Learn to earn
Collectively, the 13 counties that make up the Research Triangle Regional Partnership have the highest per capita personal income of any region in the state. Thatís due largely to the three universities that inspired the name ó UNC Chapel Hill, Duke and N.C. State. So how strange is it that these Triangle business leaders say that the key to a better economy is better education? Senior Editor Arthur O. Murray discussed the regionís future with Joe Freddoso, director of Research Triangle Park operations for San Jose, Calif.-based Cisco Systems Inc. and chairman of the North Carolina Technology Association; Jim Goodmon, CEO of Raleigh-based Capitol Broadcasting Co.; Bob Greczyn, CEO of Chapel Hill-based Blue Cross and Blue Shield of North Carolina Inc.; Charles Hayes, CEO of the regional partnership; and James Oblinger, chancellor of N.C. State.
Last year, the partnership launched a five-year, $5 million plan to bring in 100,000 jobs and increase employment in all 13 counties. What progress has been made?
Hayes: We are ahead of where we thought we would be: 15,800 net new jobs were created over the last year, and 10 of the 13 counties gained in employment.
Goodman:The plan looks at doubling our population in 15 to 16 years. Can anybody imagine this region with twice as many people? We need to figure out what weíre going to do about that, what kind of community weíre going to be, the kinds of jobs we want, what are we going to do about air quality, water quality, all those kinds of things to maintain the quality of life we have here.
Does technology still drive the economy?
Freddoso: Weíve grown the Cisco site 15% at Research Triangle Park in the last two years. We feel good about where the marketís growing. But overall, the industry is still in a period of consolidation. Youíve got to use a broad definition of technology, because if you look at Mr. Greczynís organization, itís an information-technology organization. He runs his business based on the information that he gets on a daily basis. Mr. Goodmon runs his business based on market information he gets on a daily basis thatís enabled by IT. When opportunities come up in areas like financial services with Credit Suisse First Boston and we have a definitive technological advantage in attracting those opportunities to the Triangle, we need to aggressively work together.
Goodmon:Iím not worried about our economy. Weíve got good growth trends. Weíve got good job creation. We have three of the best universities youíre going to find anywhere. So weíre going to add jobs, and weíre going to grow. The question is, when we sit down to talk about this in 15 years, what are we going to be talking aboutt?
What problems do you foresee?
Hayes: Our biggest challenge is the dropout rate in high schools. You hear figures from 20% to 40%.
Goodmon: They argue in the schools about how to calculate the rate. We got it from Harvard yesterday. What Harvard does is calculate that you start the ninth grade and do you finish the 12th grade?
Freddoso: And itís 40%, right, Jim?
Goodmon: Yeah, and with black males the dropout rate is 55%. Thatís statewide.
Hayes: If itís 20% here, thatís still a huge challenge because we know that itís going to be very difficult for whatever percentage it is to find jobs.
Freddoso: Itís economic disenfranchisement. Those jobs are gone. The other figure that causes concern is that we remediate about 50% of our kids that go into community college. Chancellor Oblinger has less of a challenge. We remediate only about 4% of our high-school graduates that go to universities.
Oblinger: Itís a very low percentage, but itís there and itís not getting less.
Freddoso: We have to look at those infrastructure things, those education things. We canít sit here in 15 years and look back. In terms of transportation infrastructure and air quality, we need to make those decisions now. It takes 10 years to build a road from initial concept to getting the first pavement laid.
Greczyn: We add about 250 jobs a year at Blue Cross, and we struggle to find people for entry-level jobs who can communicate with our customers. The training is taking twice as long.
Oblinger: We are so concerned about this that weíre going through the planning process right now to add an elementary-education dimension to our College of Education. With our strengths in math and science and the crying need for more, better-trained teachers in those fields, it is probably overdue.
Goodmon: Everybody wants to talk about consultant Richard Florida and the creative class. He ranks the Triangle as right there at the top. So weíre getting a lot of creative-class jobs, but Florida also points out ó and almost nobody mentions this ó that the creative-class regions have the largest disparities. In other words, youíve got this creative class, but the dropout, low-income-service-job, dead-end class gets bigger and bigger.
