 Okay, we came back, we're live, Think Tech Global and contributor Ray Tsuchiyama is at my left and we're going to talk about managing foreign investment, offshore investment, Ken Hawaii Manage Offshore Investment. This is pretty much the title of a program, a luncheon program, a couple of years ago. It was very interesting. The reason we did the program and, you know, and Ray you can confirm or deny, the reason we did the program is we felt that there wasn't any management of offshore investment. So we started this discussion, Ray, with the notion that back in the 1880s King Kala Kawa was trying to reach out to the world and trying to actually take affirmative action on building Hawaii's economy. Talk about it. That's right. You go back to a time when King Kala Kawa was trying to deal with an internal struggle with the sugar planters. These folks had a different idea for the economy and business and making money. And they thought that the best way to make money was, of course, through giant sugar plantations that will, you know, ravaging the environment, import thousands of new people and then have a reciprocity treaty with the United States to sell sugar cheap or cheaply to the mainland. So that was the paradigm, economic paradigm. And on many levels, King Kala Kawa thought it was not sustainable due to environmental concerns, the influx of new people to the islands, the creation of another dominant wealthy class in Hawaii's economy. A quiet and cheap labor. That's right. And a class of cheap labor. That's the class. And so King Kala Kawa was a very much inclusive person. And remember, he was an early adopter of technology. He had electric lights in the Illinois Palace. He was up on all kinds of things dealing with the steam engine, the ships, transportation. And he had an idea to send young people, and these were of the Ali class, young Hawaiian people, to go to places like Italy, like Robert Wilcox went to, Prince Kuhio to England and also to the mainland. He sent other people to Japan and Guangdong to learn Asian languages. And to prepare Hawaii to be a center to export products to Asian markets. You wanted to train them in these giant places, have them come back. Exactly. What I'm trying to do in the 1880s, that's more than 100 years ago, was to create a group, a core cohort of people, young people who were versed in Asian languages and had a global MBA, when you think about it. Able to negotiate deals and able to create new products and sustainable agriculture here in Hawaii. New diversity, and then you hear this diversified agriculture. That's what we've been talking about for decades, other than, you know, That's right. And we're always dreaming about this and having this as a goal for the society, yet he was focused on this back in the 1880s and that Hawaii could become a bridge to Asia for US. It was the perfect idea, you know, and he was actually executing it, at least for a while. And this is what I asked you before the show, which you stunned me with your answer. It didn't happen in the long term. It stopped with a great idea, you know, populating Hawaii with these globally aware people, training them overseas, making Hawaii more sophisticated, more capable, with a real plan to develop a real economy. That's right. But it stopped. What happened? The simple answer is the planters went into the legislature and stopped the funding, and this leads to the overthrow. They just were disgusted with the whole royal court and wanted to take the economy and the kingdom into their own hands. And of course, 1883 was the year. And remember, throughout the 1880s, he was working on this plan and was sending a lot of people out, outside of Hawaii, and they were coming back slowly. And you could see by the 1890s and up to the 20th century, we would have a different Hawaii. And by the 1920s, Hawaii could have become what he envisioned at that time. But you're correct that there was a hard stop in 1893. And what continued onward in history was the New Republic, which was very inward looking to the plantations, except in the United States. And then more importation of cheap labor from Asia, throughout the 1920s, up to the 30s, and kind of a controlled state, economy and so forth. This was an effect, essentially, of the overthrow, that the guys who did the overthrow, I guess the planters were very powerful among them, had no interest in making Hawaii a globally-aware place. They wanted to grow stuff, sell stuff, and they wanted cheap labor to be here and help them do it. That's absolutely right. That's real simple for them. They didn't want a world-aware class of people in Hawaii. That's correct. And we think of the royalty, the leadership of the kingdom as being very local. They were not. Yeah, that's true. They were global. They were training people in new languages and technology and innovation and so forth. And they were forward-looking than people now, when you think about it, in the 1880s. So King Kalakau to me and I am a graduate of Kalakau Intermediate, so he is my king in many ways. And again, an inclusive society and a forward-looking society, and one that could determine its economic future. And that's where we're trying to talk about. It's self-determination you're talking about, and that's what Kalakau was about. And it's really tragic that he never had his chance, his opportunity to realize that dream. And I remember also that, you know, Edison, we had movie houses down here downtown before they had movie houses on the mainland. Thomas Edison came out here and installed his movie technology. It was among the first places in the country, in the world, that had movies. We were very forward-looking. We