Roosevelt Island: New York's New Tech Hub

In a sliver of land in New York City's East River, where a lunatic asylum and smallpox hospital once stood, banners proclaim with unabashed assurance (or chutzpah): "Roosevelt Island: A Fresh Look at the Big Apple."

The bleak cityscape on the lower half of the island, accessible by cable car and occupied by a hospital for convalescents with battered bricks and rusting air conditioners, will soon be home to a complex of buildings intended to transform the island from an image of urban decay to a bold statement about 21st-century urban design—and transform New York City into an enduring 21st-century economic powerhouse.

In an unprecedented cooperative venture between City Hall, Cornell University, and the Technion–Israel Institute of Technology in Haifa, ground is about to be broken for a top-flight technology campus that Mayor Michael Bloomberg promises will give other hubs of entrepreneurial science around the country, and indeed the world, "a run for their money."

For the moment, the campus exists as an interinstitutional agreement, some architectural drawings, and the glimmer in the eye of an ambitious city executive who made his own vast personal fortune with information technology. ("This is going to be a very big hit," says Bloomberg, as of course he would.) But deliberately and relentlessly, the Big Apple has, in the last few years, been going after the same kind of power and preeminence in high technology that it enjoys in so many other fields; and the graduate school is a key to City Hall's strategic plan for digital conquest.

To realize the project, the city will provide much of the land and about $100 million in funding. Add to that a huge donation by Chuck Feeney, an 81-year-old duty-free magnate and Cornell alumnus, who has put up $350 million to see the first stage of construction through to completion. Early drawings of what it might look like (such as the one shown here) were impressive. But the noted Los Angeles–based architect Thom Mayne, who created the provocative, twisted, and torn Cooper Union building in the East Village, is expected to make it spectacular.

Until the complex is built, however, students at what's now called CornellNYC Tech will be studying in the big old brick building in Chelsea that Google bought for almost $2 billion two years ago: an outpost of the West Coast's mellow intensity under the roof of the enormous structure that used to house the Port Authority in Manhattan. (It's even got some real-life chutes and ladders for techies who want to have a little fun getting from one floor to another. The reviews on Google+ declare it, not surprisingly, "awesome.")

The graduate curriculum is designed to draw on talent and innovation in the many fields—global finance, medicine, media, design, and fashion—where New York City is already a powerhouse. Greg Pass, a former Chief Technology Officer at Twitter who's signed on with the Cornell–Technion team to help bring entrepreneurship into the mix, says the project offers "a huge opportunity to disrupt the higher-educational model."

If New York has yet to make its mark in digital innovation the way Silicon Valley has done—with Stanford as its engine of innovation, or even Boston, with MIT—some vital trends are moving in its direction. "You've got to understand how big we are," says Bloomberg, citing an encounter with a friend from Boston who told him, when the Roosevelt Island project was first being proposed, "Oh, you'll never succeed because Boston is the education capital of the country." Bloomberg says he told his friend bluntly: "New York City has more undergraduate and graduate college students than Boston has people." That, he said with a chuckle, "sort of ended that argument."

Like Google, with its $2 billion Chelsea building, some of the most important tech companies have been looking east. Twitter opened major offices on Madison Avenue last year, and eBay announced in May that it's moving some of its units to the Flatiron neighborhood. "They want to be in a big city," where, culturally, intellectually, financially, there are "more of the best and the brightest," says Bloomberg. "If intellectual capital is what you need, New York City is where you want to be."

Pass, who was packing up his house in San Francisco when I reached him on the phone, said New York offers something new. "There already is a Silicon Valley with its outcomes," he says. "The fact that the culture is different is positive."

But those cultures—East Coast and West Coast competing for digital supremacy—came to a showdown over Roosevelt Island in a story that involves billions of dollars, intense rivalries, and some pretty nasty accusations of bad faith.

The ambitious plans for New York City's tech future were originally shaped by Deputy Mayor Robert Steel and Seth Pinsky, head of the NYC Economic Development Corporation, and, grandiose as they may seem, they were based on very practical considerations.

