The Bluegrass and Beyond

Thirty years ago, Kentucky created the Governor’s Scholars Program. Twenty-six years ago, the Governor’s School for the Arts. Now, the Governor’s School for Entrepreneurs.

The idea for this new summer program is the same as with the other two: identify high-potential high school students and bring them together to boost both their development and Kentucky’s future.

The Governor’s School for Entrepreneurs is now taking applications for the first class of 50 students who will attend a free program June 9-29 at Georgetown College. The deadline to apply is Feb. 15. For more information, go to: Gse.kstc.com.

Kentucky’s economy needs more entrepreneurial thinking, said Kris Kimel, president of the Kentucky Science and Technology Corp., which is creating the program.

“Increasingly, people are going to have to create their own jobs, figure out how to create their own value,” he said. “Entrepreneurship is a way of thinking. It’s a different mindset.”

More young Kentuckians need the skills and mindset to start their own businesses, rather than assuming they will always work for somebody else, Kimel said.

This three-week program will include tours of innovative companies and talks by Kentucky entrepreneurs. Students also will hear from lawyers and other professionals who help entrepreneurs make their companies successful.

There will be a lot of teamwork time devoted to students’ ideas for products or services that could be turned into companies. That will include learning about business plans, iteration, investment capital, production, sales, marketing and long-range strategy.

“The program will be all about creative thinking, critical thinking, innovative thinking,” said Kimel, who in 2000 started the Idea Festival, an international creativity festival now held each September in Louisville.

The program is open to 9th, 10th and 11th graders in Kentucky’s public or private schools. Students may apply as individuals or in teams by filling out an online application and submitting adult references.

They also must create a two-minute video explaining their idea for an innovative product or service, or why they would be suited to become part of a team that comes up with one.

One criteria that will not be considered for admission is a student’s grades. After all, some of America’s most brilliant innovators — from Thomas Edison to Steve Jobs and Bill Gates — didn’t do well in school.

“Just because you’re a ‘C’ student doesn’t mean you’re not incredibly smart,” said Laurie Daugherty, the program’s director. “Sometimes the personality types and thinkers who make the best entrepreneurs are the kids sitting in the back of the class not really engaged in the stereotypical classroom style of learning.”

Daugherty has been traveling around Kentucky, speaking at high schools to attract applicants and raising money for the program among business people.

“There has been a lot of excitement about it,” she said. “The first application was from a student in Louisville who already has a company and wants to learn more about how he can grow it.”

KSTC has a $50,000 seed grant from the state Economic Development Cabinet. The rest of the estimated $200,000 needed for the program is being raised from businesses. There will be no cost to students.

Gov. Steve Beshear kicked off the fundraising effort recently by bringing 40 entrepreneurs and corporate leaders to Frankfort for a presentation.

“Business people get it,” Kimel said. “I think they realize this is an important part of our future, our ability to create these kinds of people and companies and jobs.”

Randall Stevens, who has started several companies in Lexington to develop innovative technology, is one of the entrepreneurs who will be teaching at the program.

“I’m a big believer in the educational process of how to become an entrepreneur,” he said.

Part of that process is learning to be comfortable taking the calculated risks needed to succeed.

Part of the program’s value will be creating a network of young Kentucky entrepreneurs going forward, Stevens said. He is trying to organize that kind of network among his fellow 24,000 graduates of the Governor’s Scholars Program.

“I want them to leave with a good education,” Kimel said of the first class of students in the Governor’s School for Entrepreneurs, “but also with a sense of empowerment that I can do this, or I can think differently.”

Improving Kentucky’s economy will require more capital. Finding that capital, both human and financial, is likely to involve more small steps than big leaps.

Two groups are taking steps worth noting. They are the Young Professionals of Eastern Kentucky and the Lexington Venture Club.

The Young Professionals of Eastern Kentucky is a new organization that hopes to help talented young people stay in — or return to — Eastern Kentucky’s mountains. It is having its kickoff event Monday night in Hazard.

“We really want to combat the brain drain,” said Bradley Parke, 24, of Knott County, the group’s vice president. “There are a lot of people who leave and want to come back, but there’s just not the opportunities for them.”

The free event, which begins with a 6:30 p.m. reception at First Federal Center on the campus of Hazard Community and Technical College, will include speeches by U.S. Rep. Hal Rogers and former Gov. Paul Patton.

Kevin Smith, 26, a Laurel County native who lives in Inez, was inspired to start Young Professionals of Kentucky after reading Visioning Kentucky’s Future, a 2008 report by the Kentucky Long-Term Policy Research Center.

