A Quiet Crisis: Regional Economic Development Transcript
Mr. Hill: There is another spin or connection between the education community and the business community that hasn’t worked terribly well. I saw what came out with the my interpretation of the Ohio Plan. Part of what we are missing is the researching development potential or capacity in the private sector and the university sector really hasn’t made a good link. We are twentieth in the nation per capita basis on R&D as a fraction of growth state product which is very, very low. We are the the overall in gross numbers.
The Ohio Plan bothered me because it focussed too much on info-nano-bio and didn’t focus enough on working with our existing base and tying it together essentially in forming partnerships and the business has problems with open science. Closed science is what they sometimes want, but we haven’t figured out how to take our corporate R&D capacity, especially with smaller firms, and linking it up with our university system.
And one of the problems we have is it cannot be either or. We need info-nano-bio. That’s the long part of our investments, but we also need to take our existing R&D base and really make it much more robust and much better than it currently is.
So, not only are we talking about those leaderships and the connection at the community college level, you are manufacturing tech programs and the manufacturing center which Cleveland Tomorrow helped found—what was that, how many years ago was that?
Mr. Roman: 17 years ago.
Mr. Hill: The Cleveland Advancement Manufacturing Program. We need to keep our leveraging off of that. It’s what Richard is saying, it’s right on the edge of making it, but we need that next push.
Mr. Shatten: Don’t forget, Tom Hayes at the County has put these training academy programs together with Dan Barry. We are taking County training money that used to just come through as sort of wasted money. It’s now a link to money under the contract to the community colleges.
So there is a systematic program in Ohio right now and in Cuyahoga County that says all of this gigantic Federal money under this thing called the Work Force Investment Act. That money is flowing down, not just washing, it’s flowing down to the contracts between community colleges and employers called training academies. I think well see Tom Hayes, as he moves up to the State, propagate that model of training academies wide.
Now, since we are on TV, I can add my one outrageous, wild and irresponsible recommendation for linkage. I have been waiting ten years to say this. You will tell me it’s stupid. We are the only place in the United States of America with State universities in four contiguous counties in the country. Four contiguous counties.
Now, imagine what the Northern Ohio State University system would look like if it was one system with a dominant campus. I would put it at Kent for the moment just for this conversation and I would give you guys sort of all urban responsibilities. I would give Akron all chemistry responsibilities. And have a single campus run by the State of Ohio without the duchies so that we actually could take some advantage of the fact that we have some talent as opposed to dividing by four, dividing by six, dividing by eight. So we are down to the number of 46. It’s a big, crazy idea.
Mr. Eckart: That’s right. It would create no scope and scale, more kids, more buildings, more money, more professors, combined research dollars, but it requires, we used the word before “bets.” It requires some nut cracking choices. You can’t be all things to all people.
Economic development is not one size fits all. We relate to the hospitals again. You can’t just say just the Clinic or just UH or just Metro. You always have to say Clinic Metro UH as if it is one single entity.
Now, granted, I’m not going to repeat the Cleveland Clinic billboards out there, but you have different components that people are in different places in life. Maryland made choices. They bid on John Hopkins (sic) and they told the University of Maryland system you will do other things. We are going to have a single and it requires us not only to make bets, but in some ways—Joe, you and I talked about this twenty years ago. The government has to choose. To choose sometimes means you have to say no, and it requires an amalgamation, it requires some cohesion and it requires some choices, and until this community is prepared to make some of those tougher choices and not say all seven of you get to go together to be first, we won’t get to be first.
Mr. Hill: It also means selective excellence. One of the problems you have is academic socialism at work. A tendency in university is to level. And when you have public universities in particular, you have to say we are going to treat different units differently. We’re going to hold you to different standards, different expectations, and I’m sure that I’ll hear from the union about this later, but the issue really --
Mr. Eckart: Your tenure doesn’t matter.
Mr. Hill: That’s it. But Cleveland State has to be an open university. We have to be the way in which people start making up through the system, but at the same time different units have to perform differently with different expectations.
Mr. Roman: And measurements.
Mr. Hill: And measurements are critical.
Mr. Roman: Only for the fact that Ohio State probably wouldn’t like your idea, I think it’s a great idea.
Mr. Shatten: We are Ohio State, you are right.
