A Quiet Crisis: Higher Education & Economic Development Transcript
MR. PROENZA: I did simply because that’s been my career and because I happened to had been in Georgia when we very much were advising the Governor that these were the things that they needed to do. So first I found it a little ironic to come to Ohio and tell Bob Taft that he needs emulate Georgia, because 20 years ago I was telling Georgia to emulate Ohio because you just replaced that wonderful Edison program that needs revitalizing, but indeed the linkage between higher education and economic development has never been clear because of this knowledge economy that we’ve been talking about and it happens in 3 ways and I think it is very important that we communicate. That one, is obviously through the training of people.
Today the knowledge economy requires intellect. It’s the knowledge and ideas that these people take forward and 95% of all technology transferred occurs when people move from one place to another either from the universities to a new workplace or from one workplace to another. 95%. The balances - what’s left over.
Secondly, universities leverage resources into the economy that would not be there except for the marvelous talented faculties that we have who leverage sometimes ten times the amount of money we spend on them. Some of Brit’s and my scientist and yours, you know, we’ll bring annually a million or more dollars in research grants from the industry and from the Federal Government and that adds tremendously to the amount of money that’s circulating in the environment. And the third way, of course, is what we’ve been talking about, that new knowledge when it is then commercialized and it’s valued in this market environment, adds new jobs, surpluses for reinvestment and economy grows. New wealth is created.
MS. BROWN: Absolutely. Let’s say it one more time. Higher education is the engine for economic development.
MR. FROLIK: I’m at tech transfer and the spin-off, the licensing. What if… walk me through it. If I’m laboring in the lab at Case. I think I’ve got a neat idea. What do I do, call up Jim Wagner and say I’ve got a neat idea?
MR. WAGNER: Some have done that. And the better way, and every school has, ever university, I’m sure, or institution has its own infrastructure but the better way is to approach the agencies and we have a structure for technology management.
And the first step, of course, is a formal disclosure, okay, and there are several options there for protection. The first question is how do I want to protect this. Do I want to patent it or not. Increasingly I think universities are being a little bit smarter about that process. It used to be, see, there’s a problem. Since you’re the smart researcher that comes to me, without me maligning anyone’s researchers, often it’s the case that there are some misunderstandings about you and your invention.
Very often the inventor comes and says this invention is ready for the market. That’s often the statement, just shrink wrap it and sell it. Mistake number 2 is often, not only that, it’s worth a zillion dollars, perhaps 2 zillion. In other words, they overvalue - it tends to get overvalued at the investigative level. And the third common problem when you come forward is your assumption that you’re a good business person. And so what we need to do actually is the next step. It’s called market assessment.
One looks at what is the potential for this widget or concept. It doesn’t necessarily have to be anything mechanical. And assuming that it’s one that we feel has potential and has value, we would help pursue a patent for that and then market that. in fact, different institutions have different strategies. Our own strategy is to be very selective now. We hadn’t in the past. And the idea now is to be much more selective based on the potential for it to have an impact, an economic impact, than to patent that, and since we have been selective, we can pay more attention to those few that get patented and try to market them.
They get marketed in a couple different arenas. One is to existing companies with whom we would enter into a licensing negotiation and set up a licensing agreement and royalty structure and all that sort of thing. Another alternative, of course, is to try to do a new start-up, a new business start-up. And some of the infrastructures Brit points out isn’t necessarily here. In fact, around the country, there have been very entrepreneurial people who have been entrepreneurial about entrepreneurism. By that I mean there are groups that have established what’s been called enterprise factories and we don’t have one of those in Ohio just yet.
But an enterprise factory is one where I can take this patented idea and this is a group that understands all the three things that I told you before and particularly the third, the business aspect of how to get this thing off the ground and going. I mentioned before Biopark and its headquarters will have some of that capability, as well.
So it starts with an idea that has to be disclosed then is evaluated then is protected and then is marketed. And I think to a greater or lesser degree, all of us go through those things.
MR. KIRWAN: One of the things we have done at the university to help the start-ups is to create something that Jim referred to we call the technology commercialization corporation. It’s sort of a one-stop shop where an entrepreneur can go, a service we provide to them, helps the entrepreneur do a business plan, helps the entrepreneur look for, if they’re going to start a company, who would be on the board, who would manage the company, because the kind of expertise needed to start a company up isn’t very abundant in Ohio. It’s abundant on the East Coast. It’s abundant on the West Coast, maybe in Austin, Texas, a few other spots around the country.
