Get Real Buffalo: Kodak Didn't Kill Rochester. It Was the Other Way ...

Get Real Buffalo: Kodak Didn't Kill Rochester. It Was the Other Way ...: Another great read from the Wall St. Journal. Substitute Rochester for Buffalo and Kodak with ????? that's the problem is there are no big ...

Kodak Didn't Kill Rochester. It Was the Other Way Around

Another great read from the Wall St. Journal.  Substitute Rochester for Buffalo and Kodak with ????? that's the problem is there are no big companies left in Buffalo...

Kodak Didn't Kill Rochester. It Was the Other Way Around

The film pioneer invented the digital camera but couldn't escape the intellectual limitations of geography.

By RICH KARLGAARD

The population of Rochester, N.Y., peaked in 1950 at 330,000. Its largest headquartered company, then and now, was Eastman Kodak. Two years later a popular radio show called "The Adventures of Ozzie and Harriet" jumped to the new medium of television. Kodak sensed a winner and sponsored the show. Little Ricky Nelson liked to tote around a Kodak Brownie Camera, which sold for $5.95.
Kodak's successful run outlasted that of "Ozzie and Harriet," which went off the air in 1966, and that of its hometown. Rochester began to shed population rapidly after a race riot in 1964, and five years later its second largest company, the Haloid Corporation, decamped for Norwalk, Conn., later renaming itself Xerox. But Kodak, with its large flows of cash and a top global brand, thrived in the 1960s and 1970s.
Then, gradually, the company began to lose its way. Kodak's troubles first appeared not in stalled revenue but in gradually declining profit margins—a point a year for most of the 1980s. The company's first consumer digital camera appeared in 1995, but buyers preferred Sony, Canon and other Japanese imports. Kodak began selling its digital cameras at a loss to keep up.
The rout was humbling for Kodak, one of whose engineers invented the digital camera in 1975. Also humbled was CEO George Fisher. Mr. Fisher—an extremely successful manager and Ph.D. in applied mathematics who had pushed Motorola hard into cellphones before taking over at that company—became chief at Kodak in 1993. Yet even he could not stop the company's decline.
Kodak's erosion became a mudslide during the last few years. Buy a smart phone today, get a camera free. Sure, the iPhone's camera might not rival Nikon's—yet. But the history of digital technology is one of the bottom steadily catching the top.

 

Bloomberg

The headquarters of Eastman Kodak Co. in Rochester, N.Y.

If Kodak's looming bankruptcy closes the book on this storied company, much will be written about the company's blindness to digital cameras and then smart phones. Rubbish! Kodak knew the future was digital as far back as the 1970s and, with Mr. Fisher at the top, began hiring managers with deep digital knowledge.
Kodak's problem wasn't blindness. Rather it was that film was a fatally attractive cash cow. Even in its decline, the company's film business produced outrageous profit. That cash paid for Kodak's forays into digital, but the result was that Kodak's digital cameras never learned to run on their own two feet. Trust-fund babies seldom do.
Kodak's other structural problem is geography. When you study the history of great American companies that stumbled and failed, or only partially recovered, you see how difficult it is to overcome the mindset of your immediate surroundings. Businesses located in places where success is the norm, and innovation is built into the ecology, have a better chance of fixing themselves.
Intel almost bit the dust in the mid-1980s but came back to greater glory. Like Kodak, it faced ruinous Japanese competition. Intel didn't hesitate. It shed its memory-chip business and bet the ranch on microprocessors. That was a big bet and it was ruthless. Memory-chip factories were shuttered and people were laid off. That was, and is, easier to do in Silicon Valley, where the laid-off can more readily find new jobs, than in a small city like Rochester, whose population is now at 210,000 plus.
Paralysis can infect cities and regions, and not just small ones. It is still a mystery how the entire Boston-area-based minicomputer industry could fail so suddenly in the early 1990s. Digital Equipment, Data General, Wang, Apollo—all went poof. Each fell from the top of their industries to death in less than a decade.
The two kings of Route 128—Digital's founder Ken Olsen and Wang's founder An Wang—were stubbornly resistant to personal computers. Together, they cast a kind of omerta over the region: PCs must never be mentioned!
John Chambers, CEO and chairman of Cisco, cut his management teeth at Wang. Mr. Chambers tells a story about playing tennis with An Wang in the late 1980s. He tried to talk to Wang about PCs. Wang became so upset that he stormed out of the match.
IBM also nearly died during the early 1990s. But unlike the companies in Boston, it retooled and recovered. Why? I would argue that IBM, being a New York City company—okay, a suburban one—had a healthy disrespect for the status quo and zero tolerance for omerta. Tough-talking Lou Gerstner had no qualms about shedding a couple hundred thousand jobs.
What Mr. Gerstner did was difficult. It would have been infinitely harder to do in Rochester, because the impact on a small city and the multiplier effect of lost jobs, axed all at once, would have been a civic disaster. Of course, Kodak's slow bleed has turned out to be a civic disaster anyway.
The world might be flat. But innovation and adaptation remain local

