 Representative Harold Ford from Memphis, who I'm pleased to say will be our commencement speaker at the end of this term. Billman, the President of the United States. Well, thank you Dr. Reese, distinguished panelists and guests. Thank you all. Senator Baker, Congressman Duncan, Quillen, and Ford, all of you. It's wonderful to be here in the volunteer state at the University of Volunteers. Governor Alexander couldn't make it today. I'll miss him because he's been one of the staunchest and most eloquent supporters of America's fair share tax plan. Right now he's on his, on his way to the east looking for opportunities to expand Tennessee's links to the Asian market. He pointed out to me that Tennessee has a significant concentration of Japanese capital investment and that the future of this state as well as every other state in our nation is dependent on an open, free, and fair trading system. And that's why he's abroad right now, aggressively promoting Tennessee's interests. He's trying to increase world trade, not block it out. I'm glad to see Governor Alexander taking this positive approach to prosperity through free trade. When I was in Tennessee last year, the Governor, Senator Baker, briefed me on the proposals for a high-tech corridor in Knoxville. They talked about soon competing with Silicon Valley. And when I see the impressive strides Tennessee has made in just the last few years, all I know they weren't just whistling Dixie. As all of you know so well, advances in technology are almost synonymous with advances in knowledge. And that's one reason why improving America's educational system must be a high priority for our nation. Last year, Scholastic aptitude test scores rose four points nationwide. And this year we have even better news to report. Yesterday we learned that the SAT scores were up nine points over a year ago. I like that trend. That's the biggest single jump since 1963. We're making a powerful comeback from the two decades of educational decline that began in the 1960s. But we have more to do if we're going to fully prepare our nation to lead the world into the 21st century. So let's keep up the good work. Now I've really come here today to listen to you. I can't wait to hear about your plans and the progress that you've made. After what I may say a few words about how America's fair share tax plan will promote high-tech investment and the prosperity that it brings here in Knoxville. Mr. President, I'd like to welcome you to the campus of the University of Tennessee. We appreciate very much of being on campus. We also very much appreciate your participating in this presidential briefing on teaming up for economic growth. We think this is a particularly appropriate time for such a discussion to be taking place. As you know, General Motors recently announced that it was siding its new Saturn plan in Tennessee. And the state under the leadership of Governor Lamar Alexander and the members of the General Assembly have initiated significant improvements in the quality of publicly educated, publicly supported education and research. If I may, let me summarize for you the points we have been making and will be making. First is the significance of basic research. Basic research is essential to the applied research which leads to economic development. Well over 50% of the basic research carried out in the United States takes place at universities like this one. The federal government is an important partner in that activity. The economic health of the country is altogether dependent upon the continued vitality of that research. Second, universities are becoming increasingly involved in applied research. The ideas emerging from laboratories and libraries are being used to improve the quality of life for Americans and to create new commercial ventures. As you know, the buzzword for this activity right now is technology transfer. Third, the economic health of the country is altogether dependent too on effective partnerships among universities and private industry and the federal government, leading to advanced research and economic growth. We believe that we have in this area a national model for such cooperation involving the University and Oak Ridge National Laboratory, the Tennessee Valley Authority, Martin Marietta, Aluminum Company of America and others. We are all working hard to enhance the quality of basic research and education and to promote activities like the Tennessee Technology Corridor on which you were briefed on your last visit to Tennessee. Fourth point is that universities are increasingly receptive to entrepreneurial activities of the faculty without jeopardizing traditional and cherished values of academic freedom, the public dissemination of knowledge, the primacy of teaching and public research. The faculty from whom you will hear today are splendid examples of individuals who balance those responsibilities. We have an interesting and diverse group of speakers, two faculty members, a dean, a director of a major federal laboratory and a chief corporate executive. And if I may, I'll begin by introducing to you Dr. Herman Postma, who's director of the Oak Ridge National Laboratory who will speak on University Laboratory Coordination Cooperation and basic research. Mr. President, 40 years ago last month, Oak Ridge entered the vocabulary of the world because of its crucial role in ending World War II. In those four decades, we have also played a very vital role in basic energy research and basic research and in defense programs. Martin Marietta has the privilege to operate those facilities for the Department of Energy, but along with that privilege goes a tremendous obligation to make sure that these technologies are transferred through effective partnerships with industries and universities. How do we do this? Well, we share people. For over 22 years, the University of Tennessee has had a biomedical school located in the midst of these facilities in Oak Ridge. Hundreds of its graduates are throughout