The Technopolis and You

On the Role of Research Universities

By Scott Henson
May 1991; pages 5, 12-13; Volume 2, No. 6

Throughout the 1980s at the University of Texas and schools across the country, links between higher education and commercial industry expanded without constraint. Beyond their traditional role of training the next generation of corporate laborers, universities began to actively gear their research - particularly high-tech and biotech research - toward "commercialization" and "technology transfer."1 At the extreme end of this trend, some universities, including UT, began to form start-up companies to market their research. A new book University Spin-Off Companies, describes various aspects of spin-off companies and technology transfer. The book contains academic papers delivered at a 1988 conference sponsored by the RGK Foundation - a privately held foundation controlled by the Kozmetsky family.2

For UT, this book's importance far outdistances its often intellectually unimpressive prose. In his role as chief economic advisor to the UT-System Board of Regents since the late 1960s, George Kozmetsky has used the University as his personal laboratory in which to experiment with new methods of making U.S. industry "competitive." These methods include: UT subsidizng MCC and Sematech, two high-tech research consortia, with a combined total of $62 million in cash and in-kind gifts; the creation of a semi-private venture-capital network; and incubation and subsidy of university spin-off companies, among others. Economists call these tactics "industrial policy," a shorthand term for subsidizing industry through public infrastructure as well as tax and investment policy. For UT, this book represents some of the debates and ideas which affect how Kozmetsky, one of UT's top policymakers, directs university resources.

Two of the three editors of the book work at UT's Institute for Constructive Capitalism (IC2), an off-campus think tank founded by Kozmetsky in the 1970s; Raymond Smilor, a UT graduate, serves as IC2 director, and David Gibson, an assistant professor in the Department of Management Science and Information Systems at the UT business school, is an IC2 research associate. In the past, the two men coauthored - along with Kozmetsky - a groundbreaking book in the field of technology transfer called Creating the Technopolis. In one chapter of University Spin-Off Companies, Smilor and Gibson rehash their technopolis spiel; other chapters, some of which were written or co-written by UT personnel, address topics surrounding start-up companies ranging from patent issues to venture capital. This review, for the purposes of brevity and focus, will concentrate on Gibson and Smilor's article, "The Role of the Research University in Creating and Sustaining the U.S. Technopolis."

Creating the Technopolis: The Wheel Spins Round

Gibson and Smilor define "the term 'technopolis' [as being] composed of techno, which reflects an emphasis on technology, and polis, which is the Greek word for city-state and reflects a balance between public and private sectors." In other words, the "technopolis" reflects the vision of liberal economic and social planners to create a new form of city-state centered around high-tech industry.

The nuts and bolts of the technopolis agenda reveal a more sophisticated (on paper) version of the Eastern European/U.S.S.R.-style socialism discredited by the 1989 revolutions. The authors want competing interests - capital and labor, large companies and small ones, etc. - to "find ways to cooperate while competing."

These statements remind one of Frederick Engels' Socialism, Utopian and Scientific, in which he declares that an "administration" (read: bureaucracy) would replace the traditional state after the proletarian revolt. The ascendancy of this "administration," Engels argued, would result in the abolition of all the contradictions inherent in capitalism. Similarly, Gibson and Smilor want to "link public- and private-sector entities (some of which have been traditionally adversarial) in order to effect change."

In order to analyze the problems involved in abolishing all the contradictions in industrial capitalism in one fell swoop (while avoiding a popular uprising), Gibson, Kozmetsky and Smilor created the "Technopolis Wheel" (see illustration), in which the seven segments interact. Many non-high tech employees will have a difficult time finding their place on the technopolis wheel. For example, despite the fact the authors consider the research university the "nucleus" of the technopolis, the only category under "UNIVERSITY" in which students might fit would be "other."

The technopolis wheel gives us an idea of who IC2 thinks should pay for its new city-state. Under LOCAL GOVERNMENT the authors list "infrastructure" as a principal role, as well as an undefined "Quality of life" which they stress must be maintained to attract skilled labor; under UNIVERSITY we find "Research centers;" under FEDERAL GOVERNMENT they list "Defense spending" and "Sponsored research;" STATE GOVERNMENT should provide "Education support."

These are some of the costs of the technopolis, the profits are either privatized by large or emerging corporations, or shared with the University through licensing agreements or by "equity participation" in spin-off companies. In essence, the university subsidizes the private companies' infrastructure by issuing tax-free debt; then it tries to make the money back before its loans come due by taking its cut from corporate profits resulting from the university-generated technologies. Taxpayers make up the difference.

