San Antonio 2018 Economic Forecast: Acceleration

 San Antonio 2018 Economic Forecast: Acceleration
By Pat Niekamp
Graham Weston, Jim Garvin, Ph.D., Dean Tanuja Singh, Steve Nivin, Ph.D. and Bob Butler presented at the 2018 economic forecast in San Antonio.

Steve Nivin, Ph.D., an associate professor of economics at St. Mary’s University, began his assessment by noting the US economy is now in its 100th month of expansion—the third-longest stretch in history.

Nivin’s “go to” statistic on the economy is found in the yield curve, which plots interest rates on bonds of equal credit quality with differing maturity dates. The yield curve is a benchmark for debt, and it predicts changes in economic output and growth.

Economist Dr. Steve Nivin is an Associate Professor at St. Mary’s University.

While pointing to a yield curve chart from the Federal Reserve, Nivin said when the curve inverts the economy will go into a recession about a year later. “It’s a good indicator of going into a recession; and, while it’s going down, it has not yet inverted, so we’re good for a while,” said Nivin.

While Nivin expects to see US growth rates slow down a bit, San Antonio can expect a 2.2 to 2.5 percent growth in employment in 2018. As for unemployment, it will remain low, in the range of 4.25 percent.

If there are another two years of growth in the US economy, it will be the longest continuous expansion in history. With this long run up, Nivin sees any further increases being driven by population growth, productivity and technology.

“We have to consider that we might see a dip in the US economy and the San Antonio economy,” said Nivin. “We’re not there yet, but I think it’s important we begin to address this.”

Cybersecurity

Bob Butler wasted little time getting to the point. In the first ten seconds of his presentation, he identified the challenges of cybersecurity: “I think our risk exposure is growing, and it’s growing at an alarming rate,” he said. Butler is a senior vice president at AECOM and a retired US Air Force colonel.

Bob Butler is Senior Vice President at AECOM.

Butler sees security risks in three parts: threat, vulnerability and consequence management. He also recognizes that both the military and private industries are dependent on the same infrastructure and solutions, which come from working cooperatively. Along with exploitation, IP theft and interruption, Butler said the most alarming threat comes from nation states and the evolution that has led to disrupting and destroying things.

“Part of what we keep on doing is looking back,” said Butler. “We have to look back to clear up vulnerabilities, but we need to look ahead to address this risk exposure.”

The greatest risk is from the four-plus-one countries of Russia, China, Iran and North Korea. The plus one represents the extremist jihadi network. In Texas, it’s Iran that’s of particular concern, because their focus is on petrochemicals and natural gas targets.

 “My sense is that we have significant challenges in front of us because our cyber hygiene is not great,” said Butler. And with the additional interconnections from smart cities tying IP addresses together, along with events like hurricanes Harvey, Irma and Maria, Butler says our adversaries are using natural catastrophes and smart interconnections to mask their real intentions.

On the positive side, Butler recently traveled to Washington, D.C., to meet with policy makers in the Senate to discuss moving into active campaign planning for the military by cyber strategies that are offensive rather than defensive.

For businesses, Butler recommends focusing on the basics and prioritizing assets. “If you’re a product company, you have to protect IP, and if you’re a service company you have to protect customers data,” he said. Those basics include continuously training employees and including customers and vendors. Another basic? Don’t compete on threat information—share it.

Butler wrapped up his comments with several recommendations and observations. First, San Antonio has good thinking, good alignment, good education and good cooperation with higher education campuses; and yet, the community needs to do more to create businesses tied to cybersecurity by creating a stronger ecosystem of support, he said.

Second, as a military city with strong officers, NCOs and airmen, how can San Antonio best leverage that talent?

Third, how can the community become more aware that cyber is part of everything and every type of business? Butler encouraged creating resilient digital foundations through master planning and by adopting “security by design” in city planning.

Lastly, Butler said San Antonio needs to scale cybersecurity. “First we have to scale with talent—we just don’t have the pool of talent we need—not in Austin, Houston or Dallas,” said Butler. “We have got to create a much larger base of people who understand what needs to be done, then share those best practices in order to grow.”

BioTechnology

Jim Garvin, the CEO of CytoBioscience, a firm in the business of helping drug developers better understand how human cells react to medicines, stopped in the middle of his presentation and told attendees if they remembered nothing else of what he had said, they should remember these two things.

First, “The best kept secret in San Antonio is that San Antonio is—not going to be or not wanting to be—but is, a world leader in biotechnology and health care,” said Garvin.

Jim Garvin, Ph.D. is the CEO of CytoBioscience.

