Don't get me wrong, any investment in the state is great, especially now, and especially for a community like Prineville. But the amount of attention that the decision by Facebook to build their first data center in Prineville is receiving is a little out of whack. For example, the Oregonian editorial board cheers this as a major statewide success story - but then these are the same folks that urged a no vote on 66 and 67, and I see a clear connection between the two.
You see, this type of investment is indicative of where Oregon has arrived in terms of its investment in human capital and in research and innovation. What comparative advantage the state has at the moment is in cheap power, cheap land and cheap labor. This is not a success story this is a failure story. What the state needs to be is a place where we have a comparative advantage in human capital and technology, and that means investments in education and in research in partnership with research universities. What we are is a poor and poorly educated state that is like a domestic developing country that will do the low value-added work because it is all we can get.
So the real story should not be how wonderful this investment is, but what does it signal in terms of the future of the state's economy? The fact that The Oregonian's editorial board didn't ask this question is a clear signal that they just don't understand the fundamentals of economic growth. Because if you think this is a good path we are on, I got news for you: As much cheap land, power and labor we have, there are many, many more countries that have much cheaper land, labor and even power. I don't know the technology too well, but I suspect that the only reason this data center is here (as well as the Google data center in the Dalles) and not in China is due to some specific costs involved with distance and the provision of bandwidth. More and more manufacturing, even in high-tech, is leaving the state and the forces of globalization are only getting stronger, which means our competitive edge has to be that we are on the technological frontier or we will be competed away. Without hugely increasing our commitment to education in this state, it is hard to see how that could happen.
Perhaps a good question to ponder is why isn't Facebook itself in Oregon? When I was visiting relatives in the Bay Area over the summer I passed Facebook's corporate headquarters on Page Mill Road in Palo Alto - right in the heart of Silicon Valley - on some of the most expensive real estate in the world. The reason it is there is because, despite its expense, Silicon Valley offers many advantages: a rich supply of highly skilled and knowledgeable workers, close proximity to venture capital, proximity to business partners and proximity to Stanford and Berkeley, two enormous engines of new research, technology and ideas. In other words, despite absolute disadvantages in terms of cost, the Valley still has a comparative advantage because of a cutting edge technological environment, proximity of businesses and human capital.
Silicon Valley did not happen by accident, but neither was it engineered. If the state of Oregon thinks it can buy its way, through tax breaks, to become the center of renewable energy research it is wrong and it is ignoring the lesson of Silicon Valley. Only by creating an environment of high human capital and technological innovation can Oregon have any hope of creating the next Silicon Valley.