were open-minded that he was reaching out to make that really work as a persona for the islands. Unfortunately, it's really tragic. And then you fast-forward to statehood. And the people behind statehood were very much forward-looking global also. And people, when you talk about Governor Burns, Inoue, Mink, Cavalio, Beppu, many people in that era were trying to transform the territory of Hawaii into a state that was at the same level as California and New York, Texas, or Florida, one of the biggest states in the region. Well, statehood was disruptive, right? It was a big change. It was a major change in direction, and it carried so much with it. You know, it's going to be a state, you know, and now you'd be accepted by the United States more fully. You wouldn't be a territory. You wouldn't be, you know, a bunch of sugar planters anymore. And you had to face these issues. You had to find your persona again. And I suppose it was the same notion that drove Calacaua, those guys who, you know, took over the reins of government at the time, or just after statehood. We are going to make this place a global place. And Burns and Arayoshi after Burns, they were all about technology. They saw the plantations ending. That's right. They saw we were in an unsustainable economic position trying to maintain plantations. And going back to 5960, 1960-61 was the time when the East West Center blossomed at the University of Hawaii, and the term international university was used for the first time at that time. And we should not be surprised when Barack Obama's father from Africa came to study here, a first African student. So you had a mixture of people from Southeast Asia, from the mainland, from all over the world coming together in Hawaii during the early 60s. And of course, one of the... Don't forget the Vietnam War. That's right. That's right. I'm going to... Yes, and the other catalyst for interest in Asian studies and so forth at the University of Hawaii and more investment was the Vietnam War. And you waged throughout the 60s under Thomas Hamilton, President Hamilton, was the premier place for Asian studies in the world. We had languages, history, political science, all kinds of people, and heavy recruiting by CIA and others for good people going back to Asia. But still it was the center when you think about it. And again, that was a critical time. But when you think about it, the Big Five was already in its last legs in the late 60s and early 60s. The plantations were dying. Yes, that's right. And they were trying to... Trying a new economic paradigm at that time, it was very much a struggle. And in the late 70s, there was an interesting time, I think about 78, 79, when the Hawaii Chamber of Commerce actually began to call for outside investment and for Pacific area or Pacific regional headquarters to be located in Hawaii. In fact, two companies, at least two companies, took it up, IBM and WANG. And they had their Pacific headquarters in Hawaii at that time. And the IBM building still stands to show you. And just late 70s and early 80s, also you saw the breakup in slow motion of Dole moving its headquarters in San Francisco, Dillingham leaving Amfax suddenly doing something in hindsight, which was unbelievable, Liberty House on the mainland in California, which was doomed to failure. And the castle could be expanding all over the world. It was an interesting time, but it didn't work. And Mr. Murdoch would come and acquire Castle and Cook. There were lots of things going on with the Big Five. And you fast forward to 2016, there aren't any anymore, except for one, Alexander Baldwin. And they're still... Well, that's the, yeah, the evaporation issue, we should talk about that. But that's another whole topic, how they survive. What was happening in the late 70s and 80s, the early 80s, the plantations were over. That's right. And the government, the state government was looking for replacements. I remember, you know, the hardest hit was Kohala, which had been a road of 20 miles or so, just plantations on all sides, growing all plantation stuff. And when they went down, all these people, you know, were out of work, they were impoverished. And the government wanted to do stuff for them. And it came up with all these, may I say, cockamamie ideas to keep people employed, none of which worked, none of which worked. But over and over again, they had these projects into which the state government, you know, sank money and it never helped really anybody. Well, and you have a very interesting point. It's not that when you see back in hindsight, nobody was doing anything. People were trying to do various experiments. When I entered Castle and Cook in 1983, Castle and Cook, as a big five company, knew nothing about high tech, was a venture capital investor in a company called Intellect at that time. So it was one of the tenants to be in the high tech part of that time. And so there was activities going on and so forth. But when you go a little bit further in 1985, everything changes. The Plaza Courts. And that's an action from afar, St. Augustine used to say, action from afar, that Hawaii was a beneficiary of the sudden realignment, currency action that made a yen, $120 to a dollar. It used to be $360 for a dollar coin. I remember in the 60s it was almost $400 yen for a dollar. Yes. From 1945 to the end of the war in inflation, they picked a round number, which was 360 degrees, $360 to a dollar at the U.S. military, and it stuck there. And up till the 70s, people in Japan, Japanese citizens, couldn't travel. It was hard to get a passport. In order to get $50 or $100, it was a tremendous effort with banks trying to get money. So