Get Real Buffalo: A City Is a Startup: The Rise of the Mayor-Entrepr...

Get Real Buffalo: A City Is a Startup: The Rise of the Mayor-Entrepr...: We need an entreprenuer for our next mayor... unfortunately this requires competencies that our current mayor nor past mayors have never had...

A City Is a Startup: The Rise of the Mayor-Entreprenuer

We need an entreprenuer for our next mayor... unfortunately this requires competencies that our current mayor nor past mayors have never had....Some one who has vision, leadership, creativity, passion and is willing to create value by bringing together the three main components of a start up...capital, ideas and talent to drive growth.

A City Is A Startup: The Rise Of The Mayor-Entrepreneur

Jon Bischke

 

Editor’s note: This post is authored by guest contributor Jon Bischke. Jon is a founder of RG Labs and is an advisor to several startups. You can follow Jon on Twitter here.
On stage at last month’s Le Web conference Shervin Pishevar, a Managing Director at Menlo Ventures, stated “The World is a Startup.” It’s an interesting perspective, and I think what’s true for the world is also true for countries, states and municipalities. With developments like last month’s announcement that Cornell was selected to build a new tech campus in New York City, it seems to follow that if “a city is a startup,” then the best mayors are the ones who are looking at their cities in much the same way as entrepreneurs look at the companies they have founded.
The ingredients for a successful startup and a successful city are remarkably similar. You need to build stuff that people want. You need to attract quality talent. You have to have enough capital to get your fledgling ideas to a point of sustainability. And you need to create a world-class culture that not only attracts the best possible people, but encourages them to stick around even when things aren’t going so great.
Paul Graham has written extensively on this topic in essays like How to Be Silicon Valley and Why Startups Condense in America. Much of his thinking no doubt played into the decision to base Y Combinator entirely in Silicon Valley. Boston’s loss was the Bay Area’s gain and a striking example of why it’s important for mayors to view their cities through an entrepreneurial lens. Paul viewed Y Combinator through that lens and it led him to believe that Silicon Valley simply had more of the ingredients that would make his companies successful than Boston did.
So let’s take a look at those ingredients. Making products and services people want to buy has to be at the top of the list of any forward-thinking mayor. Extensive research by the Kauffman Foundation shows that virtually all job creation comes from companies less than five years old. So if you’re running a city and want to increase the number of jobs in your city, you should be doing whatever you can to encourage more viable startups. It’s something that Ed Lee, San Francisco’s newly-inaugurated mayor seems to understand, telling TechCrunch back in November “I want them [tech companies] to start here in San Francisco, and I want them to stay and to grow.”
Talent is another important factor and lies at the heart of Bloomberg’s efforts in New York City. Creating a world-class engineering campus in New York can be thought of as the municipal equivalent to Facebook’s acquisition of FriendFeed or Gowalla. By having more talented people in the city, New York is better able to compete with other cities in the same way that Facebook better competes with rivals by having more talented engineers under its roof. (What’s more, Facebook recently announced that it will open an NYC engineering office in 2012.)
Of course, getting top engineers and designers to actually work for a city might prove challenging (with a notable exception to be seen in the success of the Code for America program), but mayors can have a significant impact on helping a city to attract the best and brightest.
I recently spoke with Daniel Huttenlocher, the dean of the Faculty of Computing and Information Science (CIS) at Cornell University, who played an integral role in Cornell’s bid for the Roosevelt Island campus (read more about this effort in Eric Eldon’s interview with Huttenlocher).
His observation that Bloomberg’s history as both a technologist and an entrepreneur helped him and others in his office to better understand the need for New York to increasingly be a hub for the best technologists on the planet. Bloomberg is to New York City as John Calipari is to Kentucky basketball, intuitively adhering to Vinod Khosla’s notion that CEOs should be spending a very high percentage of their time recruiting.
