Most readers will be aware that Vertex announced it is moving from 900,000 square feet of laboratories and offices in Cambridge to over a million square feet in Boston.

Some are asking if this spells serious trouble in Cambridge. This question surprises me. Cambridge is one of the world’s most important sources of next-generation technology and companies, and regularly exports them. A 2009 Kaufmann Foundation study showed that MIT spin-outs alone, if collected together, would rank as the 11th largest economy in the world. Vertex and its Telaprevir hepatitis C drug, which is on the verge of approval by the FDA, follow a time-honored tradition.

Once ideas are proven, those pursuing them should and do move into production mode. Sometimes that means taking larger, cheaper space elsewhere. When this happens, it makes room for another generation of new companies in Cambridge. While nobody wants to lose a taxpayer, Cambridge should feel proud of the contributions it makes to the rest of the world.

For nearly 400 years, Cambridge’s powerful blend of intellectual and entrepreneurial oomph has given the city an enviable self-renewing quality. Let’s look at the record. It starts with the book. Cambridge printed the first book in North America 370 years ago. About that time, it also became home to its first university, Harvard. The first computer (the Mark II) and the Internet (then called the Arpanet) came out of Cambridge. Thomas Watson placed the first two-way telephone call from his lab in Kendall Square, the wires stretching across the river to Alexander Graham Bell’s home on Beacon Hill. Some other Cambridge creations include the microwave oven, the sewing machine, instant photography, ship-to-ship radar, synthesis of penicillin and quinine, fractionation of blood, and deployment of vaccines. Many of Cambridge’s inventions today are so complex, the inventors win Nobel Prizes while most of us don’t even understand them.

(If you want the full background on these inventions and others, you are in luck. The Cambridge Historical Society is readying a comprehensive website on the history of invention in Cambridge. Send a note to innovation@cambridgehistory.org if you’d like to be notified when it’s up.)

Cambridge has launched some pretty interesting ideas in other departments as well. … Next Page »

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Many Xconomy readers have spent their careers in the innovation field. How important is our work?

We all have friends who are doctors, teachers, firemen, journalists… people who make the world better somehow. How about us? Does our work stack up as meaningful?

If you are an innovator, what follows is a primer on why you should feel pretty comfortable at your next college reunion.

I’ve assembled some examples from the Cambridge innovation community in the fields of medicine, software, and energy.

Medicine: While a doctor can treat thousands of patients over a career, and we are grateful for her work, your impact can be much, much bigger. The researcher who invents a new medicine or medical device can cure millions…even billions. Cambridge firm Gloucester Pharmaceuticals, purchased by Celgene, has done this for cutaneous T-cell lymphoma. InVivo Therapeutics is working hard on overcoming paralysis. The same basic thing is happening in nearly every disease category. Over the past four decades, new medicines have cut in half the number of hospital visits required by those suffering from 12 major diseases.

Computing: Geeks like Cambridge-based researcher Tim Berners-Lee, inventor of the World Wide Web, and those who built the myriad tools that make it work, have essentially created the world’s largest, cheapest, and most useful library, at little or no cost to the public. These days it is available even in places like rural Cambodian schools and the mountains of Nepal. Open-source mobile operating systems such as Google’s Android, developed in Cambridge and Mountain View, are spreading it even further afield. If knowledge and education are the foundations of democracy, these innovations will help bring democracy to the world.

Energy: Innovations such as the ultra capacitors being developed by MIT spin-out FastCap Systems, as well as numerous other inventions to allow low-cost wind, clean-coal, solar-energy, give us a shot at kicking our carbon fuel habit. There is no taking these innovations for granted. If we don’t kick carbon fuels, when the supply runs out, as a civilization we are done. What could be more important?

OK, you say. Some innovation really does matter. But how about those of us who are in less earth-shattering innovative endeavors? Does innovation still matter if we create new companies that, for instance, provide online marketing services, rent exotic cars, or invent new soups?

It turns out it does matter. Big time.

For the past 30 years or so, the U.S. Census Bureau has been collecting data about where new jobs come from. Recently, researchers at the Census Bureau and the Kauffman Foundation analyzed this data closely. Experts used to be believed that new jobs come from “small business” writ large. But the Census Bureau and Kauffman researchers found that this previous conclusion missed the point: growth is not from “small firms”, but rather from “new firms.”

Over the past quarter century, all net new jobs in the United States came from firms that were less than five years old. The rest, as a whole, lost jobs.

