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Hawai’i Venture Capital Association Luncheon

Posted on Feb 27, 2017 in Main

Remarks of Governor David Ige as prepared

December 12, 2016 – HVCA at the Plaza Club

Thank you all for joining us. I just returned from Maui, it was a sad moment. I was at HC&S for the final harvest of sugar in the State of Hawai‘i. I think all of us had known that agriculture was the main economic driver for many, many years here in this community. But starting probably about 200 years ago, sugar and pineapple were king and really drove our economy. Hawai‘i was number one in the world and it wasn’t by accident. It was by smart people making investments in sugar. Hawai‘i became the most productive sugar plantation in the world. It really was about how we plant, how we water, all of those kinds of things that really allowed us and sugar to be number one. In pineapple, it was the same story. We started from nothing, and grew the pineapple industry. There was a disruptive technology that was introduced into the pineapple industry just about 1910 or 1950. It was this device called the Ginaca machine. I don’t know how many of you worked at the Cannery like I did. But the Ginaca machine was a marvelous invention in the pineapple industry. It could peel, core and slice a pine, 50 pineapples a second, a minute. So Hawai‘i went from fair to middling in pineapple to the number one producer of pineapple in the world. Hawai‘i dominated the pineapple industry taking 75, 80 percent of the global market in pineapple because of that simple disruptive technology that was introduced into the industry about 50, 100 years ago now.

So the question really is about what’s next, right? Agriculture is not sustainable in Hawai‘i mainly because all of those inventions and mechanisms and processes that started in Hawai’i got distributed around the world. Ginaca machines started showing up everywhere they started planting pineapple. Soon after, the competitive advantage, the strategic advantage that Hawai‘i pineapple and sugar industry had for many, many years got distributed like all other inventions. All other technologies got distributed around the world and pretty soon the competition caught up. About 60 years or so, Hawai’i made a conscious decision because we knew that agriculture would not last forever. So we looked toward the hospitality industry. If you recall, if you go back to the 1960 census or so, hospitality or hotel industry was just an insignificant part of our economy. Clearly it was doing better but it is not what it is today. And it truly is about the people, place and culture that makes Hawai‘i special, and it really began to attract the capital necessary to make the investments in the resorts and the destination that became so important.

I’m really proud now that we are headed toward a fifth record year for the visitor industry in Hawai‘i. We’ve gone five successive years where we’ve set a record for arrivals and spending in the visitor industry each year for the last five years. And you know what? I’m confident that we’ll make next year number six because we just got certified for international travel at Kona Airport and we’ll begin to receive international flights into Kona Airport in about two weeks. And I’m confident that will propel us so that 2017 will be the sixth record year.

So the opportunity and challenge for all of us is: what’s next? What is the next economic driver for our community? Essentially the investments have been made in the hospitality industry. There’s no boom, there’s no desire to build more resorts, not a huge investment that will create growth that would drive our economy for any length of time. We all know the story of our children going away to college and never coming back. For me, it’s personal. My three children went away to school. My oldest, Lauren, just graduated Georgetown Law. She’s working for Wilmer and Hale in Washington, D.C. My middle daughter, Amy, graduated in nursing from the University of Rochester. She’s working at St. Vincent’s Hospital in Jacksonville, Florida. And my son is a senior at Johns Hopkins graduating in information technology next May, so I’ll be gone again in May. And he just accepted a job with Microsoft in Redmond, Washington. So what’s wrong with that story? Will we have an opportunity to bring them back? Will I have an opportunity to see one of these days my grandchildren here in the State of Hawai‘i?

My administration really is about how do we create the opportunities right here in Hawai‘i so that we can end this brain drain? We can stop the notion that our kids are going to go away to school, get an education, find a career elsewhere, and never have the opportunity to come back. So that’s what Startup Paradise means to me. It’s about stopping that brain drain. It’s about how do we create those opportunities right here in Hawai‘i so that Lauren, Amy, and Matthew will be excited to return to Hawai‘i and pursue their career dreams right here in the State of Hawai‘i. We have been committed, and I have personally been committed to this innovation economy. It really is the future. We do know that innovation jobs, the knowledge sector creates jobs that pays living wages that allow us and our community to have the opportunity to be successful and thrive right here in Hawai‘i, and more importantly to be able to afford to live here. So what is it that we need to do to create this Startup Paradise to really drive innovation, to really allow us to create the career opportunities that our young people want?

I’ve been focused since becoming Governor on a couple things and I think they all fit together. To me, it really starts with investment in our people. It starts with a public education. I’m committed to building the best public education system in the country. People get all nervous, like are you really, really going to say that? Yes, I am going to say that. I’m a proud graduate of Pearl City High School, and I truly believe that our public education system can be the best in the country. And it has to be because the quality of education, the quality of our people drives our economy. There is no doubt in my mind. The better our public schools do, the better our economy will do. So we do have the Governor’s Every Student Succeeds Act Task Force that has been working at creating that vision for our public school system. It really is about how do we create a future-focused education system that will really take us to the next level?

