The Aggressive Conservative Investor

I spent four years at KEMET (NSYE:KEM). One of my responsibilities was investor relations, and I met many institutional investors in New York, Silicon Valley, and other places across the country. The investor I am most impressed with, and who has the best reputation among other investors I dealt with, is the seasoned veteran Marty Whitman, manager of the Third Avenue Fund, where I have much of my investment portfolio. Marty recently updated The Aggressive Conservative Investor, a book he wrote that was originally published in 1979. I highly recommend his philosophy of value investing. I met many investors that claimed they were value investors, but few came close to measuring up to Marty and his team in practice.

Innovation I: Most students are black. They are poor. And they are scholars.

"Located just off I-95 south of the Virginia line, the school sits in a part of the state where poverty rates are high and expectations are often low. But the school's test scores are among the best in the state."

If you care anything about improving the quality of education, this article has to grab your attention.

There are some very interesting facts here, demonstrating that successful innovation in education is not different than innovation in any other area of our lives.

These aren't children from affluent, middle income families siphoned off from public school; they are students not well served by the status quo. "Few children who attend Gaston College Prep and Pride High come from well-educated families. Most parents have completed high school, but many have not. Two-parent families with college degrees can be counted on one hand."

The school provides 100% of the academics that students need to succeed, and doesn't depend on parents, who themselves lack a quality education, to help with algebra homework at night. "Students attend class each day from 8 a.m. to 5 p.m. -- and every other Saturday from 9 a.m. to 1 p.m. Tutoring takes place at the end of each day. Summer includes a three-week session to prepare for the coming year."

"Discipline is tight. Excuses aren't accepted."

Accountability is taken to a whole new personal level. "Every teacher, for example, is given a cell phone, and students and parents are given the numbers. Students who don't understand their homework are expected to call teachers at home. Teachers quickly learn that a well-taught lesson cuts down on late-night calls. Students soon learn they don't want to be the ones who always call the teacher."

The school builds on a proven model. "Gaston College Prep and Pride High are products of something called KIPP, shorthand for the Knowledge is Power Program. KIPP, which runs more than 40 schools nationwide, started in 1995 with two schools in inner-city Houston and New York's South Bronx."

It took people who were not invested in the status quo to make radical changes in the way education was delivered. Tammi Sutton and Caleb Dolan "decided to build their own high school. This all makes perfect sense to Sutton and Dolan, who weren't trained in a traditional college of education and don't spend much time worrying about the way schools are supposed to operate."

Those who are invested in the status quo are incredibly resistant to change. "Wake schools Superintendent Bill McNeal quickly pointed out that any school with voluntary enrollment enjoys a big advantage... Durham Public Schools Superintendent Ann Denlinger questioned whether traditional schools could legally require teachers to work longer hours."

Until we understand that we must fundamentally reinvent the way education is delivered to children not well served by the status quo, we will not make substantial improvements in education.

Innovation II: Will iTunes Be Firefoxed?

We all need to pay attention to the open source movement. It has incredible power to tap into the creative energy of a broad and diverse talent base. Here's an open source project as it is evolving.

A venture backed, startup company, Pioneers of the Inevitable, is developing an open source version of a software product they call Songbird, to compete with Apple's iTunes. This first hit my radar screen in the article, Will iTunes Be Firefoxed?

For those who don't know, Firefox is a browser distributed by Mozilla. The source code for Firefox is freely available for developers to "help Mozilla by fixing bugs, adding new features, making Mozilla smaller and faster, and making Mozilla development easier for others." This is what the open source movement is all about.

Mozilla has captured a significant share of the browser market from Microsoft's Internet Explorer. Users of the Firefox browser account for 12.4% of the traffic on the Swamp Fox site, for example.

Which brings us to Pioneers of the Inevitable, which are organizing their open source effort on The Songbird Media Player Pre-release Blog. That blog in itself is pretty interesting. That you are reading this is a testament to the fact that it worked. In addition, others in the blogsphere have picked up on the product and are commenting on it, like here and here. That itself is an open source model for PR.

It will be interesting to check in with Songbird from time to time to see how much progress they are making in their open source initiative, especially to find out if they can capture market share from iTunes the way Firefox has captured share from Internet Explorer.

Innovation III: No exciting SC auto news?

The State newspaper reports, "S.C. auto industry plods along in 2005: No exciting announcements, but no serious setbacks, either."

Huh? No exciting automotive news in South Carolina? How about this?

The credibility of Clemson-ICAR grows as the Society of Automotive Engineers will become a campus partner of Clemson-ICAR. "SAE President for 2005, J. E. “Ted” Robertson, P. E., said, 'Clemson-ICAR and the South Carolina Upstate region are critical and exciting players in the automotive industry. The investment of BMW and other automotive leaders in the region, and specifically in Clemson-ICAR, tells us we are joining another winning team. SAE is committed to servicing the industry. The association with Clemson University in our professional development and education programs will bring additional value.'"

Clemson ICAR is able to attract a preeminent scholar with Thomas Kurfess as its first endowed chair. "Clemson University has named Thomas R. Kurfess, Ph.D... [as] the BMW Manufacturing Chair and... as director of the Carroll A. Campbell Jr. Graduate Engineering Center. Kurfess earned his undergraduate and graduate degrees from the Massachusetts Institute of Technology, completing his doctorate in 1989, and was on the faculty of Carnegie Mellon University prior to joining the Georgia Tech faculty in 1994. His research focuses on manufacturing and on automation and mechatronics with emphasis in system dynamics, control, metrology, precision system design and CAD/CAM/CAE (Computer Aided Design/Computer Aided Manufacturing/Computer Aided Engineering.)

Clemson builds its infrastructure to support world-class scholarship which will attract top-flight students when it receives $26.6 million for the Carroll A. Campbell Jr. Graduate Engineering Center. "No educational facility in the United States has all this equipment under one roof, and most of the small-scale automotive suppliers do not have access to this type of equipment," said Chris Przirembel, Clemson’s vice president of research and economic development. "Students conversant with this technology will be invaluable to the industry."

Success breeds success. Timken Joins Clemson ICAR. "Becoming part of the Clemson University International Center for Automotive Research is a fantastic opportunity for our company and our customers. Clemson-ICAR provides unparalleled access to world-class automotive research, educators and partners," said Jacqui Dedo, [Timken] Automotive Group president. "Co-locating our product and process engineering for powertrain products at Clemson-ICAR will strengthen our technical team, enhancing the products and services we can offer our customers."

World-class knowledge clusters are supposed to attract firms interested in tapping into that knowledge. Well Bingo! Timken is old friend to Tom Kurfess, who will "continue a long-time research relationship. He came to Clemson from Georgia Tech, where he worked closely with the Timken research and development team in Norcross, Ga., and in Canton, Ohio. But his relationship with Timken goes back even further. He met his wife at Timken in 1984, when both were working as student interns during their undergraduate days at MIT.

I don't know about you, but I think all that is pretty darn exciting.

Innovation IV: $100 Hand-Cranked Laptop

"The $100 laptop has enormous disruptive potential... The computer is the size of a textbook, features built-in wireless capability that can connect to the web via WiFi and create local area networks,... can be powered by a hand crank... [and keeps costs down] by reliance on open-source software, a radical redesign that focuses on simplicity and durability, and economies of scale.

What an interesting idea!

But we intuitively know that introducing a $100 hand-cranked laptop to power users at the high-end of the laptop market will get it annihilated. Can you imagine introducing a laptop powered by a hand crank to the mainstream of corporate America? Pshhh. "The $100 laptop is being derided by industry incumbents as nothing more than a gadget... in the words of Intel Chairman Craig Barrett."

So how do you commercialize such an interesting idea? Where are there potential customers looking for a simpler, cheaper, more convenient solution to a problem where a hand cranked laptop is a great alternative?

How about children in developing countries? Right now they don't have any computer. And many of them live in places where electricity is too expensive, insufficient, or unreliable to power a computer if they had one. The $100 hand-cranked laptop is being positioned to compete against non-consumption by meeting the needs of a massive and massively underserved market.

And who knows, at the technology matures there might be niches where the technology can be introduced to power users in the US. Ever wish you had a hand-crank when your laptop died on an airplane?

Empowering Individuals Versus Institutions

Laurin Manning is a law student at USC that has a blog about SC politics called The LaurinLine, which has become quite popular and influential.