Firms less than 5 years old collectively created, net of job losses, 3 million new jobs a year. Meanwhile, companies 5 years old and up collectively lost 1 million jobs per year. This is an agenda-changing conclusion for the economic development field, because it suggests that instead of pursuing quite so many policies supporting “small business,” governments should really be pushing policies, such as entrepreneurship education, that support the creation of new business.

Fortunately, this message is now beginning to be internalized by the economic press, as highlighted in this recent piece in the Wall Street Journal calling out the need for more new firms.

The importance of innovation seems to be cropping up even in the global balance of power.

This weekend, in his New York Times op-ed “The Big American Leak,” Tom Friedman called attention to the fact (highlighted in the wikileaks cables) that the U.S. has been reduced to begging and bribing even very small countries to help it accomplish its goals.

Friedman provides numerous examples that are pretty uncomfortable for Americans to hear. He laments our dwindling power in the world, and says the problem is that we have no leverage. We are so dependent on oil that we prop up shady regimes for fear that their replacements will deny us what we need. We cannot hold a hard line.

Here’s one specific example of how Friedman thinks those of us in the innovation community may hold the key to unlocking the problem, however:

Think how different our conversations with Saudi Arabia would be if we were in the process of converting to electric cars powered by nuclear, wind, domestic natural gas and solar power? We could tell them that if we detect one more dollar of Saudi money going to the Taliban then they can protect themselves from Iran.

So, whether it be the direct value of our innovations, the jobs we create, or the enhancement of the global power of the developed world, our work is critically important to the health and well-being of our nation and the world.

Congratulations on picking such a meaningful career, and have fun at that next reunion!

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If the NSA monitored communications in Massachusetts, their analysts might raise an alert. With the baseball season over, there has been an anomalous amount of chatter using baseball terms as code for something.

They would trace the threat to Bill Warner, Avid founder and long time innovation activist. Bill has recently published a manifesto on his blog setting the bar for the rest of us. Declaring that we have too many singles and doubles, and not enough home runs, Bill is proposing we adopt a new nomenclature in our innovation economy. Here is Bill Warner’s proposed scorecard:

Single

Any growing company that is selling a successful product. This would mean any company that successfully reaches the market and serves a growing need. Essentially, you’re on base once you show that more and more people need your product.

Double

Any growing company with sales over $10M.

Triple

Any growing company with sales over $100M. Local or distant leadership. Note: huge acquisitions by distant companies will still be considered a triple due to loss of local leadership.

Home Run

>$1B market cap. Local leadership.

Grand Slam

>$10B market cap. Dominates its market; fast market growth. Local leadership.

Bill followed his scorecard manifesto with some practical suggestions on how to improve the score in this playbook.

What Bill’s getting at is that we need to think actively about building large, local companies to serve as anchors for our economy. For too long, our smartest companies have been sold early to acquirers on other coasts. This behavior deprives us of market leadership, dampens the flow of experienced executives to our region, especially in scaling and execution roles such as sales and operations, and ultimately relegates us to being the world’s R&D lab. Not a bad position on the ball field, but we can do better.

In the ensuing chatter, some have argued that economics, particularly venture fund economics, drive the decision to sell early versus growing a company independently. While this is can be true, I believe that the volition of our startup executives, and the values of our investors, can play a big role, since it is rarely certain that selling early provides a bigger ultimate return than staying in the game. A quick exit can pay for a new car, a new house, and maybe a new life for a founder. Sticking around and growing a business through difficult realities is hard work, but real impact in the Bill Gates and Steve Jobs league requires sticking around.

Hearing top startup CEOs mull over Bill’s challenge, I get the sense that a lot of folks are getting religion, and are saying “Yeah! Lets take our creations all the way.” In the end it is this attitude, more than any other factor, which will cause us to build more Gillettes, Genzymes, Akamais and EMCs.

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Today at 4:30 at the Media Lab’s Bartos Theatre, the FCC will hold a public workshop to discuss net neutrality policy. What is the importance of net neutrality to the innovation community?

We can learn a great deal about this by examining the stories of the seven pipes going into most American homes. Most homes are connected to pipes that carry water, electricity, telephony, cable TV, sewer, gas and Internet. (You can think of the Internet as a separate pipe, anyway, even though it usually comes in over the cable or telephone line.) Yet only one of these pipes has historically offered everyone the chance to innovate on top of it. We should be able to learn something about the importance of open innovation by examining the “innovation histories” of these seven pipes.