all of a sudden in 84, 85, 86, there was a big, big, big thing, 84, 85, 86, big thing, huge big thing. That's why we're going to take a break. Okay. Let's read. Aloha. I'm Kirsten Baumgart Turner, host of Sustainable Hawaii. Every Tuesday at noon we talk about issues important to Hawaii's sustainability, the issues of conservation, renewable energy, land management, food and energy security, and other issues that are extremely important as the World Conservation Congress approaches in the first week of September, and next year's World Youth Congress that's taking place here that's focusing on sustainability as well. Please tune in. Join us as we highlight all the good things that are happening to achieve sustainability in Hawaii. Mahalo. Aloha, everybody. My name is Mark Shklav. I'd like you to join me for my program, Law Across the Sea, on thinktechhawaii.com. Aloha. We're back. We're back. We're back. We're back. We're talking about, we're talking about, can Hawaii manage offshore investment? Big question. So here we are in the, where are we now? The 80s. The 80s. About 85 is the seminal point of the... Something remarkable happened. The positive accords. What happened? Japanese investment in tourism to Hawaii. And that would merely go along for the next six years. That's all. That's all. But that six years had a profound effect on our state. We're still feeling it every day. Because why I say in six years, January 91, the bombs began falling on Baghdad. And that began the 10-year recession in Hawaii because of the tourism just stopped. We're in a long way from Baghdad. You remember early 90s and mid 90s. Again, action from afar. Yeah, yeah, yeah. Over which we had no control. No control of. And that stopped tourism. And suddenly, the real estate market tanked. There were Japanese tourism stopped until the late 90s. It would grow to 2.2 million a year. In the years before that, though, through the 80s, I would say, early 80s, middle 80s until, say, 91, as you say, the Japanese were investing all over town. And they were paying trophy prices for everything. And that, in turn, was having all kinds of effect on other tourists who wanted a piece of the rock they got involved. They got all steamed up about this. And it changed the real estate market. It changed the way Kamehameha Schools felt about its property. All of a sudden, it was a comparable, you know, in real estate parlance to make all the prices go up. And because they were paying trophy prices, the whole network of pricing was going up. And you know, young people, local people, could not afford a house anymore. The economy had turned upside down somehow. It got skewed. That's, you know, the easiest word to afford. And they came at a point in about the mid to late 80s when a symbol of the old economy also vanished. It was the last bastion of manufacturing in Hawaii. There's big steel pineapple on the top, and people would always say, when is it going to get ripe? But when you go back in time, that was a symbol of Hawaii in many ways, because it was a product. And when I was at Castle and Cougar in Dole, I mean, there was major product innovations like pineapple canned in its own juice. It was a major innovation back then. But when David Murlock came in, he saw this anachronism, what he thought was an anachronism dating back to the 30s as a canning plant, and he canceled it and then transformed it into a office mixed use and a movie house and so forth, you know, project to get rent. And again, that is symbolic to me, because it ended the importation of the canning and the equipment and so forth, never got started again. There will never be another plant ever in Hawaii again. Yeah, wow, that's profound. It was the end of an era, for sure. And at the same time, the Japanese were buying all this property, turning our economy into a real estate economy, like Linda Lingle always said, it was a real estate, and I think he was right about that. It was a real estate economy, and we weren't folk. Everything that was happening was happening from real estate, including construction and subdivisions and golf courses and all this stuff. And we still have profound repercussions of that time, even today, because if you pick up the annual Hawaii Business 250 and you look at the list of companies there, there is rarely a company, or I can't name one, it's very hard, a big company that makes products for sale in a global market based on R&D. No, it's not there, it's not happening. It's really difficult. And the clothing business, which you could say qualified for that, went down because all those companies found people in Asia would make them cheaper and then would be trans-shipped over our heads we were not involved, except in tourism, and that's not enough to keep going for a clothing industry. And so the other thing that could have happened, because there was so much interest in diversification economy in the early 80s, was investment in the University of Hawaii in research. And I think we missed a time in the 80s to really focus on what could be happening 20, 30 years out and focus on how to create a good patent system, how to create incentives for faculty to come up with ideas for products, venture capital, as you said before, it wasn't for the lack of trying, because John Burns had put the message in Ariyoshi's ear, and Ariyoshi took those messages from John Burns very seriously. So Ariyoshi did care about technology. He did create, he was one of the founders, if not the founder of the Minoa Innovation Center, which is really on its last legs these days. And he tried to create a new economy, he tried to create diversified agriculture, some of those projects in