According to a recent report, the State’s $60 million investment in Science Foundation Arizona has leveraged an additional $110 million in outside capital. Now, the State has backed away from its funding commitment to SFAz putting its efforts to grow Arizona’s technology sector at risk. Hear from SFAz President and CEO Bill Harris.
Ted Simons: Science foundation Arizona has used $60 million in grants over the past two years for a number of projects, but that grant money is now in jeopardy due to funding issues with the state. More on that in a moment.
Ted Simons: First, here's an example of science foundation Arizona grant money helping an ASU effort to make fuel out of algae, a project design to the ultimately spin out as its own business.
Summerfeld: My research career has been mostly spent looking for this opportunity to explore the algae in a way that will solve some of our problems.
Voice: For the past two decades the researchers have continued their search for new varieties of algae that are well suited to the production of fuels as well as other uses. These efforts have resulted in the creation of the laboratory for algae research and biotechnology at ASU's Polytechnic campus. Here Summerfeld and colleagues work on developing improved methods for growing algae in specialized tanks or bio reactors.
Summerfeld: The effort now is trying to in a sense domesticate these algae so that we can grow them and engineered devices to produce high density culture that we can harvest and that we can ultimately extract the oil from and process to make a variety of biofuels and putting biodiesel jet fuel as well as gasoline.
Ted Simons: Here now to talk about the impact of science foundation Arizona grants and the future of those funds is Bill Harris, president and CEO of the organization. Thanks for joining us tonight.
Bill Harris: Thank you very much, pleasure to be here.
Ted Simons: Let's start with Science Foundation Arizona. What is it, what are your goals?
Bill Harris: Science Foundation Arizona is a public private partnership that was established in 2006 to help diversify the economy of Arizona and help us to avoid these downturns that we're experiencing today. It's a unique catalyst for the state.
Ted Simons: O.K. Here since 2006, but based on your experiences, especially in Ireland, talk about that.
Bill Harris: Yeah, well, I spent most of my career in universities in the United States. I'm a chemist by background, and I worked at the National Science Foundation as well. And so my work was to try to go to Ireland and change how the universities operated in Ireland to get greater value and to get new connections between the incredible manufacturing base they had there, so it was a five-year appointment where I learned an awful lot about the world, an awful lot about innovation and how business was changing. I don't think I appreciated before my trip to Ireland how rapidly business was changing, how rapidly the world was changing as Tom Freedman has told us.
Ted Simons: The -- when we talk about Ireland, I want to stay there for just a second here. Did you see success there and if so, define success.
Bill Harris: I saw enormous success there, if you're talking about the Science Foundation Ireland. It was started with a clean sheet of paper. The government of Ireland put almost a billion dollars aside and they wanted me to come in and manage it over a five-year period to help make these research investments. Even though the Irish universities had access to European money in Brussels, they needed to have a strategic advantage in the country so that places like Intel would grow there and stay there, so it was a very strategic decision.
Ted Simons: And it worked.
Bill Harris: It worked. It was reviewed by experts from MIT and Sweden and the business community. It worked so well that some people from the U.S. government began to study it, the European Union began to study it and the Chinese government began to study it as well. It is a good model, a model for the 21st century, it's a model that I was invited to help put in place in Arizona with the help of a lot of people.
Ted Simons: O.K. How much of a model that deals with Ireland, a small country, national government focus, these sorts of things, how can that translate to Arizona?
Bill Harris: I think you're talking about public private partnerships, a new way of doing research and a new way of getting value out of the universities. It's enormously effective. The government itself, you know, if you consider a state, most of our states have a population of between two and, say, six or 8 million people. Most of our states are kind of like Sweden in size, Finland in size, Ireland in size. There may be things that they're doing that could be lessons for us, so I took the lessons from the origins of the national science foundation in Washington, D.C. from Vandenburg Bush out of World War II, transcribed that and simplified the processes in the United States. I wanted to create a place science friendly and friendly to science where you could exploit science, you could exploit and build partnerships that were unique for the Irish universities and companies like Intel.