So we need to be there to provide some infrastructure support to people who, entrepreneurs who can get a company started, and that’s why Case and Ohio State independently have made an investment in early seed funds to help support technologies growing out of our universities.
MS. KILBANE: I guess, you know, we had mentioned, I think Roy had mentioned that you have the knowledge piece, you have the technology piece and the missing piece in Ohio really in a sense - you do have the education piece, but another missing piece is the entrepreneurship piece. And I was going to ask Jim a question. I see Case building that wonderful new building in the business school and I know Case has emphasized entrepreneurship emphasis in their business school.
MR. WAGNER: That’s right.
MS. KILBANE: That’s almost saying to me, you know, are we beginning to look at that third piece of the puzzle in terms of what is that creative genius that some people have and most of us don’t that lets us see and then envision an opportunity and how to go about doing it.
MR. WAGNER: We’re looking at it in two ways. One is, and I mean the “we” is the whole higher education group, creating a demand for it, also, by changing the attitudes within the research university. I mentioned before helping researchers understand that commercialization is not a four-letter word and that it is, you know, seriously, that it does not in any way necessarily, doesn’t have to, let’s put it this way, damage what we do in our fundamental research. In fact, toward that, and we have brought speakers on campus - David Morganthal locally has sponsored them - who are academics who have had an entrepreneurial activity that has expanded their career, not necessarily diverted it.
We have also had a little bit of support locally from Covington Foundation to set up - not a little bit, nice support to set up a little internal fund so that when a basic researcher is progressing along towards their very focused fundamental goals, when they get to a pointed where there is something that they developed that should be spun off, we have a little bit of money actually to do the development to get it to the point where it can then be disclosed. So it’s out of a concept even to proof of concept. The whole idea is to try to help our faculty researchers expand what they do with their research and to make meaningful our commitment to service to society.
MS. KILBANE: You know, I was thinking of something I’ve been reading about, sometimes the spark is the new building, like in Nebraska, thinking about the Peter B. Lewis Business School in which they are - I know Case in the last couple of years has gotten into the business school, the enterprise idea, and I was wondering how one can have an impact on the rest of us in Ohio and in particular northern Ohio.
MR. WAGNER: I hope it has a big impact. We, of course, have a fine reputation, in fact, one of the strongest reputations within the Weatherhead School of Management is in the entrepreneurship area. We do intend that the new building is symbolic of thinking outside of the box. As I started to say, through our researchers developing a demand for this sort of thing, we then want to link our schools together. We have done a lot of linking.
We have a new program, an institute that links our engineering school with our management school for the, for the purposes of seeing a transition from the laboratory to business development. We would hope, therefore, that as this plays out regionally or locally, that we will actually be setting a pattern that could be replicated around the country for a more effective and efficient transition of technology. Yeah. I hope it would benefit all of us.
MS. KILBANE: I guess Roy has mentioned that in a sense that wonderful entrepreneurial spirit that kind of brought perhaps many of our own parents here to this country for opportunity and people to take risks and start to do business. In a way, we don’t see that vitality that you see in other places and, you know, our, again, in looking at almost this third part of the puzzle, you know, can schools like Case and others kind of help us identify those things that in our communities, in state government, in local government, you know, kind of our barriers maybe even to do that type of thing or barriers to the way people think about it.
MR. PROENZA: The very encouraging point is we see it in our students. We have an entrepreneurship center that was endowed by Bill Fitzgerald, the CEO of Cooper Tire, that retired and the linkages that Jim outlined at Case are there plus the linkage to intellectual property law which is so critical to the appropriate protection. But the students themselves are the most encouraging point, and we run annually a competition and the kids just recently went and won the top two prizes in the regional competition and that’s just very exciting to see that in the students.
MR. WAGNER: What’s a little ironic in the research universities is that researchers are very entrepreneurial people about their own research. They run their own little companies and yet making this connection to the commercial world. It has been a little difficult.