Capital is another necessity for a city’s success. In some cases this might mean mayors actively courting angel investors and venture capitalists. The success of the Silicon Valley ecosystem is due, in no small part, to the availability of early-stage capital and its density of investors. Other metro areas have historically struggled to replicate this investment ecosystem but more attempts are underway.
Sergio Fernández de Córdova, the founder of Fuel Outdoor and chairman of New York Entrepreneur Week, pointed me to an effort underway in the state of Connecticut to provide more funding to early-stage companies in the state. In addition, New York City announced $150 million in funding solely devoted to startups in the city as part of the tech campus announcement. While these efforts might pale in comparison to the latest billion-dollar fund raised by a Silicon Valley venture firm, they are a step in the right direction for states and municipalities trying to spur innovation.
A final ingredient is culture which can loosely be translated to livability when we think about cities. This was impressed upon me recently during a meeting with Eric Garcetti, the former Los Angeles City Council President and leading contender to become the city’s next mayor. Garcetti recognizes the challenges that LA has when competing against the Bay Area to be the home base for the next great technology company. Indeed, Los Angeles has lost a number of its most promising companies to the north such as Lookout and Yammer (born out of Los Angeles-based Geni).
Still, Los Angeles is one of the most desirable cities in the country to live in and the recent Silicon Beach resurgence is due in part to this. Listening to Garcetti talk about LA’s strong points reminds you of Larry and Sergei discussing why Google’s culture made it possible for them to attract so many outstanding engineers or Tony Hsieh sharing why Zappos’ quirky, fun work environment helped them retain top performers. By emphasizing LA’s strengths, Garcetti hopes to retain talented USC, UCLA and Cal Tech grads who might not be so keen on spending “Junuary” in San Francisco.
As we roll into an election year, many cities are in a state of crisis. Budgets are a mess and job growth has been minimal for a good swath of the country. Cities in need don’t just need strong leadership, they require transformational leadership. It’s no easy feat but it’s likely that the more that mayors view their cities through an entrepreneurial lens, the better they will be able to adapt to a rapidly-changing world.
Bloomberg seems to be leading this charge with his efforts in New York City and mayor’s offices around the country are taking notice. Others like Ed Lee, Garcetti and Newark mayor Cory Booker appear to be taking a similar tone in their respective cities. Perhaps these are the first examples in what will become a long line of mayor-entrepreneurs

Get Real Buffalo: How Stimulus Spending Ruined Buffalo - From the Wa...

Get Real Buffalo: How Stimulus Spending Ruined Buffalo - From the Wa...: No reason to write our own post when the Wall Street Journal said it so well this past Saturday... How Stimulus Spending Ruined Buffalo Four...

How Stimulus Spending Ruined Buffalo - From the Wall Street Journal

No reason to write our own post when the Wall Street Journal said it so well this past Saturday...

How Stimulus Spending Ruined Buffalo

Four decades of subsidies and high taxes haven't arrested the city's decline, but here comes New York's governor with another billion dollars

By STEVEN MALANGA

Why do cities like Buffalo decline, and what role should government play in promoting recovery?
In his State of the State Address this month, New York Gov. Andrew Cuomo announced $1 billion in incentives to attract new investment to the beleaguered city by Lake Erie. "We believe in Buffalo," he said, "and we'll put our money where our mouth is." Too bad Mr. Cuomo ignores the factors that help keep areas like Buffalo inhospitable to new investment—namely steep tax rates and the high cost of government.
This is an old story for Buffalo. Ever since the city began losing its manufacturing base in the 1950s and gradually declined into one of America's poorest cities (the poverty rate today is nearly 29%), the federal and state governments have poured hundreds of millions of dollars into subsidized redevelopment schemes that have yielded few tangible benefits.
Buffalo may be the paradigmatic example of why expensive government revitalization efforts often fail. Back in 2004, the Buffalo News estimated that the city had garnered more federal redevelopment aid per capita than any other city in the country, a total of more than half a billion dollars since the 1970s. Yet, the paper noted, the city had virtually nothing to show for the money.