Ted Simons: O.K. In Arizona, public, private partnership, is the private partnership holding up its end of the bargain and let's talk about the public side.
Bill Harris: Extraordinarily well. The beauty of the experiment that Arizona's trying to do and the uniqueness of it, in most states that have tried to do something like this or in Ireland, the entity is if you like an arm of the state, a public private partnership is very different. And what Don Budinger, who is chairman of the board, and people like that did to start the science foundation is they had a commitment from the private sector to put up approximately $150 million over a five-year period and to pick up the operational cost of the foundation. What that did is it made sure that everything that we do is statewide. It means that I'm in every part of the state. I don't sit in my office in Phoenix and wait for people to come here, we're not like a bureaucracy, we're light, we're nimble, and effective, and what we've done in a short period of time, the $60 million that was suggested the state has invested in this experiment if you like, has resulted in almost $170 million of new money being brought into the state to match that money. It will probably grow by a lot more, but in two years we have transformed how some of the industries in the state work with the universities. We've established research partnerships that in all likelihood will have the potential to create jet fuel from algae. That will create a company that will be able to basically look at skin cancer and uniquely tell whether the mole or the color has changed and be able to detect it from the size of a human hair, the sensitivity, the relationship between the University of Arizona as medical school and Raytheon is phenomenal now.
Ted Simons: That's the first part of my question. The second part is the public. What is the state's commitment to Science Foundation Arizona and what's going on with that commitment?
Bill Harris: State's commitment was a five-year commitment. It was negotiated between the former speaker of the house and the private sector and the agreement was a five-year deal, approximately $150 million each, $300 million. And the state has met the first two years of its agreement and the private sector has met the first two years and also has the money for the third year. The state is facing, you know, a tough financial situation right now, and the state is struggling with how to balance its books and yet go to the future as well. One of the things that I think I've learned over the years is that you will not get to the future without innovation. You will not get to the future without a serious understanding of the new industries that are going to be created through research and innovation. I want Arizona to become a place that is the basically is an incubator for the next Google, the next Microsoft, and to create an ecosystem that's far more diverse than it is today.
Ted Simons: Yet we have lawmakers on this program and elsewhere quote as saying everything from the state can't afford to give grants right now to the legislature appropriates money and can certainly take it back if they so choose. This is happening with science foundation Arizona. I want to get your thoughts on that.
Bill Harris: Well, you know, I think that the reality is you're not going to cut your way out of this hole that we're in, if you don't grow the future, if you don't invest in the future, with education, if you don't invest in the future with a culture that supports R. and D., you're not going to win the future competitions for business. One of the things that we've done really nicely I think is created a solar technology institute. Now, this should be a state that leads the country in solar energy. We've operated a separate kind of silos, we think we have the seeds in place to create a truly transformational solar industry. One example is a partnership, and our things require a partnership between the universities and getting the best talent of each place, with the private sector. None of the money we invested goes to the private sector. It goes to the universities. The private sector matches it to get a greater return on investment and create the talent they need. But in solar energy one of the issues is how do you create real value from solar without having water problems and things like that. Roger Angel, very distinguished professor at the University of Arizona, professor Zang up at Arizona State, engineer, they submitted a proposal reviewed by out-of-state experts, by really smart people, this proposal has already demonstrated that it could be transformational. And you can take a piece of stainless steel about a half inch thick and you can focus the sunlight in less than 15 seconds burn a hole in it. I mean, it is phenomenal what they can do with new mirrors and new detectors. They expect to have cost effective electricity by the end of the year. They've started a company that has the potential to become the Microsoft of solar energy. We've started 11 companies in the last two years, so in a two-year period we've created almost a thousand new jobs, we've created high paying jobs, we've created almost 11 new companies. 50 patents are pending, and we've done that in a relatively short period of time. So, but we've I think we have demonstrated that we know how to do this. We think Arizona is uniquely positioned in the universities ready to do this, if you recognize the reality that Silicon Valley, San Diego, took 30 or 40 years to build. This isn't going to happen in two years, this is a minimum five to 10-year period to create the ecosystem. But once you get the pieces in place, you'll have the momentum to keep your children here, to avoid the future downturns that are catastrophic because you'll have a more diverse portfolio.