It’s not about incremental change. It’s not about incremental one or two percent improvements in student achievement. It’s really about what job skills will prepare our children to compete and thrive in the 21st Century, right? It’s about entrepreneurship, it’s about creativity, it’s about innovation, it’s about how to create problem solvers. It’s really not about test takers. And that’s what our education initiative really has been. It’s about empowering schools, trusting those closest to the children to develop the programs that make more sense. It’s not about one size fits all. It’s really about every school needs to meet the needs of their community, because I do know that Waimea High School on Kaua‘i will be different than Mililani High School here on O‘ahu, which will be different from Lāna‘i High School or Moloka‘i High School or Waiakea High School on the Big Island. Each community is different. Each school needs to be different so it can relate to those challenges and opportunities that are evident in every single community across the State. So it’s about empowering schools, it’s about trusting those closest to the children. It is about supporting STEM activities in our schools because I do know it’s about project-based learning. It’s about challenging our young people to take on real world problems and challenges that they can develop solutions. It is about creativity, and that’s what this whole transformation of our public school system is about.

I, for one, have been about leading by example, and it really is about changing State government. We cannot have a stagnant state government in an ever-changing world. I had the opportunity to meet Mike Buskey who’s the Chief Operating Officer of GameStop. You guys know GameStop, you see them in the mall, they sell video games. We had a very interesting conversation because he said he knows that if the rate of change inside of his company does not keep pace with the rate of change in the broader community, in the environment, that his company would become bankrupt. Just think about the tremendous changes that’s occurred in video gaming. He said some of us are into products and all kinds of different cycles, right? What’s the product cycle? What’s the product, what do you guys think is the life cycle of a video game? He said it’s seven to 14 days. You guys got the apps, right? They’re creating apps, it goes on a phone, they sell it on iTunes or it either takes off like crazy, goes viral and everybody plays it and then it crashes, right? Because people get bored and then you’re to the next big thing. Mike Buskey says if the rate of change in our organization cannot keep up with the rate of change in our community, we’re doomed to bankruptcy. So what happens if government doesn’t keep up with the rate of change in our community? If you guys think about what that means, that’s not a very good situation. So I have been working to change the corporate culture in government. It really is about embracing change. It’s about creating the opportunity. I do believe that our best and most important asset that we have in state government is our employees. It’s about investing in them. They’re on the front lines every day, making the state better for all of us. It’s really about encouraging them to take chances, to offer new ways to deliver services to our community. It really is about helping them take the chance of stepping forward and suggesting things that can make government work.

So what have we done in state government? And I’ll just point to two examples. We have been struggling in our public housing system with dead inventory. Federal government requires when someone moves out of a public housing unit, we have to bring it back up to federal standards before we can offer it. And it used to take the state about an average 200 days to renovate that unit. So it comes out, somebody vacates the unit, comes open, we go in, we make an assessment. We got to fix plumbing. We might need to fix electrical. We have to do a myriad of things. And typical state government, well, used to be typical, we’re making change. We would send in an engineer to try and figure out what needs to be done. He would spec out a bunch of different things, drywall, change plumbing, change lighting. And then we’d send in a plumber, then we’d send in a drywall guy, then we’d send in an electrician, and then 200 days later we would come out with something. But that means for 200 days, the unit is vacant and not providing services. We started this pilot called “multi-skills workforce” where we are enabling people with various skills to work as a team to fix units. So it used to take an average 200 days to repair a unit. How long do you think it takes for this new multi-skills workforce, for people with different skills going in working as a team, to renovate those vacant units, public housing units so that we can get them back online? Two hundred. So if they did it twice as fast, it would be a hundred days, which is still three months. It’s ok, it used to be six months. Three months is ok. These multi-skills units do it on average in seven days, ok? We’ve gone from 200 to seven within the civil service system. These workers are civil service workers. It’s not outside of the system. It’s not about the unions being a problem. It’s not about civil service being a problem. It’s about management being the problem, right? So we’re new management so we’re doing it differently. So we are looking for the opportunities to ensure that government can change faster. Now I’m not going to tell you that this is going to happen statewide instantaneously. But I’m committed to looking at these opportunities one by one, demonstrating to our workforce that I want them to think about how to do things differently. Most importantly, when they do it and they’re successful, then we got to celebrate that success because 200 days to seven days is a phenomenal improvement and I don’t think that anybody would ever have thought that that’s what would happen if we did this multi-skills thing.

