Austin’s rebirth holds lessons for Orlando

AUSTIN, Texas — When Robert Fabbio came to Austin in 1987, looking to start a new career,
he wondered what on earth he had done.

The real-estate market was depressed. Cattle ranching was on the decline. And the state’s oil
market had gone bust.

By Scott Maxwell | Sentinel Staff Writer

The region’s jobs were
paying, on average, the
same as Orlando’s
low-paying,
tourism-dependent
economy — about $19,000
each at the time. Not
nearly enough to support
a family.

"Entire neighborhoods
were foreclosing," Fabbio
said. "Banks were closing
down. It was a
depressing time to come."

But to hear Fabbio’s
description today of hard
times in a hard-luck town
is almost laughable. The
44-year-old, after all, is
now a millionaire — many,
many times over.

He started and sold one software company to Hewlett-Packard Corp. for more than $150
million. And IBM paid $745 million for another one of his ventures.

What’s more significant, though, is that Fabbio’s story is not one-of-a-kind in Austin. There are
dozens more.

And it’s not just the CEOs reaping the benefits.

Over the past 10 years, more than 300,000 technology jobs have been created in the Austin
region. And, on average, they pay about $75,000 a year.

Businesses and start-up ventures have flocked to Austin in the past decade, as virtually
every magazine that ranks business-friendly communities has listed this once-crumbling city
as one of the best in the country.

The result: The salary for the average job in Austin has skyrocketed to $40,381, the
27th-highest in the nation.

Salaries in Orlando, on the other hand, have languished. During the longest period of
economic prosperity in the nation’s history, Orlando lost ground to most other cities. The
average job now pays $30,198 — ranking Orlando at 148th, behind such cities as Kenosha,
Wis.; Birmingham, Ala.; and Gary, Ind.

Not everything is ideal in Austin. Like many fast-growing cities, it struggles with crowded
highways and environmental pollution.

But, for the most part, as Austin’s salaries have soared, life has improved. Money in the
pockets of residents, after all, solves many problems.

Schools are good. Culture is thriving.

All in a city that, just 10 years ago, had the highest vacancy rate of office space in the
country, suffering schools and a brain drain as University of Texas residents fled town after
they graduated.

So what happened?

Austin saw that it had problems.

And leaders there fixed them.

The transformation begins

At its roots, Austin is a government town.

The pink granite Capitol that houses the state Legislature and George W. Bush’s old
gubernatorial office looks over downtown from its northern perch. The university looms large
as well.

Through most of the 20th century, Austin relied on its stable of decent-paying government
jobs. Those who weren’t on the government payroll worked in traditional Texas trades, such
as oil or cattle. And those workers stocked Austin’s banks with their money.

Then came the 1980s — and with them, weak oil prices and a depressed cattle market. All of
Texas was suffering, and Austin was no exception.

"People think we’re kidding now," says Laura Kilcrease, an Austin investor. "But back then,
every single bank in town — bar one — closed down. We were nearly done in."

But at the brink of collapse, one of the most well-known and respected minds in town saw a
chance for his lifelong vision to finally become reality.

The visionary was George Kozmetsky, the dean of the university’s business school.

Long before Austin’s economy was in turmoil, Kozmetsky had envisioned his city as
something more than it was: a techopolis. And he knew it was time to act.

Now 84 years old and using a cane to get to meetings, brainstorming sessions and mentoring
opportunities six days a week, Kozmetsky remembers growing up in the Depression. "I didn’t
want to die in one," he said.

To hear Kozmetsky tell it, changing Austin’s destiny simply made sense.

At that point, the university was churning out thousands of business professionals every
year. And they either left town for New York or Silicon Valley; or they stayed in Austin,
where their talents were wasted. "I guarantee you, we had more Ph.D.s waiting tables than
anywhere else in the country," Kozmetsky said.

But before he could get companies to move — and start — in Austin, he had to change 100
years of Texas tradition that said oil and cattle were the state’s staples.

Kilcrease, whom Kozmetsky recruited to help him, came up with the idea of how to do just
that.

She and a contingent of other forward-thinkers trekked up the hill to the Capitol. On the desks
of legislators, they left microchips with tiny cows on them. The card attached read: "This is
your new chip for Texas."

