Nevada out-gunned by competitors in economic development race at Comdex

Thursday, Nov. 16, 2000 | 11:19 a.m.

A thousand high-tech executives from all over the world received invitations to attend a screening of "Wild California" and a party at the Luxor hotel-casino's six-story IMAX theater during Comdex this week.

They came. They ate. They mingled.

They talked business with leaders of California, whose representatives proudly tell people that they, as a state, have the sixth-largest economy in the world behind the United States, Japan, the United Kingdom, Germany and France.

The party thrown by state business and government leaders was one of the highlights of the week for Team California, the name of the exhibit on the Comdex trade show floor dedicated to recruiting and retaining companies in the Golden State.

"Our purpose is to promote the state as the No. 1 place in the world to do business," said Claire Hervey, director of international marketing and communications for the California Trade and Commerce Agency. "People are coming to California in droves because the quality of life is extremely high."

Hervey said Team California's mission is to attract companies that may not be satisfied with the way their local communities treat them.

"We talked to an Internet company from Michigan and they said, 'All they think about is cars.' When it comes to Internet commerce, some places just don't get it," she said.

As one of California's recruitment rivals who feels he "gets it," Somer Hollingsworth, president of the Nevada Development Authority, labeled Las Vegas as the "Silicon Oasis" more than a year ago.

Hollingsworth isn't going to Comdex this year, delegating the job to Chris McKiernan, vice president of client services for the NDA.

The NDA's presence at Comdex is a 10-by-10-foot booth in a high-traffic corridor that isn't even on the trade show floor. The NDA shares the booth with the Office of Business Development for the city of Las Vegas.

Contrast in styles

The contrast in styles exemplifies Nevada's uphill battle to recruit high-tech companies. Critics also say Nevada's results aren't making a dent in the bid to diversify the local economy.

Hollingsworth said Comdex isn't as big a recruitment opportunity as it appears because business people attending it are turning deals and attending mixers, not looking for a place to relocate.

"We hand out the cards and plant the seeds," Hollingsworth said. "But everybody is so busy that you're not going to be able to pull them away to take a look around."

Full attention

Hollingsworth said companies that are serious about relocating to Las Vegas will more likely make time when they can devote full attention to that, not during a major trade show. But, if McKiernan can make a few contacts now, fine -- the relocation process usually takes a year to 18 months to complete.

And some companies have taken that step.

Hollingsworth said in the last year, NDA has helped recruit All American Internet, CompuMark LLC, Develos Inc. (formerly iSwag.com), Sitel, Travelswitch.com and advised local dot-com startups realCentric.com and helloNetwork.com.

"It started with back-office operations and call centers, but then the quality of the companies started getting better and better," Hollingsworth said. "We had to start someplace, so now, we're off and running."

When the NDA announced its initiative to attract high-tech, medical and automotive companies in 1998, it may have generated unrealistic expectations, Hollingsworth admitted.

"Some people expected us to bring in Oracle and IBM right off the bat," Hollingsworth said. "We don't have any delusions about the kind of companies we're going to pick up. We've been getting some of the newer, younger companies that simply can't afford to locate in the Silicon Valley area."

Hervey downplays the cost of living in California.

"Wages generally have kept up with those costs," she said. "Besides, not every place in California has a high cost of living," she said, citing Riverside and Solano County as favorable locations.

But in San Carlos, a city of 30,000 between San Francisco and San Jose, the city's mayor said he is quitting his city council job and moving to Sacramento because he can no longer afford to live there.

Mayor David Buckmaster and his wife, Kim, a first grade teacher, said they can't afford to buy a house in the city, where the median price of a home is $780,000, the Associated Press reported.

Recruiters have picked up on the high cost of real estate and have listed that as a key attraction for moving to Southern Nevada.

"There's been a huge migration out of California," said Jane Whisner, managing director of Eastridge Group of Staffing Cos., Las Vegas.

Whisner, whose company recruits high-tech workers for dot-com companies, said she entices prospects with stories about home ownership, nearby recreational opportunities and relatively less traffic with which to contend.

The cutting edge

Team California counters with the lifestyle pitch and living in the cradle of cutting-edge technology. That's where "Wild California" comes in. The film illustrates the California lifestyle in an impressive format that's irresistible to the high-tech crowd.

"This is where they invented most of the things that make the Internet run," Hervey said of her state.

And today's dot-com community has heard the call. Hervey said about 650 companies exhibiting at Comdex -- nearly one-third of them -- are based in California.

Hollingsworth says there isn't a particular strategy to target California companies, although there have been advertising campaigns in the past encouraging companies to take a look at Nevada when the Golden State's economy was sluggish.

Now the strategy is to make as many contacts as possible and do the follow-ups.

Hollingsworth said he isn't discouraged about going up against well-budgeted rivals.

"I try not to worry about the kind of money they have," Hollingsworth said. "There are plenty of non-California companies that are looking at us and we'll win our fair share of those. Sometimes, a company absolutely has to be there (in California), but others don't want to be in the rat race and can see that they can service their California clients from Nevada.

Smaller states spend

"It's the smaller states that spend more than us that we have to worry about. Idaho spends more on economic development than we do. Utah asked the state for $19 million in economic development. They have so much more money than us, it's ridiculous."

Nevada spends about $3 million on economic development, he said.

Not all of California's resources comes from the public sector. The Team California booth is financed by utility companies, financial institutions and other businesses that would prosper when companies migrate, as well as the state.

And money isn't the only factor behind California's successes.

Hervey said "geographic destiny" helps sell the state, as recruiters tout the mountains, oceans and favorable climate California has to offer.

Blind luck

Keith Schwer, director of the Center for Business and Economic Research at UNLV, said sometimes it's just blind luck that makes the difference.

"Being first counts a lot," Schwer said. "That's why Silicon Valley has prospered. It's pretty obvious that Silicon Valley and Route 128 in Boston and Austin, Texas, have stepped up in the high-tech industry."

Schwer said the same thing can be said of Nevada's dominance in the casino industry.

"Why hasn't high-tech taken off here? It takes a long period of time to become a competitive player," said Schwer, who recently appeared before the Nevada Electric Energy Policy Commmittee and testified that the high-tech industry probably won't have an appreciable impact on the state in the next five years.

Part of the problem, he said, is that Nevada wasn't the first to try to attract the industry. Another problem is the well-financed competition.

Another criticism Schwer offered is that early efforts to recruit companies resulted in drawing firms that aren't serious high-tech players.

Not high-tech

"The call centers that have been attracted here -- because of the availability of a work force on all shifts because of the gaming industry -- are not high-tech," Schwer said.

And Schwer laments that Nevada doesn't have a university that produces many technologists.

"(The NDA) is facing some fundamental problems and they're working with a lot of constraints," Schwer said. "They can't change the lack of a major university. They've had some successes, and the results don't reflect what their efforts are."

Schwer said the opening of a casino mega-resort wipes out many gains the diversification proponents are striving for.

"Coming off a really small base, any gains don't look very large," Schwer said. "We have much to learn and a long way to go in high-tech."

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