Why High-Tech Companies Don’t Locate in Hawaii and What Hawaii Can Do About it

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BY DAVID THIELEN – On my recent trip to Hawaii, I was asked by numerous people if high-tech companies, including my software company, would consider locating in Hawaii. There appears to be a great deal of interest in building up a high tech industry (and the nice, high paying jobs they provide) in the state. So I figure it’s worth listing what the state needs to address to get companies to consider Hawaii.

  • Fix the public schools. A significant percentage of employees in high tech companies have kids and their number 1 priority for their children is a superb education. All concentrations of high tech companies have superb public schools – as good as the best private schools. And no, private schools are not an alternative as they can use public schools in the existing locations. You can talk around the issue all you want but Hawaii’s public schools are atrocious.
  • More and better universities. It just won’t work without several world class universities in the state. They not only provide interns from students working on their degree and employees from their graduates, but they are a key part of the system needed to create successful companies in the culture that is built up around them. The University of Hawaii needs to be better and you need at least one other top of the line University.
  • Bring in government research labs. This step is not essential, but it sure helps a lot. It’s much like having world class universities in that it adds to the culture in place.
  • Don’t turn people off unnecessarily. High-tech workers tend to be liberal to libertarian on social issues. Vetoing civil unions sends a message of intolerance which turns people off. Don’t put more effort into the UH football coach than the academics.
  • Provide the needed infrastructure. This spans the gamut from an active venture capital community, start-up advisory boards, and support/service companies such as web design firms, accountants, etc. It’s not enough to have companies that can do this, again they have to be world class. As an example, if the web designers there aren’t as good as the ones in silicon valley, then the company in Hawaii will fail because their website is their storefront to the world and will be sub-standard.
  • Have a base of large high-tech companies. The two big sources of high-tech start-ups is University graduates and employees at large companies that leave to start their own company. Silicon Valley is a world class center because of Hewlett-Packard and Intel as well as Stanford & Berkeley.

Ok, so the above list is impossible. For example, how do you have world-class support companies if you have no one in the state demanding that level of quality and is willing to pay for that work. You’re going to have to bootstrap and that requires building with what you have. I think it requires taking the following steps (in order):

  1. Improve the University of Hawaii and create something like the Hawaii institute of Technology. If you have two top Universities, then the best high school graduates will stay in the state, and others will come to Hawaii for college. When they graduate, you have people who want to stay in Hawaii to start new companies. This is a big up-front investment, but one that will pay off for the state in myriad ways.
  2. Start working on improving the K-12 schools. This is going to take 10+ years so you need to start now. Again, a major investment and a very difficult thing to accomplish politically, but one that will pay off many times over both for the state and for the children.
  3. Fund a local venture capital community. See if you can get Bard Feld to do a Rock Stars there in the middle of winter. Offer to match venture funding (and take 50% of the profits). There are a lot of ways to do this. Key to this is you want to make a large number of small investments, not a small number of large investments. That way not only do you spread your risk, but you are closer to building up a critical mass of local high tech companies.
  4. Get existing local companies to use small local companies for web design, accounting, legal advice, etc. and for them to push for world-class work from the local companies. This puts the basic infrastructure in place for high-tech start-ups.
  5. Once you’ve brought U.H. up to par and started a second top University, get an existing large high-tech company to locate a significant sized R&D facility there. You are going to have to pay them a lot to do so, but it’s the key next step. And the geographical location has some advantages as Asia is equally close for in person meetings.
  6. As you start to grow more and more high-tech companies, push the federal government to locate the next couple of research labs in the state. With world class universities, superb K-12 schools, and a significant number of high-tech companies, this becomes very doable.

And if doing the above is impossible, no biggie. There’s lots of other places for high-tech companies and the smartest kids in Hawaii can continue to move to the mainland for college and then jobs. Accomplishing this isn’t easy – if it was every state would have done it. And it will require a significant focused effort over a decade or more.


David Thielen blogs at https://www.davidthielen.info (and yes his mom is Rep. Cynthia Thielen)