The Technopolis' New Elite

The key to the development of technopoleis (their chosen plural form of technopolis), write Gibson and Smilor, is the "influencers," whom they define as "key individuals who make things happen and who are able to link themselves with other influencers in each of the other segments [of the technopolis wheel] as well as within each segment." The authors distinguish between "second-level influencer/manager" and the "first-level influencer/visionary" - first-level influencer/visionaries "articulate concepts and objectives for the larger community."

In case you aren't aware who's articulating the "concepts and objectives" for your community, Gibson and Smilor come out and tell us. In a footnote they write, "Examples of such first-level influencers in Texas in 1983-86 include the following: representing state government, Governor Mark White and Mayor Henry Cisneros (San Antonio); representing business, Ross Perot (investor, Dallas), Frank McBee (founder and president of Tracor), and Bobby Ray Inman (president and CEO of MCC); representing academia, Robert Baldwin ([former] vice-chairman, UT Board of Regents), Hans Mark (UT chancellor), and George Kozmetsky (former dean of UT's College and Graduate School of Business and currently director of the IC2 Institute)."

Listing examples of these people's interactions would fill volumes, and in the past has filled many Polemicist pages. But for now, let's look at the objectives of the technopolis model: "First-level influencers" interact with one another across segements of the wheel, while "second-level influencers also have their own linkages to other second-level influencers in the other institutional segments. Working together, first- and second-level influencers initiate new organizational agreements to institutionalize the linkage between business, government and academia" (emphasis added).

"An important role of the research university in a technopolis is to facilitate the recruitment and development of first- and second-level influencers for all the segments of the Technopolis Wheel," write Gibson and Smilor. They plan to educate/indoctrinate individual "influencers" in all seven segments of the Technopolis Wheel in what UT Chancellor Hans Mark calls a "common understanding" (see Chastisement, page two and the article, page three). Arguing against multicultural curriculum reform, Mark wrote in a recent issue of Academic Questions, "above all else ... the university exists to develop and pass on a "common understanding" of the world in which we live." For Hans Mark, a key "influencer" for the Austin technopolis, one could conclude that his stakes in opposing multicultural-curriculum reform may directly stem from his stakes in promoting what Gibson and Smilor term "recuitment and development of first- and second-level influencers," i.e., the generation of consensus among elites.

Despite the universal terms in which technopolis advocates frame their arguments, they have not reached universal consensus. Most of the first-level influencers the authors list are Democratic Party stalwarts - Kozmetsky's family gave thousands to Ann Richards; Mark served as Secretary of the Air Force under Democratic President Jimmy Carter, and candidate Michael Dukakis publicly stated that if elected Mark would be on his short list of an appointment as Defense Secretary; Mark White and Henry Cisneros are Democratic politicians. Nationally, most industrial policy advocates come from the liberal end of the Democratic Party - the most prominent examples being Robert Reich of Harvard and Robert Kuttner who writes for Business Week and The New Republic.

The book: University Spin-Off Companies

But in the Reagan era, public funds for industrial policy were not forthcoming. Federal funds for industry came in the form of high-technology development for the military. That's why, in addition to Democratic Party connections, most of Texas' "influencers" have ties to the military-industrial complex. Mark was Secretary of the Force, and according to Barry Goldwater, has participated in the design in most of this country's nuclear weapons. Kozmetsky founded Teledyne, a Fortune 500 military contractor. Bobby Ray Inman served as Deputy Director of the CIA. Henry Cisneros served as mayor in a city with five military bases. Frank McBee began his career as a professor in the 1950s working for the Navy at UT's Defense Research Lab, and built Tracor into a Fortune 500 military contractor. Ross Perot's hawkish inclinations are well known. This "common understanding" - or, more accurately, common ideology - among Texas "influencers" who work for or with the military outside any accountable democratic structure and instead relies on the connections and resources at the disposal of individual power brokers. Interests that compete with the military have no avenue to make themselves heard.

Technopolis Case Studies: Silicon Valley and Phoenix, AZ

Gibson and Smilor offer three case studies of technopoleis. First a developed technopolis, Silicon Valley, California, then a developing technopolis, Austin, Texas, and finally a nascent technopolis, Phoenix, Arizona.

