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COMMENTARY

Hawaii and Silicon Valley are Worlds Apart


By Rob Kay

It's essential to get out of Oahu every once in a while and see how business is conducted
elsewhere. As a marketing professional I have the opportunity to visit clients in Silicon Valley on
a regular basis. As everyone knows, the technology sector on the mainland has gone ballistic in
the past decade. The contrast between the Bay area and Hawaii couldn't be more apparent.
Take a stroll in downtown Palo Alto or Mountain View and you can practically feel the
excitement. The parking lots are filled with flashy new cars and the streets are lined with trendy
restaurants. Inside, jeans-clad twenty somethings discuss stock options, inhale cappuccino and
tap out code on their laptops. The best and the brightest entrepreneurs are here from throughout
the world, harnessing raw intellectual power to create wealth that we in the Aloha State can only
dream about.


So, why isn't it happening here? Why can't Hawaii have its own technological revolution?

I asked several prominent mainland technology and finance people with Hawaii connections what might be done to encourage the growth of technology in our state. Here is what they had to say.

Tim Bajarin-President of Creative Strategies, Tim is one of the leading Silicon Valley technology analysts and marketing gurus. (A former Hawaii resident, Tim also has family in the Aloha State.)

In my estimation, Hawaii is not really suited for software development. The Aloha State is too far from research centers and major Universities in Silicon Valley. That said, I believe there is a special niche that Hawaii is uniquely suited for--Call Centers. In particular, Hawaii-based call centers could provide tech support, telemarketing and other services directly to markets in Asia. Hawaii has all the resources to make this happen: fiber optic connectivity, a Japanese, Chinese and Korean speaking workforce and, an ideal location between the U.S. mainland and Asia. I believe these assets can be tapped by multi-nationals such as Hewlett Packard, Compaq, IBM and others who need Call Centers to service their Asian clientele. However, the state needs to implement an aggressive marketing campaign to let the world know that it's ready to do business. They have to work on this quickly. By the year 2000 the window of opportunity will be gone.

Marc Beauchamp--Communications Director, North American Securities Administrators Association in Washington, D.C. Formerly Nasdaq Stock Market spokesman and Forbes magazine's West Coast bureau chief, in the early Nineties he worked for both HEI and Hawaiian Electric Company.

What's needed is bold action and out-of-the-box thinking. Hawaii could start by creating a statewide technology tax-free enterprise zone and by deregulating the telecommunications industry. Overnight, the state could lay the foundation for a high-tech field of dreams and, believe me, they would come. Maui and the Big Island would be ideal locations for corporate technology campuses, where the best and brightest programmers could think big thoughts and write computer code for the 21st century. If Hawaii could remake itself as a high-tech Hong Kong, it could create a technology hothouse perfect for growing the Verifones of the future. How to do that? The answer isn't more government programs, it's less taxes and regulation.

Dan Case-Chairman & Chief Executive Officer of Hambrecht & Quist. Case, who works out of H&Q's San Francisco headquarters, runs one of the nation's most influential investment banks-an institution that specializes in funding cutting edge technology companies. (Case, a Punahou grad, is the brother of Steve Case, a founder of AOL.)

To successfully develop a technology industry, Hawaii first needs a long term, realistic plan to develop industry and be a more business friendly state, then fit the technology plan within this. While it is impractical to believe Hawaii can be a major leader in technology, there are encouraging signs, as well as success models such as Verifone and more recently Digital Island. The growth of telecommuting and the communications infrastructure also makes Hawaii a place where stealth commerce is being conducted. By stealth commerce I am referring to individuals or small companies selling goods and services full or part time from Hawaii over the Internet. These firms have little or no evident corporate presence or identity and are off the economic radar screen. I believe stealth commerce is being conducted more actively than anyone knows, given that the geographic centers of the businesses are often elsewhere, and given that Hawaii is such a wonderful place for a primary or second residence.

David James --President, Business Strategies International, San Francisco. Author and Asia-Pacific columnist for Upside Magazine, former vice president and general counsel of Dillingham Corporation and former chairman of business programs at the East-West Center.