I want to give you one more example before I get on. I’m a tech guy, right. So I’m big on IT and we have been focused on how we can improve the core infrastructure of government. I went and I judged a hackathon for one of the cell companies because I’m interested in that. It was kind of interesting, but you guys all know the drill. I mean the vendor has a hackathon so he can get developers to code on their platform so that there’s activity for AT&T or Sprint but they don’t want you using the generic or the open source stuff because they want you developing on their platform. So as we were leaving, I talked to David Lassner, UH president, and Todd Nacapuy, my CIO, and I said, “We ought to do this for state government.” Wouldn’t it be great to have a hackathon for state government because we can promote all the things that make sense for us in terms of development? So four months later, we had the very first Hawai’i Annual Coding Challenge about two months ago. And we did a couple of things. I challenged the departments to think differently. Can we put the biggest challenges we have in state government, offer it to the development community and ask them to help us be part of the solution to our challenges? Can you help us solve the biggest problems? Then I went inside and I talked to the departments and I said, “give me your biggest challenge.” We’re going to offer it to the coders and ask them to help us find a solution. We had more than 300 people signed up for the very first Hawai‘i Coding Challenge. They ended up creating 20 something work teams and we had four departments stand up and offer challenges. Agriculture did theirs on public markets, trying to provide different information about who’s selling at what market. We had the prison, public safety offer a challenge. Prisons schedule visitations for the inmates, and there are all kinds of rules. They don’t want the inmate’s girlfriend and wife coming to visit at the same time. So they have all these rules about how they schedule visitations and they were keeping track of it with Post-it notes, and paper and pencil, trying to manage hundreds and hundreds of visitations in the prison system. But long story short, so these people went in and for a $5,000 coding prize, we got fabulous applications developed by the developing community right here in our state to solve the biggest and trickiest problems of making state government work. So you’ll begin to see some of those applications online.

I know many of you might not because you’re not going to visit someone in the prison system but just let me say it was a win-win-win on all fronts. It was a win for the state agencies because they got terrific applications that will help them do their job better. Right now we’re in the process of implementing those applications and they had to take a chance because they had to be willing to be consultants. They had to talk about the challenges. They had to talk about the problems, about what would work, what wouldn’t work, in order to help these developers make the apps work. So the corporate change agent in need has helped these state agencies understand that the community, and the public is not the enemy. It really can be helpful to help us solve these problems. It was a win for the development community because I’ve always said we have talent right here. We need to think about how we can engage them. Why is it that whenever we have a challenge we hire some consultant from the mainland to come in instead of supporting our community here? Why is it we have these federal monsters that come down? The Health Connector is the biggest disaster. We spent $80 million to pay consultants to fly in and try and solve that challenge. It never worked, right? How come we can’t invest in our people right here because they’re invested. They know that if they want to do business in the state of Hawai’i, they can’t give us a product that doesn’t work and walk away. They have to make it work. So it really is about how can we encourage and invest in our people, our businesses, our companies? Right here and now, how can we give them a chance so we create the jobs here instead of trying to have some fly-by fly in, drop a product, install it on hardware, say it works, and then leave the state and never have it working. So that’s win number two. It really is about making an investment. It really is about, and I want to ask all of you–how can, in your businesses, you make a commitment to really stay local? To think about how you can help encourage people in our state who would have the talent to be able to do those things. Because I do believe it’s about stop waiting for Superman to solve our challenges. We need to be willing to say, “What can I do?” What can my company do? What can my business do to keep the business in here and help grow the talent, the businesses, the raw materials right here in our state to take on those biggest challenges?” Because I do believe that we have the talent in the state to do it and be successful. So I think that that’s just two examples of what we’re trying to do in state government, to really support Startup Paradise, because I think it is about how we stop waiting for someone else to do it for us, and how we step forward and move the ball forward.

We need to be doing a couple things. And so as Governor, I’ve been trying to put together the different pieces that I think is so important. It’s about changing how government works. It’s about changing the culture, embracing change, about incorporating entrepreneurship, supporting local business, asking them to help us find the solution. It is about investing in education, in public schools. I’m a big supporter of the University of Hawai‘i and a proud graduate. It really is about supporting their innovation initiatives. When you look at all of these tech hot spots all across the country, it always starts with the university and I’m proud to be a graduate of the University of Hawai‘i, and it really is about how we can all support them to really advance our innovation agenda forward. We are doing a couple other things that I think are fundamentally important and I would invite you to help us. You know, I worked for a start-up for a couple of years. I understand the challenges of venture capital and I understand it’s all about the money and about being successful. So how do we create more risk capital here for our community? I am proposing just as I did last year, but I know that we weren’t successful in getting funding for the HI Growth Initiative. So I’ve kind of upped the ante, so my budget that I’ll be submitting to the Legislature in a couple of weeks will have $10 million investment in the HI Growth Initiative because I understand how important it is for the State to be invested in start-up activities here in the State of Hawai‘i. So I would encourage you to get behind that. I think that it’s important. So it’s all the different pieces, right? It’s investing our people. It’s public education. It’s the University of Hawai‘i. It’s about changing corporate. It’s about changing government, about how we can be more supportive of innovation, how we can support start-ups, how we can be creative in helping them find the solutions that we want and need. It’s about making risk capital available and accessible so that all you entrepreneurs can have at it and create your businesses and hopefully we can help get to that next level. And so we will continue to do all of those things in our efforts to embrace and enhance Startup Paradise here in the State of Hawai‘i. For me, as I started, it is personal. You know I’m committed to create the career opportunities so that my children can get back here. You know I think on our last conference call, for the first time they actually are asking about, “OK Dad, so what’s happening in Hawai‘i?” And at least it’s on their game plan. It’s on their Rolodex. They’re trying to think about what would need to happen in order for them to have the opportunity to come back to Hawai‘i, find a job here and a career so that they can once again choose to call Hawai‘i home.
So thank you very much for allowing me to be here.