Gregory Bialecki is Massachusetts Governor Deval Patrick’s Secretary of Housing and Economic Development, and leads an ungainly collection of agencies charged with everything from promoting affordable housing in Massachusetts to attracting international business investment to the state. Here at Xconomy, we cross paths with Bialecki quite a bit, since he’s also responsible for many of the state’s initiatives to support high-tech innovation and greater collaboration between business, academia, and government.
I interviewed Bialecki at length last week, and in Part One of our conversation, published yesterday, I asked him how his work as an attorney specializing in real estate development and land-use permitting related to his current business-development role for the state. We also talked about the roles state government can play in promoting innovation. Bialecki said the Patrick Administration has spent much of the past two years simply helping players in various technology sectors to recognize that when it comes to working with business, state government can play a supportive rather than an adversarial role.
In particular, we were talking as Part One closed about the state’s obligation to help business by improving the quality of science, technology, engineering, and math education for young people. In this second half of the interview, I pressed him for more examples of things state government can do to accelerate innovation. And we went on to talk about the need for more funding to move ideas from the lab bench to early-stage commercialization, the debate over non-compete agreements in employment contracts, and the Administration’s progress drafting new business regulations on protecting consumer data.
Xconomy: I think it’s pretty easy for everyone to agree on the importance of science and engineering education. But what are some of the other parts of this innovation agenda—things that maybe are not so easy to agree on?
Secretary Bialecki: There are other aspects of the innovation ecosystem, if you will, where I think we can play a partnering role. When it comes to thinking up great ideas, Massachusetts is fantastic. But when it comes to converting those good ideas into commercial products and services, we need to do a better job. The way to do that is a collaboration between business and academia and government to look systematically at the ways we do that. In other words, what great ideas are behind the university walls right now that aren’t coming out? When I describe the state government [as] having a partnering role, in many cases it’s as simple as being a convenor or facilitator. So, for example, the Governor, who is very interested in innovation, has the capacity to say to all of the public and private universities, “Can we get together and compare notes and talk about how we are commercializing our ideas? Who has the best practices and are there things we can learn from each other? Are there things the state can do to make public universities better at it?”
That’s one of the things we are focused on—learning from universities and businesses the ways we can make these connections better and literally get good ideas out of the lab and into the hands of entrepreneurial folks. Desh Deshpande has done a magnificent job with the Deshpande Center. He is taking a very analytical approach to these issues, [asking] systemically what is standing between a good idea in an MIT lab and it being commercialized, and what do the researchers need to know that they don’t about the context or the process, and what do entrepreneurs need to know about the process of discovery that they don’t know, and how can we get these people talking. I’ve talked with Desh about this, to find out what it is we can do to make sure that the best practices that he is uncovering there are implemented throughout the state and particularly in public universities.
X: You talked about the challenge of getting ideas from the lab bench to market, and there’s a real sense that there is a funding gap there—that there aren’t enough players willing to provide seed money. Is that an area where state government can step up, or are budgets so tight that you’re limited to doing things that don’t cost money?
GB: It’s a challenge, but we do have some vehicles to help with that. In particular, it’s been a very important part of Governor Patrick’s agenda to increase the public resources available for innovation by creating a life sciences center and funding it and creating the clean energy center and funding it. The Life Sciences Center has money available for researchers in Massachusetts who have promising ideas but whose research is not getting NIH funding—it was identified that NIH funding, for legitimate reasons, tends to go to senior researchers who have a track record of discovery, so we felt that one of the gaps was that junior researchers who had very promising ideas [were not getting funded], so we can support them now. That had two goals—to get that research done, if the idea had promise, and to show that Massachusetts is the kind of place that supports young people doing research, and that it’s a good place to be in the life science sector. [Editor’s note: As of this writing, the Massachusetts legislature had not adopted a budget amendment offered by Governor Patrick that would give Massachusetts Life Science Center the funds to continue disbursing research grants. Unless the legislature revisits the issue, or unless the state government exits 2009 with a net budget surplus, the center will have no funding in 2010.]
X: What about the IT sector? As a result of the economic crisis and changes in the venture industry, I think there is a problem that’s directly analogous to the NIH funding issue you mention, which is that venture funds are far more willing to invest in established players in the software or Web arena than in first-time entrepreneurs. So there are a lot of new companies going after a very small amount of seed-stage venture capital.