Lets start with water, gas, and sewer. Perhaps Xconomy readers can point out some innovation in the last couple of decades in these areas. There sure aren’t many.

How about electricity, telephony and cable TV? These sectors often sport a degree of competition, usually with two to three players offering alternatives in each geographic market. But competition is not the same as open innovation. Electric utilities, for example, have struggled for years to broadly adopt a single modest innovation: the ability to pour power back into the grid. Telephony saw some minor innovations about 20 years ago—things like caller ID and *69—but nothing since. Cable TV saw the addition of a few more channels, and a few more pixels, but nothing that fundamentally expands what it does for us.

And then there is the Internet. Open competition on the Internet “pipe” has spawned so much innovation that industries are being turned upside down. Ask folks in the music, news, broadcast media, and telephony industries, to name a few. Have you been to a travel agency recently? How often do you physically walk into a bank? Many people believe the Internet changed the course of the most recent Presidential election. Oh, and it has placed the greater part of all the world’s knowledge at our fingertips. Enough said.

Some might say this comparison is unfair—that the other pipes could never have had this kind of impact. Of course, we’ll never know. But if you think that this level of innovation could have been achieved if the Internet were, like the other pipes, managed by a single large, benevolent service provider, one need look no farther than AOL to see what that really did look like.

In the early days, AOL was the Internet, except that it was under the aegis of a single, large, benevolent service provider. And AOL was great. We all remember chat rooms. But there is no comparison between the innovation AOL spawned and what the “open Internet” would later bring.

Companies providing Internet service would like to be able to control what flows on our Internet pipes, giving preference to their own services, and squelching others’ offerings. That would be a recipe for turning the Internet back into AOL. Recently, the FCC has started to put in place policies to prevent that. Let’s support this move. We don’t want a future in which the Internet pipe works like the other pipes.

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This article was written with Michael Greeley, general partner at Flybridge Capital Partners and chairman of the New England Venture Capital Association.

Microsoft’s Steve Ballmer is here in Cambridge this morning meeting with community leaders, and presumably also with his own staff to learn how things are going at Microsoft’s New England Research and Development Center (NERD) at One Memorial Drive.

So this would be a good moment to let him know, from the perspective of a couple of us in the local community, that his team here has done a fabulous job.

When Microsoft moved into town, it did two things in particular that have made a big impact: the first was to provide resources for a large and very capable team of people whose mission is to engage with and improve the local community. That team is made up of names and faces that have become very familiar and respected in our local tech scene: Sara Spalding, Gus Weber, Paul Coeburgh, Leah Brunson, and Brian Burke. Each of these folks has taken on significant organizational work for groups seeking to improve Massachusetts. An example is the leading role Gus has taken seeking to create better mechanisms for students to find internships at Massachusetts businesses. Sara has taken on leading roles in the Kendall Square Association and the Massachusetts IT Collaborative.

The second significant contribution Microsoft made was to create a set of community gathering spaces at NERD like none other in Kendall Square. It includes a full floor of conference center space, plus another floor with fun and unusual architecture for soirées of various sorts. They have made this space available to a broad array of outside networking groups, such as the Massachusetts Technology Leadership Council, which holds its dynamic Tech Tuesday events there.

Wednesday this week there were two back-to back terrific events at NERD. There was a reception preceding the MIT Enterprise Forum meeting featuring Ray Kurzweil, Bill Warner and Sim Simeonov. Our Lieutenant Governor, Tim Murray, and Secretary of Housing and Economic Development Greg Bialecki showed up, and it was a great conversation. Following this the place transformed into party mode, as some 26 restaurants, health clubs, and others in Kendall Square hosted hundreds of “elite” reviewers from the popular online review site Yelp. The place was packed, the music got turned up, and there was an air of festivity and community rarely felt in Kendall Square in the past.

So, thank you Microsoft. You have brought something new and special to our neighborhood.

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This article was written with Geoff Mamlet.

Today, some of our legislators will hold a hearing at the State House to discuss changes in Massachusetts’ non-compete laws. They would do well to heed our own past as an open employment state.

In the mid-1780s, Samuel Slater was a young apprentice in England working for the men who created the world’s first mass production system: a system which produced thread from cotton. At the time, Britain was intent on protecting its technology, and it was illegal for British citizens to emigrate and take with them the knowledge of British technology. See http://en.wikipedia.org/wiki/Samuel_Slater.