Ms. Pianalto: It’s called the Northeast Ohio Counsel in Higher Education where the presidents of the 22 colleges and universities in Northeast Ohio have come together. That organization has been in existence for sometime, but I’m a public trustee on that organization and it is re-engineering itself and the presidents of these 22 colleges and universities recognizing that they can’t be competing and that they are not all the same. They do have different comparative advantages.
So I’m encouraged that these 22 individuals are coming together, meeting—we have developed a strategic plan for the Northeast Ohio colleges and universities. The core elements of that plan are to focus on work force development. The technology, use of technology, not only within the technology that we need for this economy, but the use of technology in our colleges and universities.
So there is some of that going on where these individuals recognize that it does them harm to compete with one another and that they are going to be much better off if they can work together. So I think we are going to see some progress along those lines.
Mr. Minter: In the last ten years that that has all happened, just to able to break out of the Cleveland group and to incorporate and bring in the outlying, “universities and colleges.”
Another one of the sort of little step by step in terms of regionalism, I do think it will be interesting to see Dennis and Joe when, in fact, the business sector, in fact, really becomes regional. I mean, that will be—here is the private sector. That will be a huge signal to this region when it becomes Northeast Ohio tomorrow.
Mr. Eckart: You are absolutely right. With almost 17,000 COSE members across 17 or 18 counties, it is the single largest chamber of commerce of its type in the entire country. Does the its political muscle match its size yet? No. We have to. It’s part of our accountability. It’s part of our assuming significant advocacy. Do we go just go beyond issues in education?
Mr. Shatten: It is a big opportunity; right? Just lay that out a big organization with big responsibilities and more that it can do, these are good news stories; right?
Mr. Eckart: Sure. And if we just raised dues alone, $100 a member, we can put $1.8 million on the table. Now, I think I just heard the phones ringing. Please send those checks in now. But, the reality is, Steve, you are right. There is leverage across size if in fact we would be willing to do that.
A lot of what we have talked about has been growing jobs. David Davercoe, Joe, your chairman, said something to me that was interesting to me, and maybe if we could go around the table for a minute or two it would be fun for me.
Mr. Frolik: Why don’t we start with that when we come back because I think we are at the end of the audiotape.
(Whereupon, a brief recess was taken)
Mr. Frolik: Dennis, we have talked a lot about growing jobs and the kind of things we need to have in place to grow jobs and we’ll talk a little more about that. What do we do in terms of retaining what we got and strengthening what we have already in this area?
Mr. Eckart: Well, Mr. Roman’s chairman of Cleveland Tomorrow, David Davercoe, the chair of National City, is very fond of telling me the story that after 20 some years in dozens of states, he has had virtually every other mayor, governor, commissioner from 19 of those other 20 states ask him about if you are going to expand or if you are going to grow. Never been asked by the local mayor, the State of Ohio governor even though it is a Cleveland company.
And so while growing and creating the opportunities is very significant, there has to be a component of job retention and local expansion as part of a regional marketing campaign. You just can’t let folks who do business in other states become enamored of the person next door where the grass potentially does look greener.
In some context when Joe and I were looking at this a few weeks ago, we are spending less than $400,000 a year in terms of local retention attraction and recruitment. You’ve got cities all around us. Rochester, Buffalo, Syracuse, Pittsburgh—Joe, help me—Columbus and Detroit all spending million dollars of doing recruitment, retention and a attraction of existing facilities so that you don’t lose your existing base.
If you marry it in Ned with what you were talking about and Steve in terms of work force and productivity improvements, which you say we do a good job of here in Cleveland, and then take the attraction part across, Steve, you know the clusters you referred to sometime ago, where we don’t try to put up a billboard in southern California. You track our clusters.
Which you know, Richard, you worked on a long, long time ago and Steve you funded and invite folks to come here that fit here and most importantly, invite the folks to stay here to want to stay here and create the type of environment.
And it could be silly things like governance. If you are going to pour a new driveway, you stand in the same line to get the same permit that Dick Jacobs does to build the stadium. You have no one-stop shopping, you have no ease of permitting and inspections, you have no common planning process. It’s easier to go some places than it is to stay home.
So we need to have a fundamental attraction/retention program that also deals with college campus recruiting. We just don’t do it and other cities are beating us to the punch in big ways.