Kohala were diversified agriculture. But it just, it didn't work. I'm not sure why, and instead everything got swept into this real estate economy, and we didn't have a generation of people who were going to dedicate their lives to diversified industry, diversified agriculture. And I think there's a larger macro view we have to see here, is the disconnect between Bishop Street and UH Minoa. Because in 78, 79, 80, there was a very interesting project in hindsight at UH Minoa, which is in the history of the internet called Alonet. Sure. There was a precursor of the internet under Norm Eberson. It was the beginning of the internet, right? Yes. What if the Big Five could park their money and suddenly create little companies and project themselves as e-commerce leaders? Or based on this new technology. Again, it was something out of UH that could have been commercialized. A lot of things could have happened. But there's a disconnect between a commercialization of research into products. There's a whole series of steps that are happening. You don't need investment. You need investment. The legislature wasn't going to do it. You know, they're not into that. But there's a lot of investment in real estate. Well, all this investment in real estate, but the Kamehameha schools was not going to do it. They were going to invest Hither and Yahn. They were going to invest in real estate. That was their model. And Goldman Sachs? Yeah. Yeah, and Goldman Sachs and Forest, Woodland, somewhere in the northern US. So the result is that to the extent there was money to invest, it was not invested in the UH commercialization effort. It was not invested in technology. We never really got off the ground, despite the fact that George Ariyoshi tried really hard to do that. Well, and then again, going by hindsight, this is 2016, 30 years after the Plaza of Courts. I think if I was here in Honolulu at that time, which I was, I would say, oh, 30 years out because of all this Japanese investment, there should be a U.S. Japan Research Center in nanotechnology or telecommunications or summary in Hawaii. That would have happened. Oh, there are efforts, though, Ray. Remember James? Right. James out in Hawaii. I mean, I'm not saying that that was the answer to that question, but that was an effort at building a Japanese university, a place you could study, a place you could collaborate, maybe do technology. That didn't work. I don't know if it's still out there. I don't think it's still out there, but it's limping along. It never, it never realized any real, you know, any part of its vision. And, you know, don't forget the, I guess it was 2000 to 2010, where so many people were trying so hard to resurrect the notion of a tech community here. Never really happened. And even now, the legislature hasn't put any significant money into it. We have a couple of accelerators around. We had a couple of accelerators around 20 years ago. Now, maybe they're doing better now. I mean, I read this morning that some kind of collaboration between the Blue Planet Accelerator and some Korean accelerator, but it's still small potatoes compared to what it might have been. Had Burns and Ariyoshi been able to realize their plans, had the investment funds that came into the state, right, by virtue of the real estate boom, you know, been applied to other industries. So, and so we go back to the beginning of the program. Canada Society, like Hawaii, with barely 1.2 million people in the middle of the Pacific, manage its destiny as a bridge between Asia and North America. So, OK, the answer to that question is absolutely, but you have to do it, you know, and we haven't done it. And that was the purpose of that program that I mentioned before I'm talking about. We're trying to find, you know, first, the fact that, yes, it's a good idea to do that. It is better to do that than to be the victim of history, you know, and let it go whatever way it goes. And then you get to suffer the consequences. And I think in Hawaii has a tradition of either doing cargo cult and loving anything that comes off shore, comes from offshore, or being paranoid and hating everything. And it's a very fine line, you know, with next era, it might have been the other way just as quick. They just didn't handle it in the way that gave us, gave the best result. So they were paranoia instead of cargo cult. And a lot of companies have been shooed away because they fell in the paranoia side instead. And some companies have been remarkably lucky. They've seen the way to do it. They've examined, you know, the moves you make, and they have become successful, you know, as because they were from the mainland. That's all. That's cargo cult. But the reality is that if you can manage the offshore investment and you have to have offshore investment in an island state, then you can do stuff. If you can't manage it, it doesn't go right. And not much has changed since Kinkawa Kawa's day. That's the strange thing about it, that we are still capital deficient, capital scarce. We need outside technology. We need many things. However, we need self-reliance. But Kinkawa Kawa was trying to do that. He was trying to organize and give people, young people, education that would have them negotiate and be at par with anybody on the mainland, Europe or Asia. That's what he was trying to do. So Linda Lingle, in her first campaign, she, I'll never forget, she got up at the great, the great famous tech debate. She and Maisie Hurone were debating these debates. They're really something. And she said, I'm going to get up every morning at, you know, five o'clock in the morning and I'm going to call a mainland company, a big