The proof of that is that Phil Bailey, executive director of the Senate Democratic Caucus, chose LaurinLine to criticize Democratic gubernatorial candidate Frank Willis. On another occasion, Mr. Bailey also criticized Carroll Campbell. Mr. Bailey tried to make his attacks anonymously, but unfortunately for him it was possible to identify him, and Laurin did.

This created quite a stink. The State ran an article about the Willis incident, in which SC Democratic Party chairman Joe Erwin and executive director Lachlan McIntosh felt obligated to respond. The Post and Courier has an article about the Campbell affair.

Here's Laurin's version of what happened. Here's more reaction to what happened on another blog.

My point here is not to comment on the politics of the situation. I'll leave that for you to decide.

What is interesting to me is that college student creates a web site at little or no financial cost, quickly gains credibility, and rocks the political establishment. It is a great example of how empowered individuals versus institutions have become and of how small the world has gotten, even on a local level.

Creating Wealth in the Carolinas Optics Cluster

I recently received a note from John Ballato, Director of the Clemson Center for Optical Material Sciences and Engineering Technology.

The optics/optoelectronics is perfectly poised to play a large role in regional economic development since the global industry is very strong and growing (approaching $1 trillion globally by 2012. There are 170 optics facilities in the Carolinas, 100 optics companies in the Carolinas, our Carolinas MicroOptics Triangle consortium with Clemson/UNCC/WCU is top 2-3 in the country now in terms of size... just need someone or thing to organize and mobilize as is being done in automotive.

The International Society for Optical Engineering provides external validation of the significance of the Carolinas Optics Cluster.

The key to creating wealth is increasing the entrepreneurial activity around clusters like this.

Any thoughts as to who and how to do that?

SC #1 In Foreign Investment: The Asset to Build On

A recent announcement by the SC Department of Commerce reaffirms a fact that has been true for several years, South Carolina Leads the Nation in Job Attracting Foreign Investment.

These investments are managed by top professionals that are among the best in the world at what they do. These managers have global relationships, both with customers and supply chains.

For many of these firms like BMW or Michelin, we do not have to convince them to do research and development or other knowledge-based activities, we only have to leverage our relationships with international firms and our research universities for more knowledge-based activities to be done here.

The most successful example of this to date is Clemson ICAR. This model is replicable with other international firms with whom we have relationships.

Note to a friend: Culture matters

Below is a note that I sent to a friend earlier this week.

Good to see you yesterday. I had not read David Brooks column, "Psst! 'Human Capital,'" or Bruce Yandle's newsletter comments on that column. In my experience they are right. There are many dimensions to human capital.

This reminds me of a book by Thomas Sowell that I read some time ago, "The Economics and Politics of Race." He points out how some cultures of people, for example Jews or Asians, tend to be successful economically in similar ways as they migrate around the world, while others are consistently less successful as they move around. His point, powerfully made, is that culture matters.

I took 2000 off and traveled all over South Carolina, talking to CEOs, researchers, economic development professionals or anyone else who would listen about how important I thought having a more knowledge based economy was. I came away with a couple of strong impressions.

First, researchers in industry and academia in this state did not know one another for the most part. The most important role of the Carolina Crescent Coalition and subsequently InnoVenture was to introduce SC knowledge professionals to one another. You cannot collaborate until you know one other.

Second, the traditional industrial recruitment coalition in this state makes money when something brick and mortal gets built. They don't disagree that starting things like software companies is important, they just don't see how they make money so it will never be their focus. Another goal of C3 and InnoVenture was to build a new coalition of people in whose interest it was for knowledge based companies and academic research programs to exist and grow. This new coalition of people is just beginning to emerge in South Carolina.

I wrote an editorial published in the Greenville News in October, "Austin's entrepreneurial spirit offers lessons for city," about why Austin has such an entrepreneurial culture. I noted that, "Austin nurtures all these folks -- students, managers with new ideas and immigrants -- who don't fit into the power structures that exist in the community." We want to get that here, but I'm not really sure we do get that yet.

Still, I believe we are beginning to make true progress in the state, but I agree with David Brooks and with Bruce Yandle - it's very cultural. Because of that it will take a lot longer than some people are anticipating. In 2001, I visited with George Kozmetsky, former Dean of the University of Texas business school and architect of Austin's knowledge based economic development model. He was then 87 years old. We spent all day with him, and as we were milling around the lobby of the hotel waiting for our car to take us to the airport, he asked me how long I thought creating a more innovative economy would take. "Oh, five to ten years, maybe," I said. "If you don't dedicate the rest of your life to this, you'll never see it," he told me.

That was a reality check. It takes decades for cultures to change. This is not a sprint, but a marathon. We're taking the first steps in a long journey that our children and grandchildren will benefit from.

John

InnoVenture seeks researchers needing business partners - Deadline January 9

New this year, InnoVenture is seeking researchers or inventors seeking business partners to commercialize their intellectual property. The deadline for submissions is January 9, 2006.

No prior experience presenting is necessary. Each presenter will be coached to make a polished presentation. More information and applications can be made online.

InnoVenture seeks emerging companies needing capital - Deadline January 9

InnoVenture is seeking emerging companies to present to investors at the March conference. The deadline for submissions is January 9, 2006.

We're beginning to get a few applications, but we're looking for many more. No prior experience presenting to investors is necessary. Each presenting company will be coached to make a polished presentation. More information and applications can be made online.

Past presenting companies have found InnoVenture to be an excellent experience. Navigational Sciences CEO Eric Dobson said, “We were exposed to investors and received calls months later from investors. One investor we met at InnoVenture closed with us.”

Bill Baum of EcoVehicle Enterprises noted, “As a presenting company, I had anticipated meeting venture or angel investors but had not focused on the opportunities networking with complimentary businesses.”

Zipit Systems President Frank Greer said, “Zipit Systems used InnoVenture to jump start the development of our business plan and fund raising collateral. The InnoVenture team provided fantastic support.”

Swamp Fox seeks thought leaders

Swamp Fox is considering expanding the voices on the Swamp Fox Insights blog to include thought leaders in the community.

Wikipedia defines a thought leader as "a person who is recognized among his or her peers for innovative ideas and demonstrates the confidence to promote those ideas." We're thinking about asking interesting people to post an entry regularly about things they find interesting.

Now's your shot. Tell us who you would like to hear from.

Venture Philanthropy

The New York Times has an interesting article, A Scotsman Wields a Not-So-Invisible Hand in Africa, about Tom Hunter who has committed $100 million for projects to wrest Africans from poverty. Some things about this struck me.

"Why would a hard-headed and successful businessman... display what cynics might depict as a naïveté that has left many would-be saviors to rue the day they resolved to venture into Africa?... His plan is to bypass the usual channels of development aid." Discontinuous innovations always look crazy to people vested in the status quo, which is why they are almost always commercialized outside the existing mainstream market leaders. Why should philanthropy be any different? Tom Hunter's instincts about creating a new value chain to deliver his aid are probably right on.

"Sir Tom calls his form of giving 'venture philanthropy...' His philanthropy will be run on business lines with clear targets and exit strategies." This reminds me of Bill Gates approach to his philanthropy. This discipline is likely to make both highly success givers.

Prospering From Within: Identifying and Nurturing Local Assets

I first met Aaron McKethan when he was a consultant with the e-NC Authority, a quasi state agency in NC focusing on economic development and technology policy. Last summer he led a project to identify and address impediments to economic development that are specific to the counties at the geographic borders of North Carolina and the neighboring states of South Carolina and Virginia. I was impressed with his vision and his leadership.

Recently I came upon an article he wrote, Prospering From Within: Identifying and Nurturing Local AssetsHe writes:

External recruitment of business has been the dominant economic development strategy of the southern U.S. in the postwar era. Political and development leaders have emphasized the state’s low production costs, resulting from low taxes, cheap land and low-cost labor. While the South was successful in establishing a branch plant economy in the past half century, an over-reliance on external recruitment left the region vulnerable to rapid changes in international competition and technology.

Today, the region is experiencing a significant economic transition largely fueled by global outsourcing. Just as firms were initially attracted to the South by relatively low production costs, firms are increasingly re-locating plants and jobs to Asia and Latin America where production is even cheaper. In addition, productivity gains have also contributed to worker displacement in the region. Firms have leveraged new technologies to maintain or increase output without adding new workers by developing a more specialized and productive labor force.