It was a gimmick. But it worked.

Building a team

The politicians, eager to fix their ailing economy, jumped on board.

The state pumped more money into the university, bolstering the school’s master’s program for
entrepreneurship — one of the first of its kind, and now one of the best in the world.

Legislators also rewrote the rules for state pension funds, allowing the retirement money for
thousands of teachers and state workers to be invested in new companies — immediately
creating tens of millions of investment dollars for hungry entrepreneurs from around the
country.

The governors, including Bush after he was elected in 1994, hosted soirees at the mansion,
courting young executives who were looking for a new home.

The business community also rallied to the cause, knowing that new companies bring new
employees who need Realtors, accountants and lawyers. In fact, they did more than they
were asked. When Kozmetsky said he wanted to create four $1 million endowments for
top-notch professors at the business school, local leaders raised $4 million — and then found
$28 million more.

"Everything was ripe here," Kozmetsky said.

The town didn’t ignore big companies, but it thought that putting together multimillion-dollar
incentive packages to entice companies to relocate wasn’t the most effective way to build a
base. Starting new companies, with roots firmly planted in Austin, was.

"What the hell got this country going?" Kozmetsky asked. "Small businesses."

The city also created a technology incubator, where entrepreneurs could get help starting
their business, and where college students interned to learn how to launch and effectively
manage the risks of new companies.

The people

By the mid-1990s, Austin had a strong business plan in place.

But it still needed people to run it and make it work.

For that, Kozmetsky found strength in both the business community and political corridors —
but only in people who hungered for something more. "It takes people with fire in their belly,"
he said. "If you don’t have people with that fire, it ain’t gonna happen."

Leaders of successful companies, such as Fabbio, helped infuse the region with venture
capital to attract other technology. "None of this was easy," Fabbio said. "What’s often
misperceived is how hard it is. It’s like winning an Olympic medal."

The business leaders also needed someone to help convey their efforts to the residents. As techno-nerds and nouveau
executives, many simply weren’t very good at communicating.

That’s where Austin Mayor Kirk Watson came in.

Like many Austin residents, Watson knew little about the technology boom that was beginning in his community. But he knew it
was good. And he knew he wanted more.

So Watson, an attorney who is now running for Texas attorney general, helped paint a picture that residents could
understand — and rally behind.

He talked of high-paying jobs that residents could seize. He touted new property taxes that build things such as parks. And he
rallied his City Council, so that virtually every high-profile vote on economic-development initiatives was unanimous.

"The key is being able to communicate," Watson said. "You have to be able to articulate the vision."

Over time, that vision crystallized for residents.

"All we heard about was ‘tech, tech, tech,’ " said Brenda Stallings, a 54-year-old Austin substitute teacher. "I still don’t know
what they do in those computer companies. But I know they pay pretty well."

Austin today

Today, Austin is continually ranked as one of the most desirable places to live in the country.

Forbes magazine ranked the city as the best place to live in 1999. Money magazine said it was the second-best last year. And
thanks to a growing number of artists in residence, the city bills itself as the "live music capital of the world."

Here’s a look at Austin in 2002:

Schools are strong.

Seven years ago, only two of Austin’s 98 schools were recognized by Texas as being better than average. Last year, that
number had jumped to 36.

The average SAT score achieved by students in Austin’s high schools is 23 points above the national average — whereas
Orlando’s score is 23 points below.

And the student-teacher ratio in Austin is so low, at 14-1, that Austin ranks 24th-best in the country. Central Florida’s ratio of
19-1 ratio ranks 262nd, according to Money magazine.

Some of the success of Austin’s schools is attributed to increased spending from the Texas Legislature. But there is also the
simple fact that students whose families make good money typically do better in school than kids faced with poverty.

The community is diverse and places a premium on culture.

Aside from the burgeoning performing-arts center, Austin has heavily promoted its music scene, which is capped each March
by the South by Southwest music festival. The chamber of commerce even urges companies to book local bands for
corporate functions as a way to keep the musicians in town.

Nightlife comprises more than watering holes and DJs. On any given night, artists who have made Austin their home, such as
Willie Nelson, may show up to sing a few sets.

