Monthly Archives: March 2014

Despite all the talk of California’s decline, there’s one area that could eventually turn the tide back to the Golden State’s favor – higher education.
While Texas has become the model state for job creation – leading the country for what seems like the last decade – the Lone Star State would do well to emulate California’s education ecosystem to maintain its long-term economic competitiveness.
The state of California has two things Texas (and the rest of the country for that matter) needs more of – technical talent and venture capital. And, one could argue, both of those stem from a priority commitment to higher education.
In fact one of the country’s most successful investors (who ironically re-located from California to Texas in the not-too-distant past) told me recently that higher education is the most critical component to a competitive economy and sustained job growth because it’s the development of technical expertise and commercialization of products and services with genesis on campuses that attract the venture investment that creates jobs and communities.
Venture investors and companies like to stay close to each other, a key reason Silicon Valley has become the epicenter of disruptive technologies.
California learned early that a healthy higher education ecosystem could be a catalyst of sustained growth. The University of California system itself is among the best in the world, with 10 designated Tier I research Universities, more than any other state.
And for a time the Golden State reaped its rewards, growing into one of the world’s largest economies during the mid-20th Century. Hewlett Packard and Apple, the space program and even automakers, benefited from government research that turned into heavy research and development investment in the 1950’s and 1960’s, starting with Project RAND (now the RAND Corporation) in 1945.
California wisely recognized the potential of research, and more importantly how to use that research to create wealth.
Stanford has set the benchmark for technology commercialization – turning research into business plans that find a market. With a market comes venture investment to spur growth, which leads to jobs the creation of wealth and ultimately communities, like the Silicon Valley we see today.
It’s not surprising that company founders of Google, Yahoo and many others were educated in Palo Alto.
And while the seeds of Facebook were sown at Harvard, the social network pioneer benefited from its re-location to Silicon Valley, gaining the technical talent and venture capital it needed for growth.
Despite its success in education, the California economy will continue to lag if its political leadership won’t get out of the way. More taxes and regulation on entrepreneurs that risk capital and create jobs just plays into the hands of those who are competing for jobs in other states; those policies have certainly been a boon for Texas. And by the way, it’s not “stealing” jobs if you ask nicely and simply offer a better, more competitive deal. That approach often leads to “yes.”
As Margaret Thatcher once said, “the problem with socialism is that you eventually run out of other people’s money.”
Texas’ public policy, on the other hand, is built for growth, with a low tax burden, reasonable regulations and support for small businesses. The culture is entrepreneurial, and we’re investing in infrastructure to support population growth, with a multi-billion dollar commitment to water in 2013, along with transportation and energy.
In Texas, at least, sustained economic growth means supporting encouraging entrepreneurs who create jobs, not punishing them.
While Texas has led the nation in job creation for about the past decade, to fill those jobs we’ll need a skilled workforce, and to grow the companies, more venture capital.
In higher education, Texas isn’t there yet but we’re gaining. In fact Texas just passed California as the national leader in technology-related exports.
Our two flagship state universities are Tier I status – along with the University of Houston and private Rice University in Houston – but there’s more ground to cover. In the last decade the state has focused more on commercialization, and we’re seeing progress locally. In response to the energy boom in west Texas, Midland College, Texas Tech, and the University of Texas-Permian Basin have started energy-oriented academic programs to develop homegrown talent (incidentally, Midland, Texas now has a higher per-capita income than does Silicon Valley according to the Bureau of Economic Analysis). In 2013 Texas also approved legislation to create a new ‘super University’ in south Texas to train our growing Hispanic population.
While anxiety about California’s future is certainly legitimate, the Golden State still has a solid foundation on which to build, and a lot to teach Texas and the rest of the country about the right formula for sustained success. To paraphrase a Texas coaching legend, if California higher education isn’t in a class by itself, it certainly doesn’t take long to call the roll.

Craig Casselberry
100 Congress Avenue, Suite 2100
Austin, TX 78701