“There was a need for young professionals to come together,” he said, not only to create new economic opportunities for themselves and their communities, but to be more aware of opportunities already in the region.

“Many of us have a passion for this region,” he said. “We want to live and work here.”

Smith, Parke and others formed a steering committee and then a board of young professionals from across Kentucky’s 32 Appalachian counties. They applied for non-profit status and organized small get-togethers in London, Hazard, Prestonsburg, Somerset, Whitesburg and Pikeville.

“We’re pretty spread out, so we’re trying to reach every part of the region so everyone feels like they’re included,” said Parke, adding that online networking tools will be key. The organization has created a Web site (www.ypek.org) and a Facebook group with nearly 1,200 members.

In addition to networking, Smith and Parke said the group plans to form working groups to study and undertake projects around six themes: economic development; energy and environment; education; health care; technology; and civic engagement. That work will get started at the group’s next regional meeting, tentatively scheduled for early April.

They said the organization’s board includes Republicans and Democrats, and they’re being careful to avoid political associations that could limit their effectiveness in the region.

“We’re trying to say, no matter what your background or ideology is, we’re here to make a difference,” Smith said.

Meanwhile, the Lexington Venture Club gathered last week to discuss the state of venture capital funding in Kentucky.

The club reported that entrepreneurial companies in Central Kentucky attracted $47.5 million in venture funding last year for a two-year total of $116 million — not a bad showing considering the overall economic climate.

The 88 companies surveyed by the club said they hired 386 people last year, up from 230 in 2008 and 162 in 2007. The average salary for full-time jobs at those companies was $69,800, up from $61,000 two years ago.

Venture funding comes from a variety of non-traditional sources outside bank lending, such as venture capital funds, private investors and entrepreneurs and their friends and families.

It is a vital source of capital for young companies in fields such as technology and bio-sciences. Innovation is often a risky investment, but it can pay off big, both for investors in those companies and for their communities.

The gathering at Lansdowne’s Signature Club attracted nearly 200 people, prompting UK President Lee Todd to remark that Lexington’s venture capital and entrepreneur community “could not have filled a closet 10 or 15 years ago.”

The keynote speaker was David Jones Jr., chairman and managing director of Chrysalis Ventures in Louisville, the region’s oldest and largest venture capital firm with about $400 million under management. He also is non-executive chairman of Humana Inc., which his father helped found.

Jones said Kentucky is behind many neighboring states in creating the kind of innovative companies that can attract venture funding. A key to improvement, he said, will be for Kentucky to emphasize and invest more in education at all levels.

I wrote Sunday about last week’s Shakertown Roundtable, which featured former Federal Reserve Chairman Paul Volcker and included more than 50 of Kentucky’s most influential leaders in business, government, academia and philanthropy.

Given the complexity of the topic — economic crisis and recovery — and the caliber of the panel and participants, there was a lot to discuss and think about.

Here are a few additional notes from last Thursday afternoon’s conference in one of Kentucky’s most scenic settings, Shaker Village at Pleasant Hill:

■ One executive I found insightful was Paul Varga, president and CEO of the Louisville-based liquor giant Brown-Forman Corp. In stressful times like these, he joked, “You’ll all understand why I’m happy to be in the business I’m in.”

Varga said he understood some executives’ worries about a backlash of too much taxation and regulation after a period many people think had too little. Liquor has always been an easy mark for higher taxes, he said, adding that “our industry once had the ultimate government intervention: Prohibition.”

He noted that much of the economic crisis was caused by what people did with other people’s money and an abandonment of traditionally sound business practices. Varga said future prosperity will require companies to not just achieve revenue growth, but create value.

Brown Forman — and the entire bourbon industry — has remained relatively healthy by not taking on too much debt and by searching out new markets overseas and developing spinoffs such as the Bourbon Trail initiative around distillery tourism.

■ In response to a question, Volcker said ideology and economics don’t mix well. That’s because unpredictable human behavior can have a big effect on the economy.

“It’s not a rational activity,” he said of economics, adding that this crisis showed that free markets with little regulation can lead to greed, manipulation and disaster.

■ Louisville Mayor Jerry Abramson, who is running for lieutenant governor on Gov. Steve Beshear’s re-election ticket, reminded executives who criticized government spending on the social safety net that many average Americans are hurting.

“We have real families and real children who are going through some real difficulties,” Abramson said. The nation needs to take care of them, he said, not only because it’s the right thing to do but because they are the workers who will be needed to build the future.