The population is also more diverse than most American cities. Minorities account for nearly 40 percent of the population —
with Hispanics accounting for 26 percent alone.

Watson, the former mayor, said he thinks the multifaceted community plays a major role in attracting entrepreneurs and
forward-thinking executives who are looking for a new home.

"I don’t think it’s any coincidence," Watson said, "that we are a live-and-let-live and very diverse community."

Transportation is OK.

Every afternoon, traffic reaches a virtual standstill on Interstate 35, which runs north and south through Austin.

Overall, traffic is generally regarded as being only average — which is saying something for a community that has grown as
fast as Austin.

The 2000 U.S. census said Austin residents spend 23.6 minutes driving to work, compared with 24.9 minutes in Orlando.

The biggest difference in Austin appears to be the availability of mass transit. Though a proposal to build light rail suffered a
drawn-out defeat — much the way it did in Orlando — the bus system there is well-used. A Texas study found that 11 percent
of Austin residents get to work in ways other than their cars, compared with 8.4 percent in Orlando.

The millionaire factor

There’s no denying that Austin is an unusual town. In fact, a visit to the corporate boardrooms can feel a bit like a stopover in
the Twilight Zone.

Many of the veteran executives who drive Jaguars and share hard-luck tales of bear markets and failed ventures are in their
mid-30s. "There is no job in the world harder than being a CEO," opined an exhausted Ross Garber, a 35-year-old Internet
entrepreneur who started several companies and whose net worth was valued at more than $200 million in 2000.

And the super-wealthy have generated some resentment among residents who remember when $25,000 was a respectable
haul for a year’s worth of real-estate work.

Plus, the money has not trickled down to all races and classes. In general, blacks and Hispanics in Austin make nearly 30
percent less than whites.

The techies also have taken flak for not getting involved in local politics and seeking seats on the school boards and City
Council, where they would be forced to be involved in high-profile and public fashion, rather than behind closed boardroom
doors.

But business executives in Austin were sensitive to their millionaire, playboy image. So they began investing in their
community.

Perhaps nowhere is that more evident than on the banks of Austin’s Town Lake, where the city’s performing-arts center is
about to undergo an $89 million renovation — most of the money coming from executives at high-tech companies.

Michael Dell, the founder of Austin’s biggest success, Dell Computer, is donating $10 million. And planners expect private
donations from all segments of the community to pay for every dime of the project’s cost.

In Orlando, Mayor Glenda Hood has spent years trying to build a new performing-arts center, struggling to find the money to
make her dream a reality.

Residents have learned to appreciate the benefit of new wealth in their town.

"When all these new, rich guys came to town at first, I thought they were pretty obnoxious," said Ralph Diamond, who has
owned a dry-cleaning shop on West 12th Street for 15 years. "But then a lot more of them came. And they all needed their
shirts cleaned. Suddenly, they weren’t so obnoxious."

Looking ahead

Even today, Austin is looking ahead.

In fact, to hear local leaders talk about their town, they are more worried than ever about their economy.

At a conference of business executives in January, leaders talked about needing to look at diversifying their technology
economy.

Instead of just focusing on microchips and semiconductors, they are now looking to biotechnology and fuel-cell research.

In other words, Austin is again ready to take risks. "We have a chance of screwing this up," warned retired Microsoft
executive Mike Maples, while encouraging his corporate peers to work harder.

And, in fact, the current recession has taken its toll on Austin. Layoffs at big-name technology companies and failed dot-coms
total more than 20,000 in recent months.

But Orlando has had thousands of layoffs as well. The difference is, Austin is laying off jobs that pay $75,000 a year, while
the ride operators and costume characters at Orlando’s theme parks often make around $15,000.

"This is not bad for a recession," said Angelos Angelou, the Austin economist. "I would rather have one recession every 20
years than have none while having little growth.

"Austin is standing tall. No one is leaving town. Because they know — and we know — we will emerge even stronger than
before."

Katy Miller of the Sentinel staff contributed to this report. Scott Maxwell can be reached at [email protected]
or 407-420-6141.

Copyright © 2002, Orlando Sentinel

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