When Bloomberg was elected mayor in 2001, only weeks after the devastating terrorist attack on Sept. 11, a centerpiece of his strategy for the resurrection of the city was to reassure, rebuild, and expand its financial-services industry. For most of the decade, that emphasis worked stupendously well. Financial services were "a supercharged aspect of our economy," says Steel. Then came 2008, with the collapse of Lehman Brothers and the implosion, or near to it, of one big investment house and bank after another.

Bloomberg's focus changed. New York would have to diversify its economy, he insisted, and technology would be the key. "Many large companies were laying off significant numbers of people," says Pinsky.

Earlier efforts to build more diversity into the city's economy with other projects—tourism, film and television production, and a commercial bioscience industry among them—couldn't take up all the slack. "If we didn't do something to redeploy people, it was likely we were going to lose them," says Pinsky. And given that the downturn was crippling big corporations, City Hall decided an alternative would be entrepreneurship. "We set up a series of incubators, about a dozen," says Pinsky, and those have spawned, so far, some 550 businesses. "We find landlords in the city who have real estate that is currently underused and we work to encourage them to offer that space at subsidized rates." Then the city helps organize mentors for startups and seed capital to fund them. It recently created a digital map that shows exactly where tech companies are looking for employees, and where investors are who might help create new companies.

But even as these projects grew, so did a constant complaint: New York City, for all its great colleges and universities, just didn't have enough talented engineers to staff its developing high-tech industries. And what it lacked conspicuously was the kind of academic institution that dealt symbiotically with entrepreneurial businesses in the applied sciences. One obvious paradigm was Stanford and Silicon Valley out West, but another also loomed far across the seas to the east, in Israel.

As it happened, at just that moment in 2009 Dan Senor and Saul Singer published Start-Up Nation: The Story of Israel's Economic Miracle, which quickly became a New York Times bestseller and the talk of City Hall. As Israeli President Shimon Peres says in his introduction to the paperback edition, it tells the story of people "who positioned their country as a critical research-and-development center for the world's leading technology companies." And one player in that process was Technion, a venerable institute in Haifa since the 1920s that's often called the Israeli MIT. Technion has links to the Israeli defense industry, which has in turn played a huge role in developing the country's tech sector. Technion president Peretz Lavie told me proudly over the phone that Technion alumni developed the Iron Dome missile-defense system that helps protect the south of Israel from rockets flying out of Gaza. Technion can also boast three Nobel Prize laureates since 2004, and, perhaps more to the point from New York's point of view, "We have turned our students into entrepreneurs," says Lavie. About 80 percent of Technion graduates go into high-tech industries, and about a quarter into startups. "If you think of Israel as a big Silicon Valley," he says, "the backbone of this Silicon Valley are Technion graduates."

In New York City, that sounded just right. At the beginning of 2010, New York's economic-development corporation started contacting "major engineering faculties around the world," according to Pinsky. And one of the first was Technion. As Lavie told Newsweek, the institute's strategic goal was "to have international visibility and global standing," but "New York—we never thought about it." Then in March 2010, says Paul Feigin, Technion's senior vice president, "we actually got a call from the New York City Economic Development Corporation asking us what would make us interested in opening in New York City."

Months passed as City Hall got ready to call for formal expressions of interest in the creation of an institute for applied sciences. Lavie wasn't sure how interested Technion should be. "Then one day I got a personal letter from Mayor Bloomberg," Lavie told Newsweek. "And Mayor Bloomberg invited us to participate in the competition. I must tell you, at the beginning I thought somebody was pulling my leg. I called them, and I found out this was for real." The city told Technion it wanted "to copy Silicon Valley" into "the New York econo-system," says Lavie, but he was still cautious. "We decided to participate under two conditions," he told Newsweek. "One, that we are not going to invest any money. And second that we must have an American partner."

In December 2010, New York City publicly called for formal proposals for the institute from around the world, and the race really began.