Ted Simons: If the universities are ready, if the companies are ready, if you saw a country that was ready and worked to get success over there, what needs to happen to convince lawmakers who hold the purse strings and who basically are holding the money right now to say what they talk about makes sense. Let's free the money we've committed to his organization, because again that's not happening right now.
Bill Harris: Well, it's not happening, but I think everyone understands why. I mean, I think that the challenges the state faces with a new leadership team, enormous budget challenge and uncertainties of trying to put these things together, you know, causes these problems. I think we need to be more strategic, purposeful, need to control our own future and destiny. I think we do that through investments, not just cuts.
Ted Simons: I was going to ask you, can we afford -- obviously times are bad right now, whether leadership is there or not, it's a tough period. We all understand. But can we afford to wait? The rest of the world is out there in a sprint. It doesn't sound like we're keeping pace. I could be wrong. What do you think?
Bill Harris: Ted, you're not wrong. I think the world is moving very fast and I think what a lot of people have not fully understood yet is how fast the world is moving and how much talent other countries have put together now to do this. Other states are now borrowing our idea. The state of New Mexico this past year is borrowing our idea, expressly led by a Republican legislature and signed by a democratic governor. South Dakota called me a week ago to get me to help them do things. We've created the tool, we've created the experience and the skill and we've probably got about the best technical board any state could have to do this. So I think that when the budget is finally sorted out, I think that's when we ask the question, are they prepared to make the investments or not. I think right now they're still in the middle of this process, we're moving forward. We have private money invested in us. We're going to do things, but I don't think the state can be successful without a public private partnership and really getting values out of university investments.
Ted Simons: Do you think your organization could do a better job in communicating the success, what you see as a vision for the future, is that message strong enough right now?
Bill Harris: Probably never strong enough, being an academic and a scientist myself, I've always actually believed in modesty. I'd rather overdeliver than underpromise. But the things I mentioned about the skin cancer, that's going to be a homerun in sports terms. The algae jet fuel activity, I met with Frank Mars about a week ago. He's the private investor in this Heliah company. We have the potential to design, almost custom design jet fuel. Now jet fuel is the unique entity. It's got a certain carbon chain link and combustion, like kerosene. If you can design that and use the sunshine to actually produce this and not be required to use the Middle East oil, you've freed yourself. You've created an opportunity for the Pentagon to create a national security advantage. You've also created a market for Arizona business. So we now have taken this thing in the laboratory. We've got it to a prototype stage where Arizona State Polytech campus can do this, and now we're going to go to a pilot plant. If this pilot plant can be scaled up they're going to a manufacturing facility that will be in Arizona and you'll hear a lot of other people talking about algae and you'll hear - I think we have the technical advantage right now and the technical lead, and if we don't seize the example of what you can do with solar energy, we'll be making a terrible mistake. I'm confident we'll move forward and be successful in this area.
Ted Simons: Very quickly, only about 30 seconds left, critics will say that these are risky enterprises that venture capital wouldn't touch, why should public money touch it?
Bill Harris: I think the changed venture capital over the last decade indicates the risk adverse nature of the country. But we're talking intelligent risk based on expert review better than most venture capitalist can do and a better board. Bets we're making have a high probability to payoff. The more you get going with statistics the more likely you are to be successful and we want to create the ecosystem of the 21st century in Arizona. We think we can do it.
Ted Simons: Very good. Thanks for joining us, we appreciate it.
Bill Harris: Science Foundation Arizona President;