Expecting a $2 billion payback from a $100 million investment sounds about as likely as finding a winning lottery ticket.
For New York City, though, an innovative economic development partnership could transform the city into a research, technology, and engineering center, create thousands of jobs, and produce just that kind of payback.
Robert Steel, ’84, New York’s deputy mayor for economic development, said that under Mayor Michael Bloomberg the city determined that it needed this transformation in order to remain competitive with other cities in the information age. Steel spoke to about 150 Booth students at Harper Center on April 3 for his presentation, part of the Distinguished Speaker Series hosted by the Graduate Business Council.
New York is a hot spot for financial services, film making, fashion design, and tourism, Steel said, but the city lagged places such as Silicon Valley and Boston in engineering, technology, and the applied sciences, fields that are driving growth and attracting venture capital.
“We came to the conclusion we were underweight in these areas, and the places that were growing rapidly had skills we didn’t have,” he said.
Steel displayed a chart that labeled New York as “America’s college town,” with 664,000 students enrolled in post-secondary education, twice that of Los Angeles, the city with the second-highest number. However, only 0.7 percent of New Yorkers are employed as engineers, as compared to 3.1 percent in Silicon Valley.
Bloomberg is an entrepreneur who created the global financial news, information, and data service giant that bears his name. Steel said that the mayor “thinks like a start-up guy” and recognizes the correlation between research and economic development. City leaders determined that a top-tier engineering and applied sciences campus—Applied Sciences NYC—would attract more high-level talent to New York. The resulting research and development could generate hundreds of spin-off companies and thousands of new jobs.
Instead of creating a grand-scale, publicly funded project, New York offered city land, technical assistance, and $100 million for infrastructure, and then asked universities and applied-science organizations to submit proposals.
A total of 17 institutions submitted seven formal proposals, and in December 2011, the city chose a consortium of Cornell University and Technion-Israel Institute of Technology, which will build an 11-acre campus on Roosevelt Island in the East River between Manhattan and Queens.
Classes will begin in the fall at a temporary site, and the first phase of the Roosevelt Island campus is scheduled to open by 2017. By 2043, the city envisions a campus with 2,500 students, 280 faculty, 8,000 additional permanent jobs, representing a $2 billion investment. Moreover, Steel said, the city expects to attract as many as 600 start-up businesses that will spin off from the campus and create thousands more jobs. The project also is expected to generate up to 20,000 construction jobs to build the campus.
Steel said New York chose Cornell because of its presence in the city, its medical school, and its track record in entrepreneurship. Cornell alumni have started 2,600 companies in the last five years alone. Steel described Technion as the “MIT of Israel” an institution surrounded by 4,000 start-ups in the city of Haifa.
Cornell, based in upstate Ithaca, New York, also made a financial commitment that Steel said would cover the first phase of the campus. The university received a $350 million donation from alumnus Charles Feeney, a billionaire and philanthropist, insuring that the project can start on time and perhaps even beat the timetable laid out.
“I’m optimistic and confident we are going to get what we paid for,” he said. “My own instinct is that if this gets off to a good start and gets traction, it will happen faster.”
Steel was appointed deputy mayor in 2010, and his resume covers a broad business background: president and CEO of Wachovia, under secretary for domestic finance at the US Treasury, and nearly 30 years at Goldman Sachs, where he was vice chairman. Lessons he learned in those positions have guided his thinking in his current job and in planning for Applied Sciences NYC.
One idea he adheres to is that government investment is better served by creating the opportunity for a research campus rather than by deciding what should be researched or ultimately produced.
“Government shouldn’t pick winners,” he said. “Industry should pick the winners.”
Though government should encourage and support projects such as Applied Sciences NYC, Steel noted that “natural forces” limit the effectiveness of government involvement.
“There isn’t a natural reward for innovation and efficiency in government,” he said, and once a government program or service starts, “it is almost impossible to reduce it or take it away.”
Steel identified four drivers of economic development that are more effective tools for governments looking to encourage growth: improving the quality of life; a pro-business environment; investing in infrastructure; and promoting innovation and economic transformation through initiatives such as Applied Sciences NYC.
The Roosevelt Island campus is the first major project under Applied Sciences NYC but may not be the only one. The city is in discussions with Carnegie Mellon University, Columbia University and a consortium led by New York University on other potential projects.
New York has passed Boston to become the nation’s second largest venture capital center behind Silicon Valley, and Steel said the city is reinventing itself to be a center for research and technology.
“It’s not a one-shot thing. It’s a culture,” he said.
Photo by Beth Rooney