As plants close and old-economy jobs disappear, development and political leaders are experimenting with new strategies to enhance regional competitiveness. While external recruitment strategies continue, and efforts are underway to transition into a more knowledge-based economy, many leaders are increasingly focusing on demand-side initiatives. They are promoting local entrepreneurship, building new markets for products and services, expanding markets for local products that already exist, transforming the local skills base, increasing access of local businesses to new capital and focusing on new business formation.

Ahh, a man after my own heart. You'll appreciate the rest of his insights into the economy of the future.

Online Conversation About the SC Economy

On October 21st, the Council on Competitiveness sponsored a "Conversation on the SC Economy" Greenville. Professors from our research universities presented summaries of their current research on the SC economy.

We now have all six of the presentations online. (Don Schunk was unable to make the conference.) The technique we used involved taking a low res video of the speaker and digitizing the slides so that you can really read them. Once on our website, click "Economic Development Research' and then click the presentation that you want to see. Allow a few minutes for the presentation to fully load onto the RAM of your computer. After the first few slides, you should be able to use the controls to jump to any point in the presentation. Thanks to Tommy Cabaniss at Action Video in Greenville for proposing the video technique and to Amy Love at the Council for getting the presentations online.

Thanks to all of the professors for sharing their work, to Bruce Yandle for organizing the effort, and to the Greenville Chamber for handling registrations. I think you will see that some first class economic development research is being done at our state universities. Please share this e-mail with your organizations.

George W. Fletcher
SC Council on Competitiveness
(864) 421-9999 (Greenville)
(803) 264-5888 (Columbia)
(864) 380-6392 (Mobile)
gfletcher@competesc.org

"Great Oaks from Little Acorns Grow," Growing High-Impact Companies Around Major Anchors

Great Oaks from Little Acorns Grow: Strategies for New Venture Growth is a very interesting research study into why entrepreneurial firms grow. In an interview, its author concludes:

Although firms are economic entities, they are nevertheless affected by social variables such as legitimacy, status, and reputation because all economic transactions are embedded in a social supra-structure... New, unfamiliar activity or entity does not possess legitimacy because of its inherent novelty. A new firm, therefore, lacks legitimacy and may be looked upon with suspicion by stakeholders.

Maybe you have to have been there to really get what she is saying. I left KPMG, where I sold lots of consulting, and started Capital Insights, a company no one knew. I was stunned to find it so difficult to sell even to former KPMG clients. I underestimated how important KPMG, versus John Warner, was on the business card. I had a partner observe that our business had signifincalty more credibility three years after starting just because we were still around. Merely surviving that long meant to the outside world that we had to be doing something right, even if they weren't sure what that was.

The author goes on:

When a young, unknown firm has affiliations with high-status entities, stakeholders tend to impute the status of the latter onto the former, thus granting higher status to the young firm... While having a large prestigious client may seem like a double-edged sword because of the power such a client has over a young, struggling firm, the signal that the prestige of the client sends out is more valuable than any potential negative impact. Hence, entrepreneurs and managers should almost never shy away from stepping out of their comfort zone and taking on large jobs, since the payoff does arrive.

InnoVenture is focused on creating Communities of Innovation around major economic anchors in our region. We believe this is the best place to breed successful, high-impact companies, and to a large extent this is why.

How would you spent part of $20 million on education?

The BellSouth Foundation has committed $20 million over five years for state-led virtual schools and technology based learning. Carver School of Technology, part of the Atlanta Public School System’s The New Schools of Carver, will serve as a pilot site. On paper this school looks very impressive.

What kind of application would you make to BellSouth to spend a part of this $20 million?

InnoVenture 2006 Update Conference Call - November 30 at 8:00 am

There will be a conference call at 8:00 am on Wednesday 30, 2005, to provide an update on the progress of planning for InnoVenture 2006. The call will include details of plans for corporation, university and government facility innovation displays in the Innovation Hall, as well as presentations by emerging companies in the Venture Hall and by reseachers in the Invention Hall.

If you would like to participate in the call, please contact Brenda Laakso, InnoVenture Executive Director, and she can provide you with the call-in details.

Select leaders with the right backgrounds, not just "the right stuff"

On the blog at Innosight, a website related to Harvard Professor Clayton Christensen, an observation is made about selecting top talent.

One of the tenets of Innosight's thinking is that organizations need to select managers with the right backgrounds, not just "the right stuff." An organization should look for managers with the right "schools of experience" to deal with situations that may be unfamiliar to the organization as a whole.

In Swamp Fox Insights: Innovation and Entrepreneurship in a Time of Profound Change, the second of four principals for growing high-impact companies is "Assembling Outstanding Leadership."

The most critical part of identifying the right CEO is developing a very clear profile of what is essential to lead a specific company launch as a guide for assessing potential candidates... Carefully review a candidate's accomplishments, his failures, what negative feedback he thinks references might give, and his reasons for leaving prior companies. The objective is to accurately assess the candidates’ past behaviors that have led to his success or failure as the best indication of future behaviors that can be expected.

Great minds think alike.

Liberty Fellowship seek nominees for Class of 2008

I recently had lunch with Liberty Fellowship Executive Director Jennie Johnson. The Liberty Fellowship is currently seeking nominations for the class of 2008, and in particular is seeking nominations of outstanding women in business. As a member of the inaugural class of 2006, I can attest that the Liberty Fellowship is a life changing experience. Click here for information about the nomination process.

The mission of the Liberty Fellowship is "to inspire enlightened, values-based leadership in South Carolina." Founder Hayne Hipp said ,"Our vision of values-based leadership is founded in the capacity to do what it takes to lead a life that is good, useful, worthy, and meaningful. It necessitates confronting one’s human nature, and cultivating one’s humanity to become more self-aware, more self-correcting and more self-fulfilling... Our goal is that in the very near future, we need look no further than South Carolina’s leadership to understand the meaning of values-based leadership."

Nomination Criteria

Liberty Fellowship nominees must meet the following criteria to be considered for candidacy:

* Executives/professionals between the ages of 25 and 45 who have achieved success in their fields;

* Men and women who have demonstrated their potential for leadership at the highest levels of corporate and civic responsibility;

* Possessed of a breadth of experience and level of maturity that will enable them to contribute effectively to the seminar experience; as well as inherent intellectual curiosity and capability;

* From diverse backgrounds in terms of ethnicity, race and gender;

* In charge of South Carolina companies, business units or entities -- or comparable professional positions -- in either the private, nonprofit or public sectors.

Why do some company have more spin outs than others?

Recently, Dolph Bell of the Greenville News wrote an excellent article, The Children of Fluor. It is not well understood how important major companies are to stimulating the creation of entrepreneurial ones in their sector. This story highlights a great example of the benefits of clustering. In places like Austin or Silicon Valley, there would be lots of examples like this. Here, there are only a few.

Previously I have commented on how important this phenomena is. We have a culture that creates lots of community banks, but not technology companies.

Les McCraw, former Fluor CEO, opined that there were more Fluor spin-outs than at other large companies because "the skills that Fluor employees possess are typically more "transportable" than the more specialized skills of employees at other large corporations in Greenville such as BMW, Michelin or General Electric. Fluor is a services company, selling a range of services to a variety of clients, he noted, while BMW, Michelin and GE are manufacturers focused on making specific products."

I'm not sure it's really true that the skills of people were less transportable at Liberty Corp or at Multimedia, just to name a couple of major Greenville companies in the past couple of decades, but they didn't spawn 12 spin-out companies. I think there are much more challenging cultural issues at play.

What do you think? Why do some large companies have more spin-outs than others?

Does anyone have experience with TRIZ?

Recently I was introduced to TRIZ (pronounced "trees"), which is an acronym for the Russian phrase for "Theory of Inventive Problem Solving." TRIZ was developed by Genrich Altshuller and his colleagues in the former USSR starting in 1946, and is now being developed and practiced throughout the world. I have become convinced that TRIZ is a very valuable tool for systematic innovation, but I'd like to know more.

Do you or anyone you know have any experience with TRIZ? If so, please leave a note below, and I would appreciate they opportunity to connect and compare notes.

Is the Governor right? "School choice is central to moving state forward."

Mark Sanford is nothing if not persistent in pursuing his core values. Recently the Governor wrote an op ed in which he stated:

I believe becoming more competitive means pushing for reforms that are consistent with market principles, common sense, and fiscal responsibility. When it comes to making our state more competitive and more successful in the education arena, I have always firmly believed that giving parents more choices in the marketplace is critical.

