Governor Ige’s Remarks at the Hawaii Economic Association

Posted on Oct 20, 2015 in Main

Remarks of Governor David Ige as prepared

October 16, 2015 at the Halekulani Hotel

Aloha everyone. Thank you for having me.

Who knew that there were so many economists in Hawaii! It’s nice to see so many of you here interested and vested in Hawaii’s economy.

As you all know, I’m an engineer. I love numbers. So I feel right at home here with all of you.

I’m pleased that today’s theme, “Beyond GDP: Measuring Sustainable Progress and Well-Being in Hawaii,” focuses on Hawaii’s triple bottom line.  It explores the relationship between economic growth and success, environmental sustainability and quality of life. They are not mutually exclusive, as some would have us believe. When we do things the right way for the right reasons, when we work together with integrity, when we continually seek new and innovative ways to accomplish our work and commit to finding creative solutions to the critical issues facing this state, we will be able to measure economic prosperity in a way that honors our environment and the people who call Hawaii home.

My vision of the Hawaiian Islands is as a place future generations choose to call home.

This goal is very personal to me. As many of you know, I have two daughters and a son. They are all at universities on the mainland, in undergraduate and graduate level programs. They wanted the experience of living independently on the mainland.  As a parent, when they’re done with school, I want them to have meaningful job opportunities in Hawaii – with wages high enough for them to pay off their student loans and find a place to start their own households. I want their friends to have similar opportunities and for this generation to be enthusiastic about returning home. I want them to contribute to the state’s economic growth, become stewards of our environment, and enrich the social fabric of our communities.

So what will it take to make that a reality?

As a first step, I’m working with the department directors and employees to create a state government that is honest, transparent and responsive to its citizens. We are modernizing state systems so data collection and reporting functions work. We are implementing reforms that increase efficiency, reduce waste and improve accountability.

These measures will improve the overall business environment. What about the high-paying jobs? How are we as a state going to create jobs in the New Economy?

I thought it might be helpful to start by looking at what’s working and what’s not.

When it comes to personal income growth, we’re doing alright. We’re 17th in the nation. We’re 14th in the nation for employment growth, as of August. And we have the 3rd lowest unemployment rate in the country.

And when it comes to quality of life, we’re number one.

Now the bad news. According to CNBC, we are 50th in the nation for cost of living. We also don’t do very well on infrastructure, workforce quality, education and business friendliness.

Cost of living is hard to fix.  Hawaii is the most isolated community on the planet, and everything costs more.

But we can do something about the other measures, which also happen to be critical for growth. Improvement in these areas requires strategic thinking and a comprehensive plan.

It starts with education. I am committed to empowering our public schools and university, with a focus on 21st century skills and learning. Graduates must be ready to succeed in the rapidly changing workplace. Given this foundation, they will be ready to participate in and benefit from the innovation economy.

I strongly believe that the state’s economic diversification and growth plans must center on innovation. The innovation sector offers the best promise of high-quality living wage jobs for our children, and it’s a sector well-suited to our people, institutions and culture. Economists and federal policy makers all agree that innovation is the central driver for economic growth in the U.S.

Workers become more productive when they use improved equipment. Consumers benefit when new goods and services hit the market or when existing ones become better or less expensive.

The innovation industry itself is a jobs creator. One innovation job creates 5 related jobs. Innovation jobs pay higher wages and create demand for doctors, lawyers, real estate agents, chefs and baristas.

If Hawaii needs new engines of economic growth that create high-wage jobs — and I think everyone in the room would agree that we do – an innovation economy is the ticket.

Is there a role for government to support this new emerging sector? YES.

For the past several years, I’ve supported the HI Growth Initiative, an effort to foster an entrepreneurial ecosystem here in Hawaii. We want more people in Hawaii to think out of the box and create new companies with major growth potential.

Let me tell you, HI Growth has been really successful. From virtually nothing 4 years ago, entrepreneurship today is supported by 6 startup accelerator programs, 3 of them are nationally recognized.

