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His is another kind of financial forecast


People – May 2005

His is another kind of financial forecast
By Joe Rauch

Some might think, after nine years as a risk analyst and hedge-fund manager, Jayant Khadilkar would want a job with a little more precision to it. Something so he wouldn’t always feel like he was milking a white cow in a blizzard. Engineering, maybe, or plumbing.

Not Khadilkar. At 42, he’s CEO of Raleigh-based Weather Predict Inc. “Forecasts are never 100% accurate,” he says. “What we’re offering is forecasts that are more consistent, more reliable than anyone else.”

They’re for customers from his old stomping grounds — stockbrokers, commodities traders and such. A hot summer with heavy air conditioning might drive up the price of utility shares. A fall hurricane could double plywood sales. “I never really left the financial world.”

Customers of Weather Predict, founded in 2000 in Tallahassee, Fla., pay fees — typically several thousand dollars a month — for forecasts that Khadilkar says are more accurate than free ones. Some also pay a share of the profits the forecasts earn them. The forecasts are based on a proprietary system developed at Florida State University and use a patented mathematical model. Customers have password access to their own Web sites, which are continually updated, and can get telephone consulting.

So far, Weather Predict has about 10 customers, including Raleigh-based National Gas Distributors. Khadilkar wants to expand by selling information to retailers and others whose profits are affected by the weather. “If you’re trading futures on, say, natural-gas prices, you want to know when the weather is turning colder. But companies like The Home Depot also need this information so they know where to allocate inventory in anticipation of a hurricane or blizzard.”

Born in Lonavala, India, the son of a civil engineer and a homemaker, he grew up in Pume, a city of 2.3 million about 115 miles east of Bombay. He came to the United States for graduate school and got a master’s in operations research from the University of Kentucky in 1986.

Khadilkar worked for Applied Insurance Research in Boston from 1989 to early 1994 as a risk analyst, then moved to Pembroke, Bermuda-based RenaissanceRe Holdings. The company sponsored research at Florida State University on tracking hurricanes. “All hurricane tracks within the three-day window are pretty much the same. We were trying to reach out beyond that 72-hour window.”

He left in 1998 to manage a hedge fund in Raleigh and, by 1999, saw a need in the financial market for weather data. “I contacted the professor at FSU I had met through Renaissance. I asked if there was any way to use the model he developed for hurricanes with everyday weather.” Answer: yes.

Khadilkar and another investor raised more than $2 million by the summer of 2000 and began business in a garage in Tallahassee. In 2001, he moved the operation to Raleigh, where he lives. It employs 14. He won’t reveal revenue but says the company will be profitable this year. Starting a business wasn’t scary. He and his wife had started Follow the Child Montessori School in Raleigh in 1999. Their two children are easy to spot: They always know when to wear their raincoats.

Even winners are losers with nonrevenue sports


Sports – May 2005

Even winners are losers with nonrevenue sports
By Chris Roush

The name never has been quite accurate. Nonrevenue sports — the ones at colleges and universities that aren’t football and men’s basketball — usually have generated some money, just not very much. At most places, football and basketball pay the bills for baseball, softball, track and field, soccer, lacrosse, wrestling and other varsity sports.

Now athletic directors across North Carolina and the country have launched initiatives that they hope will make that name obsolete. They prefer another one, Olympic sports, though it’s not accurate either because neither golf nor lacrosse is played during the Olympics.

There’s reason for their optimism. When Dennis Thomas, the commissioner of Greensboro-based Mid-Eastern Athletic Conference, sat down to negotiate a TV contract with ESPN this year, he made an extra demand: Show sports other than football and basketball. “Before, that wasn’t done. You were just happy to get football, basketball and some women’s basketball.”

This time, he got his wish. When the network’s new cable channel, Charlotte-based ESPNU, devoted exclusively to college sports, signed a seven-year contract with the MEAC in February, it agreed to televise an undetermined number of softball, volleyball, baseball and track and field events. MEAC schools include North Carolina A&T State University in Greensboro. Games also will appear on ESPN2 and ESPN Classic.

Why would ESPN care about the obscure MEAC? Well, it has to fill ESPNU’s schedule with something. The network launched in March, joining New York-based College Sports TV in broadcasting only college sports, particularly the nonrevenues. Neither channel is widely available. In fact, neither is offered on the primary cable systems in Charlotte or Raleigh. But if that changes, the two networks eventually could give much wider exposure to sports that typically have been ignored.

