See an accompanying story on Wisconsin Manufacturers & Commerce, the state's largest business lobby, which has few ties to the state's growing tech industry.
At lunchtime on March 18, Rachel Keranen walked the two blocks from the Bendyworks office at 106 E. Doty St. to the Madison Club, the traditional gathering spot of Madison powerbrokers for 100-plus years.
Keranen, 25, is part of the new wave of leaders transforming Dane County and perhaps Wisconsin. This is the tech vanguard and the millennial generation that is shaping up to challenge an old guard that largely sees the world through the lessons of the last century. Given Wisconsin's 30-plus years of economic malaise, these new faces represent the best hope for this state's and this town's future.
The Minnesota-raised Keranen, who had the youthful wisdom to turn away from her first career in the fading world of journalism, jumped to a technical writing job at Epic, where she worked for 18 months at the fast-growing medical software giant before joining Bendyworks, an innovative app development outfit. (She has since moved on to solo technical writing and, alas, to freelance journalism.)
On this day in March, Keranen was off to the Madison Club for a WisPolitics.com luncheon featuring Democratic gubernatorial candidate Mary Burke. "I was excited to hear her talk," she said afterwards. "I wanted to understand more about her views and how she expresses herself." Networking, she added, is important to her. "The Madison Club is good for that."
Keranen, who has a degree in English from the University of Minnesota and who doesn't own a TV, strongly identifies with the tech generation's aspirations.
"This is where innovation is happening, and it's exciting to be part of it," she says.
Asked to describe the mindset of the millennial tech set, she replies: "It's a desire to innovate, to move society forward through technology. We want to improve the world. We want to make our impact. People in tech believe in its potential to do that."
Transformational change can happen. Generational change does happen. Milwaukee historian John Gurda sounds a cautionary note on the permanence of cultural bedrock, but agrees that there were "periods in Milwaukee's and Wisconsin's history where you did have what were, in retrospect, paradigm shifts."
Looking at his city, Gurda points to German immigrants deposing the old Yankee aristocracy in the late 19th century. Also to the rise and fall of Milwaukee's acclaimed "sewer socialism." Statewide, dairy farming supplanting wheat farming was an epochal change. The Progressive reforms ran so deep it once seemed they changed Wisconsin's political DNA. The baby boomers left their mark on both Madison's and Milwaukee's city halls.
Will millennials and tech entrepreneurs similarly transform Wisconsin? This is no small order for the insurgents. Reactionary forces on the left and the right are holding tight to the reins of power.
The innovators
On a warm Friday night in June, when weekend-minded young people were filling outdoor patios, drinking and socializing around the Capitol Square, about 50 millennials were crowded into the fourth-floor conference room of 100State, a cluster of 130 brainstorming techies who work collectively and individually on projects. The gathering was to brainstorm ideas for "Madison in Motion," a sustainable transportation plan the city is putting together.
Mayor Paul Soglin, an aging baby boomer who gets tech, greeted the attendees. Transportation planner Dave Trowbridge described the planning process. The attendees broke into small groups, where they batted around transportation ideas with facilitators.
"The city sees 100State as the place to get feedback from the innovators, the collaborators, the doers of Madison," 100State executive director Mike Fenchel, 27, explains.
100State has drawn heavily from Epic expats, including cofounder Niko Skievaski. The 27-year-old economist has emerged as a key scenemaker. Skievaski spun off 100Health from 100State -- both have recently moved from 100 State Street to nearby offices -- and has the unabashed goal of helping launch 100 health IT startups in the next five years. Madison, he says, "is prime for innovation."
This past winter, Skievaski and other 100State members reached out to Milwaukee and its peer group 96Square, defying the haughty indifference that leaders of the two cities usually display for one another. Seeking to strengthen ties between the two entrepreneurial communities, the Madison group visited 96Square's startup and coworking space at the old Blatz Brewery in November. The Milwaukeeans then came to Madison on a ferociously cold night in January to meet their Capitol counterparts in a jammed, beer-enhanced reception of around 150 young entrepreneurs at the new downtown library.
Accomplishments have been modest. The two groups have formed common LinkedIn and Twitter communities and extended guest office privileges to one another's members. When I cornered one of the visiting Milwaukeeans at the library reception, I brought up the long history of animosity that has marked Milwaukee-Madison relations.