However, we ran for the first year a business launch competition where we put together a nice jury of external folks to evaluate business plans, and we made a little bit of money available for the winner to help do pre-seed. That’s really all the money we could find at the time, but the seed money that Brit is speaking about. And there’s a lot of speculation, how many would we get. These folks had to have some connection with the University and they could be alumnus, also. And we thought, if we could get into the double digits for this, we would be happy.
We had something in excess of 17 applications for it. It was almost as though when the institution said, you know, it’s okay to be entrepreneurial, it’s all right, that folks said, all right, I’ll play, and some flood gates began to open.
MR. FROLIK: That’s interesting because we spent some time at the first discussion here talking about culture shift in northeast Ohio, that we have not been a very entrepreneurial culture. Universities have long had a reputation of places that are politically quite liberal but pretty conservative when it came to changing the way things work in my department.
Roy, how do you go about changing that mind-set within an institution like a college or university?
MR. CHURCH: Well, that certainly is a challenge, but I think one of the ways is to get people more connected to the opportunities and to the larger environment. You know, one of the things that we have seen really spawn the development of the entrepreneurial programs and the spirit in our community is not research. We’re not a research institution, but our faculty and staff have gotten much more deeply connected to the changing nature of our community and its aspirations.
And what they have concluded is that, in fact, we have a responsibility as one of the public resources in our community to help the community change, and so faculty members have been saying, you know, what is it we can contribute to that process. Now, we, too, have tried to build the entrepreneurial support system and to give the permission and we have done that through a variety of mechanisms. One of them is that through a partnership again with the community, we have been able to create this Great Lakes incubator for developing enterprises, and the notion is hat we will create a regional innovation center that will support any entrepreneur whether it’s from within the academic community or from within the community from idea, inception all the way to commercialization and support all along the way.
Now, we have partnered with our County chamber of commerce and with our County commissioners to put that continuum of support in place. In fact, the County commissioners have stepped forward and committed $385,000 a year for five years to provide that kind of start-up support because the notion is that some of the assistance to the entrepreneur in terms of those other gaps or components such as the business acumen, the market research, the analysis that needs to be done is not going to be available for every entrepreneur given whatever walk of life he or she comes from.
But if you can add that little additional value at the right time, you can nurture the development of the creative idea toward commercialization. Now, one of the things we’re doing is tapping not only our faculty to assist in that process as entrepreneurs work along the continuum from idea inception to commercialization but also tapping into the students. You know, one of our university partnerships programs is with the University of Toledo in computer science and engineering, and those students have a wealth of experience in software application development and so they are becoming actively involved in supporting entrepreneurs in moving those ideas further along that continuum. I think that’s the kind of partnership that has to happen.
MR. KIRWAN: Just to your specific question about how do you get faculty involved.
MR. FROLIK: You’re moving the battle.
MR. KIRWAN: I think a couple of points. First of all, it’s not, you know, this isn’t relevant for every single researcher at the university, somebody who is doing highly theoretical research which is very important say in physics, particle physics or something like that where the knowledge will be an application several decades down the road, you know, you don’t have to reach those people, but I think one of the exciting things about our times are that there are a couple of areas of research information technology, biotechnology, material science that are very close to the marketplace. That is to say what faculty are interested in working on have application in the marketplace that is not too many years removed, and so I have found that if you make it known it’s a priority and you’re willing to put some resources forward, that there are plenty of faculty working in relative areas that are eager to become engaged.
If I could, I just wanted to make one other point that sometimes people might wonder, well, you know, in all of this flurry to become engaged in economic activity and supporting applied research and so on and so forth, what happens to the undergraduate. I mean, are we shortchanging our undergraduates, and something I feel I have observed and feel very strongly about, you know, all of this activity enhances undergraduate education.
You know, we’re talking about entrepreneurial activities in engineering and applied physics and certain areas of chemistry and in medicine and so on and so forth, and what happens with these start-up companies is they look to the university, you know, who’s going to be our employees. We can’t hire a lot of full time. They hire undergraduates and graduate students to go and work in these companies.
What incredible experience for these students, what an enrichment to their education to have an opportunity to do something like that. And let’s never forget Michael Dell started Dell Computer from his dorm room at the University of Texas, so there are plenty of entrepreneurial young people that are populating our campuses who benefit from this emphasis on innovation and enterprise development.