Chuck Gerber is executive vice president of ESPN Regional Television in Charlotte, which oversees programming on ESPNU. He says the new network, which plans to air about 300 sporting events a year, will help baseball, softball and lacrosse the most. “That kind of exposure can only help a university. It helps them attract athletes, attract alumni and raise money. If we grow the interest, it’s good for us and good for the institution.”

More TV coverage, however, is only one of the tactics that colleges and universities in the state are employing to boost Olympic sports. They also are offering promotions and giveaways, advertising in local newspapers, selling sponsorships in game programs and on signs at the field or arena and raising ticket prices.

N.C. State University spends nearly $100,000 a year to advertise games for baseball, women’s basketball, softball and other sports, says Charlie Cobb, associate athletics director. At East Carolina University in Greenville, the outfield wall is covered with sponsorship signs. And at women’s basketball games at UNC Chapel Hill, cheerleaders throw T-shirts and souvenir basketballs into the crowd.

Fans aren’t the only ones being targeted. The UNC Chapel Hill board of trustees has proposed hiking student athletics fees, part of which goes to the athletic department, from $98 per student to $248.

The school also increased ticket prices for men’s lacrosse and baseball, men’s and women’s soccer and women’s basketball. Those are the only secondary sports in which it charges admission, which increased from $4 to $5 for all events except women’s basketball, which went from $5 to $7. It also installed 300 seats with backs and cup holders near the floor of Carmichael Auditorium, where the women’s basketball team plays, and sold those for $10 a game. It will install more for next season. In mid-March, Beth Miller, senior associate athletic director for Olympic sports, said she couldn’t say yet how much the increases yielded. “But they’re so far away from becoming self-sustaining that’s not a realistic goal. Our main philosophy with Olympic sports is that we want to put people in the stands and have larger crowds more than it is to generate revenue. But we also want to generate revenue.”

Among state schools with more than 5,000 students, only UNC Greensboro reported a profit from Olympic sports in 2003-04, mostly due to strong baseball and soccer programs. Other North Carolina universities posted wide disparities between revenue and expenses. “If we were actually in the business to generate revenue from these sports, we would all be fired a year ago,” says Chris Kennedy, senior associate athletic director at Duke University.

Kennedy cites the Duke men’s lacrosse team as an example of the uphill battle schools face. Scholarships cost more than $500,000 a year, and then there’s the cost of travel. “Even if you have a sponsorship deal with SDX or someone, it’s going to cost you $800,000 if you want to compete on the ACC or national level.” That’s about $700,000 more than lacrosse generated last year.

Winning helps. Two of the most successful women’s basketball programs, Tennessee and Connecticut, made money in 2003-04, according to financial statements filed with the U.S. Department of Education.

State’s Cobb says baseball and women’s basketball eventually could sustain themselves. The school spent $6 million last year to renovate its baseball field, which should boost attendance. But it’s far from a sure thing. “We’ve got a game tomorrow, and the temperature is supposed to be 39 degrees. Winning obviously helps, but so does nice weather.”

Dead-end drugs show side effects


Tar Heel Tattler – May 2005

Dead-end drugs show side effects
By Edward Martin

GlaxoSmithKline might have thought it was immune. The drug maker recently played bystander as several Research Triangle Park neighbors took a licking. First, tests indicated Inspire Pharmaceuticals’ new ocular lubricant was no more a sight for sore eyes than a placebo. Then Biogen Idec, which made an acclaimed multiple sclerosis drug, revealed that three users had died of liver damage. In Durham, Icagen quit testing an experimental epilepsy drug because of safety concerns.

But only a few days after Biogen stopped sales of Tysabri, the federal Food and Drug Administration halted GSK’s testing of its code-named 699 multiple sclerosis drug because it worked on a similar principle. “It was chemically different, but the FDA hit the pause button to figure out what happened to Tysabri,” GSK spokeswoman Gaile Renegar says.

Traditionally, for every 10,000 chemical compounds tested, only one is approved for sale. The odds may be getting even longer. Experts blame heightened awareness of drug safety, a proliferation of new compounds and other factors for a rash of canceled or delayed drug launches.

Tar Heel drug makers could use a dose of the antidepressant Zoloft. The Triangle feels the pain more than most drug centers. It has giants like 6,000-employee GSK, which has one of its North American headquarters in RTP, as well as smaller companies such as Inspire, which typically work on early-stage drugs when risks of failure are highest. Chapel Hill-based Pozen recently had a migraine drug approved — but only after two others failed in 2003 and 2004. Cases such as those and Inspire’s diquafosol, which the company had hoped the FDA would accept as a dry-eye treatment, show the hurdles new drugs face.

