Does government have a role in creating the next Willis Carrier?

Sep 11, 2012




Schramm is the former president of the Kauffman Foundation and also helped launch the Startup America Partnership. He is a fellow at the George W. Bush Institute's 4% Growth Project writing about entrepreneurship and economic development.

He is now a University Professor at Syracuse University teaching a course on entrepreneurial history and its evolution in upstate New York.

The Innovation Trail recently spoke with Mr. Schramm to get his take on innovation - and the government's role in it - in upstate New York.

Note: This interview has been edited for both time and clarity.

Q: Rochester is still a hub for creativity and patents, but does the state still have that mentality of the days of Willis Carrier and George Eastman; is it still here?

A: I’d love to be able to say “sure,” but I’m not sure the evidence supports that. So you’re right, Rochester still, I believe, has the highest density on a per capita basis of patent holders in the country. But with the demise of Kodak, what’s going to happen there? Is Rochester – it’s not actually known as a hotbed of entrepreneurship, that these people turn their patents and their inventions and obvious their ingenious capacity to think in new realms into new businesses. And the arch that I worry about that goes over everything in New York is a tax regime and a regulatory regime that, to speak in plain language, would frighten any entrepreneur.

Q: So I think what you’re hinting at is that there’s too much government involvement and it’s stifling this entrepreneurship or innovation mentality or environment.

A: That’s correct. You know, you build up too much government and it does stifle entrepreneurship. It becomes a situation in which nobody does anything without asking for permission. Now, historically, I want to suggest to you that Willis Carrier didn’t ask anybody for permission: “Can I invent air conditioning? Can I hire thousands of people?”

Q: When you look at places like Albany and GlobalFoundries and a lot of the nanotech there, isn’t a lot of that government funded and government backed?

A: I think the proof is in the pudding. Do you think when we look back in 10 years that Albany will be like Route 128 in Boston, awash in new companies? Albany’s not going to do it because in the end you can give tax breaks to build the buildings, okay? You can give tax breaks to induce people to come in, but the minute those companies start to make money, the state will confiscate profit. Who would do it?

Q: There’s an argument that entrepreneurship and innovation wouldn’t happen without, at least, some government support and building that infrastructure. Your thoughts on that argument?

A: It’s a-historical and it’s not correct. Before the federal government was any size whatsoever, we had industrialized America with virtually no help from the federal government, okay? And the narrative that government is important? I don’t believe it’s true.

Q: So where does the responsibility to create the right kind of environment for entrepreneurship and startups lie? You’re seeing a lot of emphasis from universities. Right here at Syracuse University: they hired you; you have the Student Sandbox now, there’s the Tech Garden.

A: Yup, there’s a lot of stuff. Well, I don’t know if anybody has the responsibility. We never had to have responsibility. Americans, if left to themselves, will do this. The evidence is all on my side. We create more businesses per capita than any country in the world except Israel. Seventy percent of high school kids want to start a business. We would have so much more of this if governments got out of the way.

Q: Traditionally, a lot of startups and small businesses are just that, they’re small. They’re not big job creators. Can five companies that hire five or six people replace Carrier Air Conditioning and its thousands of workers?

A: No.

Q: So are they really enough of a solution?

A: The ones that become scaled businesses, that’s the trick. All of them start small.

The Innovation Trail is a collaboration between six upstate New York public media outlets. The initiative, funded by the Corporation for Public Broadcasting, helps the public gain a better understanding of the connection between technological breakthroughs and the revitalization of the upstate New York economy.

You can follow reporter Ryan Delaney on Twitter @RyanWRVO