#1 Cost of Doing Business in Hawaii?

[Wayne Karo]

Michael Tsai, Honolulu Advertiser Staff Writer, summarizes the business environment here in Hawaii as "interminable waiting periods for permits; onerous taxes; regulatory processes that seem designed to suffocate rather than promote private enterprise; layers of bureaucracy". (For the full 8/19/2009 article see: http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/200908...)

I hear these and other complaints often. Can you identify your most specific challenge in doing business in Hawaii and quantify its impact on your business, work, or life style?

[Wayne Karo]

On the back page of the 8/14/2009 edition of Pacific Business News, it said that the American Legislative Exchange Council cited "relatively high taxes, low wages, and the quality of the legal system" in ranking the State. Can you quantify issues like these as they directly impact you?

[Laurence A. Lee]

You mean other than meddling Political Interests that use their Pawns in the Legislature and Courts, in an effort to kill off High-Value business investments like Hawaiian Waste Systems and the Hawaii SuperFerry after they've invested millions in (Union-Developed) Construction?

Pffth. I don't mind doing consulting work on my own in Hawaii, but there's no way in hell I'd drop more than $100K of my own money in a Hawaii-based venture. For that kind of money, I'd get better stability in terms of what to expect from Government Action, and a better bang for the buck if I started out-of-State in Seattle, San Francisco, or Las Vegas.

... and that's my opinion regardless of Act 221 or any Son-of-221 that may emerge. Fool me once, shame on you Hawaii. Fool me twice....

Best of luck to all the high-value ventures.

[Daniel Leuck]

Hi Wayne. One of the major costs for us this year was the investment of time required to do our part in informing our governor and legislators about the impact of bills such as HB1405, the affiliate web tax, on our company and our customers. If I figure our time at our typical billing rate, Ikayzo and Ooi easily invested in excess of $20,000 communicating this impact to Governor Lingle and our state legislators in person, on the phone, on-line and in writing.

Other costs such as health insurance, rent and taxes are high, but roughly comparable to my experience with running a company in San Francisco.

[Gus Higuera]

So now I ask, what are the major benefits of doing business in Hawaii?

[Daniel Leuck]

Another cost is poor infrastructure. Over the past year loss of electricity, air conditioning and internet connectivity at the Manoa Innovation Center has cost us thousands. Just last month half of Manoa lost electricity for a day.

Gus Higuera: So now I ask, what are the major benefits of doing business in Hawaii?

I believe working in what I consider to be the most beautiful place on earth to be conducive to creativity and productivity. This is obviously subjective. Here are a few other reasons:

• $5 billion in military spending, including numerous sizable R&D projects that are required to sub to small local firms.
• Hawaii is a gateway to Asia. We do a lot of business in Japan, which is easier both in terms of logistics and personal connections in Hawaii.
• The opportunity to work in Hawaii can be a powerful recruiting tool. Pipeline is a good example of a company that has used this approach to build a world class team.

[Ken Berkun]

Our biggest additional expense is time and travel for meetings on the mainland. Generally you're adding, oh call it $500 on average, for the plane ticket and an extra day in either direction for a meeting. This limits the meetings and forces creative scheduling to get the most meetings per flight, but no matter how you look at it, this is a significant extra expense. Sure we use Skype and the phone, but sometimes you just have to be there. On the other hand, we are half-way to China and may see some savings there as we move into manufacturing.

I think the Act 221 situation has been hashed to death, so no comment on that.

We have not had to apply for any permits and the various payroll taxes and withholding are handled by ADP. I don't think we are really any significantly worse off than most other states.

Also hashed over is the lack of local funding. Completely true, if you need significant funding there are better locations. But this is not a surprise, one should plan appropriately.

The bandwidth to my home (where I work) is quite slow and I have no upgrade option.

While the tech community here is small the advantage is that you can know everyone!

Outside of the Act 221 fiasco the government has neither helped nor hindered me, which is about all I can ask for.

Ken

[John]

I agree about the additional time and expense of meeting with people outside of Hawaii.

For all the criticisms the government receives, I think the traveling issue has a far greater impact and is obviously not caused by the government.

Any technology product that requires face to face sales to end users and the channel is at almost an insurmountable disadvantage - and this would be the case even if the Hawaii state government was perfect.

[Peter Kay]

The issue that keeps coming back to haunt me is the near rock-bottom quality of the public education system. This really hurts in a few key ways.

1. We get a poorly educated workforce.

2. Any parent that wants a decent education for their kids has to pay about $10-15k/yr/child with after tax money.

#2 is a killer on two fronts: first it lowers one's standard of living. If you have 2 kids, that's $30k/yr, every year. from K-12.

Secondly, #2 really puts the brakes on getting talented people to move here. A given mainland executive might swallow a 20% pay cut to live in Paradise. He might even take the hit on housing costs. But if you tell him he's going to take yet another hit to pay for private education (e.g. 4 kids at $60k/yr!), the camel's back gets broken.

I see the poor educational system as the #1 thing that hurt our business again and again, forcing us to import expertise and ultimately throttling growth.

The final insult to injury is that paradoxically our state has the highest concentration of private schools and also some of the best private schools. So on one side we have one of the worst education systems costing about $15k/child right next to some of the best educational systems costing about $15k/child. hmm...

[Ken Berkun]

Peter,
Very good points and I agree completely. On the other hand, keep in mind that the Seattle school system is not so great (although the surrounding communities, such as where Microsoft is have better ones), and the California school systems are self-destructing as we speak. Nonetheless, this is a fixable problem that is currently being made worse not better.

Ken

Peter Kay said:

The issue that keeps coming back to haunt me is the near rock-bottom quality of the public education system. This really hurts in a few key ways.

1. We get a poorly educated workforce.

2. Any parent that wants a decent education for their kids has to pay about $10-15k/yr/child with after tax money.

#2 is a killer on two fronts: first it lowers one's standard of living. If you have 2 kids, that's $30k/yr, every year. from K-12.

Secondly, #2 really puts the brakes on getting talented people to move here. A given mainland executive might swallow a 20% pay cut to live in Paradise. He might even take the hit on housing costs. But if you tell him he's going to take yet another hit to pay for private education (e.g. 4 kids at $60k/yr!), the camel's back gets broken.

I see the poor educational system as the #1 thing that hurt our business again and again, forcing us to import expertise and ultimately throttling growth.

The final insult to injury is that paradoxically our state has the highest concentration of private schools and also some of the best private schools. So on one side we have one of the worst education systems costing about $15k/child right next to some of the best educational systems costing about $15k/child. hmm...

[Daniel Leuck]

Perhaps we should replace the former with vouchers so everyone can enjoy the latter.

Peter Kay: So on one side we have one of the worst education systems costing about $15k/child right next to some of the best educational systems costing about $15k/child. hmm...

[Ken Berkun]

That's a joke, right?

Daniel Leuck said:

Perhaps we should replace the former with vouchers so everyone can enjoy the latter.

Peter Kay: So on one side we have one of the worst education systems costing about $15k/child right next to some of the best educational systems costing about $15k/child. hmm...

[Daniel Leuck]

Not at all. After 100 years of the current system, which has consistently sold the poor and middle class short, I think its time to try something new. Our state more than any other could use some healthy competition. Your tax dollars are going to pay for your neighbor's kid's education anyway. Why not let him vote with his dollar?

I realize this is a wildly unpopular idea in Hawaii so let me state right now that A) My opinions are my own and don't represent those of TechHui and B) If you disagree we can still be friends. Most of my friends disagree with me on a wide range of issues. :-)

Ken Berkun: That's a joke, right?