Main Street in Buffalo: Emptied of traffic and stores by a light-rail infrastructure stimulus project in the 1980s.

Officials squandered millions granting loans and subsidies to projects that went bust. There was a proposed trade center near the famed Peace Bridge that was never completed even after the city granted it federally backed loans; a failed shopping plaza on William Street; and several hotels that defaulted on their government loans. Among the past three decades' failures have been a dozen or so businesses in the theater district—"one of Western New York's most heavily subsidized stretches of real estate," said the Buffalo News.
Even when government subsidies spurred actual building, the city has seen little broader economic impact. In the 1980s Buffalo used tens of millions of dollars of federal Urban Development Action Grants to attract private investment in a few signature developments, like the Key Center office tower in the downtown, and Hilton and Hyatt Hotels. But the projects didn't produce a sustained investment boom elsewhere in the city.
Sometimes these schemes have done real harm. In the 1970s, the federal government decided to invest $530 million to build a 6.2-mile light-rail system through downtown Buffalo. It was supposed to further spur redevelopment, of course.
Opened in 1985 and anchored by a transit mall that banned cars, the rail line fell well below ridership projections—and downtown businesses suffered mightily from the lack of traffic. As Buffalo landlord Stephen P. Fitzmaurice wrote in 2009: "Walk down Main Street on the transit mall; aside from a few necessities like drug and cell phone stores, blight dominates." Last month the city received a $15 million federal grant to restore traffic to Main Street.
These massive investment subsidies failed partly because officials were ill-suited to select the right projects and often instead gave money to favored insiders. Even former Mayor Anthony Masiello described the federal government's redevelopment funds as "a politically motivated system trying to please everybody."
But Buffalo also struggles because it remains among the highest-taxed localities in the country. According to Cato Institute scholar Dean Stansel, a Buffalo resident pays 25% more in income taxes than does the average resident in America's 100 largest metro areas. Buffalo's 8.75% sales tax, according to the Tax Foundation, is the fifth highest among the country's 120 cities with more than 200,000 residents. And the property-tax burden in Buffalo and surrounding Erie County ranks in the top 10% nationwide.
These taxes have gone to support a spendthrift local government that nourishes itself at the expense of the private sector. In 2003, then-Gov. George Pataki appointed a financial control board to audit Buffalo's finances. The Buffalo Fiscal Stability Authority accused city government of financial mismanagement, inadequate oversight, and fragmented record keeping. It detailed numerous wasteful practices in city government, including loading employee contracts with expensive provisions.
The city's virtually insolvent school district, for example, paid for elective cosmetic surgery for its teachers and other staff. "Buffalo must have the best looking teachers in the country," says John Faso, a former member of the control board, which lobbied unsuccessfully to have the perk ended. It continues today, to the tune of some $6 million a year.
The city also struggles to cut spending because of expensive state-imposed mandates, including a union-friendly binding arbitration law that results in rich public-employee contracts, and a state law that allows unionized public workers to continue receiving the benefits of a contract—including pay increases—even after the contract has expired. Good luck getting concessions from union leaders in new contract negotiations under such conditions.
But Mr. Cuomo says little about relieving hard-pressed municipalities by lifting such mandates, even while other governors have already signed laws lessening the fiscal burden on local governments. New Jersey, for example, eliminated binding arbitration, which often favored unions, and enacted a new arbitration law that allows cities and towns to impose a settlement when there is an impasse in contract negotiations. Nor did Mr. Cuomo address New York's steep tax burden, the second-highest in the country. Instead of cutting that burden, he recently raised income taxes on the wealthiest New Yorkers.
In the Empire State, the official version of Buffalo's decline is that the city lost its manufacturing jobs to cheap overseas competitors. But the flight of blue-collar jobs from upstate New York began in the late 1950s when businesses and investment bolted to more competitive American states, not to foreign countries. Today, business executives consistently rank New York one of the least desirable states in which to open or expand a business.
Another billion dollars in government subsidies for Buffalo won't change that.
Mr. Malanga is a senior fellow at the Manhattan Institute.