prestigious universities and research institutions and drug companies in this country. There are now more than 300 students, faculty and research members of the University of Tennessee working in Oak Ridge alongside 2,500 other employees who tried to advance the state of knowledge. We have faculty from the Oak Ridge National Laboratory who teach at the University, having students and sharing research experiences. This past year, the state chose as its top rated center of excellence, the Science Alliance, which is a further cooperation between the State, University of Tennessee and the Oak Ridge National Laboratory and funded it over $3 million, but in addition, private funds have augmented that by over $2 million more. We also share facilities. We have enormous and very unique facilities in Oak Ridge, and we open them to users from throughout the country. We heard described today one in measurements and controls, very important area for this country, but also areas of biotechnology and waste management are being established here. For perhaps most important, we share accomplishments, and I want to describe very briefly one major accomplishment that occurred just this year. The Department of Energy, of course, is very interested in surfaces and materials. Surfaces are important because that's where friction occurs. We like to reduce friction. That's where the action takes place in solar cells. It's where things erode or corrode and wear out. So if we can somehow preserve the bulk properties of materials, but change just the surfaces, then perhaps we can make major advances in the way we use energy. The university professor had the idea that maybe it went beyond just energy and said that we can toughen surfaces to do other things. And he thought that what might be what might happen is such as one might take place in a hip joint. This is a surgically implantable hip joint, and this is the plastic socket. And they fit very well together now. But when they are implanted in a body, after five to 10 years, the body fluids begin to erode and cut away this surface. When that happens, the the ball becomes loose in the socket. And the debris that comes from that wearing out enters the system and grinds away. And you probably have had or heard of friends who have had another operation. And these operations are not only very expensive, they're painful, and they cause people to be out of work for a period of time. Well, this hunch of this professor was certainly correct. The time is being extended from an average of five to 10 years to almost 1000 years because of the ability to implant atoms of nitrogen just in the surface of that material and retain the bulk properties of that material. Now 1000 years is enough to satisfy even the 969 years of Methuselah. And I think that's the good news. The good news goes, the good news goes further. It's a cheap process. It adds only about one to 2% to the cost of that. And it saves hundreds of millions of dollars in lost time and medical expenses and of course in pain and suffering. Johnson and Johnson Company has plans now to commercialize that. So we have a tremendous success story from going from one area of basic research through cooperation with the university to an actually commercializable project that is going to mean a lot to a lot of people. The bad news, sir, is that we cannot fix the rest of the body that way, but we're working on it. I think that represents the strength of what is happening here in Tennessee, the ability of national laboratory, government, state government, university and industry to work together. Could I hope that maybe one day someone will then tell us how we make the 1000 years? One of the best examples I know, Mr. President of applied research within the university is having significant impact on society is the UTK Center for Productivity Through Quality. And to discuss that is Dr. Warren Neil, Dean of the College of Business Administration. Mr. President, I know you're painfully aware of the trading balance that exists today between ourselves and Japan. I know you can recall, as I do, the day when made in Japan, a label put on a product meant very, very poor quality. And I see that label today on many products that we have in this country and it means the epitome of the highest quality, presumably in the world. How did they get that way? I've asked myself and I've heard a number of answers to that. Let me be a historian for just a couple seconds. The Japanese attribute this remarkable success in large measure, interesting enough to an American statistician by the name of Edwards Deming. He was a prophet in this land after World War II, but he didn't get a good reception. In fact, we have a saying in academics that one must travel 50 miles away from home to get any reception. Deming had to travel a little longer than that to get a good reception, but the Japanese welcomed him with open arms and they implemented what he had to say. And as a result, they epitomized high quality today. We're fortunate at the University of Tennessee to have had and have a number of protégés of Dr. Deming. And in 1981, they got together and they said, what we need to do is establish an institute for productivity through quality here. We need to take some of the ideas that Deming had and implement those into American industry. We want to focus, they said, on teaching American industry the lost science and the lost art of quality and productivity in this country. Well, we did that in 1981. We put together an interdisciplinary team of not just statisticians, but accounting people, industrial psychologists and a variety of other things with the focus is that we were going to teach management and workers in a firm to monitor the critical measures on a production process so that they would know when to stop it or when to make it go, a variety of things to increase quality and thus productivity. It required rather statistical measures that were sophisticated models, but that wasn't the main