The American textile industry was desperate for a way to compete against the British. They offered a bounty of $100 to people willing to import British technical knowledge. “For which man will bring us English models, will be given monetary funds for his reward.”

Slater, at the end of his apprenticeship, emigrated to the US, taking with him his knowledge of the British mill technology. Arriving in Beverly, Massachusetts, Slater used his skill to build there the first cotton mill in America. He went on to produce numerous improvements to the British designs.

The innovations introduced by Slater are recognized as having kicked off the industrial revolution in America, and he became known as its father. By 1810, there were 50 mills spinning cotton into yarn or thread. By 1815, there were 140 mills within 30 miles of Providence alone, with 26,000 people on the payroll.

The freedom Slater had in Massachusetts to practice his trade, despite restrictions elsewhere, made our region the center of a technology boom that changed the world.

We would like to leave our legislators with this thought: today’s Massachusetts non-compete law does not prevent a young person from following in Slater’s footsteps. It merely encourages that young person to do so in California. Surely this is short-sighted.

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There has been a lively debate following Scott Kirsner’s Innovation Economy blog “Why Waltham Doesn’t Matter.” One of the threads is whether it matters if entrepreneurs and VCs are physically concentrated close to each other.

It should not matter where a VC’s offices are located. Good VCs and entrepreneurs will find each other. Andrew Perlman, who co-founded several local big successes, including Coatue, Sirtris, and GreatPoint Energy, in my observation is almost never in his office. He is out meeting investors and other potential collaborators wherever they may be. On any given day someone like Andrew may be found in his Cambridge office, or at a coal mine in the midwest, or in a place like Novosibirsk, Russia’s science city, where he acquired some of the core technology for Coatue.

This can be true for VCs as well. Based on how often I see Bob Metcalfe outside of his Polaris Venture Partners office, I’m not convinced he has one. Celebrated West Coast VC Vinod Khosla has had no trouble investing in young companies in the Cambridge area, such as iSkoot, Mascoma, and GreatPoint Energy.

But these are our superstars. Many of the rest of us find it hard to make connections. This is particularly true for newcomers, such as the roughly 3,000 new arrivals at MIT each year. They may be amongst the smartest people in the world, but they don’t know anybody and they often have limited social skills. How has this group of people consistently pumped out some of the world’s most important technology companies?

This is where the density of Cambridge kicks in. People working and studying in and around Kendall Square meet constantly and informally: at myriad talks at MIT where you are likely to run into a Nobel Laureate, at gatherings we can walk to after work before heading home, in the hallways of our tightly clustered buildings of powerhouses like Google, Microsoft, Akamai, Genzyme, Novartis, and Biogen Idec, at local watering holes like the Muddy Charles, and at loosely structured meetups, such as those at Bijan Sabet and Nabeel Hyatt’s OpenCoffee Club at Café Andala in Central Square. These chance meetings are where a bright kid from Israel gets urged to start a company, how a new entrepreneur first “clicks” with an investor, how an investor helps find a great CFO for that entrepreneur, and how a lawyer offers to kick in the time to get it all incorporated. Stuff happens here, and this is why Cambridge matters.

We tend to take this for granted, and we miss its importance. Anyone who has spent time in other science and technology regions, such as Cambridge (England), Shanghai, or Silicon Valley knows that those places are spread out and broken up. Key labs, companies, and universities are so far apart that getting together may mean a two-hour car drive.

How do we make the most of this unique structural advantage? There are many great role models out there. Joost Bonsen, another Xconomist, helped create MIT’s $100K business plan competition, which galvanized current students at MIT to think about startups, and created a movement which spread to many other universities. He also helped create TechLink, a group that organizes mixers between different departments at MIT, and which helped MIT become a better collaborating university at the student level. Desh Deshpande created the Deshpande Center for Technological Innovation at MIT, getting capital and help to individuals with exceptional nascent ideas. The British Consulate, and later and on a grander scale, Microsoft, opened beautiful meeting facilities next to MIT where networking groups were welcome to hold their events. Jeff Bussgang and his colleagues at Flybridge Capital Partners created Stay In MA, which helps students cover the costs of attending local professional conferences. Some of us are working on a project called Venture Café, which seeks to create a different type of ‘center’ in the center of Kendall Square.