Governor Sanford closes the editorial:

We can -- and should -- have a legitimate discussion on how to best implement broad school choice, so that every parent can choose the best option for each child. Our one-size fits all approach to education hasn't gotten us where we need to be, and I firmly believe we must try something new -- something that's worked in other states -- for the students who need it most.

I'm open to any new idea that will move our schools forward, but rest assured I'm more convinced now than ever that a big part of that solution lies in expanding access to additional educational choices.

So, do you think he is right? Is giving parents more choices in the marketplace in some form central to moving the state forward?

The Tragedy of the Commons

Those of us involved in civic entrepreneurship appreciate how difficult it is to create a common area where everyone can benefit. One the one hand, few want to pay for the commons, while on the other hand everyone wants to benefits from it.

In the December 13, 1968 issue of Science, Garrett Hardin writes a very insightful article, The Tragedy of the Commons. He includes this analogy to describe the tragedy.

The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.

As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?" This utility has one negative and one positive component.

1) The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1.

2) The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of -1.

Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another. . . . But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit--in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

Click for the full text of The Tragedy of the Commons

A Call for Disruption in Education

This article originally appeared in the Wall Street Journal on November 4, 2006.

S.O.S. (Save Our Schools)
By CHRIS WHITTLE
November 4, 2005; Page A14

What if Ford announced tomorrow that it was eliminating all research and development in order to add $7.4 billion to its annual bottom line? Readers of these pages would instantly recognize the absurdity of such an action because only through R&D can a company maintain its competitiveness and value. That an organization with more than twice the annual revenues of Ford has virtually no R&D budget will surely be surprising. But R&D was not stopped. Rather R&D was never seriously begun.

The entity with virtually no R&D? American public education. The revenue for K-12 schooling in the U.S. is around $400 billion per year. Our spending on K-12 education in just two school days equals the entire revenue of an entry-level Fortune 500 company. Yet despite spending so much to operate our schools, our investment in advancing their design and updating their systems is negligible. Why?

It was not intentional. It largely just happened -- an artifact of the historical development of public schools. As cities and towns sprang up, school systems were built to serve them, which resulted in one of the most fragmented sectors imaginable. The U.S. has around 15,000 school systems, with only six schools in the average district. This immense fragmentation means that virtually all of our school systems lack the scale to conduct any meaningful R&D. Ask any school superintendent about the district's R&D budget. He or she will laugh -- or appear puzzled.

If school systems were businesses, only three would have scale sufficient to be included in the Fortune 500 -- and those three would be a long way from the top of the list. Even the few large-scale districts find that pressing operational issues prevent their conducting significant research and development.

This seems like a perfect example of where the federal government could and should step in to fill a breach. Certainly it has the required scale. Certainly such involvement seems appropriate, if the prerequisite for federal action is the inability of local or state entities to act. Federal engagement in innovation in other categories critical to our national well-being provides ample precedent. Consider the $27 billion of R&D money pumped into the National Institutes of Health every year to help bring our citizens one of the finest health-care systems on the globe. How about the $9 billion that went into just one Department of Defense project: the design and development of the Joint Strike Fighter?

So is our federal government contributing to the future of our children by investing in school design on a similar scale? I am sorry to report that it is not. Within the Department of Education is a small entity called the Institute of Education Science that is charged with conducting educational research activities. Unfortunately, the part of its annual appropriation devoted to education research is $260 million: 1% of annual federal spending on health-care research. If the federal government were to spend on education research an amount pro rata to its investment in health-care research, the IES would be receiving 30 times its current funding -- and we would have much better schools to show for it.

So where are our national policy makers? Where are the Bell Labs, Xerox Research Parks, Ford Test Tracks, Strategic Defense Initiatives and NASAs of education? Why is America so slow to arrive at the inevitable conclusion that schools are a national security priority -- and that federal funding of R&D investment in them would serve as, shall we say, Homeland Offense?

Perhaps it's the longstanding view that our schools should be locally governed. But one can adhere to the concept of local control of schools, as I do, and still support national investment in their improvement. Our inaction is something beyond the local-control bias. We are suffering from a decades-long national failure of imagination as to what our schools could become. After 15 years of up-close involvement with public education, I have heard the same refrain all too often: "We know what to do to improve schools. Our problems are just a failure of execution." I don't buy that. I believe that our current school "design" is suffering from educational "metal fatigue," and that we must intentionally seek -- and invest in -- a fundamentally new gestalt.

So what might schools of the future be like? Although our vision may be obscured by our attendance at "old design" schools for most of our formative years, educational visionaries can see, through the mist, the coastlines of these new schools. They see schools in which students are much more engaged in their "job" of learning; schools where teachers are paid like other professionals; schools that are hybrids between our current brick-and-mortar model and home-schooling techniques; schools where the assets of our magical digital age are fully unleashed, not to replace teachers, but rather to work in seamless combination with them. These designers know we can move our schools -- and our educational results -- to another level, just as we moved from the candle to the light bulb, from the prop plane to the jet.

For this to happen quickly and well, however, our national political leadership must fund a whole new level of educational innovation. Great new schools do not just happen. As with every business innovation, they must be thoughtfully developed and designed -- and that takes real resources that are simply not available to local school systems.

Mr. Whittle, author of "Crash Course -- Imagining A Better Future for Public Education" (Riverhead, 2005), is founder and CEO of Edison Schools, the largest private partner of public schools.

The Center of the Southeastern Megalopolis: Where did you hear this first?

Robert E. Lang and Dawn Dhavale, from the Metropolitan Institute at Virginia Tech, recently published a report, Beyond Megalopolis: Exploring America’s New “Megapolitan” Geography.

Their research identifies ten US “Megapolitan Areas,” clustered networks of metropolitan areas that exceed 10 million total residents. They quote from Jean Gottmann's book Megalopolis,

the Megapolitan concept seems to have popularized the idea that the modern cities are better reviewed not in isolation, as centers of a restricted area only, but rather as parts of “city-systems,” as participants in urban networks revolving in widening orbits.

On page 14 of their report is a map of the megapolitan areas they have identified, including the "The Piedmont Megapolitan" is roughly defined between I-85 from Research Triangle Park to Montgomery and I-59/75 from Birmingham to Knoxville.

This area is very similar to the "Southeastern Innovation Corridor," described as Research Triangle Park to Birmingham, and Oak Ridge to Charleston, that is the focus of InnoVenture.

In an increasingly global economy, it makes sense to think in terms of economically interconnected regions that have the critical mass of talent and resources to be globally competitive.

Anyone up to creating South by Southeast?

The PINFO blog commented on the Swamp Fox Insights entry: Austin's entrepreneurial spirit offers lessons for city.

PINFO queries, "Perhaps, Greenville would like to consider launching SXSE."

In Austin, the South by Southwest Music and Media Conference (SXSW) 2006, in its twentieth year.

Anyone up to creating South by Southeast?

The voice of the best and brightest students - Part I

Friday I attended an Advisory Board meeting of the Clemson College of Business and Behavioral Science. The highlight was a discussion with 20 or so members of the College's Student Advisory Board. It is always encouraging and uplifting to be around the best and brightest young people.

I told them that recently the Greenville Chamber had gone to Austin, TX, where we were told that Austin was entrepreneurial in large part because of the large concentration of students. The point was made that several large companies in Austin had been founded by people 19 to 24 years old.

I asked the Clemson students how many of them anticipated starting their own company versus getting a job right out of school. That led to a very interesting discussion.

Several said they were very interested in starting their own company, but weren't sure how. They very much wanted to get plugged into the business community, but didn't know how. They didn't feel the culture at Clemson, and the Upstate in general, encouraged and fostered entrepreneurial risk taking.

That should be a wake up call for us. We all know that is critical we retain the best and brightest young talent, and we are concerned that we lose too many to other more supportive regions. Students are interested in building relationships with the business community, but don't know how.

That is a problem the business community needs to solve. My guess is that it is not much different in other regions of the southeast. Retaining the best and brightest talent already at our strong universities is low hanging fruit.

The voice of the best and brightest students - Part II

Thursday I taught an entrepreneurship class at Clemson. There were about 30 students, half undergraduates and half graduate students, mostly engineering majors with few prior business courses. They were a bright and engaging group, and teaching them was a blast.

I was struck that over three quarters of the class were students from outside the United States, mostly from China and Germany.

Hmmm ... why weren't American engineering students interested in taking a class in entrepreneurship?