How do you extend prosperity to a place such as Warren County?
Hayes: Itís very difficult. Iím a native of Warren County, so I can say ugly things about it. Warren County has one of the most exciting histories of any county. There were four governors that came from that county, nine attorneys general, the only speaker of the U.S. House this state has ever produced. Even in recent history, Reynolds Price is from Warren County. Charlie Rose claims he is from Henderson, but heís really from Warren County. But most of those people left. The jobs werenít there. Why werenít the jobs there? A lot of it was because they didnít embrace change. They were doing well up until the 1950s.
So how do you help Warren County?
Hayes: We had an idea to start a mini-hub to go out from the core of this engine, which is Raleigh-Durham International Airport and Research Triangle Park, and go out 25 to 30 miles in different directions and create good employment opportunities, with all of the counties within that mini-hub to share the tax base that was generated. The idea was that you can create jobs close enough for the people from the Warren Counties to drive to, but that doesnít help the tax base in that county. So the county canít put the money in the schools, et cetera, that they need to do. You can grow from within ó antiques, history, Lake Gaston, lots of things ó but none of that creates a lot of tax base, and you need the tax base to fund the types of services that you need. So thatís one of the initiatives that weíre trying.
Oblinger: I was just involved with a team that came to visit N.C. State and Carolina because of our cooperative biomedical-engineering program. They were well aware that North Carolina now is third in the U.S. in biotechnology companies. They were particularly interested in how that had happened. We had to do a little bit of homework and look back at how the companies got started. Well, the state invested in the North Carolina Biotechnology Center, and sure enough, the businesses started in urban areas around the universities. But as spinoffs took place over the past 20 to 25 years, those spread out across the state.
But wouldnít the jobs have to be where the research is?
Oblinger: If we get into nutriceuticals ó plants with medicinal qualities ó those plants are not going to be grown within the Beltline. They are going to be out in North Carolina, and thatís where the manufacturing facilities, extraction plants, are going to be located.
Hayes: What Chancellor Oblinger is talking about is a bioprocessing program. Vance-Granville Community College, which serves Warren County, was one of the first community colleges to start such a program. One of the leading companies that helped that was Novozymes in Franklin County. So we are seeing this work. All of our region is within an hourís drive of RDU and of RTP. But the real challenge is going to be, how do you get the property tax back to these counties? Weíll have a pretty good success in creating the jobs. But then how do you get the money to do what you need to do?
Greczyn: We can attract people who are looking for a different lifestyle and who can get more house for less money in some of these outlying counties. I have lost count of the people who work at Blue Cross who drive an hour to an hour and a half to work because there are no jobs where they live. Theyíre quite happy to do it.
Freddoso: If we create incubators, university- or private-sector based, 85% of the companies that come from them end up locating within about 20 miles of the incubator.
How can poorer counties help themselves?
Freddoso: Itís outside the Triangle region, but Scotland County has used Gates Foundation money to basically remake its large, comprehensive high school into six themed high schools. Education leaders partnered with economic developers to determine where they thought prosperity was going to come from. Itís one of the lower-ranked counties in the state, and it is taking that risk.
Greczyn: Thereís a whole raft of business opportunity around the fact that weíre going to have a very large increase in the older population. We have every opportunity to become sort of Florida Junior.
Oblinger: Nonwoven textiles. There has probably been $100 million invested in the Triangle every year, at least for the last several years, on nonwoven research. A lot of it deals with some of these bioprotective clothing fabrics that have been created at N.C. State. We have multinational firms coming into North Carolina to build multimillion-dollar facilities. Thatís where the growth is, and itís pretty sophisticated growth, too.
Hayes: One of the more recent investments in nonwovens in this region was in Person County by an international company. Itís global and itís local and itís technology, and it is getting to the rural areas.