Inspire applied for permission to test diquafosol in June 2003, says Jenny Kobin, senior director of investor relations. Tests proceeded, and the company hoped to market it this year. But in early 2004, the FDA ordered more tests. The verdict was that diquafosol was no more effective than a saline solution. Inspire stock dropped 45% the day of the FDA announcement.

But not all dead-end drugs are dead. Kobin says Inspire hopes to get FDA approval to sell its dry-eye drug for corneal wounds, such as those left by laser surgery. Sometimes Plan B works out OK, too: Scientists at New York-based Pfizer Pharmaceuticals were testing a drug called sildenafil in the early 1990s for use in treating the heart condition angina when they discovered unexpected side effects. Viagra sales topped $1.5 billion in 2004.

BofA finds it pays to scuttle scandals


Tar Heel Tattler – May 2005

BofA finds it pays to scuttle scandals
By Frank Maley

Imagine that your bank had paid more than $1.1 billion to make two legal cases go away in the past couple of months. And fessed up to losing credit-card data for up to 1.2 million customers. You might think twice about doing business with it. Charlotte-based Bank of America Corp. did all those things, but it didn’t seem to matter. “It’s funny how it just doesn’t seem to stick,” says Tony Plath, associate professor of finance at UNC Charlotte.

In February, BofA agreed to pay $675 million — without admitting guilt — to end a federal Securities and Exchange Commission investigation of its mutual-fund trading. The SEC had accused the bank and its year-old acquisition, FleetBoston Financial, of market timing, trading shares to take advantage of price differences in different markets, and of late trading, buying and selling shares after markets close.

In March, the bank announced it would pay $460.5 million to settle lawsuits by investors who had bought bonds of WorldCom before the Clinton, Miss.-based telecom giant filed for bankruptcy amid fraud accusations in 2002. The suits contended that BofA brokers sold them bonds when they should have known the company was on the ropes. Also in March, BofA admitted that it had lost computer tapes containing personal information on as many as 1.2 million federal workers.

True, BofA’s stock price slipped 5% in March, but at least some of that could have been caused by other concerns such as rising interest rates. One ingredient in BofA’s Teflon coating is timing. Its problems have come after a series of bigger scandals. “They did the wrong thing at the right time,” Plath says.

While most of the accusations are about technical matters beyond the ken of average bank customers, the company can counter with one easy-to-digest statistic: Net income jumped 30% to $14 billion in 2004. BofA also has been able to manage its bad news. It often employs a standard PR tactic of settling lawsuits — even though some might see it as an admission of guilt. “A lot of what I see them doing, it doesn’t necessarily surprise me,” says Adam Bernstein, a principal at Charlotte-based Carolina Public Relations. “But I’m always impressed with how they’re able to manage it.”

After the fall


Up Front: May 2005

After the fall

She fell outside her doctor’s office after her checkup, losing her balance when she stepped off the pavement onto the grass. There’s nothing unusual about an 84-year-old woman falling. And if it had to happen, it’s hard to imagine a better place — other than an emergency room — for it to occur.

Her head bashed the concrete. But that didn’t hurt as much as her left arm, with which she had tried to break the fall. A man driving by stopped and helped her to her feet. She went back inside: Her bones were getting so brittle, her doctor had once told her, any fall could snap one. He felt her forearm. Nothing, he assured her, was broken. He didn’t bother to X-ray it. Nobody even looked at the knot swelling on the back of her head. The waiting room was full. It was a busy day. She got in her car and drove home.

When the daughter who lives with her came home from work four hours later, she found her mother waiting — in pain, forearm swelling, nauseated. The daughter, a medical technician, knew that people get sick to their stomachs when a fracture leaks marrow into the bloodstream. She took her mother to an urgent-care center, which X-rayed the arm. It was broken in two places. The limb was so swollen they had to cut the wedding ring off her finger.

When the daughter — my sister-in-law — called to tell the doctor, he wanted to see the X-rays. Dreams of trial lawyers no doubt deviled his sleep that night. But when my mother-in-law talked to my wife the following day, the first thing she said was she wasn’t going to sue him. But she knew she had to find another doctor: She couldn’t go back to this one.