Innovision Technology Awards - November 9 - Register ASAP

The 2005 InnoVision Technology Awards Dinner will be held this Wednesday, November 9, 2005, at the Palmetto Expo Center in Greenville, SC. There is still time to register by contacting Amy Robichaud, at Deloitte & Touche 864-240-5474 or dmullinax@deloitte.com

Amy and the rest of the InnoVision Advisory Board always do a fabulous job. The InnoVision Awards is always one of the most interesting and enjoyable evenings of the year.

I have two personal favorites among the finalists. InnoVenture is a finalist in the Community Service Award category. TiBA Solutions is a finalist in the Technology Application Award for their development of the SC Business One Stop. Keep your fingers crossed.

The best and brightest of the finalists though is a group of students from the Southside High School Robotics Team, for inventing a stair climbing robot which could carry firefighting gear up stairs and injured people down. It is so good they are going to commercialize it. These students are awesome and inspiring. There's hope for America as long as there are kids like these.

Austin's entrepreneurial spirit offers lessons for city

Originally appeared in the Greenville News
Monday, October 31, 2005

By John Warner

I really enjoy going to Austin, Texas, because every time I come home inspired.

In 2001, a small group from South Carolina went to study Austin's endowed chair program. Since then, several industry/academic partnerships have been launched, like the Clemson International Center for Automotive Research and the SC Health Science Collaborative.

Recently, the Greenville Chamber of Commerce made an intercommunity visit to Austin. In the past 30 years, Austin has emerged as an entrepreneurial haven that attracts the third-most venture capital in the country. Why?

People really enjoy living in Austin and are dedicated to preserving and celebrating their distinctiveness. Their attitude is captured in a bumper sticker: Keep Austin Weird. The distinctiveness of a city starts with its local, independent businesses, so Austin fosters the growth and development of local companies and doesn't subsidize the mega chains that are making America look homogenized.

Creative energy takes many forms. Austin has a vibrant local music scene and is the self-proclaimed "Live Music Capital of the World." Several of us old fogies were surprised to find that the live music didn't really start until 11 p.m.

The answer that we heard over and over again is that the entrepreneurialism comes from tens of thousands of students at the University of Texas and other universities within 100 miles. There is a brain drain from other places to Austin, with 55 percent of the population having a college degree. Several large, homegrown companies, like Dell Computer, were started by people 19 to 24 years old.

John Thornton of Austin Ventures pointed out that many of the best entrepreneurs are managers in large companies with an idea about how to serve a niche of customers not well served today. They go to their boss and get the answer, "That's a great idea, but that is not the business we are in." Austin Ventures likes to talk with those managers.

John Sibley Butler of the Institute of Innovation and Creativity said that much of the entrepreneurial energy comes from immigrants and other outsiders, who have the inner fire to create something new and different.

Austin nurtures all these folks -- students, managers with new ideas and immigrants -- who don't fit into the power structures that exist in the community. On the plane ride to Austin, I sat next to a woman who had lived in Greenville only a year and told me how difficult it had been to get plugged into the leadership of our community. Now, if this was the only time I had heard this about Greenville, it would have been easy to write it off as an isolated case. But I hear it frequently, in particular from African Americans trying to become part of the leadership.

Leaders in Greenville don't perceive that it is a tight, closed system. We think of ourselves as enlightened and open to new ideas and people. So where does the disconnect come from? It's not uncommon to find major companies and other organizations in Greenville where almost all of the senior leadership has been in place 20 or 30 years. These leaders have deep relationships going back decades, and like anyone would, they tend to rely on people they have known and trusted for a long time.

The economist Joseph Schumpeter famously described the entrepreneurial dynamic that seeks "new consumers, new goods, the new methods of production or transportation, the new markets, the new forms of industrial organization ... that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism."

Austin has a creative destruction furnace that creates enormous wealth and keeps the community vibrant to a much greater degree than Greenville does. If we want to ignite an entrepreneurial furnace in Greenville, we need to tap into the creative energy in our community the way Austin has. We need to identify what is distinctive about Greenville and celebrate it. We need to make sure outsiders -- like students, managers with new ideas, and immigrants -- are supported and nurtured.

We left Austin with the feeling that a lot of people in Greenville are doing a lot of things right. I couldn't help but notice, though, how Keep Austin Weird made several Greenvillians very uncomfortable. But we can't have it both ways. We can't become a highly innovative and entrepreneurial place without promoting and celebrating the creative energy that comes from people with highly different backgrounds and perspectives.

And the really hard part for some of us is that a bunch of that creative energy is going to be really noisy at 2 o'clock in the morning.

What happens when the technical terms are in Mandarin?

Qian Qichen, a Retired Chinese Communist Party Vice-premier and Principal architect of China’s foreign policy after the Tiananmen Square crackdown said,

The 21st Century is not the “American Century.” That does not mean that the United States does not want the dream. Rather it is incapable of realizing the goal.

Today's New York Times has an article headlined, China Luring Foreign Scholars to Make Its Universities Great.

Maybe in 20 years M.I.T. will be studying Qinghua's example," says Rao Zihe, director of the Institute of Biophysics at Qinghua University, an institution renowned for its sciences and regarded by many as China's finest university. "How long it will take to catch up can't be predicted, but in some respects we are already better than the Harvards today.

In only a generation, China has sharply increased the proportion of its college-age population in higher education, to roughly 20 percent now from 1.4 percent in 1978. In engineering alone, China is producing 442,000 new undergraduates a year, along with 48,000 graduates with masters' degrees and 8,000 Ph.D's.

It was noted on the Greenville Chamber's recent intercity visit to Austin, that one of the things that makes Austin so highly innovative and entrepreneurial is that because of several large, top-rate universities nearby, Austin benefits from a brain drain to Austin from other places resulting 55 percent of the population in Austin having a college degree. Because United States has many of the world's preeminent universities, for the better part of the last century the United States as a whole has benefited from a brain drain from the rest of the world to the United States.

Ten years ago, I had an investment in Specialty Electronics in Landrum, which had a plant in Singapore. I was meeting with the domestic Singapore plant manager, who was discussing working with a subcontractor in Taiwan. I asked what language someone from Singapore spoke when he went to Taiwan. "Oh," he said, "we speak English during the day because the technology vocabulary of information technology is English, and it is easier to do business in English than it is to translate technical terms into Mandarin. At night when we go drinking, we speak Mandarin."

That is the power of having the standards invented in the United States, even if the products are manufactured somewhere else. A large part of America's global competitiveness is based on the fact that technology is invented here and the leading research and ideas are in English.

Since 9/11, the brain drain to the United States has slowed considerably. Part of it is travel restrictions from 9/11, but an even greater part of it is the fact that the quality of the top universities in other parts of the world are increasing considerably and students no longer have to leave home to get a top flight education.

If we think it is scary that the Chinese work cheaper than we do, we ought to have nightmares about what happens when the technical terms are in Mandarin, and as a result the leading research and ideas are less accessible to Americans.

Wall Street Journal: Education End-Run

We have some incredibly talented teachers in our schools. Imagine how empowered our best educational entrepreneurs would be to meet the needs of students not well served by the status quo if every parent could do what is described in the editorial below. This is an incredibly simple idea that would dramatically improve the quality and reduce the cost of education if it were implemented everywhere. Unleasing the creative energy in our educators is essential in a world where we will no longer be able to depend on attracting the best and brightest from the rest of the world.

Education End-Run
Editorial in the Wall Street Journal
October 27, 2005; Page A20

There's no shortage of bills in Congress to provide school aid for victims of the Gulf Coast hurricanes. But by far the best proposal out there is the Family Education Reimbursement Act, if for no other reason than its express goal is to circumvent the bureaucracies that make it so difficult to speed federal relief to displaced students and the schools that take them in.

The measure was introduced last week by House Education Committee Chairman John Boehner of Ohio and Bobby Jindal of Louisiana, both Republicans, and its implementation couldn't be simpler. To create an account, parents could register on the Web, through a toll-free number or by signing up in person at a school. The accounts would provide up to $6,700 for each child, which is the average expenditure in states that have been enrolling the bulk of Katrina's 372,000 displaced students.

Next, parents would provide the account number to the school enrolling their child, and the school would use that information to get reimbursed. That's it. No endless paperwork for the families. No lengthy reimbursement procedure for the schools. Instead of forcing a school that has graciously opened its doors to refugees to make an extra funding request to the district, which in turn must go to the state, which in turn must go to the feds, the legislation provides a user-friendly alternative.