Mr. Minter: We do have a couple significant things to build on. It’s about the bunts and the singles and the Cleveland Advanced Manufacturing Program that has been a very solid program. We have to continue to have that program built and provide support for it and WireNet which is largely operative on the West Side working with companies of twenty to onehundred fifty people providing those kinds of resources that help re-engineer so that they could stay in their current locations.
That is a large part of this region’s manufacturing base are these small companies that expand and contract as the economy changes. And we have been widely recognized throughout the country. We constantly have visitors come here, but keeping those dollars coming to stay at it for the long term, and then I think Cleveland did a pretty good job over the last decade in developing some industrial parks and land space, but now we have the tougher job is that we have got to do something with roads in order to make some of the green space more available.
It is the whole business in the ground fields, because if we are going to have the job locate, then you’ve got to be able to say, here is space, here is land, here is help in terms of financing. We have a lot of those elements, but we’ve got to go more to scale.
Mr. Hill: There is one thing we people forget. We are having this discussion while LTV Steel is going through its reorganization, and there is going to be lots of news coming out over the next couple weeks about that, but we keep forgetting that the State of Ohio, since 1982, the manufacturing sector has added $15.2 billion worth of value in inflation adjustment terms which shows you how important it is.
Going back to the attraction and especially retention and expansion is that that is where that has largely come from. So it’s not only getting the physical stuff right, and of course getting the government to treat business like a customer, very important, but, again, it’s focussing on innovations within that base.
Mr. Shatten: This community built a music and communications building and a convocation center at the exact same time it that it could have built a gigantic industrial engineering program and an incubator.
So it’s in alignment of our higher education system to say what should our higher education system do be absolutely certain it’s supporting the manufacturing. And Akron should have an agenda. Cleveland State should have a quintupled agenda because I think there is a lot of retention you can market and you can market effectively, and then you have to think again, don’t forget the Growth Association has to have a method. Once we are out marketing, we have to get them, land them and keep them. We have to have the land that you are speaking to, Steve.
So there is a big agenda of stuff that can be done with the systems here, but I think we have—it’s right at the edge. It’s right at the edge. People need to take some of those assignments. I would love to see the President of Cleveland State say “manufacturing can anchor us” and don’t think of manufacturing as some rotten old place where you are going to get laid off. You had some words when we started, I forget the words you said. Nano—I forget those fancy little words you had. They were cute.
Mr. Hill: Nano-bio-info.
Mr. Minter: I thought he was the one.
Mr. Hill: I got them from Richard.
Mr. Shatten: Those are manufacturing jobs. We did some studies. Where were the largest manufacturing jobs created in the last ten years? San Francisco. Manufacturing is not a bad thing, it’s a wonderful thing.
Mr. Hill: What’s also interesting in this community is the Cleveland Institute of Art has the best industrial design program and it’s not even a player, not in the game.
Mr. Shatten: Not in the game.
Mr. Hill: Not in the game. And if you look at the technologies and sets of industries in the State of Ohio, industrial design is one of the lynch pins and that really is the way you bring forward new products. So why isn’t CIA recognized as a wonderful resource in this community?
Mr. Shatten: It’s a great idea.
Mr. Eckart: The clusters are instruments, controls and electronics. We do more parts for planes, but don’t build any planes here. Across that single cluster, and that that needs to develop. Basically, it’s finding out what you have that you don’t have to go invent and then build and expand upon it.
Mr. Hill: One of the best areas of software that this region does is factory automation and controls and the fact is we don’t really play it up for what it is.
Mr. Shatten: But we have thousands, thousands of human beings working here who are writing software for factory automation control. It is a huge industry.
Mr. Hill: And there is no difference between old economy and new economy. There are firms that innovate, firms that use information technology, firms that bring forward new products, and then there are dying firms and that’s it.
Mr. Frolik: I think there has been a lot of beating up on ourselves in this region about missing the boat. Why don’t we recognize those things, that we write the software for the manufacturing, or people who are working in the manufacturing—Sandy was talking about in the back office of the Federal Reserve Bank they have little robots. There are a lot of very high tech things, and we are certainly not perceived as high-tech region.
Ms. Pianalto: That has shown how much productivity increases have occurred in that manufacturing sector in an industry which is very important to Northeast Ohio, the trucking industry. You think what new ideas have come to that industry, and it’s interesting. The diagnostics that are now going into a truck, because what’s important if you are operating a truck is to make sure that truck stays operational. And they are moving over long distances and the last thing you want is to have that truck breakdown. They are now, and these are manufacturers here in Northeast Ohio, are putting diagnostics in trucks that will let the operator of that truck know way in advance what is happening inside that truck so that fixes can take place well in advance of a breakdown. And so, you know, you think of this industry like trucking, and see how much technology has been brought to that table.
