Dr. George Kozmetsky and the Rise of Austin Tech

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It all started with the dean.

Before Dr. George Kozmetsky became the dean of what is now the McCombs School of Business at the University of Texas at Austin (UT) he was a technology entrepreneur, cofounding global conglomerate Teledyne with Harry Singleton in 1960 and the IC2?Institute think tank in the late 70s. He later served as a mentor to both Michael Dell and National Instruments founder Dr. James Truchard. President Bill Clinton awarded Kozmetsky the National Medal of Technology in 1993.

But back home in Austin, Texas, he is probably best remembered for his daily schedule.

For years, Dr. Kozmetsky held office hours for his students every Friday morning at 5 am, when the print edition of the Wall Street Journal was delivered. Well known for his approachable personality, Kozmetsky would go over the business news of the day with his students, sharing with them his thoughts on the economy at large, as well as career advice, business strategies, and any other topics that came up in the hour-long discussions. For the students, it was a can’t-miss appointment.

“I had the good fortune of having Dr. Kozmetsky as an MBA professor at UT, so he was kind of the guy who seeded he whole venture capital and technology idea into my head,” remembers Austin-based venture capitalist Rudy Garza. “And it was pretty humbling, you know? He had built this $60 billion company and he would let any student come meet with him. You could just go. Any of his class students, any MBA student, could go and visit with him and talk about any topic. I was just fascinated. So I took advantage of that and became a regular participant in those regular 5 am Friday meetings.”

Garza is far from alone in this experience. Kozmetsky is something of a?local legend?in Austin, a name that comes up in conversation with entrepreneurs and business leaders all over town, especially if they’ve been working in the area for more than a few years.

Take John Harkey, the CEO of Houston-based Consolidated Restaurant Companies and an ’83 UT graduate, for example. In a 2013 profile in the McCombs School alumni magazine, Harkey mentioned the role that Dr. Kozmetsky had played in his own business education.?"He would say, 'Meet me at five in the morning,'" Harkey told the magazine McCombs Today. "So, I would be up at 5 am banging on the dean's office window” (to be let in).?"He was just a great visionary; He really kicked off the beginning of the preeminence of the UT business school."

Jason Seats, the former director of TechStars’ Austin accelerator program, calls Kozmetsky “the guy who pushed the rock down the hill” to get the Austin technology community up to critical mass. Many of the young students and campus leaders he mentored back in his UT days are still in town, Seats tells me, working on startups, investing in new technologies, and leading many of the more-established companies. They are the city’s founding generation of entrepreneurs and tech investors.?

I met with Seats at the TechStars Austin office back when I was working on my first book, and he shared a story with me about a man he had met shortly after arriving in town. He was a “crumpled up old man” that Seats ended up sitting next to at a Chamber of Commerce dinner. Not surprisingly, this old timer was right there with Dr. Kozmetsky in those early days too, stopping by the office in the predawn hours along with a long line of students and well-wishers every Friday morning, all coming to get business advice from the “oracle of Austin.” Everyone from timid undergrads to the governor of Texas made their way through that office during his tenure at the McComb School, which extended from 1966 through 1982.

Dr. Kozmetsky died in 2003, but his impact on the Austin area tech ecosystem remains as vital as ever. At his memorial service,?UT president Larry Faulkner?called?Kozmetsky?an “innovative pioneer,” citing his vision and creativity when it came to both business matters and education. “He was the father of Austin's entrepreneurial spirit and a prominent presence in the business community worldwide,” Faulkner said. “His accomplishments reflected brightly on this city and helped to place Austin's name on the global register. Whenever I travel throughout the nation and overseas, I discover that business leaders are keenly aware of George Kozmetsky and what he has achieved here. In fact, many speak to me with reverence about what George had done for them personally.”

Chances are, he would not be surprised at all by what the Austin area technology scene has become.

I’ve been reflecting on this legacy a lot lately, especially with all the growth the Austin has seen both since Dr. Kozmetsky dies and when I first started covering the city’s tech ecosystem in 2013.

According to the Austin Chamber of Commerce, there are more than 9,600 employers in the capital city metro area that are qualified as high tech, accounting for nearly 17% of the regions jobs (compared to barely 9% nationally). Average annual tech employment in Austin jumped 4.3% in 2021 alone, adding 7,669 jobs. And these numbers are from a while back, so the current reality is likely even greater.