All schools would be eligible -- public, private, parochial or charters. And the accounts would be portable. The money would follow the child in case a displaced family decides to move back home or relocate somewhere else. And in a welcome nod to fiscal conscientiousness that has been all too rare in Congress, at the end of the school year any unused funds would go back to the Treasury. The program would be administered by an agency -- preferably a private one -- that could be up and running in as little as a month's time.

The problem with competing measures -- such as the Senate bill cosponsored by Republican Mike Enzi of Wyoming and Democrat Ted Kennedy of Massachusetts -- is that they filter federal relief through the existing education bureaucracy. We can't explain Mr. Enzi's behavior, but Mr. Kennedy's is predictable. His special-interest constituency is this very bureaucracy, nurtured by the teachers unions.

Mr. Kennedy says his bill doesn't discriminate against private or religious institutions, and technically it doesn't. But there are so many restrictions on how the funds can be used that the bill would likely dissuade all but a few from taking part. That of course undermines the original goal of providing education assistance to all the families displaced by Katrina, no matter where their children attend school.

We suspect that the opposition coming from Mr. Kennedy, National Education Association President Reg Weaver and others can also be explained by their fear that these education accounts would be a big success. The last thing they want to see is proof that there's an alternative to the education status quo.

People do what is measured: Education - Innovation - Entrepreneurship

As we develop a more highly innovative and productive economy, we need a vision to increase educational attainment, innovation capacity and entrepreneurial activity; we need to build the capability to deliver on that vision; and then we need to measure progress in these areas.

Educated - Innovative - Entrepreneurial - ought to become our mantra. It is concise, yet captures the fullness of what we need to do. Below is a straw man of what a scorecard built on these metrics might include.

• Increase human capital through education.

Improvement in NAEP scores in fourth grade. (Note 1)

Improvement in NAEP scores in eight grade. (Note 1)

Percent of ninth graders graduating on-time.

Percent associate's degree or higher.

Percent bachelor's degree or higher.

• Increase value added through innovation. (Note 2)

Capital investment.

R&D expenditures.

Number of patents.

Hi-tech's share of the local economy.

• Increase wealth through entrepreneurship. (Note 2)

The number of new firm births per 1,000 population.


Growth in the number of new firm births.

The proportion of young firms that are growing.

The amount of venture capital investment.

These measures could be by county, or they could be rolled up by region or for the entire state. The measures of innovation capacity or entrepreneurial activity, and perhaps a modified measure of human capital, could be made for each cluster. The strategy of each cluster or political subdivision would be to increase their educational attainment, innovation capacity and entrepreneurial activity.


Note 1 -The SC Department of Education suggests that, "the National Assessment of Education Progress, also known as "The Nation's Report Card," is the nation's only ongoing survey of what students know and can do in core academic subjects. It also is the only assessment that allows states to compare their results with other states, or with results for the rest of the nation. "

Note 2 - With the exception of "Capital investment," these measures of innovation capacity and an entrepreneurial capacity are suggested by the SBA Office of Advocacy in their report, The Innovation-Entrepreneurship NEXUS: A National Assessment of Entrepreneurship and Regional Economic Growth and Development. Capital Investment is appropriate because industrial recruiting is a part of a comprehensive economic development strategy. Relationships with companies that have branch manufacturing locations in South Carolina should be leveraged to attract research and development facilities of those companies, like was achieved with the BMW IT Research Center at Clemson ICAR.

Feedback from a student on my book

Recently I met with a college student to provide information for a class project. His professor had assigned my book, Swamp Fox Insights, as a class reading. I told him what I asked in return for meeting with him was feedback on my book. I've gotten lots of nice compliments, but nothing has been as meaningful as this email from someone starting out.

* * *

Dear Mr. Warner,

I wanted to once again thank you for meeting with me a few weeks ago. I have now finished your book and have highlighted a few quotes that I feel were the most powerful. Each illustrated what I feel are important leadership qualities.

Swamp Fox Insights:

In reading Swamp Fox Insights the most powerful message I gained was leadership and the importance of a leader. Through out the book I wrote down some of the memorable quotes that illustrated the importance of a strong leader, and how they should approach leading a group. Each quote seemed to clearly paint a picture and eloquently illustrate an idea even though it was very simple.

“We consistently over estimate the amount of change in the next 2 years, and under estimate the amount of change in the next 10 years.” Bill Gates

I completely agree with Bill Gates on this one, and change has to happen over time, and the change that occurs today is the effect of years of effort over time. There might be observed change today, but I feel that this only happens because of hard work over the course of time.

With a goal in mind to change something for the future it is important to have a clear and attainable goal, and realize that things will take time, and they may take time to develop. In Bill Gate’s case he has certainly observed change in the operating systems that Microsoft has made, and none of them had big short term change, but rather gradual change that when linked together were very noticeable and apparent.

“Nothing meaningful happens until a leader envisions what can be ...”

Without a vision no goals will be set, and no future will be dreamed. Major change does not happen by chance, and a strong leader must envision a future and a direction.

“Perhaps nothing is more valuable in life than people who can be counted on to do what they say they will do.”

“Leaders cannot do it all and must delegate important tasks to subordinates.”

“Authority can be delegated, but responsibility cannot.”

The first quote is something I feel is extremely important. Throughout life and school I have always been someone who has been dependable and reliable, and I expect the same from people around me. The saying goes that if you want it done right you should do it yourself, but there are times when you can’t do everything and it is those instances when you need to rely on someone else who is dependable.

I have observed that the most effective leaders are those who are able to delegate authority and find people who can effectively execute those tasks. Leaders can only achieve so much by themselves, and they need to find high quality people to do important tasks.

And no matter how responsible the people are that are around you or how well they execute their responsibilities, I find that it is a leader who does have to be responsible for the outcomes and making sure they are done properly. When it is done well and properly they should get the credit, but if something goes wrong, it is a leader’s job to take responsibility.

All of these quotes describe how important a leader is in order to develop a High-Impact Company, and even though the model is describing how to develop a company, I have noticed how the qualities that we look for in a team for a company are the same qualities that I have looked to surround myself in school. Throughout school we have projects and presentations and tasks that have to be accomplished and in order to achieve the goals, a leader has to have a vision, a leader has to delegate and a leader has to take responsibility. As a leader I have dealt with these problems, and they are very similar to the problems that a leader of a company would also have to deal with. Within the various organizations I am involved with I have different roles. In some of my classes I am a subordinate who has to be highly dependable and I take on the tasks that are delegated from a group leader, while in my fraternity I am a leader who has to be responsible and one who develops a vision.

After reading Swamp Fox Insights I feel I have became more understanding of what I need to do as a leader, and as a subordinate of a leader. Also your book has made me more aware of my strengths and weaknesses as a leader, and it has clarified how I can work to be a better leader and follower.

Thank you very much for everything.

* * *

Man on man. This is why I wrote the book.

Notes from Austin: Keep Austin Weird

The Greater Greenville Chamber of Commerce took an intercommunity visit to Austin, TX on October 16, 17 and 18. These are notes from that trip.

The sound bite from the trip has to be, Keep Austin Weird.

As we were told the story, two local businesses, BookPeople and Waterloo Records, faced a Borders Books and Music being built across the street, which was fine except that the city was providing incentives to the developer. The owners of BookPeople and Waterloo did not appreciate paying Austin city taxes that then subsidized out of town competitors.

So they organized the Austin Independent Business Alliance and a campaign to Keep Austin Weird. Steve Bercu of BookPeople explained his view that the distinctiveness of a city comes from its local, independent businesses, so it is critical that a city foster the growth and development of local companies - or at least not subsidize the mega chains that are making America look homogenized.

Keep Austin Weird resonated with people in Austin and has come to mean preserving and celebrating Austin's distinctiveness far beyond just independent businesses. Austin is also the self-proclaimed "Live Music Capital of the World," and people there celebrate that they have 150 or so live music venues in town. Some of us old fogies decided to paint the town only to find out that much of the live music didn't begin until 11:00 pm. Oh to be twenty something again.

In all, Keep Austin Weird celebrates the diversity that makes Austin Austin - one of the most creative and entrepreneurial places in the world. I couldn't help but notice how the whole idea made several people from Greenville very uncomfortable. But we can't have it both ways. We can't become a highly innovative and entrepreneurial place, without promoting and celebrating the creative energy that comes from people with highly different backgrounds and perspectives.

And the really hard part for some of us is that a bunch of that creative energy is going to be really noisy at 2:00 am in the morning.

Notes from Austin: Why is Austin entrepreneurial?