"What antagonism?" the puzzled young man asked me.
Those old fights didn't interest him.
Glory days over
But those old fights define Wisconsin, economically and politically. It's as though our leaders are historical reenactors at Old World Wisconsin. They fire their muskets and shout the old-time shibboleths. Most of this is just spectacle -- not really connected to resolving Wisconsin's precarious economic position in the 21st century. But old habits don't easily die.
Looking back at old glories, Democrats embrace the unions. Indeed, nothing rallies the base like a pledge to repeal the union-gutting Act 10. But unions are a declining force and face a questionable future in an era when worker-filled assembly lines are disappearing. Nationally, only one in nine workers is a member. In Wisconsin, union membership plunged from 33.5% of the non-farm workforce in 1965 to 12.4% in 2013, according to the economists at the Unionstats.com website.
The future is not bright. The expanding IT field, with its mix of collaborative teams, creative work and 1099 workers, seems particularly ill-suited to old-school unionism.
Republicans, meanwhile, embrace big business, especially traditional manufacturing, and have decisively tilted the state's tax, regulatory and development initiatives to its benefit. That's a king-size problem. Manufacturing jobs may have led Wisconsin's modest recovery from the Great Recession. And Wisconsin does rank with Indiana as one of the top two industrial states in the nation. But Wisconsin's glory days of manufacturing have decisively passed.
In 1979, manufacturing and its high-paying unionized work accounted for 33% of the jobs in Wisconsin. By 2012, it was 18%, according to the Center on Wisconsin Strategy (COWS).
Reality is that Wisconsin never recovered economically from the crushing recession of 1981-82. The bloody harbinger of Rust Belt de-industrialization, it laid waste to the huge manufacturing base in the eastern half of the state that runs from the Fox River Valley through Milwaukee, Racine and Kenosha and out to Janesville and Beloit.
Independent observers from both the left (Center on Wisconsin Strategy) and the right (Wisconsin Taxpayers Alliance) agree this recession was the turning point for the Wisconsin economy. "If you look at the numbers, that's when everything changed," says Dale Knapp, the WTA research director.
'Same old industry mix'
Kay Plantes, a former Madison business consultant, says Wisconsin started hemorrhaging corporate headquarters to out-of-state acquirers, who often closed Wisconsin plants and moved high-paying managerial jobs out of state.
"Manufacturing was devastated," says Laura Dresser of COWS. "Nothing has looked as good as 1979 for [narrowing] racial disparities and for the median worker wage." Indeed, in 1979, the median wage of a black worker in Wisconsin was 94% of a white worker's; in 2012, it was 61%, according to COWS.
Knapp points out that Dairy State wages were a little below the national average prior to the 1981-82 recession. "After the collapse of manufacturing, everything shifted. Now average wages are 10% to 12% below the national average."
Decades later, little has changed. The state's industry mix is pretty much the same, especially in eastern Wisconsin, says WTA President Todd Berry. "The folks who are surviving and remaining profitable are becoming more and more lean, so you wouldn't expect them to be creating a lot of jobs."
Berry says that manufacturing is leading the way on job growth "because there's not that much growth going on elsewhere."
"I don't want to trash manufacturing," Berry adds. "We have a lot of good, established firms here that have adapted and changed. But the fact is, we have the same old industry mix."
Wisconsin's outdated economic strategy may have reached its nadir when it was reported that the state's economic development agency approved a $6 million tax credit for Ashley Furniture Industries, even though the home furnishings giant gave notice it may lay off half of its nearly 3,900 Wisconsin workers. The company subsequently said it really plans to hire more workers here, despite earlier telling the state otherwise.
Knapp says the state's old industry mix still defines the current economic policy: "You think about manufacturing and the old Wisconsin way, and we're still hanging on to it."
More attention should be paid to technology, he argues. But when the Legislature enacted tax credits early in the administration of Gov. Scott Walker, "they went to manufacturing and to [relieve] corporate taxes, essentially," he says.
Moreover, the tax credits were aimed at existing companies and not at startups. "Then when they realized they had more money [in the state treasury], they effectively eliminated the corporate income tax for manufacturers and farmers," Berry notes.
"Think who wasn't helped by that -- it was health care, software development and technology," he says. "Anything that is growing they didn't help."