MR. FROLIK: Several times during the course of the discussion we have talked about things that are going on in other states. A number of you have worked in other states, obviously you travel and talk with your colleagues around the country. Beginning maybe with Luis, if you look around, what are some places or some specific programs that Ohio could learn from that we should maybe be thinking about? Who are doing the sorts of things that we should be doing here?
MR. PROENZA: Well, certainly Texas, Austin in particular, Georgia, the Georgia Research Alliance, the Hope Scholarship, North Carolina, the focus on the three major research universities and emerging research strengths at urban institutions throughout the state, the Research Triangle Park focus on some key areas, some in Maryland.
The examples are almost endless and we have been behind the curve. Quite literally we have just not been focused particularly on benchmarking ourselves and recognizing what others are doing. It’s not that we’re not moving forward a little bit. It’s just that the competition is passing us by.
MR. FROLIK: The Georgia one to me is very intriguing. Can you talk a little bit about that and what the Research Alliance does in Georgia.
MR. PROENZA: And again, one of the important things to communicate is that it doesn’t happen overnight. It’s not that, you know, you have failed us entirely in this area but it would have been nice to get started because we’re 20 years behind the curve. Okay?
They began literally in the ‘60s by an analysis of the brain tree and they made initially a commitment of nearly 400 faculty positions in one university alone in one year to grow the excellence and the expertise to grow programs in size and so forth. And then in the late ‘70s, they began to realize they had some strengths that could be related matching strength to opportunity to the opportunities that lay before the state and diversifying its economy away from cotton, peanuts and peaches and literally, they realized there were opportunities to really begin.
And it had begun in Atlanta in particular but some in other parts of the state, particularly in Athens, and they really began to talk about what investments might be made, Very informally. Former Governor Joe Frank Harris, during that time Zell Miller was lieutenant governor, longest running lieutenant governor I think in the history of Georgia, 19 years, but those conversations between the university presidents, the governor and just a handful of business leaders first made the governor aware that two investments were needed, one in biotechnology at the University of Georgia and another one in information technology, telecommunications, microelectronics I think was the word that was used at Georgia Tech, and those enabled those two institutions to take a massive leap forward and do the kinds of things that Brit was talking about, bringing in a scientist that overnight brought $6 million of competitive research, and the next thing there were two companies and the next thing there was a building.
And that was the ground work that then said to people we need formalize this, and that became the Georgia Research Alliance, a formal program that the state said we’re going to invest strategically in some programs and only at a few universities but, again, they made a decision that was broader than we’ve made in Ohio. They said not just Georgia and Georgia Tech, they said their private university, Emery University there and a couple of others. And they picked three areas initially and an initial investment of some $200 million has netted them $800 million in leveraged funds and countless numbers of start-up companies to the point that last year Georgia could very proudly say it was fifth in the nation in venture capital investment and first in high tech job creation.
MR. KIRWAN: Isn’t that amazing. You know, there’s another dramatic example where we can actually compare what happened in Ohio with another state and that’s a state we sometimes don’t like to compare ourselves with, that’s the state of Michigan. The state of Michigan decided, you know, this biotechnology, this is a technology for the future. NIH, which is already incredibly well funded is going to double its budget. Its enormous budget over the next five years is going to be doubled to support research. We’re going to be a big time player in biotechnology and they’re creating the so-called biotechnology triangle, the University of Michigan, Michigan State and Wayne State.
And the state decided to invest about a billion dollars from its tobacco settlement funds, front load it into building this biomedical research triangle in Michigan. Now, we in Ohio, and let me say we are indebted to the fact that, indebted for the fact that the state decided to invest a portion of the tobacco money in biomedical research. Quite frankly, it was a partnership between Case, Ohio State and University of Cincinnati that led the effort to get that done.
But what is the allocation in Ohio? Well, it’s about $400 million spread out over the next 15 years. The first investment will be made hopefully next year of about $30 million across the entire state. Now, you know, that’s $30 million we wouldn’t have had otherwise and we’re very pleased that we got it, but when you look at the comparison to the approach that Michigan took and why they took it and the fact that this was really a strategy, a strategic choice that the state made, I think it sets up rather dramatic…
MS. BROWN: Let’s just look at another example, another rust-belt state, Wisconsin, one of the only ten or nine below us in personal income growth in the nation and they, too, have established a biopark, have made a determined decision strategically understood in place to invest $300 million in one year to start this. Right. We can just click them all off, all the states around us and, of course, the big examples that are the well-known cases.
