A conversation with Ted Smith, Pt. 1: ‘Louisville rocks musically, but we need the business equivalent of that momentum’

Ted Smith is the antidote to the Joe Reagan-era GLI.

Ted Smith, left, talks with LVL1′s Chris Cprek at the Insider Outing earlier this summer.

Instead of reciting canned consultant generated nonsense about the “Idea Capital of the World,” Mayor Greg Fischer’s director of Economic Development and Innovation will take your poorly formed idea, disassemble it with a dialectical flourish, discard the crap, then hand you back the polished jewel of a concept.

In a nice way.

There’s also that un-Reagan-like phenomenon we call “Ted Smith, Rock Star.”

We first saw the Ted Smith, Rock Star thing earlier this summer when Smith came to the Louisville Digital Association/Insider Louisville Insider Outing at Hogan’s Fountain in Cherokee Park.

Entrepreneurs, investors and big thinkers – the smartest people in this  town – gathered ’round him to bounce off ideas. For hours.

Could be it’s because Smith has been where they want to go. The Pittsburgh native has touched some of Louisville’s biggest tech successes, including TechRepublic. In 2008, he founded, then sold, MedTrackAlert, an interactive media company that provides health and prescription info to subscribers.

Now, Smith is part of the team developing Mayor Greg Fischer’s 25-year vision for Louisville, which Fischer is scheduled to reveal Thursday at the 2012 Leadership Louisville Luncheon.

So, when we got a chance to interview Smith, we were excited, but more than a little intimidated.

The 30 minutes we were promised turned into more than an hour of the candid, uninhibited back-and-forth everyone seems to expect from Smith – everything from his thoughts on the future of the city and the Fischer Administration’s take on what IdeaFestival should become to the future of manufacturing and farming.

Here’s Part One of a two-part Q & A. Part Two will run Monday, Sept 3:

Insider Louisville: We want to see Louisville realize its potential. But because we don’t have a great school – we don’t have a Stanford, an MIT …

Ted Smith: We don’t.

 Is there an example of a city that’s surged without a great university?

When I was leaving my brief tour of duty with the federal government (as senior adviser in the Office of the National Coordinator for Health IT), we were spending time visiting different parts of the country with a program called “DC to VC.” We had policy makers such as Aneesh Choprah (the Obama Administration’s first chief technology officer) and Todd Park (Choprah’s successor) – usually both of the them –  in a room with venture capitalists and angel investors and entrepreneurs. When you just parachute in to the usual suspect towns such as Palo Alto or Austin, it’s a wholly different feel than when you parachute into Omaha when they’re having Big Omaha. Or when you parachute into Syracuse, where they’re all fired up about reinventing upstate New York. I think at some level, the question may be, which one … If you’re a hedge fund investor, you’d have to ask, “In 10 years, which one of these things is going to define the market? Is it going to be Omaha, or is it going to be Austin?”

You just have to ask, “Where are we going?” If you really do want to skate where the puck is going to be, you have to start placing bets. I agree with you that if you’re putting your chips down, you need a Stanford and you need the sort of progressive, funky, risk-embracing, risk tolerant kind of place. You’re right. We’re missing key structural elements. Absolutely true.

I think if you subscribe to the thesis that the world is going to look different in the future, then I think the flyover cities start to look more interesting. I think they get more interesting because the innovation cycle just gets shorter and shorter all the time. And I know that’s sounds trite, but it’s not. It’s not. It’s just true. The pace new concepts enter the market and get to scale is just ridiculous at this point.

Twitter. What is it? Five years? We become so numb to this. I guess we think Twitter has been around forever, but it hasn’t. These are things that impact hundreds of millions of people. And that’s a ridiculously difficult thing to do … to impact hundreds of millions of people and do it on a very short cycle. That’s never been done before in the history of humanity!

Those are macro trends that are our best friend. The barriers to entry are going down. Arguably, the clutter is getting greater. If what we need to do is encourage a focal point for this creative energy, it’s not, “What university do you have in you’re back yard?” Forget about the university. Let’s talk about what it takes to bring people together. There, I think the jury is out for Louisville, Kentucky. The jury is out for everybody in the Midwest.

