Albany and the NanoTech Future

The titan of Albany, New York spoke last night.  Alain Kalayeros, the 56 year old Lebanese physicist, wore his trademark dark denim pants and black three-button long sleeve t-shirt to the University Club of Albany to talk about his vision.  The less brilliant people in the room – like me – wore suits.

Kalayeros is an impressive academic, simultaneously holding the titles of Professor of Nanoscience, Senior Vice President and Chief Executive Officer, College of Nanoscale Science and Engineering (CNSE) of the University at Albany, and Vice President and Special Advisor to the President, University-wide Economic Innovation and Outreach.  He has written 150 articles, contributed to 7 books, and holds 13 patents.  But he is more important than that.  As the highest paid state employee in New York, he is entrusted with an economic transformation of New York.  His successes have politicians all the way up to President Obama visiting Kalayeros to drool over his promise and bask in his adoration.

So far, Kalayeros has built a cutting-edge facility for nanotechnology that has attracted billions of dollars in public and private investments, wooed high-tech multi-national corporations to upstate New York, and launched spin-offs and off-shoots that are taking root in dozens of communities.  He is among the top recipients of federal research grants in the nation.  Kalayeros is the king of nanotech, and master of New York State.

At the event last night Kalayeros spoke for a brief thirty minutes and took questions (hand written only) for another twenty minutes.  I want to share a few things he said.  I will paraphrase him as best I can.

1) Kalayeros referred to the emerging economic reality as an “upscale” economy.  In political circles the usual term is innovation economy, but Kalayeros’ depiction went further than the rosy term of innovation allows.  Because of high-tech, said Kalayeros, the U.S. is producing more and better products, but doing so with fewer workers.  We are upscaling to greater efficiency.  With high American labor costs the low tech jobs are moving overseas.  So, semi-skilled workers are driven to unemployment while more than three million high-tech jobs remain unfilled for want of qualified candidates.

He said this has happened before.  The advent of the automobile saw the high-tech car manufacturing jobs start in the U.S., while the older jobs in the horse and buggy industry moved to places like Canada.  In effect, Kalayeros described America as the big brother in a “hand-me-down” global economy.  America gets the good new stuff, and hands down the worn items to developing nations.

One negative consequence of this hand-me-down effect is that we have no room, nor much need for semi-skilled workers.  Low and no-skill workers are always needed as their tasks are always close at hand, centered on the maintenance of everyday life.  High skill workers we need more of.  Semi-skilled workers are out of luck and will be forced to either drop to lower paying jobs, or leap into the top tier.  It is an interesting assessment and one that I cannot immediately argue with.  However, it does seem to leave little hope for semi-skilled workers who have reached or passed middle age.

2) Kalayeros quoted a statistic demonstrating that more information was produced in 2011 than in the 9,000 previous years.  2012 will produced more information than 2011, and so on.  It is a humbling reality.  The reason is the computer.  In processing power more computations and calculations can be done faster than ever imagined, and more people are using computers.  Surely gigabytes of worthless information will be produced, but the sheer volume makes sifting through the information for the best stuff is a problem in itself.  According to Kalayeros, by 2013, the average laptop computer will have more computational power than all the humans on Earth.

3) Kalayeros discounted the idea of small businesses as engines of economic growth.  Small businesses, said he, are predominantly service jobs – retail, restaurants, etc.  They may employ people but they are not creating brand new jobs and they do not drive innovation.  To make clear his point Kalayeros described a shopping mall economy.

In this depiction big businesses are the anchor stores, small businesses fill in the space between mall anchors.  The small shops are there only because of the big shops, not vice versa.  For the Albany area Kalayeros described General Electric of the past century and today’s nanotech.  Both were massive operations from which small and mid-sized companies sprouted.  To support them suppliers, retail centers, bars, and so forth sprang up.  I surmise that Kalayeros would chafe at the term “trickle down,” but his mall analogy was persuasive.

4) Kalayeros did point out the America has a trump card in the global economic competition.  The U.S. is alone in having demographic trends that will increase the pool of skilled workers through 2050.  China, Korea, Japan, and the nations of Europe all expect declines as aging populations are not replaced by younger workers.

5) Then, Kalayeros made a point to admonish the audience by stating that America is the “only place in the world that plays by the rules.”  From China to Germany, the model of a private sector driven economy is subverted by government interventionism and the vast injection of dollars.  America is effectively bringing a knife to a gun fight.

He went on to say that the prevailing business model of America is dead.  According to Kalayeros, private companies do not and can not create and build the economy of the future.  Stopping short of calling for a state-run economy, Kalayeros stressed the need for public-private partnership, which sounded less like partnerships than public giveaways such as Solyndra.  It is understandable that Kalayeros would feel this way because it is the support of the state government that made Albany – and Kalayeros himself – the center of the nanotech world.  On this point he has credibility because the nanotech project in Albany has succeeded already, and promises even greater successes.

With the deftness of a P.T. Barnum, Kalayeros has wowed and amazed five governors and legislative leaders to pour cash into his operation.  For ten years the construction has not stopped, nor has the good news of companies like Sematech moving to Albany.

To my eyes nanotech in Albany has been the exception, not the rule.  Even  still I am not sure that the investments have yet paid off – I am sure they will – but the final verdict is outstanding.  That Kalayeros made it work is a credit to him, but the news is damning with stories of taxpayer dollars wasted on project after project.

6) I hoped Kalayeros would elaborate further on his claim that the private sector business model is dead.  The reason he gave was simple, “cost and complexity.”  Here I would like to quibble with the genius physicist.

He says that something like the CNSE Albany NanoTech Complex could not be built by private companies.  Too much “cost and complexity.”  Perhaps, but cost is a result of complexity, and has Kalayeros himself illustrated, the cost of technology and computing power has fallen and should continue to fall rapidly.  Other costs, like labor, land, and so forth, are not new.  Those things have been costs factors in every project since antiquity.  So the rest of the escalation in cost must be a result of the complexity.

To what do we owe the complexity?  I did not have a chance to ask, so Kalayeros did not have the chance to answer, but it seems to me that complexity is relative.  The process of building clean-rooms and the functions of manufacturing equipment must be complex, but surely private companies can manage that.  Rather, in my suspicion, the true complexity is a result of government.  Regulations, codes, environmental concerns, OSHA, human resource management, permitting, and so on, are all wildly complex, and inevitably must drive up cost.  With his government partners Kalayeros has been able to see these things handled, if not swept away, by political leaders.  For private companies that would take dump trucks full of money for lawyers, lobbyists, public relations efforts, and donations for campaigns.

If the private sector model of America is broken, it would seem to me that it is the government that broke it.  Dramatically reducing the complexity of getting something done would simultaneously reduce the cost.

7) Lastly, Kalayeros made a remark in passing that piqued my curiosity.  He said, “the U.S. university infrastructure is outdated and irrelevant.”  I would have liked him to elaborate.  That is a juicy bit to chew on.

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