Coming back to Scott’s blog post, I don’t believe it matters if you are a VC in Boston, Cambridge, or Waltham, or if you are a company, a city government, a university, or simply an individual who cares about innovation. The way to matter is to contribute to building and strengthening your community in the ways you can. Pick an initiative and run with it. If it doesn’t work, try something else. You will make a difference, and at the very least, perhaps Scott Kirsner won’t get on your case.

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On snowy days in certain neighborhoods of our great city it is not unusual for someone to put an old trash can in an on-street parking space that they have recently cleared. We all know there is threat implied: if you take the spot, you will regret it. Given the effort expended to clear the spot, the person who did all the work may feel justified in blocking others from taking it. But we all know that this tends to screw things up for everyone. Pretty soon cars circling looking for parking spaces clog the roads, and nobody can get home, even if they have blocked a spot.

This is a textbook example of the classic “tragedy of the commons” problem, in which following our personal self-interest eventually screws things up for everyone.

I believe the use of non-competes falls into the same category. By laying claim to our best employees, and keeping them from working for others, our economy becomes less agile, many of our best employees get tied up in what may not be the best job for them, and their only option is to move to a state that prohibits non-competes.

Don’t get me wrong. I use non-competes in my business, and nearly everyone else I know does, too. Non-competes are in our individual self-interest. The problem is just that they probably aren’t in our collective interest.

In states where non-competes are unenforceable, such as California, we know from our brethren there that employees rapidly gain experience, moving from company to company in quick succession. One of the results of this is that the best people quickly flock to the best companies as they start to show promise. This may be one reason that the world’s tech powerhouses like Google and Cisco disproportionately come from California.

While one could argue that banning non-competes hurts California companies individually, empirical evidence seems to suggest that the system benefits to society collectively outweigh this. In addition to the observation that the Googles and Ciscos of the world tend to grow more commonly in California, it also appears that investors are most happy to put their money there. Venture capital investment there has grown much faster there in the past decade than it has in Massachusetts, reaching a level now that is about three times that of Massachusetts.

This problem is not just theoretical. It is practical, and personal. Twice in the last few months, I have seen cases where great employees were prevented from working for the company that could make the best use of their talents. In one of these cases, the current employer was effectively out of business, although not yet legally dissolved, and for reportedly emotional reasons suggested it would litigate if the employee in question moved to a healthier company in the same industry. This scared off the new employer, who simply didn’t want the legal risk. The employee had to switch industries to take a new job.

Years ago, one of our executives left my employ at Cambridge Innovation Center. I was somewhat concerned that he would help others compete with us, and I reminded him of his non-compete. Not long after, I learned he had moved to California. While this may have benefitted my firm, it was clearly not good for Massachusetts.

I believe movement from company to company is a form of innovation pollination, and we should encourage it. It is time for our lawmakers to ban non-competes.

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Old places can accomplish new things.

Boston and Tokyo are both about 400 years old. Yet we’re different when it comes to planning for the future. Not long ago, Tokyo finished building a new island in its harbor, and a new city on that island, complete with a subway system that runs without human intervention. The goal? Explore what its future might look like by building “a showcase for future living.”

Closer to home, Toronto recognized a few years ago that it was losing ground in the sciences, so it deleted two-square kilometers of its downtown and replaced it with the Mars Discovery District, a vast collection of intertwined university research facilities, commercial research space, and the best biotech incubator space I’ve ever seen—and I’m an incubator guy.

Tokyo and Toronto prove it’s possible for places to set ambitious goals and achieve them.

Recently, at the Nantucket Conference, I interviewed a successful Boston-area CEO who reminded me that smart organizations think long-term. With sales of over $500M, Robert Keane’s 15-year-old Vistaprint dominates its sector. Yet he remarked, “We are a young company. This is the beginning of the Vistaprint story. Our management’s perspective is decades, not years.”

Greater Boston should take a page from Tokyo, Toronto, and business leaders like Robert Keane, and dedicate energy to thinking long term and thinking big.

Let’s not kid ourselves: we haven’t been doing this lately. Other than putting a car tunnel underground and creating a ‘subway line’ that looks suspiciously like a bus service, I can’t think of much we’ve done in the past 20 years that one could fairly describe as BIG.

Visions for our future in the Boston area will not be handed to us on a platter by President Obama, or anybody else. We need to craft them ourselves. It is time we began a dialogue about what we would like to accomplish together. I invite Xconomy readers to share here their personal grand visions for our future. What should we set our sights on?

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