When Cornell president David Skorton first saw how ambitious City Hall's plans for the Roosevelt Island project were, he was stunned: "I never thought I would have a chance to do something like this," says Skorton. Cornell, like many other universities, has experience setting up satellite campuses abroad, including a medical school in Qatar, and it has had some facilities and programs in New York City for the better part of a century. But "I did not see this solicitation coming with anything like the form that it took," he says. The goal was to create an institution that would be known not only for technological innovation but for "tech in the service of commerce," as Skorton puts it.

By last summer, some 18 proposals were submitted, and very quickly thereafter it looked like Stanford, that über-incubator of California's Silicon Valley, would have the inside track for what it called the "StanfordNYC innovation chain." But as more plans got firmer and the commitments demanded from the participants got bigger, Cornell and Technion teamed up and started to look unbeatable.

Suddenly, in the very last days of the competition, Stanford pulled out of the race altogether. "It took Stanford aback, the way we were treated," says the university's communications director, Lisa Lapin. "We got a sense that it was more of an antagonistic relationship than a welcoming one." Lapin forwarded to Newsweek a blistering statement from Stanford general counsel Debra Zumwalt saying many of the positions taken by the city "were not in good faith." "In my decades of doing negotiations with both private parties and government agencies, I have never seen anything like it," said Zumwalt. "It was clear from our negotiations ... that the city would not be working as a partner with Stanford and indeed would be making it more difficult and expensive than necessary to get this project done successfully," said Zumwalt.

There were specific issues about hefty penalties that Stanford was expected to pay even if the city was responsible for delays or other difficulties. "Stanford wanted to work with New York City to implement the mayor's bold vision for a transformative technology campus. We reluctantly came to the conclusion that the city could not deliver on that promise and decided to withdraw."

Out in Palo Alto, Calif., some people feel Stanford was set up for a fall right from the beginning, suckered into giving the project the prestige of the Stanford name. City Hall maintains it was just driving a hard bargain, getting all the contenders to put as much as possible into the project, with as many protections as possible for the New York City taxpayer. "I think Stanford came into the competition thinking they were the odds-on favorite," one city official suggested, "and I think that at the end of the day it became a bigger obligation than they felt comfortable making."

Mayor Bloomberg, for his part, notes that other big projects are taking shape, including a new New York University–affiliated applied-sciences institute in Brooklyn, and he would still like to see Stanford set up shop in New York City. "I'd love to have them come," he told Newsweek, "and there is still plenty of room here."

In the end, Cornell simply had an overwhelming home-court advantage that makes it close to the perfect choice for the core project on Roosevelt Island, and gives it the resources and political connections to get the job done. Cornell has always had a strong focus on engineering, and it has always put an emphasis on the practical applications of the many disciplines it teaches. It was founded as a land-grant college in the 19th century with the explicit aim of instructing students in "the mechanical arts." So there is no problem with the notion that academics and entrepreneurs can work together, whether teaching or starting new businesses.

Feeney, the extraordinary philanthropist who is funding the first phase of CornellNYC Tech development, is also playing a quiet but important role shaping its vision, according to Skorton. (Feeney is a graduate of Cornell's hotel school.) "When he got interested, he got interested in a very intense way," says the university president. The low-profile Feeney may have given away $6 billion around the world, and quietly, but he's no soft touch. "He's a businessperson," says Skorton. "He has that combination of intelligence, insight, and impatience that gets things done." And Feeney's not the only Cornell alumnus in New York City. The university's main campus is upstate in Ithaca ("centrally isolated," as they like to say), but it counts about 50,000 former students in the five boroughs and environs. In short, it's got the kind of network that might be used, should the occasion arise, to get the City Council to waive any unjust penalties of the kind that Stanford found potentially so disturbing.

In a city—and a business—that is changing constantly, Skorton says he intends to keep the curriculum flexible.

"You can't put something in and allow it to ossify," he says. But from the moment classes begin this fall, the aim is to be, well, awesome.

Luke Kerr Dineen contributed to this report.