The State of Hawaii can work harder at encouraging a spirit of private entrepreneurship. Government can do this by reducing the stultifying burden of government regulations and high taxes that weakens entrepreneurship in this State. If Hawaii is serious about encouraging technology growth here, it should establish significant tax and investment incentives for technology businesses, not merely serve as a cheerleader and bureaucratic facilitator. The State should step up to the plate with substantial venture capital funding for promising technology projects.

Guy Kawasaki-CEO and Chairman of Garage.com, author, Forbes columnist and former chief evangelist of Apple Computer, Inc. (Kawasaki is a graduate of Iolani.)

Do whatever it takes to make the engineering department of the University of Hawaii into a world-class organization. This means throwing money at the issues of both facilities and faculty.

Carrie Wong--Chief Operating Officer, Niehaus Ryan Wong. Ms. Wong helped build NRW into one of the public relations powerhouses of Silicon Valley. (She is a graduate of Hawaii School for Girls).

Hawaii can attract more high-tech business by leveraging two of its greatest assets: bandwidth and quality-of-life. With some of the largest amounts of fiber-optic cable connections in the world, Hawaii is ideal for tech companies. Business discounts on cabling could potentially be a huge attraction. In the computer technology field, especially in the service industry, finding and retaining good people can be a business' biggest challenge. The warm climate, friendly people, beautiful and inspiring environment and slower pace make Hawaii an attractive spot for smart, talented burnt-out ex-Silicon Valley workers. However, to make relocating this talent (especially bringing back the locals who left the islands for a career in high-tech) possible, the state must begin by making housing more affordable and improving the transit system. Lastly, create the best and most competitive education program to train professionals in the computing field, and that's not just programmers -- that includes marketing and communications, sales, administration, MBAs, etc.

Lessons to be Learned

So where do we go from here? Let's boil down some of the main points addressed by the commentators above.

Create a business friendly environment. Although some elected officials understand how important a business-friendly environment is to Hawaii's economic growth, the majority of those in our legislative body evidently have not gotten the message. If we continue to disregard what everyone has been telling us for 30 years-that we are overtaxed and over-regulated, high technology will never get off the ground. As Dan Case indicates, Hawaii needs to develop a long-term plan to create a business-friendly environment. (Anyone interested in this subject should check out the cover story in the September issue of Honolulu Magazine-"We Were Warned".)

Create tax incentives for technology and promote greater deregulation of telecommunications. Hawaii is competing in a global economy. In order to do this we have to shed our provincial ways and think, as Marc Beauchamp said, "Out-of-the-Box". That means coming up with creative tax incentives, providing land for tech parks, and continued deregulation of our telecommunications industry.

Providing venture capital for promising technology. There is virtually no money available for high-tech start-ups. The most successful company in the history of the state, Digital Island, had to go outside of Hawaii to get funded. It would be in the State's interests to make real money available to legitimate start-ups willing to set up shop here.

Getting serious about business attraction. Believe it or not, entrepreneurs in Hawaii are actually penalized, tax-wise, for doing business outside of the state. In order to attract high-tech businesses or consultants that would like to set up shop here, we must stop taxing exported services. If the Internet makes it easy for people to live anywhere they like, let's make it advantageous for this new mobile breed of entrepreneurs to move here.

Growing new technologies and services. Tim Bajarin, the Silicon Valley futurist, has a vision of Hawaii as a "Call Center for the Pacific Rim". To its credit, the Campbell Estate has seized this concept and is actively marketing Kapolei on the mainland as a 21st century call center. This is an example of bold thinking that other technology centers in the State can emulate.

Improving Education. High technology flourishes where companies can find the best talent. Again, Hawaii will continue to lag the nation in technology if we don't produce an educated workforce. As Guy Kawasaki and Carrie Wong allude to, we need to put more resources into improving our University and the general state of education from K-12.

Appoint a cabinet-level technology advocate. There must be a full-time cabinet-level advocate/advisor to the Governor whose sole responsibility is the development of high technology. This individual should understand technology and have real influence on the Governor and the Legislature. The advocate must also be able to "sell" Hawaii to Silicon Valley CEOs and have the ability to shepherd technology-friendly incentives through the Legislature. Without an advocate, technology will continue to be lost in the political shuffle.

Our State has been missing out on the greatest creation of wealth in our nation's history. While our economy has remained mired in recession the rest of the nation is passing us by. It's time we change the way we do business.

The Honolulu Advertiser - Sunday October 4 1998

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