Berry would get no argument from Madison techies.
Tech grievances
Mark Bakken, 49, is a leader in the new Wisconsin economy. His Nordic Consulting, which counsels medical facilities on optimizing Epic's electronic medical records, has proved a huge success. Nordic's revenues this year are expected to hit $120 million just four years after the company launched. The company's workforce totals 430, including 190 in the Madison area.
"Tax credits are worthless," Bakken says. "They're just handouts. They will not sway one person on whether or not they're going to invest in a startup."
Bakken, who is a serial entrepreneur, explains that investors put their money on the strength of a company's business plan and the savviness of its management team. "If there happens to be a freebie from the state, great. But it's a freebie," he says. "I've personally invested in 15 different startups. I'm not doing this because of some crazy law."
But this "crazy law" ranks high on the list of pro-business accomplishments claimed by the Walker administration and by Wisconsin Manufacturers & Commerce, the state's preeminent voice of big business.
It's also not the only example of how the Capitol's business agenda differs from the tech agenda. At $25 million, the long-delayed state venture capital fund proved much smaller than what tech proponents argued the state needed to deal with the dearth of investment capital for startups.
The fact that biotech companies aren't eligible for funding -- anti-abortion lawmakers blocked their participation because they feared they might use stem cell lines derived from human embryos -- is another major tech grievance.
Biotech leader Kevin Conroy, head of Exact Sciences, which has developed a breakthrough noninvasive method for diagnosing colorectal cancer, says legislative hostility has helped destroy the inside track that Wisconsin researchers once had in looking for life-saving medical breakthroughs through stem cell research.
"Wisconsin is where stem cell research started, yet we have only two companies, as far as I know, involved in the stem cell business," he says. California and the East Coast, meanwhile, now have "hundreds" of stem cell companies.
"It's frustrating that we don't take something started in Wisconsin and target it as a major area of economic growth," Conroy says. "Instead, it's been exported to California and to the East Coast without a significant amount of economic value returned to Wisconsin.
"How many times are we going to allow that to happen?" he asks.
No help from legislators
Conroy has strong ties to Democratic politics and is a bit of an anomaly for that reason. Young tech leaders tend to treat state politics as if it has a radioactive glow.
Ald. Scott Resnick, vice president of Hardin Design & Development and a 2015 mayoral candidate, makes the same case as Conroy, grumbling that the state's decision to exclude biotech from eligibility was totally political. What's more, he gripes, neighboring Michigan's venture fund is eight times larger than Wisconsin's, at $200 million.
"You just roll your eyes and say, 'Why even bother?' That's why many of my peer entrepreneurs won't go to the city or state for help," says Resnick.
"It's becoming such a disheartening situation," he adds. "I don't see one legislator who I can say speaks for the tech community."
In 2008, tensions between the new and old Wisconsin economies blew up. Epic executives, led by founder Judith Faulkner, objected to WMC's political operation spending close to $2 million to elect a conservative state Supreme Court justice. Epic even threatened to stop working with vendors who supported WMC's agenda.
The fracas highlighted the fact that WMC's strong support of conservative candidates is at odds with Wisconsin's new tech magnates. For example, Bakken of Nordic Consulting is supporting Mary Burke for governor. Bill Linton, founder of Fitchburg's Promega biotech, has backed Democratic candidates like Tammy Baldwin. Faulkner has backed Democrats as well.
These are all growing companies. All have national profiles, and international standing in Epic's and Promega's cases. Promega just broke ground on a new $30 million assembly plant on its Fitchburg campus, which follows the opening last year of a $120 million high-tech manufacturing plant. Nordic has quickly jumped into the ranks of the top 100 health IT companies in the U.S. Epic's workforce now surpasses 7,400, making it one of the largest state employers.
And tech jobs are good jobs. The average Wisconsin tech salary was $68,400 in 2012, according to the Tech American Foundation. That was 71% higher than the average Dairy State private-sector wage.
How do old-line manufacturing wages compare? They've been stagnant for 30-plus years, despite sizable workplace productivity gains. Using inflation-controlled dollars, COWS says the average 1979 hourly wage of $20.60 compares to $19.75 in 2012.
The road to the future would seem clear, but not to the people with the loudest voices at the Capitol. This is a problem for Wisconsin in the 21st century.
