Bringing Boston back home

This being America, the visible enthusiasm level behind each encounter is dialled higher than in the UK, otherwise there’s nothing about these every-Thursday sessions at the heart of the Boston Innovation District that’s too alien to entrepreneurial get-togethers in the UK – Scotland’s Entrepreneurial Spark or Power of Youth for example - where business wannabes bounce ideas off experienced players, either to sense-check their concepts, to solve specific problems, to find mentors or partners, or to seek longer-term backing.

The real difference is invisible amongst the polo shirts, shorts and chinos on this hot New England evening. It is the underlying tacit understanding of the amount of money, and the willingness to risk it, that is personified by some of the regulars.

As Christopher Wolfe, president of Boston-based electronics firm MNR, and board member of the British American Business Council of New England puts it “There is more VC money in the Cambridge Innovation Center building than there is in the whole of the UK”.

The CIC is just one manifestation of how “the Commonwealth of Massachusetts” retains its commanding position in areas considered most relevant to the US’s future competitive advantage. In its annual ranking of states, the Beacon Hill Institute, a think tank based at the local Suffolk University, ranks Massachusetts as the US’s most competitive state, the leader in technology state, and second in “human resources” (meaning education level of its workforce).

Overall, the small, liberal northeastern state of Massachusetts (population 6.7 m), birthplace of the US, has a profile that any nation or region of the post-industrial West would envy. Out of the 50 states in the Union, it produces the most science and engineering graduates, it is the top ranked in terms of support from the National Institutes of Health (Washington’s biomedical research-funding body), it has the second highest amount of scientists and engineers in the workforce, is the third biggest producer of academic R&D, it has the second most patents issued per capita, and number one in the overall league of hi-tech employment.

It also scores highly in openness to immigration, receipt of foreign direct investment, though against its clear advantages in technology, human resources and business incubation the worst than can be said is that suffers from expensive housing, expensive energy (all imported) and a “creaky” road infrastructure.

All of which begs the question, what lessons are there for Scotland? It is not a new question. Traffic has passed between Charles River and the Clyde for over two centuries. Founded by puritan settlers, with a strong maritime fishing and trading history (the mid-sized Port of Boston handles 221,000 containers a year), there are at least superficial similarities between its relation to the rest of the US and that of Scotland to the UK. These might include the historical Puritan/Presbyterian emphasis on educational excellence, plus a residual moral superiority over the rest of the union. Both Scotland and Massachusetts have experienced the extreme highs and lows of having been a first-mover in the 19th Century industrial revolution, and both are now inclined to relatively progressive politics. Massachusetts for example was the first state in the union to introduce near universal health care in 2006, long before “Obamacare” was thought of.

Since its textile mills and shipyards fell silent, as manufacturing jobs migrated first to the American South and then to China, and at least since the term the “Massachusetts Miracle” was coined in the 1980s to celebrate the state’s regeneration, Scottish technocrats, business educators and entrepreneurial cheerleaders have been watching and learning from the New England capital.

The origins of the “miracle”, which has eluded the less industrially diversified rust belt cities of the American Mid-West, are subject of a long-running debate too involved to summarise here. Important factors include the way that Cold War-era defence spending filled the hole left by the demise of textiles, a prestigious higher education cluster well placed to secure federal funding for research, not all of it defence-related. The high tech community, computers and software firms spawned by defence spending and developed by the brainiest of American talent, became a force capable, in the eyes of one right-of-centre commentator “of articulating the need for better [ie lower] tax policy and an emphasis on creating wealth rather than simply redistributing it”.

According to Frank Conte communications director of the Beacon Hill institute, “I’m not sure that there was deliberate policy but I’m not discounting the effect of political and business leadership - that and Yankee ingenuity. We are blessed with non-tradable assets healthcare and education that one cannot easily outsource - at least for now.”

“Taxes did play a part back in the 1970s when we introduced a property tax limitation which was demanded by the business community at a time engineers were facing high housing cost attributed to high automatic property tax increases. We are no longer high tax state like before”.

What should our politicians do to achieve similar results? “Public sector participation has been thankfully limited but a bi-partisan effort in the 1990 dramatically [improved] public elementary and secondary education. It also introduced and promoted the formation of a charter school movement [a US variation on England’s “Free Schools”]. This has certainly helped.”

Even If you don’t chose to go as far back as the foundation of Harvard University (1636), or of MIT (1861) to discover the secret of Massachusetts’s success, you might find it along Route 128, a kind of Boston bypass. This is arguably the original “silicon highway” in that many of the nation’s first tech companies were started here in the 1950s. When New York City ran out of space, Boston had the empty suburbs in the 1950’s which provided space for growth, spawning such companies as Polaroid, Digital Equipment and Wang Labs.