She asked me not to write anything about it. But rarely a month goes by that this magazine doesn’t carry something — whether it’s a major piece such as last July’s cover story or an item as brief as a Tattler — about the mess we’ve made of our health-care system. We believe this is one of the most important issues facing not only business but our whole society. Though many in the medical community are doing their damndest to demonize plaintiffs’ attorneys and lay the blame on lawyers’ venality and greed, an incident such as this one can’t help but remind us: The boogeyman isn’t always the one carrying the briefcase.

Weaving tapestry is women’s work


People – April 2005

Weaving tapestry is women’s work
By Vicki Grooms

Sharon Decker is a preacher’s daughter, former beauty queen, mother, executive and now an innkeeper and business owner. When people ask her if women can have it all, she says sure. “Just not at the same time.” She left a job in August as president of Tanner Holdings, the planning arm of Tanner Cos., a Rutherfordton clothing manufacturer. Her reason, she says, was to follow her heart to a new business.

Decker, 48, a former Duke Power executive who chaired the Charlotte Chamber in 1998, spent nearly $1 million to buy and renovate the town hall and firehouse, built in 1925, and two other buildings in downtown Rutherfordton, about 70 miles west of Charlotte. She used them to start The Tapestry Group LLC, which offers retreats, seminars, consulting and other services for women struggling with competing pressures. She, her husband, Bob, and four children have lived in Rutherfordton since 1999, when she became president of Tanner’s Doncaster division. The centerpiece of Tapestry is The Firehouse Inn, where the four beds are made with Italian linens and some rooms have gas fireplaces.

Decker says Tapestry is more akin to a religious calling. “There’s a work life. There’s a personal life. There may not be a spiritual life. I look at life as a tapestry. It has threads. Some are broken. Sometimes colors work or don’t work. But in the end, it’s a beautiful piece of work.”

One of three daughters of a Baptist minister, she was Miss Gastonia and graduated with a bachelor’s in economics in 1979 from UNC Greensboro. She worked for Duke Power from 1980 to 1997, starting as a customer-service representative and becoming the company’s first woman vice president. In 1997, she started the Lynnwood Foundation, which oversaw preservation of the Duke mansion, Charlotte home of Duke Power founder James B. Duke. She was president and CEO until 1999.

But she hasn’t left the corporate life altogether. She is on the boards of Charlotte-based Coca-Cola Bottling Company Consolidated, Matthews-based Family Dollar Stores and Herschend Family Entertainment Group, a Branson, Mo.-based theme-park operator. She also is a student in a two-year program for lay pastors at the Presbytery of Western North Carolina’s School for the Laity.

The Tapestry Group has five employees, including her and her husband. The Deckers also have formed North Washington Street Properties, a real-estate company, and she remains a consultant to Tanner Holdings. She also is paid to speak at businesses and community forums and is writing a religious-themed book.

Still, she says she won’t be trying to juggle too many roles at once. “Now I think of it as synchronization — not balance.”

State auditor figured he could do better job


People – April 2005

State auditor figured he could do better job
By Frank Maley

Les Merritt seems to have the right pedigree for state auditor. He’s the first certified public accountant to fill the post. He has been a Wake County commissioner, which gives him grassroots political experience, and he has performed public audits as a partner in Zebulon-based Merritt, Petway, Mills & Hockaday. After losing in 2000, he beat Ralph Campbell in a close election last November.

But is he tough enough? Campbell frequently riled bureaucrats, including fellow Democrats, with his high-profile audits, but voters knew he was on the job and returned him to office twice. Merritt, 53, plans to keep a lower profile. Since November, he has met with heads of state agencies and says he hopes to change the duck-and-cover mentality that they told him guided their relationships with his predecessor.

An auditor, he says, earns his salt by correcting small problems before they become big embarrassments. “We’re not out there aiming at having a sensational report or surprising anybody with things that could have been headed off earlier, so I really want to change how the office operates.” Doing that could require more manpower. But first, Merritt plans to see if he can accomplish his goals merely by doing things more efficiently. He also wants to take a closer look at how nonprofits spend state money.

He grew up on a tobacco farm in Sampson County and earned two bachelor’s degrees from N.C. State University. He got one in economics in 1974 and another in accounting four years later after management training at Central Carolina Bank, now part of Atlanta-based SunTrust Banks. “I found out that I could really like that accounting stuff, I guess, especially when I was going through the audit department.”

After passing his CPA exam, he moved to Zebulon in 1981 to work for Robert Privette’s practice and made partner in 1983. He went solo in ’88. When he sold his stake last year to eliminate possible conflicts of interest, his firm employed 11 CPAs. About 40% of revenue came from public agencies. All along, he had followed what the auditor’s office was doing and finally decided he could do it better.

