economy, their focus was largely on matching up available real estate with business needs. They took action when real estate opportunities meshed with tech promotion.

The Cornell-Technion Initiative and NYC’s Potential 

In 2012, as the Cornell-Technion Roosevelt Island initiative took shape, Etzkowitz and I felt that our thesis of the missing link in NYC’s innovation ecosystem — a Stanford-MIT-like institution focusing on commercializing knowledge, tech transfer and incubation, as well as basic research and education - had found a place on NYC’s policy agenda.

In retrospect, it looks as though to get the interest of Deputy Mayor Dan Doctoroff we should have translated the Software Report recommendations into a real estate-driven project. When I met with Doctoroff I should have come in with a plan not just for policy but for leveraging $100 million in vacant city land and municipal bonding to attract 20 times that in university and business investment.

A lot of cities are trying to emulate the success of the Bay Area and Route 128. The typical competitors are state capitals with a local university like Albany, N.Y. or Austin, Tex. or Raleigh, N.C. On the Cornell-Technion plan, Etzkowitz comments:

Mayor Bloomberg’s Roosevelt Island project is now focusing on master’s-level students. But research groups require a variety of skills and levels of involvement, including Ph.D. students, post-doctoral fellows, teaching faculty, research associates and undergraduates, supported by large-scale research funding, typically from the federal government, with state government and industry support at the margin.

I remember attending a meeting of MIT alumni in NYC, when Mayor Bloomberg had just published his book and was contemplating a run for Mayor to succeed Giuliani. He emphasized how competition keeps everyone on their toes. Afterwards I spoke with an MIT professor who said that NYC would never catch up to Route 128 because it didn't have the entrepreneurial spirit. Etzkowitz thinks this is still a problem: "NYC still needs an MIT-type institution, along with a system of mentoring research groups to generate spinoffs. Entrepreneurship is a group activity."

One of the hopes of Mayor Bloomberg's economic development team is that Technion - which has a strong record of generating spinoffs - will stimulate Cornell and together they will light a fire under NYU, Columbia, CUNY and SUNY. Etzkowitz sees some potential in some "home team" NYC projects:

NYU has a big data analysis center focused on urban issues, building upon its mathematical strengths and industry links. Columbia is breaking its geographical boundaries, expanding its technology projects above 120th street and linking with City College, in a joint biomedical/engineering research center, building on the strengths of these two schools. NYC also has special assets. The SUNY Fashion Institute of Technology spins out boutique fashion firms, continuing the Institute’s role of bringing together industry and labor to helped the garment industry grow into the fashion industry. Similarly, the SUNY at Purchase theater and dance schools operate on an implicit incubator model, graduating theater and dance troupes into NYC’s thriving cultural economy.

A key to the future is how state governments are responding to their revenue challenges. Etzkowitz  thinks that underfunding of schools in California since Proposition 13 and cutbacks in support of the University of California may damage the Bay Area franchise. Massachusetts, meanwhile, is going in the other direction, funding its public schools and universities.

Henry, thank you for our conversations. And for you, the reader who has read this far - there is more to this story, so stay tuned! (Follow tweets on Twitter - @cityeconomist.) (August 14, 2014: See followup post here.)

NYC | To Be #1 in Tech? The Cornell-Technion Campus

Model of Planned 2 mil. sf Cornell-Technion Campus

The December 19 announcement of the winning university bid to create a high-tech campus in New York was stunning. It was preceded by mystery and secrecy.

When he was elected, Mayor Bloomberg was expected by many to be a leader in bringing technology to New York City. In 2011, in his third term, he has fulfilled this expectation.

Part of his plan was an RFP for universities to bid on using city land to build a high-tech campus. In May the Mayor also provided a roadmap for NYC to become "the leading digital city".

The Offer, the Sites and the Candidates

The Mayor offered $100 million of NYC money toward university use of underutilized NYC land along with the land itself. The three main candidate sites were Governor's Island, the Brooklyn Navy Yard and Roosevelt Island. The campus was conceived of as the "Stanford of the East", and the smart money was on Stanford winning the RFP. After all, Silicon Valley has long been #1 in venture capital investments in technology, evidence of its long expertise in spinning off high-tech companies from centers of excellence in a university environment.   