purpose. The main purpose was to change the philosophy of management, to break the barriers of union and management, of worker, the superior, subordinate relationships, to forge together a team with a common purpose and that was to increase quality and thus productivity. Quite simply, what we had in mind is to implement a system so if you didn't have to rework an item that came off of the assembly line, you could obviously produce more of them. And that's what we tried to do. Well, we had some doubters. We had some people that said this is just simply too sophisticated to introduce to the worker on the assembly line. We had some managers that said, hey, we're resistant to that. We're not going to do that. And I got some very interesting stories that came back to me. I met a couple of young ladies who were sisters in a carburetor plant in the deep south in a small town and they got so excited about coming to this institute and experiencing this educational process and they did. They came and they went back to their plant and they took the defect rate from 2% to 0%. A small change indeed, but it meant $30,000 to the bottom line of that firm. There are other examples and not just the worker, the manager. I had a manager of a large engine plant in one of the Fortune 500 firms say to me, I'd like to come to this institute, but my boss simply says it's really not worthy of it. He finally convinced his boss. His boss told him if he would come that he would use the institute provided he would come back and solve an engine block production problem that had plagued that company for 25 years. Well, that gentleman came to this institute and three weeks later after his return to the plant, he solved that problem and it meant a multimillion dollar savings to that firm. So the proof of the pudding in the sum 200 firms that we're working with around this nation today is really exemplified by the chart I have behind up here. For example, General Motors has saved $3 million to $5 million by implementing this system. They save that annually. Ford Motor has realized the savings of $1.9 million annually and Harris Corporation, a leader in the manufacturing of semiconductor chips, has implemented the system and they have saved over a million dollars a year. I had Harris Corporation put one of those advanced silicon chips on the bottom of the chart up there and I hope you can see that. Well, as I said, the indications that we have is the important thing is not the statistical models, not the sophisticated mathematical techniques, but rather the philosophy behind it. One manager said, and I may quote, the most significant benefits defy all monetary qualifications. The daily dynamics and interaction of the plant, the change culture in the plant, workers are happier, they're finding meaning to their job. Well, all of this is to say that while we're involved very heavily with industrial examples, the importance of this concept is applicable to the service industry and other sectors in this economy. We're presently working with those sectors and we're committed to the ideal that this college and this university can have a profound effect on American industry. We can indeed help change the positive aspects of this new industrial revolution to strengthen American industry, to make it more competitive worldwide. And I'm pleased to have the opportunity to talk with you about it. Thank you. Mr. Dick Ray, manager of operations for Alcole, will speak about the revitalization, modernization of a major American industry. Mr. President, when General Motors located its new Saturn plant in Tennessee, it just verified something that we Alcoons have known for 75 years. That's Tennessee's an awfully good place to do business. General Motors will be investing huge dollars, a lot of technology in their world class factor of the future. In 1983, the aluminum company of America made a similar decision about its Tennessee operations, one of the state's largest and oldest employers. As you know, General Motors will be building their plant from scratch. What we're going to do at Tennessee is to rebuild an old facility. But we really have the same objective in mind. And that's to meet and beat global competition. Alcole's Tennessee operations is really a classic example of the transition. We had just about 15 years in vision. We were Alice in Wonderland, hard to stand still. We had run down facilities. We had obsolete technology and foreign competition when you end the result in readying that came from all of this. We were to 4,000 people in our plant were in jeopardy. Now, the simple solution to it. Our final speaker, Mr. President, is Dr. Randy Hinke, who is both a U.T.K. professor of botany and founder and president of Phyton Technologies Incorporated. Good morning, Mr. President. I'm very happy to be able to tell you about our company, Phyton Technologies. It was a company certainly conceived in the university environment. And it's a company that has its early success and development and growth based in support provided by. And we produce starter plants, as shown in this flat here. These young plants, our starter plants, are sold, farmers that produce the plants that you see on this podium here. There are also plants that are used by our foresters in reforestation and revegetation of our parklands. There are also plants that can be used in production plants that lowers the risk, offers many advantages to the grower and should significantly increase his profitability. Let me tell you a little bit about how Phyton was started. I mentioned earlier that this technology was largely developed as a result of basic research in our country's universities over the last 15 years. Dr. Milton Constantine and myself, co-founders of Phyton, have been doing research in this area for about 10 years at the University of Tennessee. The university has been involved in not only the basic researches around this technology, but in applied research as well. And in the full service role that the