Drawing their data from the book Silicon Valley Fever: Growth of High-technology Culture (1984), Gibson and Smilor put forward Silicon Valley as a model for which their technopolis should strive. The biggest selling point: "About 40,000 new jobs were created in the area each year in the early 1980s, and the area's economy was among the fastest-growing and wealthiest in the country." This analysis focuses on boosterism for "creating jobs," which apparently justifies virtually any project economic planners want to promote.

Despite the existence of 23 high-tech related Superfund sites in Silicon Valley - which covers only a 30-mile by 10-mile area - the article never broaches the issue of high-tech toxics or their effects on workers and their families.3 In addition, they write, "annual job turnover in Silicon Valley has traditionally been about 30 percent ... In other words, the average employee would have three different jobs in ten years." While the authors attribute this turnover to a shortage of skilled workers, the example points to the impermancy and instability of high-tech ventures.

Gibson and Smilor point to Stanford University, a private institution in Palo Alto, California, as instrumental in developing Silicon Valley as a high-tech mecca. They hail former Stanford Vice-President Frederick Terman as the man who facilitated the high-tech boom by creating the Stanford Industrial Park, the model for the Balcones Research Center in Austin and dozens of other research parks across the country. Hewlett-Packard, a firm founded by two Stanford graduates, became the first tenants of the industrial park in the early 50s.

Research parks attempt to centralize and subsidize corporate R&D around the university. In Arizona - which the authors label an "emerging technopolis" - liberal Democratic Governor Bruce Babbitt spearheaded the push for a high-tech based economy. But in Arizona, a desert state, the authors worry about maintaining a sufficient level of public funding of infrastructure, because Arizona's constitution contains provisions that inhibit speculative financing by the state or municipalities. "High-technology industry has ... significant infrastructure requirements, such as water and sewer systems. For example, large companies may use 3 million gallons of water in their daily industrial processes." The authors think either the state through universities and their research parks or local government should pick up the infrastructure tab. Presumably they would also subsidize toxic waste disposal and clean-up costs after chemical spills. According to Theresa Case (Polemicist, December 1990), more than 100 chemical spills have occurred in Silicon Valley in the last ten years.

Certainly Gibson and Smilor expect more mundane business expenses to be paid from the public coffers. They applaud the city of Tempe, Arizona, for "planning for quality-of-life factors" for the managers and employees at the ASU research park. Tempe "is improving the feeder roads surrounding the site. Furthermore the park offers tennis courts, and FAA-approved heliport, jogging paths, equestrian trails, ramadas and picnic areas, and three lakes that are fed by treated wastewater from a nearby Motorola manufacturing plant. A conference center is proposed with a hotel site including a child care learning center, a health management facility, a pool, restaurants and support service."

Providing child care for the highly paid managers and employees brought in to the run the technopolis - read: the new form of city-state - won't solve the childcare dilemma of single, underpaid or unemployed parents in Tempe or elsewhere. And people not fortunate enough to take advantage of the on-site equestrian trails must still pay through their state and local taxes. What is a ramada, anyway?

The Austin Technopolis

Gibson and Smilor argue that "the nucleus in the development of the Austin technopolis is the University of Texas at Austin." "The development of the Austin technopolis reached a crescendo," they declare, "in 1983 when the Microelectronics and Computer Technology Corporation (MCC) chose Austin as its headquarters."

UT laid out $14 million for the land and buildings for MCC, and some $20 million for equipment and facilities. In addition, the University put up $16 million in matching funds for 32-endowed chairs to attract hot-shot academics in computer science and electrical engineering, for a grand total of $50 million in public funding toward the MCC project.

But according to the IC2 version of Austin's high-tech industry, UT's role in high tech began not in the 80s, but in the early 1940s with the creation of the Balcones Research Center and the Defense Research Lab (DRL). The DRL (today the Applied Research Lab) was established by the Navy and the University at the Balcones Research Center during World War II to develop a series of surface-to-air missiles. The "federal government ceded the land to the University of Texas and funded research in strategic resources to support the war effort."

UT's development of its high-tech industry out of a World War II lab parallels the development of high-tech industry nationwide. During World War II, while most men were in the military and most women were in the factories, the defense department moved into research facilities on college campuses across the country to generate war technology for use against the Germans and Japanese. When the war ended, these research labs either did not leave, or they simply moved into off-campus research centers like Balcones and Stanford Industrial Park.

