Minimizing Risk: An Op-ed From Talk Business Editor Roby Brock

The following is an opinion letter from Talk Business Quarterly executive editor Roby Brock.  It appeared in the most recent edition of Talk Business Quarterly.

Arkansas leaders know that the continued competition between our state and others for job prospects will always be a big business slugfest.

Sometimes we’ll win. Often, we’ll lose. Those are the odds we’re facing.

So how do we improve our chances, if indeed, we actually can?

Recently, I had a conversation with Grant Tennille, the state’s top job recruiter. As head of the Arkansas Economic Development Commission (AEDC), Tennille is one of Gov. Beebe’s most trusted advisors for one of his most important missions: new jobs.

The conversation was refreshing. Tennille knows that pursuing lower-to-medium paying jobs in manufacturing and other industrial arenas is where the state’s bread is buttered.  The majority of our economic incentives are geared for this pursuit and, quite frankly, it is where we’ll get the most bang for our buck considering our workforce’s skills and education.

Tennille freely admits that if the state wants to be a leader for those highly sought after jobs – high-tech jobs – the tools we have in our arsenal will have to change. It won’t be easy.

While the state has been able to help some tech-based industries with incentives, the biggest obstacle for growing our white-collar workforce is one that government is ill-suited for: risk.

“The difficulty is, for government, these are risky endeavors and we are talking about tax dollars. And government isn’t really good at risk because taxpayers expect a return,” Tennille said. “If you talk to any venture capitalist, they’ll tell you they fire at 10 companies or 20 companies hoping that one of them will hit. Those aren’t great odds for government.”

Rhode Island provides an example of the potential for debacle that exists.

In 2010, that state’s government leaders invested $75 million through a loan guarantee for famous former Red Sox pitcher Curt Schilling’s 38 Studios, a video gaming start-up company.  Two years later, the World Series pitcher defaulted on the loan, losing millions of his own money, as the entrepreneurial endeavor struck out.

“When you talk about knowledge-based industries, the assets of those companies exist within the six-inch space between a bunch of smart people’s ears and you can’t put a mortgage on a human being,” Tennille explained. “We really are working very hard right now to try to understand how we re-calibrate some of these tools.”

If they can be re-calibrated.

There are some unsexy things that Arkansas could do to help new entrepreneurs and a few things we’re already doing.  You’ll see a few highlights in our story this issue on tech companies in northwest Arkansas.  Our story on Conway also provides examples.

Here is a short-list of ideas:

– Cut red tape and provide administrative support.  Any one who has started a company will attest to the bureaucracy of government filings necessary to get off the ground. It has been streamlined to a degree, but having resources through our state universities, business incubators or AEDC to actually handle the paperwork for these start-ups would help entrepreneurs focus on their ideas and implementation.

– Create more community clusters and networking events.  Projects like the Iceberg CoWorking Space in Fayetteville need to be replicated across Arkansas.  More networking opportunities would also help so that relationships could foster. At least once a year, there needs to be a broader must-attend event to bring entrepreneurs together, a smaller-scale version of Austin’s SXSW.

– More investment in broadband and key transportation needs. High-speed broadband is the 21st Century’s equivalent of interstates.  Finding incentives or providing cold, hard cash to develop more strategic broadband coverage in the state is imperative.  And our “old-fashioned” transportation corridors, particularly existing interstates and the Arkansas River, need top funding priority to be maintained and improved.

– Education and workforce training.  We see a number of successful education models in Arkansas geared towards retraining workers for new skill sets with employers on the upswing.  These don’t require two-year degrees in some instances. The fast-track training is affordable and has a quick and big payback. We need more of it.

– Tax policy we can all agree on.  The forthcoming tax debates at the capitol are going to divide us over the direction of Arkansas tax policy. Beebe wants to cut the grocery tax further, while GOP lawmakers additionally want major income tax reform. It would be healthy if we came to a quick consensus on the subject.  As we all know, uncertainty doesn’t foster business growth.  At the least, it would help if Democrats and Republicans would commission a legislative study on the state’s overall tax climate. It could be the Bible we refer to for our rankings, instead of jumping on every flawed national list that gets spun for partisan purposes.

– Market our entrepreneurial roots.  We are the state that allowed Sam Walton’s empire to grow into the world’s most famous and successful business enterprise.  It opens doors for us on every domestic and overseas economic recruiting trip. Beyond Wal-Mart, we have renowned companies, such as Tyson Foods, J.B. Hunt, Acxiom and others. With some of the aforementioned changes, couldn’t we tout the Natural State as the Natural State for Entrepreneurs?

Maybe even a Land of Opportunity.