Having a Republican auditor might spook Democrats, but Merritt says they have no more to fear than members of his party do. And he says he’s not afraid to make people mad. “I can talk about bridge building all I want to, but I’m sure there’s going to come a time that you’re on somebody’s foot, whether it’s a Republican or a Democrat, and you got to go where that carries you. It’s just the nature of the office.”

Scratch that – handshake deal turns into a fistfight


Tar Heel Tattler – April 2005

Scratch that – handshake deal turns into a fistfight
By Arthur O. Murray

Maybe they should have seen it coming. After all, executives of Kannapolis-based Pro-Tint Inc. and Charlotte-based United Packaging & Industrial Inc. were trying to adapt a product to help military helicopter pilots see through their windshields better. But the two companies flew blindly on a collision course created by their informal partnership.

At stake: millions of dollars in defense and commercial contracts for a product that could have applications on any aircraft. Neither side is talking — to each other or to journalists. But Pro-Tint wants a Superior Court judge to bar United Packaging and a subsidiary, United Protective Technologies, from filling orders until the courts determine whether Pro-Tint is entitled to a share of the proceeds.

The story starts in 1997, when Steve Fricker — vice president and part-owner of Pro-Tint, which also installs tinted windows in buildings and automobiles — started selling sheets of transparent polyester windshield covers to stock-car racing teams. NASCAR had ordered them to replace glass windshields with shatterproof plastic. But grit and other debris quickly nicked the plastic. Fricker’s coverings protected it. When the top sheet became nicked or soiled, it could be torn off — free sheets to the wind — leaving a clear surface. Most top NASCAR teams use the coverings.

In 2001, defense agencies asked Pro-Tint about using the sheets. The following year, United Packaging representatives, who said they had experience with military contracts, suggested a collaboration to refine the sheets and to market and sell them, according to Pro-Tint’s request for a preliminary injunction.

Pro-Tint and United Packaging orally agreed at the time that “each would contribute its respective expertise” to create a third company, United Protective Technologies, to manage the project. But when the company was incorporated in July, Pro-Tint wasn’t listed as an owner. Still, it continued working with United. It did likewise in 2003 after rejecting a written agreement that would have given it half the profits but, it says, ceded control to United. The military approved the sheets in late 2004, Pro-Tint says.

In mid-January, United’s lawyers sent Pro-Tint a letter telling it to stop claiming that it was part of the project. Pro-Tint says United planned to begin filling orders a month later.

In its motion, Pro-Tint seeks a share of the project’s profits, damages and acknowledgement of its role in the product. As of early March, no hearing had been set. And it didn’t look as if either side could see its way to a compromise.



Up Front: April 2005


I had considered writing about the time I saved Hunter S. Thompson from getting busted when the father of gonzo journal-ism whipped out a joint in a bar frequented by off-duty Miami vice cops. But the prospect of doing two columns in a row on dead men so depresses me that, rather than ponder the mysteries of life or lack thereof, I’ll try to tackle a thornier question: What is it that women really want?

Before I’m accused of being too in touch with my inner pig, let me point out that this is the crux of this month’s cover story, probably one of the most difficult pieces we’ve ever put together. The problem with making the paucity of women CEOs a Business North Carolina story is that there’s nothing peculiar to North Carolina about it.

Yes, only one of the 14 Fortune 500 companies based in the state has a woman CEO. But there are only eight on the national list, and one of them — Hewlett-Packard’s Carly Fiorina — has been booted since it was published last fall. For you stat fans, that means 7% of North Carolina’s Fortune 500 CEOs are — is — female, compared with 1.6% nationwide. (And that’s with Carly counted; without her, it’s 1.4%.)

A woman running a major corporation is a rarity, not only in this socially conservative state but across the country. And what has held them back has not been all that testosterone at the top. “None of the women I talked to complained about ever being discriminated against because of gender,” says Senior Editor Ed Martin, who wrote the story. “Maybe that’s because the kind of women who succeed don’t face this kind of discrimination or can work around and overcome it.”

Discrimination, in all its guises, exists, of course, but an even bigger factor is at play, one that wasn’t around 30 years ago when my wife and her friends were boarding buses to Raleigh to lobby for the Equal Rights Amendment — which North Carolina still hasn’t passed. Women now have more choices. They’re not always easy to make.