MS. KILBANE: In fact, there are documents, the Board of Regent documents, you say that for every dollar that is invested in the research challenge by the state, you get…
MS. BROWN: 10 back.
MS. KILBANE: I remember 8 to 9 dollars back. It makes me think of, you know, looking at those NIH dollars which we are competitive here in Ohio but not for the science foundation dollars, but it makes us - you know, again, that is strategic idea of how you can leverage what you have.
MS. BROWN: Absolutely.
MR. WAGNER: I feel like, just a quick side comment for the purposes of balance, Brit made the comment that this has a positive impact on undergraduates and it must. It must have a positive impact even broader than that. In the final analysis when we talk about economic well-being, we are really talking about quality of life issues.
Maryland is an interesting state because it seemed perhaps, and northern Virginia, that region, it seemed that perhaps because we brought the kinds of people who live in that region, the law makers, et cetera, that there was an intrinsic value that these folks placed on education broadly and I think education was strong there and it was a fertile ground for, in this case, the biotechnology industry in Maryland and the communications industry in Virginia, telecommunications and information technology in Virginia.
My point is this, that just for balance, we should realize that we’re not - we can’t talk about merely growing as higher, you know, folks in higher education in the field, merely growing the technology areas in our institutions and making the technological linkages. Remember that we have the disciplines that deal with human expression and communication. As I mentioned before, issues that deal with the nation’s social conscience and political conscience as well, all of these other disciplines that really make a fully educated person need to be supported by this as well and need to be considered if indeed quality of life is what we…
MR. KIRWAN: The foundations of our democracy.
MR. WAGNER: I felt this so strongly.
MR. FROLIK: For all the Liberal Arts majors, I would like to thank you. I have a lot of science and math if my transcript were laid out.
MS. BROWN: There have been studies also on this aspect of the university importance in our lives and it is that the rate of return in social terms from having a well educated person, think of the diminished health care costs from a better educated person, so the quality of life issue broadens very, very substantially into really a business calculation when one looks at the value of higher education.
MR. PROENZA: Especially in economic terms and really just beginning with education, Sally. And this is a point I have made to your colleagues, because just in terms of the added taxes that a college graduate will pay as a result of the state subsidy, you will get back in inflation-adjusted dollars about $1.84. If you add to that all of the other points that both Jim and Jenny are putting forward, the social rate of return of education is calculated to be at least 60% annually in terms of all of the spin-offs.
Think about what it costs you to keep a person in prison. It’s in excess of $30,000 per year and yet the most important factor in keeping a person out of prison is education which costs you less than $5,000 a year.
MS. KILBANE: That is a secondary very much key argument in terms of the extra analogy which causes you privately to underinvest because you underestimate your rate of return looking at your private rate of return and then you have that social rate of return. In a sense, that says to me that’s the justification for the state’s involvement here because, you know, that’s that social rate of return that we would not reap without the additional investment that simply a private sector investment would generate and that’s kind of a theoretical reason to understand why we…
MS. BROWN: The public domain.
MR. CHURCH: The other reality is that the technologies of today that we have been talking about transferring and utilizing for economic development are just at ephemeral as the technologies of yesterday and in ten to fifteen years, we are going to be different. So the liberal arts skills that we’re teaching college students today are going to be what sustain them through the changing cycles over time and that’s a critical investment that pays off in the long term dramatically.
MS. BROWN: I just have to make a comment because it relates back to the very well-stated comments about information technology and how they impact manufacturing. But I just read the most wonderful article about information technology soon to be accomplished at the molecular level. Silicon chips will no longer be the driving force of new industries of the future. Right now we know that we’re working and have the capability with nanotechnology to move atoms around and to flip molecules on command to get quantum computers that are going to be hundreds of thousands of times faster than what we can do today.
So this is where today’s knowledge is just what we’re building on today but we have to be looking forward 20, 30 years to the technologies of the future, and that is the wonder, it’s the magic of research that we all have enjoyed so much I think in our own associations with it.