We’ve attracted venture capital investment to the state and today have 5 Hawaii-based venture funds. We have coworking spaces and maker spaces where serendipitous collaboration can happen. And in any given week, you can find events and meet ups that teach and encourage entrepreneurism.

A recent report by UHERO, sponsored by the Hawaii Business Roundtable, found that innovation jobs make up over 7 percent of Hawaii’s economy.

A Kaufmann Foundation report ranked Hawaii 12th in the nation for startup growth, just below New York and above California. That’s pretty good, and I know we can do better!

Instead of pineapples and sugar, Hawaii is adapting to the new economy by identifying our strengths and applying innovation to transform those into opportunities for high growth businesses.

Innovation in Hawaii means developing new clean energy technologies. It means new agriculture technologies. New local fashions. New apps for your computers and phones. It means locally-created digital media and film content designed for multiple platforms.

This knowledge-based economy also conveniently helps us work towards that triple bottom line of growing the economy while also addressing social justice and environment issues.

For one, a knowledge workforce is good for the environment. It has a low carbon footprint. Digitally driven innovations don’t require large land-bases or resources to develop. Innovation workers prefer an urban lifestyle over traffic and sprawl. And they’re naturally attracted to places like Hawaii with a high quality of life.

Looking at recent negotiations for the Trans-Pacific Partnership, it’s clear that the global economy recognizes the importance of this knowledge workforce and the importance of Asian economies.

Innovation also helps increase GDP, creating wealth and a bigger tax base. That means resources to pay for government programs that work to address social issues such as homelessness and affordable housing.

In addition to the HI Growth Initiative, the state has undertaken other initiatives that utilize innovation to achieve the triple bottom line.

A good example is Hawaii’s clean energy mandate. Our goal of 100 percent of our electricity generated from renewable sources by 2045 is both eco-friendly AND good for our economy. The mandate has stimulated demand for clean tech innovations, many of them running through our Hawaii Energy Excelerator. And it has created a growing industry that needs engineers, technicians and data analysts, and maybe a few good economists.

When the innovation sector gets going, our working and living conditions also improve.

For some people that means less time spent in traffic because you’re working remotely on a startup project – or benefiting from other people working on those kinds of projects and not being on the roads.

For others, it might be the enjoyment of owning your own home because the wages they are paid in innovation or a related field are higher than many industries. On top of that, thanks to our clean energy goals, we’ll also be paying less in electricity costs and enjoy a greener environment.

To keep up the momentum we’ve built and to reach critical mass, the state must continue to invest in innovation. Building a new growth sector in our economy doesn’t happen overnight. It also doesn’t happen without significant government investment in key areas.

The Oahu Economic Development Board, Enterprise Honolulu, studied Hawaii’s innovation economy and wrote a report in December 2014 that called for “a significant and consistent level of funding into the innovation economy.” The report said that investment “is crucial, especially when the ecosystem is new and less robust.”

I’ll offer two analogies. We don’t expect a child to go college without first attending kindergarten, middle and high school. As a result, as a society we support all levels of education, so that children can learn to do basic arithmetic before they learn trig and calculus.

Or take tourism: Hawaii’s tourism industry is strong and resilient because we support and maintain airports, we encourage hotel owners to keep their offerings fresh, and we undertake major sand replenishment projects on Waikiki Beach.

Likewise, if we want innovation to drive growth, the state needs to invest in the whole package: infrastructure, access to capital and workforce development.

We need to expand the state’s broadband capacity and make it available to businesses. We need to continue making risk capital available to innovation businesses because it’s not something banks or federal research grants are built for. And we need our schools to produce educated workers that can help feed the new knowledge businesses being created.

The University of Hawaii of course plays a major role here.

The university is teaching students the skills and disciplines that will help feed the new economy. As a major research entity, the university also generates reams of new knowledge with commercial potential. Entrepreneurs must be encouraged to partner with faculty to discover and bring to market new ideas and technologies that will change the world.