Not everybody — male or female — can or should be the boss. Not everybody wants to. But because only women can bear children, and still bear the brunt of bringing them up, they’re at a distinct disadvantage when it comes to investing the single- minded drive it takes to reach the top. And unlike some of the women in senior management Ed interviewed for his story, most don’t make the millions that afford them nannies and other resources to balance home and job. For many career women, these choices are indeed sacrifices.

Still, these women managers are lucky. For many, maybe most, working-class women, it’s not and never has been a matter of choice. Thirty years ago, this state had the highest female participation in the work force of any industrial state, a legacy of the textile industry and the low wages it paid men and women. “Moreover, women were expected to run their households and nurture their children even after putting in long hours at the mill,” Al Stuart writes in The North Carolina Atlas. “Thus, having a ‘career’ and a family is nothing new to the women of North Carolina.”

Make work


Make Work

Triad leaders profess faith in life after dearth for manufacturing

The economy of the Triad — famous for making textiles, apparel, furniture and cigarettes — is changing. As production moves overseas, the 12-county region’s manufacturing sector dwindles — jobs decreased 10.4% from mid- 2002 to mid-2004 — and its focus shifts from traditional industries to new ones created by research and development. Senior Editor Arthur O. Murray discussed this trend with Sue Cole, regional CEO of U.S. Trust in Greensboro and past chairman of North Carolina Citizens for Business and Industry, the state chamber of commerce; Richard Dean, president of Wake Forest University Health Services in Winston-Salem; Charlie Greene, president of furniture maker Classic Gallery Group in High Point; James Renick, chancellor of North Carolina A&T State University in Greensboro; and Penny Whiteheart, senior vice president of the Piedmont Triad Partnership economic-development agency.

What’s higher education’s role in this?

Renick: If we’re seriously concerned about economic development and the viability of our community, we’ve got to leverage the intellectual capital that occurs on our campuses and relate more closely to our community, particularly the business community.

How does that relate to creating business?

Dean: There’s a cliché that after 40, people don’t invent in science. So really, it’s the post-doctorate fellows — the young thought-provoking people who are challenging the dogma they were taught — who are creating knowledge. You need to have something going on that brings young people together. They demand certain services, and that leads to the self-perpetuating growth of entertainment and activities. The pathway that we’re going down will allow us to not create a new Triad but reinvigorate the persona that was the Triad in the remote past.

Explain that.

Dean: Using Winston-Salem as indicative of the Piedmont Triad, the life cycle of commerce here became profoundly successful through the entrepreneurialism of people like R.J. Reynolds. So we have had in our remote past a profound level of entrepreneurialism by young people. But as part of the cycle, the companies become so profoundly successful that eventually the leadership cannot allow too much more entrepreneurialism because it will undermine the establishment.

Cole: Those entrepreneurs who became very, very successful and created these very large firms in the Piedmont Triad ended up downsizing due to problems or combining with other companies or whatever. It really resulted in the company not being loyal to the employee. So young people see that maybe working for a big company is not what they want to do. I think they have become more entrepreneurial, and that is a good thing.

Renick: The question is, how do we engage young creative people in the process? Our community still says that if you’re 45 or older, you maybe get a shot. But anybody under 45 really is not running much around here. And that sends the message to 20-somethings that ‘I’ve got to wait 20 more years.’ How do we work to include them in the mainstream so they’re excited about entrepreneurial activity, business and industry? That is going to be increasingly important. Until we break down those barriers, I think, that’s going to be an Achilles’ heel.

Is the Triad still in a down cycle?

Dean: We’re on the upswing. The depth to which one falls is how long it takes to have the population — the critical mass of the population — recognize where it is and insist on it being different. People stop being in the bleachers and being just cheerleaders and get out on the floor and become participants.

Renick: Some of the recovery will be driven by external factors. Some of it is actually driven by our students. For example, my student-government president has a Web-based business, and he’s got a couple of employees, maybe three employees now. He’s outgrown the dorm, and he’s going to go to a local business incubator.

Cole: Just look at what we’re doing in biotech. The Department of Labor awarded Forsyth Technical Community College a great program to be the leader in biotech training. Winston-Salem State University is looking at a degree program in biotech, which will not only help diversity in that segment but will give us exactly the type of workers that we need to fill that industry.