company. I'm going to ask them, I'm going to tell them, I'm the governor. I'm going to ask them to come out here and invest their money in Hawaii. Because we have the resources they need. We have the market they need. This is a great place for them to set up shop. She never did that, but it was a good idea. And had it been done, I think, we would be having a different conversation here. And again, going back to the 80s, there was a famous or infamous Forbes article that riled everybody that, you know, Hawaii's a Marxist state that resisted, foreign oil, or even mainland investors and so forth. And that made people defensive, very defensive in Hawaii. But it made investors reluctant. That's right. It's hard to invest in a place where you want to see a smooth permit process. You want to see a return in investment. Because it's all about risk. Investor calculates risk all the time. Is it riskier to do it one in Hawaii rather than in any Silicon Valley or Colorado? So that's the way, and money doesn't flow to a place that has too much risk. And it hasn't flowed to Hawaii. And we've scared a lot of people off. I mean, TMT is a good way to scare everybody off. And there are so many other issues that have happened where we have protested. The Superferry is another one. Collectively, we have shown that we don't like offshore investment here. And offshore investment says, well, if you don't like us, we're not gonna come around. It's too hard. The Forbes article was followed by many other articles. That's one every few years. Only a few years. And so all the dreams of Burns and Ariyoshi to make us self-reliant, to have us be a hub of intellectual property and development and all that, they really have not worked. And really the question, I mean, this is really provocative question, but do you see, is there really a possibility of achieving that now? I mean, I think we have a culture that doesn't allow to achieve that. Do we have a possibility? Well, I sometimes think about this later night that perhaps King Kalakawa had a good idea that we should, instead of having people, young people here, have them trained outside and come back in a way and let them see the world and bring back ideas. And so I think that's one way of doing it because King Kalakawa felt that it's great to speak olala Hawaii, it's great to do the hula, to revive Hawaiian traditions and culture, but at the same time, if he was alive today, he says, why aren't you studying Chinese or Japanese and software engineering? That's what he would say to young people today. Yeah, and my model is, in many ways, is Singapore. Singapore is self-reliant, Singapore brings people in. It realizes the value of human capital, encourages people to do business. Its tax structure is friendly, its business regulatory structure is friendly. We don't go anywhere near that. But I have one story to tell. When I went to MIT, I uncovered a very interesting history of Singapore. When they were down and out, they had nothing, absolutely nothing in the 60s. They cried to the UN to help them. The UN gave a contract to MIT. MIT sent a delegation of faculty that examined the whole Singaporean economy and they said, well, you have to really upgrade education, management, engineering, and there's something coming in the future called semiconductors, that you have to plan to become the hub of final assembly and testing of semiconductors and they went. So it's not Confucianism. It's also being at the cusp of looking for the next great big innovation. Yeah, seeing the opportunity. Like the story, I don't know if you ever read the book by Simon Winchester out of East West Center called Pacific. One of the chapters is about Sony. Sony, a couple of guys who were involved in the war, they heard about transistor radios in Canada in Saskatchewan and they sent a couple of young fellows to Saskatchewan to find out everything they could about transistor radios and they looked everywhere, did everything they could find and brought it back and pressed them. Now Sony was making transistor radios better than anywhere in the world. And so you can do this and we can find a way to do the science and technology but we have to be willful about it and we have to be able to plan and we have to be able to address offshore investment in a way that will give them confidence and so they will not take advantage of us. So we will have a win-win deal with offshore investment. We haven't reached that balance. Who will do that Ray? Will you do that? Well, I'm promoting the ideas right now but it's something that society, the Hawaiian society really has to take it to the next level as a society. Yeah, okay, well, there's a camera, there it is, number one over there. Okay, now you're talking now to the next generation, whatever that is, I'm not sure that the millennials are the next generation anymore. It's the one after the millennials. Tell them what they need to do in order to preserve this, you know, this King Kalakaua vision. Right, we have to look at King Kalakaua as our model. He was a very global person, he was an innovator and yet he was very rooted in history and local ways and to look ahead to the future and to be at par, at equals to anybody in technology, innovation, science and also be sellers. We have to market, we have to market products and make them customer centric. And this is a philosophy ideal for young people throughout Hawaii and something that will transform Hawaii and make people here control, manage its own destiny going forward and not people from the outside. And tourism is not necessarily the answer. Tourism goes the other way, I'm sorry. Thank you Ray, you are a great contributor. Thank you.