The Cuomo Administration’s partnership with Elon Musk’s Solar City makes sense. Public capital for property, plant, and equipment can, indeed, help the firm achieve an immediate production scale, allowing it to produce at a low enough per unit cost to be competitive in a global marketplace. Doing so in the form of long term operating leases ensures that the State retains control of this physical capital, which does much to align the interests of both parties, posturing them for a long term public private partnership.
That’s excellent, and light years ahead of any other industrial development policy that we’ve ever had. And the subsidies are justified when photovoltaic panel producers in China are being heavily subsidized by their government.
But, still, concerns remain. They can be addressed, and this plan can be made stronger. This is how.
Complete corporate campus, rather than a manufacturing plant alone
Let’s go back to Elon Musk and offer him a better deal. Let’s make more Buffalo Billion capital available for the build out of an entire corporate campus – not just one of its manufacturing plants.
We can woo Solar City’s headquarters here with the prospect of a corporate campus along a revived Buffalo River that enjoys the spatial feel of a university. Prototyping centers, design studios, research laboratories, technology incubators, training facilities, lecture halls, spaces to spawn startups, residential spaces for visiting scientists, and symposium venues for industry conferences.
If we are simply hosting a manufacturing plant for a firm headquartered in Silicon Valley, then we will forever be extorted for more and more – with the threat of the firm moving to another State constantly hanging above our head. But if our region can entrench itself into the identity of this firm, then we can better root it here, making it more difficult for them to pick up and move in 10 or 20 years.
It’s the difference between building companies and building corporate institutions. If we can give a firm the physical capital to innovate in a robust and sustained way, then it will emerge the type of firm that spawns new technologies from which unimaginable industries then emerge.
Factories alone don’t do that.
We should be sure not to allow Solar City to define itself narrowly as solar panel manufacturer, but more broadly, with the aim of integrating photovoltaic technologies into every facet of life, every type of building material, every transport mode, and every industrial mechanism for either war or peace. That objective will require an army of innovators – whose products will require many factories, not just one.
Elon Musk, the founder of PayPal, has invested heavily in some of the most ambitious private investment projects ever undertaken, including the development of space travel technology and, of course, founding the uber-elite auto producer, Tesla.
The region should make a concerted effort to appeal to Musk, a billionaire who is motivated more by his eventual legacy and the long arch of history than short term earnings reports. He has the ability to lead the revival of the Rust Belt, another legacy that he could add to an ongoing list.
He is the kind of billionaire whom this region would be wise to empower. With resources to quickly cultivate his firms into corporate institutions on a par with Microsoft, Google, and IBM, Buffalo Niagara could make glorious new gains in industrial redevelopment.
A broader economic development strategy
A game changing economic development policy for Buffalo Niagara: we will empower the most forward thinking billionaires in America with university-like corporate campuses that wildly enhance their capacity to innovate. In exchange, we would require that they base all of their firm’s operations in Buffalo – from accounting, to manufacturing, to research and development.
For firms on the brink of explosive, disruptively transformational growth, and who lack a major industrial footprint elsewhere domestically, this development deal would make sense for both parties. For taxpayers, the region desperately needs to build up its export industries to generate new cash flows for the region.
For these high growth firms, we facilitate their immediate global competitiveness and an ability to compete at an otherwise unachievably low production cost per unit. And we can give them a globally unparalleled capacity to innovate in a sustained way, in the form of a university-like corporate campus.
Let’s identify a handful of firms in industries that are postured for transformative impact, and build out billion dollar corporate campuses for 5 to 8 firms, with a total price tag somewhere around $10 billion.
Innovating out from behind
For some firms, such a development deal could greatly increase its equity value – especially for privately held firms like the Waterloo, ON based Blackberry, which is seeking to reposition itself in the competitive mobile phone market. It’s a firm searching for identity and comeback, who might see the brand value in locating at Buffalo, this quintessential national underdog of a city.
More than just narrative value, firms that are chronically outperformed by corporate giants have only viable option to get unstuck from a third place (or worse) market position: game changing innovation.
For other firms, the campus would have a nominal effect on one’s book value – but would have a profound impact on the firm’s corporate culture and creative capacities. Imagine for instance the chronically third placed Sprint in the mobile communications industry. Taking such a firm out of New York City and giving it a sprawling corporate campus that feels like a university with waterfront views and lakeside breezes, could be the gaming changing x-factor that bumps it into a position of market dominance. Such a campus would orient the firm around wild innovation, giving it an irreversibly forward thinking posture.
This style of development deal will be most attractive to firms in a particularly precarious situation: those that enjoy massive revenues in stable but steadily declining industries. Because of their vulnerability to disruptive technologies that will emerge unpredictably, these firms are often the most concerned with their ability to spawn new technologies with the aspirational objective of reshaping entire industries.
Take a look at a firm like Corning, the glass company that reinvented itself into a materials company, which reinvented itself again into a fiber optics company – and now with over a $20 billion market cap. Sure, a firm like Corning has at least another decades worth of massive revenues with the continued deployment of fiber optics technology around the world, and the pressing national need for expanded domestic bandwidth.
But the Corning, NY-based firm has angst mightily to ensure that it is on the front lines of innovation. At one point, they even setup a satellite office in Silicon Valley to stay plugged into what’s happening with the nation’s younger tech companies. They’ve worried that their Southern Tier location isolates them from the nation’s clusters of innovation.
This style of development deal would be well fitted to Corning’s long term corporate strategy of continued reinvention and diversification. Corning lusts for a more creative and dynamic corporate culture. They have the resources to orient themselves firmly around research and development, to spawn potentially hundreds of new technologies. And they have organic upstate roots.