■ Centre College President John Roush said most aging baby boomers won’t be able to enjoy the leisurely retirement they expected because our old economy and lifestyle expectations weren’t sustainable.

“We’re not going to get to go fishing every day,” said Roush, 59, who said he likes to fish.

But Roush said he is encouraged that today’s college students have different expectations. “They have a sense of possibility and optimism,” he said.

■ University of Kentucky President Lee Todd said America needs to renew its focus on research and development, advanced manufacturing and high-quality education. Kentucky students need more math and science — and more confidence in their abilities.

With the right education and training, Kentucky students can compete with anyone, said Todd, himself the product of a small town in Hopkins County. As an example, he mentioned UK students’ strong showing last week in the international solar house design competition in Washington, D.C.

Kentucky students need to start their own businesses, not just expect to work for someone else. And the state needs to emphasize entrepreneurship and business development, not just attracting employers from elsewhere.

“Kentucky people who start companies will stay in Kentucky,” Todd said. “We’ve got to create our own jobs.”

Kentucky Educational Television videotaped the Shakertown Roundtable and will show an edited version on Nov. 23 at 8 p.m. and at other times.

Paul Volcker, who was chairman of the Federal Reserve under presidents Jimmy Carter and Ronald Reagan and is a top adviser to President Barack Obama, has earned a reputation as one of the rarest of creatures: a straight-talking economist.

Volcker was true to form Thursday, when he came to Kentucky to speak at the Shakertown Roundtable, a gathering of about 60 of the state’s most influential leaders in business, government, education and philanthropy.

The 82-year-old economist was blunt in his assessment of what caused this economic crisis and what’s needed to fix it. And he brought things back into focus when some executives tried to point fingers, shift blame and complain about recovery strategies.

“We spent, as a nation, more than we were producing,” Volcker said. Mix that with a real-estate bubble, reckless financial manipulation and too little government oversight, and it was a recipe for disaster.

“We were leveraging the economy … and then it all unraveled,” he said, adding that the recovery will be a “considerable slog” that could take years.

Volcker has advised Obama to restore legal restrictions, enacted after the Great Depression but repealed in the 1990s, that separated investment and commercial banking and prevented banks from becoming “too big to fail.”

The Obama administration has balked at Volcker’s suggestions amid industry opposition. But Volcker warned that without such reforms the nation could face a repeat of its current crisis in a few years.

After Volcker’s remarks, the 11 other panelists gave their views on the economy and the proper relationship between business and government. They included Gov. Steve Beshear, Louisville Mayor Jerry Abramson, the presidents of the universities of Kentucky and Louisville and several business leaders.

David Grissom, president of Mayfair Capital in Louisville, said he was depressed at the quality of national leadership. He complained about the huge amounts of money government is using to try to rescue the economy.

Julie Janson, president of Duke Energy in Kentucky and Ohio, lamented new government regulations on energy and utilities.

Churchill Downs Chief Executive Robert Evans warned this was a bad time to raise taxes and increase government regulation of business.

U of L President Jim Ramsey cited sobering statistics about Kentucky’s economic “blood bath,” such as the decline in manufacturing jobs in the past decade from 310,000 to 200,000 and the fact that Kentucky spends $9,000 a year on each public school student, $6,000 on each college student — and $19,000 on each prison inmate.

As each panelist took his or her turn, things turned gloomier. Then the last panelist, the governor, spoke.

Beshear said he thinks Kentucky is in better shape economically than many states and, with smart strategy and investment, the state could position itself to take advantage of future economic opportunities, such as advanced manufacturing.

“Until I heard from the governor, I was in a state of desperation,” Volcker deadpanned, adding that he agrees with Beshear’s optimism.

But, Volcker said, Kentucky and the nation must see the economic crisis as a “wake-up call” and make some fundamental changes.

Volcker also agreed with comments by UK President Lee Todd, who emphasized the need for more rigorous math and science education and more technology research that can be commercialized to create jobs.

Todd criticized the recent emphasis on the service economy: “We can’t create wealth by serving hamburgers to each other.”

In the best line of the day, Volcker said Americans need to shift away from “financial engineering” and focus once again on civil, mechanical and electrical engineering.

We need to regain our leadership in technology development and manufacturing, he said, rather than churning out so many business school graduates who are focused on making big, quick and easy profits by manipulating money.

If there’s one thing this year’s Shakertown Roundtable made clear, it is this: Economic recovery will require us to figure out how to prosper in a new and different global economy, rather than simply trying to get back what we have lost.

Centre College President John Roush, commenting from the audience, perhaps said it best: “I think we are going back to a place of well-being. But it’s a different place.”