I have very fond memories of UH, having gotten my degree from the College of Engineering. I never had the opportunity to travel outside the state of Hawaii, until my junior year at Manoa.  My first trip outside of Hawaii was to Silicon Valley, it was spring break and I was interviewing for jobs.

I interviewed at all the big companies, like IBM, HP, and Intel. By graduation day, I had 41 job offers all across America. I had 1 job offer in Hawaii. Hawaii is my home, and so I took that one job offer and the rest is history.

What I want for our kids is for that jobs equation to be more balanced. 40 offers on the mainland, 40 offers in Hawaii. And I can tell you that the different initiatives we’re pursuing as a state are all pointed toward this goal.

Let’s imagine little Leilani. She grows up in Mililani and she starts to learn about digital media, or robotics, or coding in elementary and middle school. Just one or two classes or lessons, here and there, or after school or summer enrichment. But it exposes her to these new technical skills. And when she gets to Mililani High School, she joins the robotics team and guess what, they win the state competition and they win again at nationals. She goes on to the University of Hawaii and studies engineering. She learns about business through the Pacific Asian Center for Entrepreneurship, at the Shidler College of Business.

Leilani and her friends cook up a startup idea and they compete in a UH business plan competition and submit their idea to Accelerate UH. After Leilani graduates, she goes back to her robotics roots and applies to a Hawaii robotics accelerator affiliated with NASA. And even when her first company fails – which happens often, even in Silicon Valley – it’s ok. She’s learned to be an innovator. It’s in her DNA.  She’s adaptable and nimble enough to switch ideas, pivot and start again. And she can choose to do all of this without leaving Hawaii.

The state is well on its way to making this a reality. This is a new storyline for Hawaii.

We’ve all heard that old storyline, of the talented young person, best in her class, who goes to a mainland college and never comes back. We’re changing that as we speak.

Ten years ago, a girl like Leilani graduated from college and like me, had 40 job offers in Silicon Valley, Seattle, San Diego, and Austin and 1 in Hawaii. And not surprisingly, she took a job in Mountain View.

But today, in 2015, a girl like Leilani has just graduated and although she’s had offers in Mountain View, she also had strong offers in Hawaii. So she’s still here, working for a hot new startup.

And what’s more exciting is that we are starting to see the girl who graduated in 2010 coming home to Hawaii after her mainland experience. We have real life examples of mid-career kamaaina come home from Silicon Valley. There’s a software entrepreneur named Darius Monsef on the Big Island who sold his company a few years ago and is building a new one out of Waimea. Just recently he closed on a successful fundraising round. That’s happening on Maui, too: a veteran tech entrepreneur named Tina Fitch has come home and has hired local software developers to help her build a new mobile app. She too is successfully fundraising.

So what’s changed between then and now? Our investment in innovation.

Through the public education system, we’re giving children like Leilani the tools to be an innovative thinker.

But we also need to be thinking about her future needs as a business owner. We need to focus resources on making the business conditions ripe for her to stay and grow her business in the islands. That is largely what we’ve done through the HI Growth Initiative.

She needs risk capital to start her business. She needs educated workers to hire. She needs a coworking space or other flexible office space to work out of as she expands her business. And she needs gigabit broadband to sell her innovation in the global marketplace.

If we can keep doing this, Leilani and all her friends will become the drivers of Hawaii’s new knowledge-based economy. They will create new businesses that are in tune with environmental constraints that will create demand for other high wage jobs. And in the process they will start to generate wealth that enables us to have the resources to tackle social and environmental issues.

We will get to that triple bottom line. Not only will this take innovative thinking but also a concerted effort and an investment of resources in our innovation economy.

This is my hope and my vision for Hawaii’s future, for my children’s future for our children’s future. I ask you to join me and to help make this a reality for Leilani and all the citizens of Hawaii.