Political agnostics
"For the most part politics seems like a crapshoot and doesn't really matter," says Skievaski, who probably speaks for many in his generation. That mashup of millennials and techies has yielded a cohort of political outliers. They don't fit the rigid left/right typology of contemporary politics. And they are deeply suspicious of politics as a result.
Skievaski, who admits he isn't politically active, describes himself as socially liberal and deeply entrepreneurial. In the old political lexicon, this does not compute. The millennials he works with are political ciphers as well.
"I can't tell you any of their party affiliations," he says. "I don't think any of them would say they're Democrat or Republican. I think they'd be offended if you called them one or the other."
By training, Skievaski has his feet in both ideological camps. Studying economics at Arizona State, he became immersed in the hands-off libertarian perspective on economic growth, but when he earned his master's at Boston University he became schooled in the Keynesian belief that government should intervene to keep the economy humming.
During his nearly three years at Epic, he says he handled a variety of jobs, including product pricing and lecturing his colleagues on health-care economics. Post-Epic, Skievaski has been a whirlwind of multitasking entrepreneurialism -- helping launch 100State and 100Health, selling a niche humor book aimed at the medical-cost coding community, licensing communications software (Breadcrumbs) to businesses, and teaching economics at Madison College.
Skievaski exhibits the "pragmatic idealism" that cultural commentators like Morley Winograd say typifies the millennial generation (roughly 18- to 33-year-olds). This puts him at odds with the ideologues who personify the ruling boomer generation. As a group, millennials push the "socially liberal" button and are famously supportive of gay marriage, notes columnist Joel Kotkin, who spoke at the May conference of the Madison Region Economic Partnership. But Kotkin notes they're also inclined to support local "bottom-up" solutions and be suspicious of "top-down" decisions coming from a distant federal government.
Though a political skeptic, Skievaski is involved in the Vote Project. This is a 100State effort geared to helping millennials request absentee ballots through a series of online prompts.
"If successful, it can curb a terrible process and allow more people like me to vote," he says. "It's like hacking the process. Not in the sense of doing anything illegal, but in finding creative ways to do something seemingly impossible. That's what excites me."
Status quo must go
So is a change gonna come?
The conventional narrative sees Wisconsin ferociously divided between Democrats and Republicans, with a tiny number of uncommitted voters spinning the roulette wheel on Election Day. "Republicans are more red than ever. Democrats are more blue than ever," says UW-Madison political scientist Don Downs.
Money is a partial explanation for Wisconsin's fiercely revanchist politics. The old chieftains, like so many Afghan warlords, fill the campaign purses and hence call the tune.
In the 2012 state elections, business and labor sources accounted for two-thirds of the total $16.5 million in political expenditures, according to the Wisconsin Democracy Campaign, a watchdog group.
"It's real easy for both parties to stay aligned with the old alliances," says Tom Still, president of the Wisconsin Technology Council. "Those are folks they've always felt comfortable with and drawn support from. But they're not necessarily at the forefront of shaping the new economy."
Downs says both parties are gripped by "a reactionary, status quo impulse."
Republicans, for example refuse to acknowledge that society has pivoted on gay marriage. Democrats remain steadfast to the declining union movement. "You're dealing with a broader issue of human psychology," Downs suggests. A lot of people hold tight to their beliefs despite the ground having shifted from under them."
And that's a key point. Disruption isn't just an economic phenomenon.
American history is dotted, Downs notes, with transformative political shifts. The collapse of the Federalists in 1800, the rise of Jacksonian democracy in 1828, the Civil War's recasting of the national purpose, the Populist defeat in 1896, the rise of the New Deal in 1932.
And the Wisconsin impasse? "Something has to give," Downs says, adding that a political realignment is even possible.
"There's just too much pressure on the system," Gurda agrees. "But I'm not sure how or when it will break." He thinks change isn't possible until after the 2020 census, when reapportionment can undo the structural rewiring the Republicans performed after 2010 to protect their legislative power base.
In terms of millennials, Kotkin figures it will be five to 10 years before they'll be positioned to start calling the shots.
Let's hope big change is coming.
Thirty-five years into a dispiriting economic slide, Wisconsin sorely needs to shake off the dead hand of the past. This will take a massive generational shift in economic and political leadership. The good news is that it's beginning to reveal itself.