Goodmon: The most important question is, will our future be an accident, or will it be as we plan it? I was thinking about Governor Jim Hunt. He had these 10 points, and he gave everybody a card and says, ĎHere are 10 points. Weíre going to do Smart Start, weíre going to raise teacher pay, weíre going to establish this ó boom, boom, boom, boom.í I was scared to death that he would see me somewhere and I wouldnít have that card in my pocket.
Oblinger: It was laminated, wasnít it?
Goodmon: It was. See, we donít have a list in North Carolina now. The legislature eliminated the State Planning Office to save money. So what are the priorities? Do we have a plan to reduce dropouts? Do we have a plan to reduce juvenile diabetes? We lead the nation in that. I mean, what are our goals? Whatever you want to say about Governor Hunt, he had a plan. You might not have liked everything on the plan, but he had one. So we all got behind it.
Greczyn: And he wouldnít let you forget it.
Goodmon: But you see what I mean? We can name all the important things to do, how weíre going to get the best teachers, but there is no plan. And Iím all to pieces over it because I donít know what to do. Suppose every time Bob had to pay a claim, 50% of the time it didnít work.
Greczyn: Thatís a scary thought.
Goodmon: But think about it. How did we get to a 50% dropout rate? I donít understand how systems deteriorate like that.
Hayes: Part of the challenge is, I donít think we just got there. Weíve always had that dropout rate, but we had jobs for those people to go into.
Goodmon: Now they are gone.
Hayes: Yeah, and the jobs left the state faster than we fixed this dropout problem. Goodmon: Here it is: Good results without good planning is good luck. And Iíve never believed in luck. Iíve never had good luck. Iím not going to bet my business on luck. And I donít know why weíre betting our kids on luck.
Freddoso: The state certified three physics teachers at the high-school level last year. Think about that. Are we really preparing a work force thatís ready for the knowledge economy when we certify three physics teachers, which is the basis of electrical engineering and innovation?
Hayes: And then we pay them $25,000 a year to start.
Freddoso: Jimís right. We need vision out there that says, ĎWeíre going to be players in the knowledge economy and weíre going to educate our students to that,í and that means that we drop that dropout rate.
Greczyn: And we had better be about it, because doing what weíre talking about doing is a 10-to-15-year process.
And this is the region that is most known for education.
Freddoso: But you need to look at it a different way. Weíre the region thatís probably the most aware of whatís going to go on in the future. Itís too bad that UNC President Molly Broad isnít here so she could give you her initial thoughts from being back from China. If you look at global competitiveness, we deal with that every day. China is producing seven times the technical graduates at the secondary level that weíre producing.
Oblinger: About 90% of engineers are being trained overseas.
Freddoso: India made an investment in 1951 in their institutes of information technology when they were a socialist economy. Now they are producing some of the finest engineers in the world. They donít have to come to the United States anymore to innovate. They can innovate in Bangalore as quickly as they can innovate here.
Everyone thought the high-tech element of the Research Triangle would be bulletproof. After seeing layoffs and outsourcing continuing, how much risk is there in the high-tech economy?
Freddoso: When I look at our company, we do work 24-7. We do development work 24-7. We have to hold up our end of the bargain in the U.S. by producing knowledge workers that are going to contribute. If we donít, then weíre going to lose our place at the table.
When IBM sells part of its computer business to a Chinese company, how does that reflect on the state of high-tech?
Freddoso: Thatís just part of the global economy. Probably our most fierce competition over the next 20 years is going to come from Asia. Iím not sure we have a plan on the national level to lead us.
Greczyn: You see more and more criticism out there in the public of success, of innovation, because they donít really feel that theyíre part of it. The basic build-ing block of economic development to me is education.
Freddoso: King Abdullah in Jordan probably realized this better than anybody. That country has no natural resources. It has a small port. Yet heís putting 50% of his wealth into education. They are incubating software companies in Jordan that are now selling to the U.S. They are remaking their education system to offer opportunity to those that hadnít had it. We need to look at some of those countries that are emerging and take a model from them and get back our aggressiveness.
Greczyn: And in North Carolina, it took a court decision to even get us to begin to face the issues of how we fund education across our state differentially.