The “knowledge” economy started early with the creation of the then “micro computer” developed by DEC and Wang. They were slow to grasp the impact of the PC an DEC is now a part of HP and Wang is long gone. Nevertheless the knowledge infrastructure remained and smart people from these companies went to found smaller successors.

According to Christopher Wolfe: “Now In greater Boston, biotech is the leading edge. Combining the skills of MIT with Harvard Medical School has been a boon to the creation of new pharma companies. Genzyme, Biogen and others all started or have big facilities.”

It also helped that Boston, like Edinburgh, is the nation’s second financial city, umbilically tied to New York as the Scottish capital is to the City. Since the 1960’s and the foundation of managed funds through Boston-based giant Fidelity Investments, has created a risk-taking financial environment that has kept technology businesses well fed.

Jamie Coleman, the moving force behind Edinburgh’s acclaimed start-up accelerator CodeBase, looks across the Atlantic in envy:

“Those people who are in MIT talking about entrepreneurship have actually done it, they’re not just dry academics.”

“The VC scene there represents smart patient capital, people who can see exits a long way off. You get more access to cash as you prove the idea is right, whereas there is a lack of venture in Scotland, there simply isn’t the local venture cash, we can on occasionally persuade VCs to come up here. It’s the single thing that hurts most companies in Scotland is lack of venture, not to say there's a lack of angels, they‘re great, but lack firepower. I’m not joking when I say we really do have that level of talent here, but at present we don’t have the US-style diversity of capital structures to really go for it.”

“I’d say the main message from Massachusetts is about practicality of building companies and learning the mechanics and [financial] engineering about what it takes to build the best companies, it’s not a wing and a prayer, it’s about what you do to make it work, its process as well as eco-system. I like the US idea of linking in the supply chains. We have the big corporates that have touchpoints in Scotland, we could potentially pull a bit of a lever to access for major bits.”

For Gordon Stuart of Informatics Ventures, a Scottish Enterprise-backed support system for tech entrepreneurs that annually sends participants in MIT’s one-week Entrepreneurship Development Program (EDP) at MIT, where they learn about venture creation. “All the people have benefited hugely” he said. “They get all the American can-do ra-ra stuff, they all come back with a very positive view.”

“Interestingly, they also come back recognising that the folks over there aren’t superhuman, and that we have people over here who are just as talented, that’s good for them to learn as well, that you don’t have to be godlike to do what, they do in Boston, it’s largely down to attitude, which as you know is not always a Scottish strength.”

According to Chris Wolfe of MNR Technologies, which creates custom-built electromechanical products, “Many VC’s started in the Boston banking community or the technology community (or a combination of both) bringing ideas and capital together. Big VC can be defined by region: Boston, New York and Silicon Valley. The CIC, sits VC and Ideas together in one location, it’s the ideal idea-funding combination.”

Boston’s success in forging the virtuous triangle between academia and business has many keen students in Scotland, not least Professor Sir Jim MacDonald, principal and vice chancellor of Strathclyde University who has long channelled “the same spirit as MIT”, to ensure that his university on the Clyde, like its equivalent on the Charles, has “significant, positive impacts on society and the economy, both locally and globally”.

Although MIT is just one of the world leading technological and entrepreneurial universities Strathclyde works with (others include Stanford and New York University, as well as several others in Europe and the Far East) Strathclyde has long seen the benefit of working closely with MIT, in areas such as power and energy systems - particularly in grid technology and renewable energy systems, a “high value programme” in pharmaceutical manufacturing involving GSK, Novartis, Astra Zenica and Bayer Healthcare. It is also exploring new collaborative areas in neuro-photonics and quantum technologies, and partnered with MIT in contributing to the SCALE entrepreneurship training programme led by Bill Aulet from the MIT Sloan School of Management and Noam Wasserman from Harvard Business School.

Although differences between the US and Scottish economies are too numerous to list, cherry-picking applicable parts of the Massachusetts success story wouldn’t work without some overarching similarities. With the partial exception of “healthcare” (patients come from all over the world to be treated in the state’s great teaching hospitals and clinics), the main sectors of the Boston/Cambridge economy of higher education, high-tech, financial services and tourism.

As it happens these are all, to a greater or lesser extent, Scottish strengths. In other words, as Jim McDonald, Jamie Coleman and other far-sighted adherents of the New England American dream have recognised, the main elements of the miracle are here already, if only Scots had the attitude to match.