Their research created the foundation for a high-tech industry that expanded exponentially along with the communications industry, the arms race and later with the introduction of computers.

In 1955 Frank McBee - then supervisor of the mechanical engineering department at the Defense Research Lab - along with three of his professional colleagues founded what today is Austin's only home-grown Fortune 500 corporation. Originally, the company was named Associated Consultants and Engineers, and McBee and his three partners maintained their positions as UT faculty while they worked as private entrepreneurs. Gibson and Smilor write, "The company's name was changed to Texas Research Associates (TRA) in 1957. During the late 1950s, the four scientists taught and did research at UT while working on developing TRA. In 1962, the firm merged with a company called Textran and adopted its present name of Tracor. By this time, McBee had left the University of Texas to devote himself full time to building the company."

After 1965, say the authors, Tracor produced 16 Austin-based "spin-off" companies including Radian Corporation, Espey Huston, and Continuum Co. (see chart) That is, employees of Tracor or one of its spin-offs acquired their own capital and founded new, separate companies. The authors estimate that about 5,500 people were employed in these companies as of 1985.

Here's where Gibson and Smilor's history ends. But actually it's where Tracor's destiny almost symbolically merged with the 80s Austin high-tech boom after Frank McBee retired as Chairman and CEO of Tracor in 1987. According to a contemporary article in the Austin Business Journal, Westmark Systems, owned by Adm. Bobby Ray Inman, purchased Tracor after a friendly tender offer. Inman first came to Austin as the much-touted chairman and CEO of MCC, but he had previously served as Deputy Director of the CIA, director of Naval Intelligence, and director of the National Security Agency.

The Wall Street Journal reported that "Tracor was acquired [by Westmark] for $714 million - 23 times its earnings - in a 1987 LBO [leveraged buyout] with the help of a $330 million bridge loan from Shearson" Lehman Brothers. After the friendly takeover, Inman packed Tracor's board of directors with political and military heavyweights like former Democratic Party chairman Robert Strauss, Former Defense Secretary Donald Rumsfeld and former Transportation Secretary Drew Lewis. By December 1989 the company was losing money because of rising debt payments. The Wall Street Journal said Inman "admitted that his years as a master spy didn't prepare him for the perils of leveraged buyouts;" Inman bailed out, announcing his retirement. A year later in January 1991, the 36-year old company filed a reorganization plan in an Austin bankruptcy court whereby "the defense concern would split into three companies and cut its debt by about $510 million. Bondholders would swap all of their debt for stock in each of the companies and bank lenders would swap a portion of their debt for stock and warrants," said the Wall Street Journal.

Despite the disgrace, UT's managers still consider Bobby Ray Inman one of their own. UT President "Dollar" Bill Cunningham last fall appointed Inman to an ad hoc committee on university life. And, as noted above, Gibson and Smilor still include him on their list of "Influencers" at UT.

Although Tracor was ultimately an unfortunate choice for a case study, IC2 still holds to its technopolis model. And IC2's director, George Kozmetsky, still relies on this model to help make UT policy. University Spin-Off Companies hardly qualifies as light bedtime reading. Wading through the needless academic jargon looking for substance isn't always a rewarding task. But the book does lay out some of the key concepts and issues facing the economic and social planners of today's multiversities. And for UT, it may give insight into the "common understanding" of the University's elites.

1 The beginnings of this trend can be found in the genesis of the biotechnology industry. When, in the mid-seventies, molecular biologists discovered cost-effective ways to clone genes, a new biotech industry almost immediately sprang up. Unlike mechanical or electrical engineers who worked in the private sector, almost all molecular biologists were employed at universities because previously there had been few if any marketable products resulting from research in that field. Thus, companies were forced to either hire away top research faculty from universities, or license the patents resulting from those professors' research. University spin-off companies grew in response to this shortage of skilled labor. For an excellent discussion of the birth of "spin-off" companies in the biotechnology industry, see: Martin Kenney, Biotechnology: the university-industrial complex; Yale University Press, 1986.

2 George Kozmetsky, the chief economic advisor to the UT board of regents, founder of Teledyne Inc. (a Fortune 500 defense contractor) and one of the wealthiest men in Texas, chairs the foundation's board. His wife, Ronya, serves as its president. See Polemicist December 1989, May 1990, November 1990.

3 For more information on the effects and dangers of high-tech toxics in Austin, see Polemicist December 1990, April 1991, and the page four article in this issue.