The Greater Greenville Chamber of Commerce took an intercommunity visit to Austin, TX on October 16, 17 and 18. These are notes from that trip.

What makes Austin so entrepreneurial? That was the question I asked every chance I got to anyone who would listen.

Maybe the most honest answer we got was, "We don't have any idea," which gets to the heart of how difficult it is to understand a very complex cultural dynamic. Perhaps in some ways it might be hardest for people in Austin to see how different their culture really is. But we dug deeper.

The easy answer that we heard over and over again is that it comes from students. There are 50,000 students at the University of Texas, and tens of thousands more within a 100 miles. There is a brain drain from other places in Texas, and even around the world, to Austin, with 55 percent of the population having a college degree. The most well known example is the young Michael Dell dropping out of school at 19 to start Dell Computer. Several of the largest home grown companies in Austin were started by people 19 to 24 years old.

John Thornton of Austin Ventures pointed out that many of the best entrepreneurs spin out of large companies in the area. They have an idea about how to serve a niche of customers not well served by the status quo. They go to their boss with the idea and get the answer, "That's a great idea, but that is not the business we are in." Austin Ventures likes to talk with those managers.

John Sibley Butler, Director of the Institute of Creativity and Innovation, said that much of the entrepreneurial drive and energy comes from immigrants and other outsiders. He's written a book about it, Immigrant and Minority Entrepreneurship : The Continuous Rebirth of American Communities. His argument is that throughout America's history, the first generation are highly motivated merchants. The second generation are attorneys and accountants. The third generation are philanthropists. And the fourth generation are worthless.

I am struck that all these folks - students dropping out of school, managers leaving companies, and immigrants - are misfits. They don't fit into the power structures that exist in the community. They are driven to create something new where they can be in control. Many don't do what they do because they want to as much as because they have to.

They don't always maintain this entrepreneurial energy throughout their career. Very few companies have spun out of Dell Computer, because, the theory goes, Dell is a very internal looking company that likes to control everything in its sandbox. Other companies in Austin are much more collaborative with outside firms and spin out new companies, which may not be better for their shareholders, but it is clearly better for the community as a whole.

In Austin, the whole notion that most of the creative energy is driven by outsiders ties into the idea that Austin is Weird - a place where differences are celebrated. The notion challenges us to understand how outsiders are incorporated into our community back home.

Notes from Austin: A conversation with an outsider

The Greater Greenville Chamber of Commerce took an intercommunity visit to Austin, TX on October 16, 17 and 18. These are notes from that trip.

One the plane ride to Austin, I sat next to someone who had lived in Greenville only a year. She told me how difficult it had been for her to get plugged into the community. She had asked to volunteer on committees and seek other ways of being incorporated into the community but had found it very difficult to be included. Now, if this was the only time I had heard this about Greenville, it would have been easy to write it off as an isolated case. But I hear it frequently, in particular from African-Americans trying to become part of the leadership in the community.

The problem, though, is that leaders in Greenville don't perceive that it is a tight, closed system. We think of ourselves as enlightened and open to new ideas and people. So where does the disconnect come from, and why do newcomers have a much easier time integrating into Austin than they do into Greenville?

What Austin has, and what Greenville doesn't to a large extent, is a high level of churn driven by the high level of entrepreneurial activity and creative energy. It's not uncommon to find major companies and other organizations in Greenville where almost all of the senior leadership has been in place 20 or 30 years. They have deep relationships going back decades, and they have benefited together from the status quo. Like anyone would, they tend to rely on people they have known and trusted for a long time. They don't necessarily try to keep new people out (though I'm not so naive to believe this doesn't happen), it is just very difficult to break into the club unless you work at it for years.

In Capitalism, Socialism and Democracy, Joseph Schumpeter described the entrepreneurial dynamic.

The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, new goods, the new methods of production or transportation, the new markets, the new forms of industrial organization … that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.

Creative Destruction is an incredibly challenging notion to those in charge today. But it is the furnace of energy that creates wealth and keeps the community vibrant. Austin has it to a much greater degree than Greenville does.

I'm sure that Austin, like everywhere, has its citadels of power too. But Austin has a culture of people creating the new new thing, and this gives outsiders a chance to catch a new wave and become a player in the community.

If we want to ignite an entrepreneurial engine that drives the creation of enormous wealth in the community, then we have to address how outsiders - like students, managers spinning out of large companies, and immigrants - find opportunities to lead. The reception of outsiders and the creation of entrepreneurial wealth are integrally tied together.

Notes from Austin: What we're doing right

The Greater Greenville Chamber of Commerce took an intercommunity visit to Austin, TX on October 16, 17 and 18. These are notes from that trip.

There is a lot we can learn from Austin, TX, especially how they capture and capitalize on their creative, entrepreneurial energy. But one of the important things we left Austin with was the good feeling that we were doing a lot of things right.

Start with downtown Greenville. We heard a lot about the downtown scene in Austin - 75 restaurants and 150 live music venues. While our bus tour guide the first day kept calling them "joints" as we went by, quite frankly many of them were seedy dives. Austin, to a large extent is a big college town, and many of the restaurants and retail reflect that. Greenville, by contrast, has lots of restaurants too, but there is more variety and quality in our mix. While our music scene might not match up to Austin, Greenvillle has a strong and growing visual arts community. The visual impact of downtown Austin doesn't hold a candle to downtown Greenville. Austin flat has some of the ugliest buildings anywhere.

The danger in an upscale Greenville is that it doesn't appeal to young people. But just last week a new young professionals organization, PULSE, was launched and over 400 young people came. When I got back from Austin I mentioned to a younger colleague that we needed to organize transportation form Furman and Clemson to make sure students could get to downtown Greeenville, and he quickly informed me that I am out of touch and students have already found their way downtown. So improvements in downtown are, in fact, attracting young people from the area as much as they are attracting everyone else.

Over the past forty years, we have recruited international branch manufacturers to the area, and now have one of the highest levels of international investment per capita of anywhere in the country. The people running these facilities are among the best in the world at what they do, and are a source of world class talent in our community. Those that have creative ideas and want to spin out of their current company are an untapped source of entrepreneurial activity in Greenville.

We have started to leverage these international relationships to attract research and development to compliment the manufacturing we already have here and build our innovation capacity. I took a trip to Austin in 2001 with a small group to study their endowed chair program, and since then several important industry/univesity relationships have been formed around endowed chairs, including the Clemson International Center for Automotive Research and the SC Health Sciences Initiatives.

We've begun to form institutions of collaborations to plug people and organizations together. The Greenville Chamber has been reinvented around an innovation economy mission. InnoVenture is building momentum. The Innovision Technology Awards are hopping. New organizations, like PULSE and the Digital Alliance, continue to emerge.

Many people in Greenville are doing a lot of things right. Even the Greenville Council Council even voted recently to encourage strip malls to plant trees in their expansive asphalt parking lots. Imagine that. It is a very encouraging time to live, work, and play in Greenville.

I look forward to intercommunity visits in 10 or 20 years from others coming to Greenville to learn how we created one of the country's most innovative and entrepreneurial communities.

SC Low in Overall Entrepreneurship in Hydrogen Strategy Study

Engenuity commissioned a comprehensive study of the potential of the hydrogen economy in South Carolina.

SC ranks well very among the 50 states in its level of discovery-stage projects.

Yet is lower-than-average in overall R&D.

And ranks low in overall entrepreneurship, which is where the wealth will be created.

SC Low on National Assessment of Entrepreneurship

A national assessment of entrepreneurship and regional economic growth and development ranks South Carolina cities low.

Greenville - 52

Spartanburg - 125

Columbia - 133

So why does SC create lots of new community banks?

Clearly South Carolina overall does not convert our innovation capacity into entrepreneurial activity at the rate of more innovative communities. But today in the mail, I received another prospectus for a community bank. This is the one area where there is lots of start-up activity in South Carolina. Why is that?

We do have a track record of having successful commercial banks. One of the most successful high-impact companies in the region is The South Financial Group, which since its founding in 1986 has grown to a market capitalization of $2 billion. More banking resources ($1.3 trillion) are headquartered in Charlotte than in all but one other U.S. city.

As a result, many successful community banks are started and grown here with regularity. Each time a community bank is grown and sold, investors receive liquidity, some of which they reinvest into the next generation of community banks. Community banks also provide a training ground for young managers, who become the leaders of the next generation of banks. There is a tremendous amount of knowledge in the community about how to successfully grow community banks, and therefore a large number of them are started.