Forest Giant’s Dave Durand, back to camera, makes a point as Ted Smith, Austin Cameron and Hunter Hammonds, far right, ponder the topic at Insider Outing.

I’m struggling to find hopeful signs, but the airplane was invented in Dayton, Ohio, not in New York or San Francisco. “Why not here?” You know? Why not here?

Right. Why not here?

The one thing we do have … immigrants always marvel at how easy it is to get around here. Do you want to go to Mumbai? What are you dealing with? Ten or 12 million people? No infrastructure. Yet they innovate. Why can’t we innovate?

Look, I think our single biggest challenge right now is density. Density! We have an entrepreneurial culture in this community. It manifests itself in different ways for different generations. We’re not a one-industry town. Lots of Midwestern towns tend to get defined, especially of our size, tend to get defined … Charlotte in banking. If you were in banking, you were on the winning team. If you worked somewhere else, you weren’t. We’re not that kind of the city. You can go with the critical side … we have an identify crisis. “Oh, what is our tagline? What are supposed to be?”

I find that to be our greatest strength. I’d like to have the problem of New York City in that it’s “the city that never sleeps.” That’s a terrible, terrible tagline. It does’t mean anything except it’s a really big place with a lot going on. Wouldn’t you want to be in a place with a whole lot going? The problem that you had a hard time coming up with the definitive shortlist that describes the city?

There have been a whole bunch of people trying to come up with the definitive short list … It’s horses. It’s bourbon. It’s food. I love the fact we have a hard time coming up with a list. It’s the single most promising thing we have going for us. That Louisville is a decidedly different place for different people, and they all love it.

But we still have a density problem …

We still have density issues. I’ll go back to that. We need to work very hard not only to keep young people … but to continue to attract as many immigrants as we can of all colors and of all stripes and of all ages and sizes. This is an imperative. This is an intellectual diversity imperative. We need all kinds of crafty, handy, clever inventive people, and the more the better. I think we’ve done a good job on the music side. J.K. (McKnight, Forecastle Festival founder) and others have rocked it. We sort of need the business equivalent of that momentum.

Every time I turn around there’s another great band. J.K. has given all those young bands a bigger stage, a bigger venue, incorporating them into Forecastle … giving them the stage to reach a bigger audience. And because of that, there are more and better bands every week. If we could do that with the …

… with the start-up scene! Look, I’m betting really heavily on the IdeaFestival right now, not because it’s particularly bold or novel, but because it’s the single biggest resonator that has some scale. In my day job here (as economic development director), we’re treating this year’s IdeaFestival as “the other Derby.” The state and city have a long standing tradition of (saying), “That’s an economic development event. That justifies the Millionaire’s Row tickets, because we’re going to be bringing in executives from Ford.” And that is the way Derby has played out historically forever. IdeaFestival could be an excuse to do something very different. I’m going through the Rolodex to see who needs to come to town to have a conversation about our community. To sample it. To see the possibilities.

So you’re talking about bringing the best and the brightest who may not know anything about Louisville … bring ‘em in, let ‘em stay at 21C. Give ‘em a dinner someplace and turn them loose at IdeaFestival …

I think what we’re going to find out is, nobody has cornered the market on big ideas. Creative ideas. But, a city that’s truly welcoming. Greg likes to use the term, ‘Make it our default culture.’ IdeaFestival should be our default culture. We’re open-minded. We’re curious. We’re interested to apply things we glean with industry. Make it into something. What Kris Kimmel has done is birth something that fits quite well in Louisville, Kentucky. That kind of curiosity correlated with the food industry! It is the definition of open-minded that you would like to sample the cuisines of the world. We do that. In music, we like the authentic. We like the emerging. The fusion of it all. We’re hitting it! We’re getting darn close in a way that if I were – and I won’t pick on any of our neighboring cities – but I think they actually do have identity crises … defined by yesterday’s biggest employer.

I think we could – I hate to say “catch” … I think we could catch Cincinnati. I think we need about a million more people.

I’m with you, but if we had a quarter of that, I’d be happy. If we had 200,000 more people, it would be a remarkably different place. It really would be if we had a million. You wouldn’t recognize it.