MIT was also seen as a possible candidate. The Route 128 area in Boston followed the same track as Stanford and was widely viewed as #2 in tech spinoffs. An MIT professor visiting New York City 15 years ago told me that New York City would never catch up to Boston in the tech VC arena because New York City "doesn't have the entrepreneurial spirit".

Well, guess what. The first surprise of 2011 was that the VC people were reporting that tech investments in NYC were exceeding tech investments in Boston. New York was now #2 only to the Bay Area. For whatever reason, MIT did not submit a bid.

Stanford seemed to be putting a huge amount effort into its proposal, but then it suddenly withdrew. Was this a sign that the project was just too ambitious? Or was too tied to real estate? Was this exciting idea going to be still-born?

Cornell, with its existing nexus to New York City (the Cornell-Weill Medical Center, the Cornell Club, the Cornell Institute for Labor Relations), was expected to join Stanford. But Cornell had its own idea and reached out to The Technion-Israel Institute of Technology in a series of secret meetings. Technion had the experience with spinning off companies that Cornell lacked.

Politicking meanwhile continued over the various sites. Roosevelt Island is in Rep. Carolyn Maloney's district and on October 19 she held a press conference to argue the case for this being the best site. On December 14 she announced that her campaign and petition drive had convinced the US Postal Service to take Roosevelt Island off the list of post offices to be shuttered. So for the time being a post office on Roosevelt Island was guaranteed.

The Announcements

Just as well, since four days later, on December 19, the Mayor revealed ahead of schedule that Cornell and Technion won the competition with a plan for building a facility on Roosevelt Island with 2 million square feet of space, costing $2 billion. The plan was given credibility by the announcement of the $350 million gift on top of the $100 million promised by the City of New York for infrastructure improvements and $300 million worth of land. The $350 million gift is the largest Cornell has ever received. With $750 million in hand, $2 billion doesn't seem so far away. The visionary Cornell donor was later identified as The Atlantic Philanthropies, founded and funded by Charles F. Feeney.

The Mayor must have been impressed not only by the degree of Cornell support but by the Cornell-Technion commitment to green architecture in the zero-pollution buildings themselves and in the planned academic staffing. It will also include major expertise in computer science (a given), energy efficiency and public health.

New Yorkers were ecstatic. BetaBeat ("The Lowdown on High-Tech") produced a slide show of "14 Terrifically Scientific Signs" that 2011 is "the year for New York Tech". One sign was the bypassing of Boston. Another was the materialization of the tech campus.

The Importance of the Campus

BetaBeat was being funny, but New York City may indeed soon be #1 in tech. Density is destiny and the aggregation of tech consumers and producers in NYC is going to be hard to beat when teamed up with a nerve center for high-tech research, education, innovation and financing. I have no inside information about why Stanford pulled out, but word of a $350 million gift by an alumnus to Cornell to support its bid for the tech campus may have prompted some serious questions to and by Stanford about the degree to which it could match this degree of commitment. The gift was a preemptive strike, about which much more will be written by people interested in the history and strategy of the relationship between cities and scientific knowledge and the commercial exploitation of this knowledge.

This is a breakthrough not just for New York City but for the United States. As manufacturing jobs have flowed overseas, the United States must generate new kinds of jobs - well-paid jobs. High-tech startups offer the potential for creating such jobs. University campuses that concentrate technical and business talent and provide incentives for forming startups have been proven job-generators.

I've been following this subject since 1973 when I wrote a report on "The Wealth of Cities" for the Council on Municipal Performance. From 1992 to 2006 I served three New York City Comptrollers as their Chief Economist and I worked on a report called "The NYC Software/IT Industry: How NYC Can Compete More Effectively in Information Technology" (April 1999). It shows how jobs in Information Technology in New York City grew 15 percent a year during the second half of the 1990s. I handed a copy to Deputy Mayor Dan Doctoroff early on in Mayor Bloomberg's first term. Here is a summary with links to the report. CUNY Chancellor Matthew Goldstein said he liked it. I think it still makes good reading in the context of the new Cornell-Technion campus. See if you agree.

Happy New Year!