University of Tennessee plays, it has also offered workshops and symposia to the private commercial sector to show them how this new technology could impact their businesses. Well, Dr. Constantine and myself were involved in those workshops and symposias and that's where we decided that we would like to start a business ourselves. We did the basic research, we're involved in a lot of the applied research and involved in teaching. In true academic fashion, however, we decided to study the process of starting a business and that took us two years. However, at about the same point in time, the university becoming aware of its increased role in entrepreneurship, the formation of the Tennessee Technology Foundation, and the increased initiatives on a number of economic development agencies literally took us by the hand and taught us a new vocabulary. Vocabulary included profit and cash flow and taught us how to develop a business plan. It put us with financiers and showed us how we needed to raise capital. They, in fact, did put us into business in our early days. But it doesn't end there. FITON has been in existence for about three years shipping product for two. We started within two employees, we now have over 50, and expect to have over 100 in the next few months. We are producing six million of these starter plants in a very small space and expect to produce 50 million in the near future. This growth in the growth that we have realized in the recent years has been in part as a result of continued support by the University of Tennessee. We certainly relate with the basic research. We certainly have to go on with these new activities. This, along with the private sector, they brought us our venture capital, local regional venture capital firms, banking firms, accounting firms, legal firms, didn't charge us what they perhaps should have, but have invested in good faith in our future, and this is what has been required. In addition, Tennessee Valley Authority, Small Business Innovation Research Program, the US Department of Agriculture, have all supplied our company with grant funds to continue the development of the technology. We are excited about the success that our company has experienced through this teaming up of universities, government, and private sectors. It is truly a formula that has succeeded for fight time. Mr. President, these are a few of many people in Tennessee who are working hard to achieve such goals as improved quality of education, increased productivity, economic growth, improvement in the quality of life. We're very pleased that you're able to be with us this morning and be delighted if you had a response for us. Thank you. Well, first of all, I am fascinated by what I've heard and at the same time here we have all heard concrete examples that explain some of the statistics about which I like to speak now and then, such as how we could since 1979 lose 1,600,000 manufacturing jobs. And one of the talk shows over the weekend, there was someone from government that was making quite a point of this, neglected to answer why at the same time since 1979, we have added more than 9 million new jobs to transportation industries, to service industries and so forth. And I've seen here the examples of what we're talking about. When I was young, which was quite a while ago, everybody reminds me, I have high technology then probably referred to a model T that could make it up a hill. But we've come a long way. I think we're standing at the beginning of a new era, technological revolution that will transform all our lives for the better. And it's more than just the personal computers that have found a place in so many of our homes and offices. Every facet of industry has been evidenced here at this table today, the manufacturing, agriculture, science, healthcare is being improved, made more efficient and productive by technology. Our healthy increases in productivity are in great part attributable to the efficiencies that technology brings. And technology also strengthens our national security and has given us the hope that within the next generation, the human race can strengthen and ensure for the long-term our ability to deter nuclear war with non-nuclear defense systems that would allow us to protect against missiles without threatening innocent civilians. But while we celebrate the beginning of this new era, we should remember that misguided tax policies in the late 60s and 70s almost destroyed America's position as the leader of a high-tech revolution. Not just the tax policies, I know that you're sure you were going to hear me say something about that, but when I first became a part of government, I did so imbued with the feeling that, among other things, government had developed a kind of adversarial relationship with its own business community, where government and its business community should be partners and not with government being the senior partner, by any means. We had, I say we'd almost wiped out the venture capital markets in this country with tax rates plus the high rate of inflation. Entrepreneurs were forced to look abroad for financing. You gave an example of someone who couldn't find what was needed here. There was a fellow named Gene Amdahl, the inventor of what many consider the most successful computer that was ever built, and back in the 70s he was going to start his own company. He couldn't find the venture capital that he needed in this country, and he was forced to go to Japan to a large high-tech competitor, and they gave him the money all right in exchange for his ideas. Now, high-tax rates were literally producing an exodus of American high-tech to foreign countries and creating tax refugees out of some of our best minds and talents and most successful entrepreneurs. One figure that just experienced this just a few years ago, in the late 70s, there was only 39 million dollars, and I believe the year was 1979, a venture capital available in the United States. Today there is four billion dollars