Food is such a mundane thing. Food was always something raised by someone way, way away. Not a very interesting or technologically demanding profession. Why isn’t technology getting applied to food production?

That’s a wonderful question. I think we’re getting closer with companies like Grasshoppers. They went from stabilizing the business to a place where they can start to apply technology. Disrupting the food chain is not a short-term proposition. We spent a lot of time building this food chain, the way it works.

But you see these idealized plans that show abandoned buildings turned into multi-layered urban farms for high-profit, high-yield plants. Very cool, very 22nd Century. Why not here?

Do the math … how much food would you have to produce (to make a profit), and it turns out to be a lot more than you could produce in the building. Once you start running the numbers on hydroponics and vertical farms, it turns out how little we understand the volume of the food that’s rolling in here on rail. In trucks. On planes. It’s tremendous. We think it’s significant if we can take a few percentages of their meat buying and make it local meat buying if you’re Sysco. Turns out we don’t have enough local meat for them to buy even 30 percent or 40 percent can locally source. Then we say, “Well, why don’t we have enough meat?” So, we go out into the state and say, “Can you guys get together to organize your supply?” And they say, ‘That’s new.” That old infrastructure has been around a long time, and everyone has just gotten used to working with it. They expect it to work the way it works. I’m not making excuses. It’s a big journey, and I think we can do this journey.

So, if farming is a stretch, how can we change Louisville? Where is the revolution going to happen? Louisville to me is … we’re just there and it could be really fabulous in 10 years. Or we could be stuck.

Look, I grew up in Pittsburgh, so I experienced stuck professionally. I like to say, “We’ll let the mayor … he deals with manufacturing and music. Those are the two things he knows well. I do health care and technology. Those are things I know pretty well. Manufacturing is a tricky area. The only place I get really excited about manufacturing are the companies that are pushing forward, like Cafe Press. Let me tell you what I love about Cafe Press … I love the fact they move their Headquarters from San Mateo. There are whole bunch of tech jobs. You would have expected them to put the tech jobs in Class A space right down on Main Street. Programmers like clean, glassy marble environments. The men and women making T-shirts, hats and stickers will be down in Riverport in a tin box. That isn’t the decision they made. Bob Marino walked me around and he was like a kid in a candy store. I was struck by, here you have SEO men and women working on a wire mezzanine over someone making T-shirts and mugs down below. Bob said, “Ted, let me tell you. We’re creating intellectual property here. We’re now filing patents because this is good co-mingling of very different roles. What they share in common is, they’re trying to get the per-unit cost of one T-shirt to match 100 shirts’ unit cost.”

A little bit like Michael Dell. A little bit like Steve Jobs. Driven toward an extreme goal data point. That’s a really hard thing. Most have just given up: “I guess we’ll just have to charge more for that one hat.” Instead, Bob is like, “I can get that delta down ….” Every day he gets that delta down, in a mass customized model. He’ll gain tremendous market share. I think the secret sauce is in the new ways of working. I think Louisville has that.

Why did Marino come here?

I think he realized to get that unit cost down, he needed the whole thing sitting at the end of the runway. GLI likes to use the term, “value-added logistics.” I think that understates what we’re talking about here. We’re not talking about “value added logistics.” I think we’re talking about modern manufacturing. Modern manufacturing has elements of the design being done at the same place as the fabrication, which is right next to the distribution. Any one of those processes can be modified.

If you look at some of the companies we’re bringing in to town now, even in the bio-medical area, I think they may have come in to be near UPS. Because they need to rip an organ sample out of the belly of a plane quickly. But they’re right away turning that into a data file. And they need to get that out to somebody on a completely different channel. That’s not your grandfather’s logistic business. Your grandfather’s logistic business was more like Geek Squad. The broken thing came in, it got fixed and it got shipped back out. Now we’re talking about analog to digital. How do you think about that?

It’s not about the trucks and planes and the trains. Now, it’s about the trucks and the planes and trains AND the gigabit network and the reliability of that gigabit network.

Man, that’s a hell of a lot more exciting future.