And, Joe, I think we are aware of the fact that we are participating in the new economy, because the definition of a new economy, it’s not so much what you are producing, but how you are producing, and we are producing in everything we do. You mentioned the Feds processing currency, we are producing that now with robots or moving that currency around with robots, no longer with people.
So yes, we are participating in this new economy because the new economy is how we’re making things, how we’re doing things, and I think it’s just very clear that Northeast Ohio is participating in that new economy.
Mr. Shatten: It’s going to be very hard though, the whole question is is this happy talk or depress talk. It’s very hard for Northeast Ohio to say how should we feel, good or bad right now?
Mr. Frolik: How about just nervous?
Mr. Shatten: And should we be nervous or optimistic, and that’s the tricky piece here. We have to go back to this cohort of fourth graders who will be us in that matter of time.
Ms. Pianalto: To participate in this new economy does require an understanding and ability to use technology, and we don’t necessarily have the work force ready to do that.
In the nineteen seventies, most jobs—only 25% of the jobs in the country required an equivalent of a college education. Today that’s closer to 35% of the jobs. And we don’t have a work force in the country that has the 35% of our work force has a college education, and we clearly don’t have that in Northeast Ohio.
Mr. Shatten: And we don’t spend anything here in making that happen.
Ms. Pianalto: So really getting that work force prepared to participate in this new economy is just so critical.
Mr. Roman: Another element I think of that’s sometimes sort of embodied when we talk about new economy, and we have all been working on this to some degree in Northeast Ohio is some area of entrepreneurship, and will the cohort of fourth graders be as likely to go work for Parker Hannifin as a scientist as possibly be willing to start their own business.
And all statistics in our community seem to suggest that we have a problem. Whether it’s our culture that has sort of forced us to be an entrepreneurship in the last 30 or 40 years, we certainly were onehundred years ago, but we seem to be riding that wave of a very strong manufacturing economy during much of the 40’s, 50’s, and 60’s. We seem to have that dilemma in front of us, and it’s a hard one because it really is cultural. I don’t know how you get to that in standards, or so forth, but it’s there and we have to deal with it as a community because we need more fourth graders who are going to be just as interested when they’re 22 at starting—a lot of pressure on these fourth graders, but we need that.
Mr. Frolik: I have heard in preparation for this discussion a number of people say the venture capitalists here in the region, but the venture capitalists here aren’t bringing us ideas. We are hearing from other people coming to us with ideas. How do you change that culture? How do you inculcate that entrepreneurial ethic, that obviously, like Rockefeller and Mather had 100 years ago in the City?
Mr. Shatten: Look, I think there are a lot of shots at this, but really, fundamentally, underneath this entrepreneurship here, it is not a culture story and it is not a one-shot story. It is the base that generates talent that can be entrepreneurial is not as big as we would like it to be. We don’t have enough college-educated people and our scientific research, while good, is not big enough.
We are missing $300,000,000 probably in biomedical research in this region right now. And without $300,000,000, it’s hard to get the cooperation. You can’t just create an entrepreneurial culture. Creating an entrepreneurial culture means getting this cluster thing. So if the design is good, we need to have not only the best designers, but the most designers.
We have to be big enough at enough things and place multiple bets, which makes it very hard to play this game because we always want to go with one-liners. We want to go nanotechnology and we all get excited and do our one nanotechnology, but it turns out we have to do nanotechnology and we have to do biotechnology and we have to do rubber and we have to do chemistry. And so seven is a best number. What are our seven bets? Not what’s our one bet, and we should to be rallying around seven bets and spending money on it.
Mr. Hill: But there is also a linkage issue that’s been missing in Ohio. And the linkage is, again, between the existing base and our research and technology base.
I do work occasionally for the American Academy for Advancement of Science, the research competitor in this group, and one of the most exciting proposals we ran into was in the State of Maine. Very small state, limited amount of money, and what they said is whenever we fund anything within a firm, it’s closed science, it doesn’t build our base, and whenever we fund something purely in the university system, it doesn’t hook up with business at all. And so we said, why don’t you take the best of both worlds and say you are going to put together a competition that funds business and either nonprofit research labs or your universities and partnerships with juries that are composed of academics as well as business types.