in venture capital that is available, and I think that one of the basic rules of economics was proven that if you tax something you get less of it. So when this was the result I think of our cutting the taxes and certainly the taxes on capital gains and so forth. High rates discourage work and risk-taking and initiative and imagination, and there really a tax on hope and optimism and our faith in the future. And they penalize many of the people that give us the most, the risk-takers, the entrepreneurs who create whole new businesses and industries, and often do it out of no more than a dream and some hard work. There's this little bottle also, evidences. Cutting the tax rates has opened the floodgates on entrepreneurship in our country. That's why in the theory that you can't have too much of a good thing we're going to propose more tax cuts in our fair share tax plan, and we're going to cut the capital gains tax rate again to encourage more venture capital and fuel the fires of technological innovation. Equally important for entrepreneurs and small businesses we're bringing down the top personal tax rate to 35 percent and that's just half of what it was five years ago. We're going to close wasteful loopholes and we'll be able to lower tax rates on America's businesses. We think it's time that America pulled its money out of tax shelters and started investing in the future. This tax cutting has given the economy new blood and new life and in the last 33 months we have created eight million new jobs alone and I believe that this tax plan that I'm out on the road talking about we'll be talking had the privilege of driving the prototype of the new car that is going to be built here. I don't get to do that very often only drive the jeep when I'm up at the ranch. Eight years as governor when we finally left the governor's office and went home I remember one night Nancy and I were invited out to dinner we went out and got in the back seat of the car and waited for somebody to get any driving that's at her and I must say was an experience having driven for a lot of years you're really going to be making something very remarkable here. Well the best way I think to stay number one is to lower tax rates further and give all of our business community and our people a chance. You can feel the excitement and I felt it here at this table down here in Tennessee it's the excitement of progress. Your congressman here John Duncan and his colleagues Jimmy Quillen and Harold Ford and I are not going to let Washington obstruct the road to the future so you let these people know how you feel and we'll pass this tax bill in this year of 1985 and open the future to hope an opportunity. This whole idea of your partnership here it's government education private sector I've had some experience with that when I became governor of California I invited what had to be the top industrialist and business and labor people or with the leadership of the state of California to a luncheon. The room wasn't much bigger than this one and probably no more people that are here today and I suggested to them an idea and that was would they volunteer their services to be formed into task forces to go into every agency and department of the state government and come back and tell us how modern business practices could be put to work to make it more efficient more economical and to a man and woman they volunteered and for the next period of virtually a year these busy people gave an average of more than three days a week to this task they appointed among themselves an executive committee to put things together and they delivered to us 1200 specific recommendations by the time I had left the governorship we had implemented more than 800 of those for a visible savings of billions of dollars to government and had vastly reduced the size of the government while the population of California was increasing faster than any other state we've done something the same kind at the federal level and that partnership does work and the the private sector in every way in this country of ours has made us unique in all the world it's possible that some of the deterioration of our technology and all that has been mentioned here maybe that was a result of world war two where everything of ours remained intact and the rest of the world our industrial partners and neighbors had theirs virtually destroyed in in the war and then we set out to help them rebuild and they rebuilt in a different period of time and with all the newer things that were available well we don't have to bomb everything here to catch up with them just do what several of you here have been suggesting that you have been doing and I see my job that of johnson the others here in government to get out of your way to be a partner but not a senior partner and to have policies that we are sure are not going to hinder the practice of the free economy I think we've discovered in this land more than any place else freedom really works what I've gone on for too long here I'll stop stop talking listen some more Mr president I'd like to do three things briefly one is to remind the audience to remain in place until the white house party has departed this room second this has been a very high-tech discussion as a memento of the university I'd like to remind you this is a very comprehensive university and I'd like to present you and on behalf of the University of Tennessee the three-volume history of the intellectual life in the colonial south which was written by the late Dr Richard bill davis a very distinguished professor of english here this publication won the national book award several years ago and finally simply to say on behalf of all of us thank you very much for coming may I say that I found myself personally that one of the great advantages of higher education was that more and more as the years have gone by I'm reading the books that professors suggested I should read is outside reading while I was in school and enjoying thank you