Goodmon: Iím sure itís not reasonable to expect our legislature to do this, so we have got to elect somebody thatís got a list. And it needs to be a little more than the lottery. But the way it works now in the legislature, the only way we can move forward is to have a real leader as governor who has his list and who just beats them to pieces to get it through. Because I havenít heard a single legislator say anything about the dropout rate.
Youíre businessmen. Arenít you supposed to want those lower taxes?
Freddoso: Youíve got to look at the trade-off.
Goodmon: How are we going to come up with a plan as a state and get everybody behind it and march down the street and do it? I donít know how to do it except elect a governor that will ...
You think the solution has to come from the government instead of the private sector?
Greczyn: Thatís part of the answer. What weíre doing with the partnership is bringing together business people and economic-development leaders who start a change in the way we do things.
Oblinger: Yet the core topic has not been rocket science. How long have we known that education is the key to the future? So the question is not just whatís the plan, but what are we going to do about it?
Greczyn: Look at how our university system thrives, even in the face of cuts. The cuts have not been as dramatic as they have been in other states because the legislature has indeed tried to step up and has funded continuing growth. We need to translate some of that energy, without taking it away from our wonderful university system, into high school. Because Iím convinced that we lose these kids their freshman year in high school.
Freddoso: Itís when they get to that decision point, where they have to figure out whatís relevant. You can get any five people that have been involved in the region and you would come to this. Itís not difficult to see, but itís hard to implement.
Hayes: Regions are different. The strategy will be different in different places. Freddoso: It goes back to the Scotland County example, getting the key leaders at the table to talk about it and developing strategies around what they think their areas of competency are.
What risks will the partnership have to take to ensure its future?
Hayes: We get about 40% of our funding from the legislature, and if weíre going to lead in some of these issues that are not popular and not things to say, you risk that funding. You may also risk your funding from the private sector. And I will tell you, as you go around the state, everybody doesnít believe we ought to embrace higher education and economic development, that we ought to get those together.
Greczyn: Itís also going to take private action. I sort of tout the High Five program, which is an effort of a small group of companies in this region combined with Wake, Durham, Orange and Johnston counties. Itís private money looking at reformatting high school to make it more relevant.
Freddoso: Iím particularly excited about the learn-and-earn programs, where a student has an opportunity to go to high school on a community-college or four-year-college campus. At the end of a five-year period they end up with either an associateís degree or two years of college credit.
Greczyn: Sometimes government leads in efforts, and sometimes government follows. And it requires private action to create successes to show government where to go.
How tough is it to do that?
Goodmon: Itís real tough to do that if weíre not all on the same page or if we donít have something that we all coalesce around. But who gets up every morning and the first thing they think is, ĎWhat am I going to do about this dropout rate?í
What needs to happen in five years to help the regionís economy?
Freddoso: Itís vital that we look at air service. A lot of the trouble weíve had attracting venture capital is due to our lack of air service.
Hayes: Last year we brought 36 CEOs and academicians together to come up with a five-year plan. It basically says we have to make sure that our region remains competitive and focused on areas that we can lead the world or be among the world leaders in competition. But we need to look longer than five years.
Goodmon: We need to be willing to make the investments in our infrastructure ó part of that being education. This concept of the state being willing to fund the infrastructure ó roads, air quality ó is the key. Weíve lost sight of our taxes being an investment in our place, our roads for our businesses, our police department that takes care of us. How have we let that happen?
Freddoso: Weíve done the same thing with teaching.
Goodmon: I donít know how that happened, but weíre counting it as an expense rather than an investment. Weíre just choking everybody, and weíre electing the people that promise to do it.
Oblinger: The university wants to be an active partner. I would hate to think that we need to be further embarrassed, like Sputnik really embarrassed us as a country. And we launched tremendous research-and-development efforts as a result and prospered through that for 40 or 50 years in lots of different sectors. I hope we donít have to learn it through an embarrassment, but weíve laid enough things on the table today that I think weíre confessing to being embarrassed already.