Mr. Eckart: In the last several days, we just rolled out an announcement about where we will actually create a jury of business plan competitions --
Mr. Hill: Multiple ones.
Mr. Eckart:—multiple. And spend half a million dollars rewarding folks who take risks. And in so doing that, it’s just is a baby piece, but what we got away from was what this community did so well which was taking risks, and we have few risk takers today. And in this context, this is a marriage between the business community, the university community and Reserve and other capital folks to actually fund business plans and there will be components to that that can make a difference, but this is only just a single component that measures our willingness to invest and to take risk.
Mr. Hill: That’s wonderful. And I would like to see that same type of thing going through OBOR, Ohio Board of Regions, to get partnerships going like that when it comes to research and development dollars. I think you would have a better constituency for the Ohio Plan if you had that type of research competition with real partnership and it would get us to that five to fifteen year period to re-energize the base, and not to the exclusion, but it’s got to be both. We’ve got to put together a portfolio approach that deals with the short, medium and long run. We haven’t articulated that yet. It’s got to take place.
Mr. Minter: Being with this conversation really pushes even harder at why we’ve got to invest so much in education. Those are the steps where the incremental success things give a degree—will give a degree of confidence to a lot of other facets of our economy to move forward.
Just the more I think about it, the more that’s—that is the reluctant piece where this community lacks confidence that we can really make a change and why what is going on right now in the Cleveland Public Schools and the inner-ring suburban schools because you will find me continuing to stress this with what’s happening in terms of higher education.
It also says to me, for example, there are probably a lot more us who ought to be highly exercised and highly energized and we probably aren’t about what’s going on at Cleveland State University and the current search and where that university is going to go.
Try and think about that in the next decade, because it’s someplace where you can make an investment. And if we look back at Case Western Reserve University and the medical school in the early eighties when our foundation and a number of others put money in supporting the basic science departments and how that paid off in terms of AIH grants and so on and so forth, where there was a tremendous amount of money and where they will be we already know from the Federal budget, very significant increases.
So, part of the business of being—getting the competitive edge on the economy is also looking at where there are some resources out there to be tapped. It would be nice if we got more than our fair share. And clearly, in the education arena, both elementary and secondary education and higher education, we need to take some major steps and we’ve got some tremendous resources to build on here.
Mr. Shatten: Those major steps though, I don’t think this is going to be possible until a governor has the strength to look at this budget today and say we are going to need to raise taxes.
We have talked about education and everybody agrees that this is the way to growth and to innovation and to entrepreneurship, but this state, under the current circumstances, I don’t think is going to be able to pull it off without a tax increase. And we’re not allowed to say “tax increase” in this society, you say tax increase and everybody hides under the table.
But, over the last twenty years, we have successfully disinvested in education and hurt our income, our wealth-generating capacity. You are raising a basic point, Steve, and I would add onto that, you can’t duck it. There has to be a debate about trying to slim down and slim down. You can’t just do that. There has to be a way to say, we deserve our fourth graders a better education so that they can be entrepreneurs when they graduate from college and go onto graduate school and create jobs. It is a huge, messy, miserable issue. I’m angry about it. I’m exorcised about it.
Mr. Eckart: But when in the years of Voinovich was there marketing more, doing more with less?
Mr. Shatten: And you pay a premium for that which begs the question, in my view, as to what do you then expect the next mayor of Cleveland to do? Having gone out and done a major tax increase for our schools, having been through the audacity of trying to sell the power plant after they sold the sewer system after they sold the bus system to keep the City alive and afloat once upon a time.
Is there an element of political leadership that is prepared to have the kind of very frank discussion about other assets? The airport is one that comes to mind, the linkage with the Akron/Canton Airport. How you develop Burke, which is a primo piece of real estate, and by the way, which Chicago decided they were going to get rid of that because it’s too valuable lakefront real estate right now. And Joe and Cleveland Tomorrow with Civic Vision have done a number of initiatives, but where in the context of the mother city in linkage with certainly Lorain and Akron probably, and I define by the way the mother city as picking up the under-ring suburbs because their future is in inexorably linked --
Mr. Shatten: So that’s sort of the role of the mayor in terms of pushing that issue? Is that where that lands?