MS. KILBANE: Can we come back just a second. We talked a lot here about technology and research tech transfer but the fundamental issue to me goes back to the education of the individuals within our state and giving them the opportunities to develop their own gifts and talents. And I think in the long run, that’s what changes the quality of life, and to me, that is the underlying fundamental moral argument in terms of, again, why the state should invest and why we all as parents invest in our own children because we want them to have better lives.
And even in terms of the technology transfer, you know we could put a lot of money in tech transfers and seed research and try to develop businesses, but what makes those things go are the employees that you have and if we do not begin to increase the people that have the skills that we need in the future, that all that means, there’s going to be nice higher wages for people that are already there but it means in the long run that we have left so many other folks behind and I don’t think that, I really don’t think that those of us in Ohio that kind of help in a small way shape public policy, you know, can walk away from our jobs and having had that that we haven’t at least tried to make this case that this is real, real important for all of us.
And I don’t want to let the undergraduates, you know, having taught undergraduates, that’s the one thing about education, I used to teach not only at Case but at Cleveland State, and probably the most inspirational students I have ever seen are Cleveland State. Case are brilliant, bright, wonderful kids. Cleveland State are literally people that have very little and I’m sure Roy sees the same students, struggles extraordinarily hard to get an education and fees go up $50 and there’s a buzz in the class, gee, $50, I don’t know if I can come back next semester.
Every class I taught at, people worked full-time, went to school full-time, virtually everybody worked part-time and went to school full-time. I have a son there now. I said look around your classroom. These are inspirational people. My favorite student was a lady that worked all night at the Cleveland Clinic, had a class at 8:30 in the morning, was there every day, front row, A student. Last time I heard she was going for her Master’s degree. I think the bottom line for me in terms of education is what we can do for the people in our community and for our, you know, it benefits the community but it truly benefits them.
MR. PROENZA: I think in the interest that you called for earlier of honesty, we need not only to revisit that time and again and just recognize that indeed since time and memorial from Aristotle to every major statesperson - all of you may be reading John Adams’ wonderful biography that says education is the duty of government and so forth. The irony is look at the figures that Jenny cited for us. Only 39% of Ohioans have a high school education.
MS. BROWN: Some college.
MR. PROENZA: I apologize. It is a little larger, but the bottom line is K through 12 is compulsory and yet if I’m correct, a much smaller percentage graduate. The Organization for Economic Development published a study earlier this year that shows that 22 other nations now graduate a higher percentage of their population from secondary school than we do and already three other nations are graduating a higher percentage of their population from college than we are.
MR. KIRWAN: And that’s a new development. That’s never happened before in history. We have always been the leader providing access to higher education.
MR. PROENZA: When you go back to this education deficit that Jenny said, we owe it to Ohioans. The only way that our state, our society will advance is as a larger fraction of our population participates, completes and moves forward and so your comments…
MR. WAGNER: That’s the latent opportunity that this quiet crisis ought to transform into.
MR. PROENZA: That we focus on the common interests of our State by enhancing the educational attainment of a larger and larger and larger fraction of our population.
MS. BROWN: And getting back to that tie again between personal income and economic development, we have the two choices. We either have low educational goals and continual declining economics in the state and personal income or we try to achieve higher, we invest in higher education which is no longer a luxury, it’s a necessity, and we see all the resulting benefits from that. The chancellor has put it this way, you know, the choice is clear, there is no choice. We really have to invest in higher education and it is much more. It is an economic but it is also a social issue. It’s a quality of life issue. It’s what we owe to the people of this state.
MR. KIRWAN: And without being overly dramatic, would you say Ohio is sort of at a crossroads?
MS. BROWN: Oh, my, yes.
MR. PROENZA: Time is running out for us to make the right choice here.
MS. BROWN: Yes.
MS. KILBANE: The cluster works both ways. We get this diffusion and this explosive growth that comes with clusters and this investment. We saw clusters with the rubber industries. As clusters begin to disintegrate and collapse, this disinvestment kind of structure or investment growth all goes backwards and so clusters can work for you and against you. you’re absolutely right.
We’re at that point where the market is not working with us but it’s not killing us and so in order to make that happen, again, we have to do the right thing.
MR. FROLIK: Brit was right about something else, which is that we’re running out of time. I thank you all and hope that we can maybe do this again.