Dean: For about the last three or four years, we’ve been developing infrastructure in Winston-Salem that will lead to sixth-, seventh- and eighth-graders getting interested in science. Whatever their level of intellectual capability is, they can rise to that level in a growing biotechnology industry. I won’t identify which minister gave me the insight, but he said, ‘Dick, you have to understand that historically when kids wanted to succeed and they looked around in their community, the successful person they saw was a person that maybe graduated from high school, got hired at R.J. Reynolds or the equivalent and 25 to 30 years later is very well off, is very comfortable.’ That’s the model that is prevalent in our community, and we have to infect the community with people that have other directions that they have succeeded in.

Cole: The kids get it. I’ve had the honor of interviewing Morehead Scholars for this region, and over 70% of them said their primary interest was in science and biotech.

But every place is touting biotech.

Renick: There really isn’t a silver bullet. Part of the strategy has to be a diverse approach to growing our region and growing the economy. Some things are more or less in vogue, and your point is really a good one. How do we create a diversified portfolio to attract activity? Because it won’t all be biotech. It could be entertainment. It could be athletics. It could be recruiting a government agency to come to town. One really, really good way to think about it is: What are those clusters of activity that would allow us to, in a diversified portfolio, hedge our bets a little bit? That way we’ll be in a better position to capitalize on what’s possible.

Greene: One of the things that happened in our region was that the changes were so fast — the loss of textiles, the loss of furniture, the loss of the peripheral businesses — that folks out of a job in their mid-40s, early 50s come to a community college looking for, in my mind, a miracle: ‘Tell me what I can do to get back to where I was.’ These are the ones I’m concerned about. They’ve got 15 to 25 years left before they can think retirement. What are we going to do with those folks? Because you can’t take them into a biotech program. You can’t take them into a high-level technology program. I’m very grateful to see Dell come because that would be a job that many of those folks could fill.

Cole: An advantage we’ve got is that work ethic. Some of those people can be retrained for basic manufacturing.

Greene: But they will never again make what they were seeing when they left the job. They’ll make something, but they won’t do that well. The problem is that those people are looking to see now how they can get back on track. What are we going to do if we don’t have manufacturing? What are we going to do when that entrepreneurial spirit hits a home run and comes up with something? Are we going to have to take it offshore to get it built?

Dean: I agree with you. And I would venture to say that while manufacturing is not going to see the growth that it was seeing 30 years ago, you can prevent the rate of decline that would naturally occur if one is not paying attention.

How long will biotech take to replace those jobs?

Dean: It’ll take 15 years for the biotech initiative to develop as a burgeoning economically contributive engine. It took a lot longer to get Research Triangle Park going. None of us has enough resources to survive for 20 years. This is where the Partnership comes in. There have to be jobs for people.

Whiteheart: A lot of times people ask us, ‘Why is manufacturing a recruiting target when it’s declining nationally?’ The answer is, that’s the pressure we have. That’s our market demand: to provide jobs for these people you’ve described. We believe that the Piedmont Triad has a competitive advantage for manufacturing today. So to the extent that companies, because of cost pressures, are consolidating, taking critical looks at existing facilities when deciding where to upgrade equipment, we feel like we’re competing to save what is here. In cases where companies may consolidate a Richmond-Atlanta situation, we think that the Piedmont Triad can be the location for that. And so we find ourselves competing for a lot of diverse manufacturing. Companies that are in more traditional manufacturing can be successful here.

Dean: You don’t start declining from the top 20-30% of things. You decline from the bottom feeders of the world first, the ones that failed. As long as we can create an environment for manufacturing here in textiles or furniture that allows it to compete against its own industry, it will do OK compared to everywhere else. We don’t need to be ecumenical about sharing the losses across the whole country. Let everybody else lose more than we do.

Whiteheart: You can look across the region and see companies investing millions of dollars in manufacturing facilities. Dell has certainly gotten a lot of the headlines, but Unilin is building an $80 million plant in Thomasville. Unilin is a Belgian company that makes Pergo flooring. So I want to speak up for manufacturing. It’s not maybe where innovation is right now, but we think we can have success there, and we need to. We have a demand for it. I don’t want to make it sound like we think we’re going to increase the manufacturing employment here, but we’re definitely working to stem the decline.

How can the Triad capture its share of biotechnology?

Dean: We have the resources in the research universities. If you look at a lot of these places that want to have biotech centers, they do not have a feeder system of scientists that are spitting these ideas out. It’s that level that gets it going and keeps it going.

But there’s catching up to do to be as successful as places such as Boston.