It is this type of community knowledge and track record that needs to be developed in the region around emerging companies introducing exciting new innovations to the marketplace.

And do you think we create more entrepreneurial activity?

Last week the featured article on Swamp Fox was about starting a Collaborative Innovation Center to help accelerate the creation of high-impact companies.

There was great discussion around this idea?

But what do you think?

Do you like the idea of a Collaborative Innovation Center?

Do you have another idea?

Book Signing - Open Book Columbia - October 11th

I am having a book signing for Swamp Fox Insights; Innovation and Entrepreneurship in a Time of Profound Change at the Happy Bookseller in Columbia on Tuesday, October 11, 2005 from 5:00 pm to 7:00 pm.

Here's the details, and here's a map to the Happy Bookseller

Please tell your friends, and if you are in town come join us.

Thanks to everyone who dropped by the Open Book in Greenville last week. We had several wonderful conversations about the book and more.

Notes from Pawley's - "Those old people need us"

The third seminar of the Liberty Fellowship was the last week of September 2005 at Pawley's Island. Below are notes from the week.

We've spent three seminars studying how to achieve Aristotelian happiness. In the Ring of Gyges, a ring makes a just man invisible and anonymous. Wearing it,

no one ... would be so incorruptible that he would stay on the path of justice or bring himself to keep away from other people's property and not touch it, when he could with impunity take whatever he wanted from the market, go into houses and have sexual relations with anyone he wanted, kill anyone, free all those he wished from prison, and do the other things which would make him like a god among men.

Aristotle argues we are just only because our actions are visible to others and we are accountable to the community.

My grandfather Furman's parents died when he was young, and he was raised in poverty by an aunt. He was an alcoholic, and lived a fairly self-destructive life. In his 60s, through faith in God he got control over his demon and became sober.

"We love because he first loved us," the author of 1 John tells us. Paul is certain that,

Do not be anxious about anything, but in everything, by prayer and petition, and with thanksgiving, present your requests to God. And the peace of God, which passes all understanding, will guard your hearts and minds in Christ.

Into his 70s, Furman drove for Meals on Wheels. He not only delivered meals, but he took time to visit with each person he brought a meal to. They were more hungry for his company at times than they were for the food.

I sometimes rode with him. One day he came to get me, and I told him I didn't want to go. He calmly, but sternly, told me that was OK, but that, "those old people need us" and he left.

Furman seared my soul with a hot brand. He had found peace that passes all understanding, and out of gratitude he brought a small token of the love and peace he knew to the old people. With that simple declarative statement he brought me along with him into a world of service to others.

Paul says now we see in a mirror dimly, but then we will see face to face. The old people saw a small reflection of the devine in a broken vessel of a man who delivered them a meal from time to time and stayed to visit for awhile. He gave them all he had to give out of gratitude for what he himself had received.

Furman wasn't just because other people were looking. Aristotle didn't get that.

Notes from Pawley's - "Dear, the azaleas are beautiful"

The third seminar of the Liberty Fellowship was the last week of September 2005 at Pawley's Island. Below are notes from the week.

A woman in the seminar who had been a senior executive in a major corporation related a wonderful story. In her mid 30s, she had recently been hired as the Vice President of Planning. A male board member in his 80s came up to her at a reception and asked what she did with the company. "I'm the Vice President of Planning," she told him. "Dear, the azaleas are beautiful," he replied.

He thought she said the Vice President of Planting. This should be a word of caution to guys about the biases women face too often in having the same credibility as men.

I enjoyed hearing the story, because the woman who related it clearly enjoyed telling it. At a time of too much bitterness and hostility, it's nice when people can laugh at themselves and their circumstances.

Then walking along the beach early the next morning, it dawned on me what a wonderful job that would be - the Vice President of Planting - the person that plants things that bloom and become beautiful.

Reflecting further, it dawned on me that Hayne Hipp created the Liberty Fellowship to make Vice Presidents of Planting out of the fellows - people inspired to serve their community through leadership that empowers others to bloom and accomplish great things.

The Vice President of Planting. I like that. It's something we should all aspire to be.

Notes from Pawley's - Robert E. Lee's globalization dilemma

The third seminar of the Liberty Fellowship was the last week of September 2005 at Pawley's Island. Below are notes from the week.

Early in the week, we had a discussion about globalization and the loyalty of organizations to governments. For example, KEMET, Milliken, Michelin and BMW operate in a global environment. What loyalty do they owe to the US, France, or Germany - or China for that matter?

Later in the week a seminar moderator from California, who has done an outstanding job, was presented a SC flag that had flown over the state house. A discussion of SC history led to a discussion of the War Between the States and the right of states to succeed from the union. Our friend was adamant that it was very clear before the war that states had no such right to secede under the US constitution.

But the great debate of the first half of the 1800s was precisely over the supremacy of the federal government versus the states. South Carolina's greatest statesman, John C. Calhoun (no not Strom, though Strom may have met Calhoun as a child), argued fiercely that states had the right to nullify laws of the United States with which states disagreed.

Perhaps the greatest specific example of how uncertain it was to whom loyalties were owed was the dilemma faced by Robert E. Lee. His grandfather was General "Light Horse" Harry Lee, hero of the American Revolution. Robert E. Lee attended the United States Military Academy and graduated second in his class having received no demerits, which has not been accomplished again. This was a man for whom duty to God and Country was supreme in his life.

Lee’s world was in rapid transition, and it was very unclear to whom loyalties were owed. Given the choice between being loyal to the State of Virginia or being loyal to the United States of America, Robert E. Lee chose Virginia.

The world has changed so fundamentally since then, that Lee's choice is one we can not conceive of making today. Lee’s decision seems quaint and anachronistic. Our knee jerk reaction today is that KEMET and Milliken are American companies, and though operating in a global economy, they owe their loyalty to the United States. In a few decades will that loyalty seem as quaint and anachronistic, and quite frankly as misplaced, as Lee’s loyalty to Virginia?

My view is as long as it is the US government protecting us from incoming missiles, even those that may have KEMET capacitors in the nose cone, it is clear where our loyalty must lie.

But then it was clear to Robert E. Lee too.

Book Signing - Open Book Greenville - October 6th

I am having a book signing for Swamp Fox Insights; Innovation and Entrepreneurship in a Time of Profound Change at the Open Book in Greenville on Thursday, October 6, 2005 from 5:00 pm to 7:00 pm.

Here's the details, and here's a map to the Open Book

Please tell your friends, and if you are in town come join us.

Hopefully I won't be alone.

Very Interesting Report - The Innovation-Entrepreneurship NEXUS

OK. I know. Not everyone is a junkie like I am for a research report from the SBA Office of Advocacy entitled, "The Innovation-Entrepreneurship NEXUS: A National Assessment of Entrepreneurship and Regional Economic Growth and Development."

But every now and then you come across something like this that resonates because it precisely matches up with your experience. Here's the Cliff Notes version:

1) "When compared to local-serving industries, traded industries are generally larger, grow faster, and pay higher wages... In regions with higher levels of entrepreneurship activity the percent of all industries that are traded is significantly higher than in those regions with lower levels of entrepreneurship."

Note: SC is #1 in the continental US in foreign direct investment.

2) "The most entrepreneurial regions in the United States also possess the greatest innovation capacity." The author's Regional Innovation Capacity Index is made up of total R&D expenditures, the number of patents issued, and regional technology orientation.

Note: We can leverage our historical successes in industrial recruitment, the deep base of international companies with a presence here, to increase our innovation capacity. We don't have to convince BMW and other global companies to do research. We only have to convince them to do research here.

3) "The Regional Entrepreneurship Index was computed as the average of the relative rankings (equally weighted) of three core metrics: 1) the number of new firm births per 1,000 labor force, 2) growth in the number of new firm births and 3) the proportion of young firms that are growing." The author's Regional Entrepreneurship Index is a measure the capability of converting innovation capacity into entrepreneurial activity.

Note: We need a lot of work in this area. FastTrac in the Lowcountry, in the Midlands, Upstate, is a start.

4) "Innovation and entrepreneurship are both positive and statistically significant factors in regional employment change... entrepreneurship appears to mediate between innovation and regional employment."

Note: Thus the reason InnoVenture has major companies, universities, and emerging companies in the same room. Major companies and universities drive innovation, and the emerging, high-impact companies will spin out. That is the Austin model George Kozmetsky gave me in 2001.

This should be the foundation of the economic development strategy in our region.