Securing Houston's economic and world-city futureHouston has a unique window of opportunity right now to secure its economic future as well as improve its world-city status. We're currently the global capital of the oil and gas industry, one of the most important industries in the world. The short to medium-term future for oil and gas also looks bright. But the long-term future of energy technology is fuzzy. Will we be well positioned to be the capital of all energy technologies? Or will it pass us by, and we will become the next Detroit/Cleveland/Pittsburgh/etc.?
A good case study would the information technology industry and Boston vs. Silicon Valley. Boston was the original information technology hub, especially in the mainframe and mini-computer eras, but Silicon Valley's vibrant entrepreneurialism eventually left Boston in the dust. Could the same thing happen to us with alternative energy and California, Denver/Boulder, Austin, or elsewhere?
There is a lot of acknowledgment that we need to broaden our energy-industry base to include more alternative energy, but there doesn't seem to be a lot of specific strategy (Opportunity Houston excepted). My suggestion? Build on Paul Graham's idea for creating the next Silicon Valley (estimated price only $1B, or two Reliant Stadiums), but focus it instead on alternative energy companies. These companies are cheap right now and starving for capital in this economy (see this Business Week story on the Biofuel Bubble). Investing in them conditional on moving to Houston would be a bargain many would readily accept, helping to establish a Silicon Valley-like critical mass here.
Where would the capital come from for these investments? A massive private equity/venture captial fund would be established with a focus not just on absolute returns, but on broadly enhancing the Houston economy, especially in alternative energy. Employers all over the region would offer this fund as an option in their 401K plans (it's like one of those "special situations" funds you may have seen combined with a mission-oriented, socially responsible fund like the environmental ones), maybe limited to no more than 5% of your portfolio (since it is a high-risk investment category). I think huge numbers of people would happily put part of their retirement portfolios in this fund, not just because they believe in Houston and want to see it succeed, but also because it's in their own best interest: if the city does well, their home value does well and their kids will have more opportunities here. It's a win-win virtuous cycle.
I think the primary target should be biofuel companies (especially algae), since that plays to our engineering, refining, and distribution strengths more than wind or solar (and we already have some traction here). Just like Silicon Valley is awash in programmers all trying to create the next big thing, we need to be swimming in chemists and biogeneticists all competing to make the next big biofuel breakthrough.
Of course, all of this needs to be backed up with not just money, but with academic support in the form of the world's largest collaborative energy research institute spread across Rice, UH, and TAMU - just like the support Stanford provided Silicon Valley.
At the beginning of this post, I also mentioned that this could improve our world city status. The more I've thought about it, top world cities don't just have big economies, industries, and populations (which we certainly have), they also have an intangible "buzz factor" - a sexy, exciting story as part of their identity. The fame and celebrity of the entertainment industry gave it to LA. Technology and natural beauty gave it to the San Francisco bay area. Media, finance, the UN, and Manhattan gave it to NYC. Some cities have the buzz without the world-city economy or population to back it up - Vegas, Denver, Portland, and Austin come to mind. Atlanta tried to buy the buzz with the Olympics. You get the idea. Houston lacks that popular buzz factor, and oil and gas alone is not going to get us there. Top-tier tourism is not a realistic option. But if we morph into the Silicon Valley of Energy - one of the bedrock industries of the world - I think that would do it.
It's an incredible opportunity, and one we should seize quickly. If oil prices continue to re-inflate, these alternative energy companies will again become popular and expensive with plenty of capital options - making it almost impossible to move them here. Other cities may build an insurmountable lead in different alternative energy clusters, leaving us behind (right now it is very open, with no clear leader). It's all too easy to cruise on our recession-resistant economy and strong oil and gas industry, but this is the time to take aggressive action. Attack, while the moment is right, and secure Houston's future greatness.