Dean: High-tech manufacturing in the Northeast, in the Boston area, is a major piece of their biotech industry that places them at the front. As places start, they create these small businesses. They grow a little bit. They’re bought by these firms or corporations in Boston, and all their manufacturing is right there. What we need to do is get a critical mass of things that are growing here, in which the manufacturing is done here. This is a better place to be than Boston. It is.

Renick: Your example of Boston is interesting, I was talking to a Gillette executive yesterday, and with the pending merger with Procter & Gamble they’re going to lay off 6,000 people. So they’re going to have some issues and problems shortly.

With Dell coming and the Sara Lee spinoff, the Triad seems to have momentum.

Whiteheart: Well, the national economy is improving. In the economic-development business, two or three years ago was doom and gloom because no one had near-term expansion plans, certainly not in manufacturing. We’ve seen our inquiries, our visits, our announcements increasing over the last 18 months. It’s much, much better. Probably that spins off to the bankers.

Dean: And the venture capitalists.

Whiteheart: And the hospitals and the universities probably feel that economic optimism. Does it get easier? It’s very hard to compete right now. I love hearing testimony about the Piedmont Triad’s quality of life, but I guarantee you that everyone who lives along I-85 thinks that their quality of life is superlative. It’s excellent here, but it’s hard to differentiate it from Richmond or Greenville, S.C.

Dean: It’s hard to sell it until they’ve experienced it.

Cole: I think we are our own worst critics. Think about the beauty of this state and how diverse it is and what that can mean to tourism, which is what, Penny, a $12 billion or $13 billion industry now?

Whiteheart: The state says it will be our top industry in the future.

Cole: And then our climate. Look at the state’s location — halfway between Atlanta and D.C., halfway between Miami and New York. We’ve got a lot of things going for us. The work that Action Greensboro does to focus on the downtown as a gathering place for people is really important. The collaboration between High Point, Winston-Salem and Greensboro is as good as it’s ever been.

Did the bidding war for Dell damage that?

Greene: Just the opposite.

Cole: It was enhanced.

Greene: The difference between where we are and where we’re headed is narrowing every day because the difference between how long it takes to get from the west side of Winston-Salem to the east side of Greensboro is shortening every day. You can get anywhere in the Triad in 20 to 30 minutes. A lot of the folks from Dell are buying homes in High Point and Greensboro. As we pull together this whole Triad, we’re going to eliminate a lot of our problems. We’ve got the best educational facilities in the state within 30 minutes of any one of us.

Cole: Higher education, community colleges.

Greene: Guilford Technical Community College President Don Cameron probably has more vision than any person I’ve ever worked with. He has no fear of hiring the person who could be his replacement to do a secondary job. We talked about entertainment. Guilford Tech in High Point now has the Larry Gatlin School of Entertainment.

Cole: And the culinary school.

Greene: It’s the ones from 25 or 30 up who have lost their jobs that we really have to find something they can do, and then we go on from there. I don’t think, as a country, we can operate without manufacturing. It’s a very dark road if we start thinking that we can be the inventors but let somebody else make it.

What kinds of roadblocks do entrepreneurs face?

Renick: We have 60-somethings designing programs for 20-somethings. That approach is going to create some missed opportunities. I’m a little nervous about some of the tech-transfer conversations people are having, even though they really don’t understand the basic science behind the tech transfer.

Is financing a problem?

Renick: I think that’s changing. When young people are coming up with ideas, there are people around that want to help them, nurture the idea, point them into the direction where they might get capital to advance the idea. We’re seeing younger, more organized people thinking about their future. I see more attention being paid to idea generation coming out of that younger set and their being more entrepreneurial and not necessarily thinking solely of, at least for the college kids, going to a company. Going to a company is great. But for many kids for such a long period of time, that was it. Now I’m noticing that they have some interesting ideas about what they want to do, and they’re not what they were 10 years ago.

Cole: Well, the cost of entry for some of these ventures is not as great as it was. As you said, your student-government president is operating a business out of his dorm room with his computer.

Dean: If you look at venture capital, North Carolina is way behind many other places. The Piedmont Triad is behind even in the state.

Why is that?

Dean: We’ve got to remind ourselves of what we’re coming out of. It’s the worst thing that’s happened in several decades. As of this moment, it is difficult for entrepreneurs to find the capital — local venture capital — in North Carolina. But I do know there are several venture-capital firms that are looking at this area. One has got a branch office in Winston-Salem. Others are being formed. So it’s on the correct trajectory. It’s just going to be awhile before it’s so prevalent that it’s not going to be an issue. Maybe it’s always going to be an issue.