Austin remains a?top five tech talent market, is home to some?20 unicorns, and is?increasingly attracting?enterprise tech players to middle of the country.?

There’s a lot of good and bad to unpack in all of that, and opinions on the region’s future seem to be shifting from week to week, but the fact remains that Austin has stepped into the spotlight as one of the premier “not California” technology hubs in the country.

The question is why.

None of this is an accident, says Julie Huls, president of the Austin Technology Council, explaining that the technology sector currently supports about 26 percent of the jobs in Austin, accounting for some 110,000 local workers, and contributes $21 billion in direct value to the regional economy annually. One out of every five new tech jobs in Texas is in Austin.

“I think we’ve been fortunate that we have a super-friendly business climate,” she tells me in her office about 15 minutes from downtown Austin, “and obviously tech is enjoying that, but there are other industries that are enjoying that as well.”?

And that reputation is spreading beyond Texas. Huls says she takes at least one phone call per week from people in states like New York and California who want to know more about doing business in the area because they’re thinking about moving to Texas to start a company. That’s in addition to the business owners who reach out to her when planning a corporate move to the state.

“I think that everyone outside of Austin understands that Austin is different,” Huls says. “So we have a lot of people coming in. And then we have lot of executives that have been here for 15 or 20 years and have had a series of companies and successes, and they just like living in Austin so they’ve stayed around.”

Certainly, more than a little of this has to do with the city’s reputation as an affordable, easy-going place to live and do business, as well as its standing as one of the great live music and entertainment cities in the U.S. Having the University of Texas in town, as well as the offices of Texas state government, certainly don’t hurt either.

Everybody wants to live in Austin; Forbes calls it “Austin envy.”

It’s the best place to start a small business, according to the Business Journals newspaper chain; the most popular city for college graduates, according to the Brookings Institution; and was number-one on Kiplinger’s list of the nation’s 10 best cities for the next decade as of 2013. And the Fiscal Times ranked Austin at number two on its list of the top cities that people are moving to.?

The city is riding the same wave of success that has made Texas America’s fastest-growing state. In 2022 alone, more than 450,000 people moved to Texas from other states, according to Bank of America.

Austin’s entrepreneurs, of course, know all of this perfectly well; it’s why they’re in the state in the first place and it’s why they’re working in Austin in particular. They know it’s a nice place to live. They know it’s a good place to start a business. They know it’s a great place to raise a family. And they don’t (necessarily) want the rest of the world to move to town and ruin it for them. But, on a more direct level, all this civic pride has been spilling over to the business community, helping startups with recruitment, luring more established companies to town, and in general just making life easier for entrepreneurs.

“A huge part of why people love Austin has everything to do with our creative scene – mostly music, because everybody knows Austin is about live music,” Huls says. “So we’re starting to work with other music organizations now to just make sure everybody knows how important it is to protect that affordability factor. The creatives really are fueling the rest of us.”

It doesn’t come cheap, however. Austin’s famously affordable cost of living is pretty much a memory these days and, while it’s still cheaper than the Bay Area and other coastal cities, the Texas is far from a low-cost place to be. As of 2023, Austin’s overall cost of living is 9% higher than the state average and 1% higher than the national average. Housing in particular is tight, at 16% more expensive than the U.S average.

And the situation is getting worse.

Still, Austin’s place on the cost-income ratio compares favorably to many other parts of the country, especially the big metro areas where most tech jobs have long been located.?

“Austin has I think a lot of really nice solid assets that we can build on,” Huls explains. “The university has been great, and it’s not just UT. We have actually within the span of maybe 100 miles several awesome universities and colleges that our companies can choose from for talent, or choose to commercialize technologies from. And I think people read the headlines and have a tendency to think that we’ve got it all figured out. And we probably aren’t there yet. But there is a growing awareness, not just through tech but through traditional business and public leadership, that we do have a lot of model components here in Austin. Or if not that, then maybe we have sort of a formula for success in the new information economy.”

I have to wonder what Dr. Kozmetsky would think about what the city has become.

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