To support his statement, Garvin listed statistics on the biotech community. In Texas, there are 3,900 biotech firms, with the vast majority within a 150-mile radius of San Antonio; there are 100,000 biotech jobs in Texas and more Ph.D.’s in biotech that graduate from Texas schools than any other state; Texas has over 20,000 active clinical drug trials, and there are more than 4,000 researchers and practitioners in San Antonio. What’s more, six of the top 100 medical schools are in Texas, and three are within 200 miles of San Antonio.

Second, Garvin sees San Antonio as the tip of the spear. “What you’re going to see happen in the world of medicine, in the world of biotech, is going to change how people are treated and how diseases are cured, and it’s happening in San Antonio,” said Garvin, “ and, with all due respect to the people from Austin or Houston or Dallas, none of them can compete with San Antonio.”

Garvin also claims the cure for cancer will come from San Antonio. “I believe that with all my heart,” he said.

Garvin told attendees, “We are the leader, and we’ve got to act like the leader. Understand, without equivocation, we are number one.”

Entrepreneurship

Less than a day before the start of the forecast, San Antonio city leaders announced they would not participate in the RFP for Amazon’s HQ2. What’s at stake? The prize is $5 billion dollars in capital expenditures—equal to five USAA buildings—and 50,000 jobs at a $100,00 per year average.

“I want to talk about something small and boring,” said speaker Graham Weston, “and there’s probably only one person in this room who cares about this, and that’s Jenna Saucedo-Herrera.” Saucedo-Herrera is the CEO of the San Antonio Economic Development Foundation. Weston is the founder of Rackspace, Geekdom and the 80/20 Foundation, and he built the Weston Centre, an office tower in downtown San Antonio.

Graham Weston is an entrepreneur who started Rackspace, Geekdom, and the 8020 Foundation.

In reality, everyone in the room wanted to hear Weston’s insights and the pros and cons of San Antonio’s decision not to bid for HQ2. Weston sees both the large and small employers of San Antonio and the for-profit institutions as the ones that will move the needle—not government.

Using Wisconsin as an example in their bid to bring the Foxconn manufacturing plant to that state, Weston pointed out the state government agreed to a $3 billion incentive package. “For every job created, the incentive package is equal to $15,000 a year, per job,” said Weston. “They spent a lot of money to get those jobs.”

Weston asked three questions about a deal like Amazon’s. First, does San Antonio want Amazon? Second, is the community willing to pay the price? And third, will they win?

Picking up his phone, Weston pulled up the Amazon RFP and read out loud what cities need to do to win. “First they are looking for cities that produce a pipeline of talented people,” said Weston. Acknowledging San Antonio has great universities producing a pipeline of talented people, he also pointed out one of the most important ways to produce enough talented people is to have a city that attracts them from other places.

Reading from the RFP, “Amazon states will have, in addition to the perfunctory business climate, close proximity to transportation infrastructure, mass transit, including light rail, walking and biking options, easily accessible culture, recreation in green spaces and cities that embrace sustainability and renewable energy, recycling, rebuilding and a creative approach to the environment,” said Weston.

“I would just say if we have to have those things to win, we’re not going to win,” said Weston.

Using Denver as an example, Weston said, “Ten years ago, Denver was zero on all of those things, and today they are one of the great cities in the world. I think it’s there for us, and we’ve made a great start by being in Texas, being in the South and being San Antonio. We have all of the tailwinds any city could dream of. The question is this: in ten years when we get an RFP like this, will we bid, and will we win?”

“That’s up to us,” said Weston.

Q&A

Greehey School of Business dean, Tanuja Singh, Ph.D., lead the Q&A with the speakers, and she began by asking Weston if a lack of investment capital holds the city back. While agreeing it does,

Tanjua Singh, Ph.D. is the Dean of the Greehy School of Business at St. Mary’s University.

especially at the early stage, Weston went on to say, “Capital will find the good opportunities.”

When Dr. Singh asked Butler what type of talent the cybersecurity industry is looking for, Butler said, along with aptitude and attitude, “They need to have the ability to move across disciplines and the mental agility to think about protection.”

Singh asked Garvin about finding more venture capital for biotech. “If you look at Red McCombs and the other big philanthropists in the city, they are giving money to Dallas and Houston because they think that’s where it’s happening,” he said. “We have to do a better job of saying, ‘Hey, it’s happening right here.’”

“One of the perceptions of San Antonio is as a travel and tourism destination city,” said Singh. “As we move away from that perception to a high-intellect and high-talent city, do we have the human and financial capital to make that transition?”

According to Nivin, “The short answer is yes, we have clearly diversified. What drives economic development is education and training. You have to have the people to have a business—that’s the lifeblood—well educated from pre-K through higher ed.”

 

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