GB: When the Governor came in, it was clearly identified that there were funding gaps in the life sciences and in clean energy. We heard from a lot of people that those gaps were significant, and that they were causing good ideas not to be pursued to a commercial state. In general, we were hearing that on the IT side that was less of an issue. Of course, there has been a sea change in the amount of private venture capital available, and that is part of the conversation we’ve been having with folks in the IT Collaborative. On the one hand, you hear some very pessimistic things about whether private VC will return. But I also hear a lot of people who are pushing for an evolution in the way young companies get started; there are a lot more young companies in IT focusing now on the development of products that require less capital. So, for example, you’ve seen this whole cottage industry of folks developing iPhone apps and other mobile apps, and a lot of the innovation in IT now is focused on seeing how far you can get if you know you are only going to raise $100,000. We’re continuing to look at whether the changes in the private venture capital market in IT mean that, in some cases, there may be a role for public funding.
X: Back in July you published a blog post listing all the reasons why the Patrick Administration is being cautious about taking a stand on the question of non-compete agreements in Massachusetts. As you know, many people think the use of non-compete agreements in many employment contracts puts a big damper on innovation, by discouraging people from switching employers or starting new companies. What kinds of evidence would it take to persuade the Administration that some kind of change is needed in this area?
GB: Our approach on these innovation agenda issues has been to really engage in dialogue with the business community and the academic community and give first priority to the things where we see broad consensus and shared priorities. As I have been talking with people in the IT industry in Massachusetts, the issue of non-competes is frequently brought up, and there is concern that Massachusetts law is inhibiting innovation on some peoples’ parts, and that’s something we take seriously. But from Day One I was really surprised at the lack of consensus on the subject. I know there are some people who feel very strongly about the issue, but not only is there a lack of consensus that one answer is better than another, but there is a tremendous range of opinion on how important the issue is. Some people feel it’s a very important issue, but I’ve also heard from a lot of people that it’s not one of the top three issues—that there are things that Massachusetts could and should do better, but that [reforming non-competes] is not one of the top three things that would really help the innovation ecosystem.
So, as I said in the blog post—what Representative Brownsberger is working on, we are going to keep in close touch on that. I’m not saying that everybody has got to agree to [proposed reforms]; if a guideline is that we are not going to make a change unless everybody is happy, then we would never make a change. But I don’t think a ban [on non-compete agreements] is the place where we are going to find broad consensus. Rep. Brownsberger is trying to find another balance point that there could be consensus around, and if he can find such a place, we’ll work with him on that.
X: One last question. One of the organizations under your direction is the Office of Consumer Affairs and Business Regulation, which has been working on new regulations around the way Massachusetts businesses store and protect private personal data. The implementation of those regulations has been postponed four or five times now. Isn’t there a point at which these repeated postponements create uncertainty in the business community about whether they will ever really have to change their data-protection practices?
GB: The ideal situation would be that we would come out with a set of regulations and that we were not revising and postponing them several times. But in this particular case, we have been listening to the business community, and we have been hearing that the earlier versions of the regulations were not reflective of the best practices in the industry for balancing consumer privacy with business operations. So we have been continuing to make changes, for two reasons. One is that we were hearing that the regulations as they were originally proposed were burdensome on business, in ways that were not central to protecting personal information. That was the main reason for holding off. The other reason is that in the course of having these conversations with companies in a variety of industry sectors, it became very clear that businesses were sizing us up as a partner, and sizing up whether we were innovative ourselves. And what we heard from a variety of folks in the tech sector was that the fact that you’re issuing these rules which don’t reflect the ways in which good businesses are protecting personal information really shows us that you’re not very tech-savvy, and it undercuts your credibility.
A draft of the new regulations has just been issued, and legally those draft regulations have to go through a new public hearing. But the early returns on the public comment have been that this draft is a dramatic improvement, and we are cautiously optimistic that we have struck the right balance this time. Just a simple example of what I was talking about is encryption. The statute that ordered us to issue regulations set a certain standard for encryption. But the tech folks were telling us that encryption technology is changing every day, so the idea that you could say in your regulation, “Here is the encryption standard,” is totally ignorant about how the technology is working. They said, if you want to set a performance standard for the protection of privacy and then allow us to use the technology that is available today, tomorrow, and the next day, then that is something we can work with—but don’t tell us to use a certain technology. So we’re leaving that up to the private sector, and we think part of the reason the new draft regulations have been well received in the early returns is that they are saying, “Here’s what we want you to do if you are handling personal information: we want you to keep it safe, but we are going to give you more flexibility about how you take care of that.”
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