David Michael Miller
Your head could explode from the cognitive dissonance caused by Wisconsin's recent economic news. It's the confluence of — and disconnect between — the very old and the very new.
On one hand, the rising health-tech industry seemingly got a huge boost with the report that Epic, the Verona-based electronic health records giant, would soon be welcoming outside app developers to work in its vast system of hospital and physician groups. (See related story on that perhaps overhyped claim.)
On the other hand, the state's conservative leadership busied itself with settling an old blood grudge with organized labor. The Legislature took up a so-called right-to-work law that eviscerates the already weakened and increasingly irrelevant private-sector union movement in Wisconsin. (Only 8% of private-sector employees are unionized.)
These two events, so jarringly at odds, border on the crazy-making when it comes to imagining a coherent strategy to revive the struggling Badger economy. But that's Wisconsin, a state at war with itself.
"They're having a 20th century argument in the 21st century," Daniel Kennelly, a city of Madison economic development specialist, says of the Legislature's debate over right-to-work.
Local tech leaders were left scratching their heads. Right-to-work supporters at the Capitol say the move would strengthen the state economy. Young tech entrepreneurs don't see it.
"As an employer, I can tell you this has zero bearing on my decision to stay in Wisconsin or to hire more people," says Dan Wilson, founder of Moxe Health, which devises health data integration solutions. "My industry — health IT — is not going to be affected by this."
"All the new companies aren't really part of that world," agrees James Lloyd, a co-founder of Redox, which also does health data integration. "There's no such thing as a software developers union."
And ditto for Brad Grzesiak, co-founder of the Bendyworks software shop. Grzesiak is worried, though, that the anti-union groundswell will hurt the image of Wisconsin among the generally left-leaning programmer community, saying: "That will make it harder for me to recruit people."
Steve Faulkner, a co-founder of Murfie, the music storage and sales service, has a novel take on the right-to-work showdown. It's something, it's safe to say, you won't hear from the state's old school business elite. Faulkner sees unions as organizers of human capital just as corporations are organizers of financial capital. Both pool resources together to corner a market, he points out. "That's what capitalism does."
Companies are always setting up exclusive agreements, he says, "So if the people you work with decide to set up a union, I think that's reasonable."
Free-market advocates should oppose right-to-work legislation, Faulkner argues, because it represents government manipulating the human capital market "to give power to capital."
But who cares what guys like him have to say?
Ignoring the new kids
It's tempting to dismiss the comments of the techie execs as inconsequential because they represent startups and boutique businesses with small workforces. They are midgets compared to the titans of Wisconsin industry who have promoted right-to-work through their powerful lobbying arm, Wisconsin Manufacturers & Commerce.
But ignoring the new kids is a big mistake.
"In every single state, in every single metro area, young firms create the most jobs. That's true everywhere," says Dane Stangler, vice president of research and policy at the Ewing Marion Kauffman Foundation, which advocates for startup businesses.
The tech component has certainly paid off in Dane County.
It's fueled, of course, by homegrown Epic and its rise as the dominant electronic health records vendor in the country. The workforce tops 8,000. Revenue in 2014 reportedly hit $1.8 billion. And because founder Judith Faulkner insists on running the entire operation through its fairyland campus in Verona, the region has boomed economically. Epic alone accounted for 27% of all the new jobs created here from 2001 to 2012, according to Kennelly.
The city staffer's presentation on the Madison area's economic dynamics makes a persuasive case that the Dane County metro area is impressively outperforming the rest of the state. With 10% of the state's population, Dane County accounts for 12% of the state's jobs, 15% of its economic output and 16% of the businesses created since 2000 and 73% of the net new jobs created in Wisconsin between 2004 and 2014.
The Milwaukee Journal Sentinel diced the numbers in a different fashion and came to the same conclusion: Dane County led the state in job creation between 2003 and 2013, with nearly 20,000 new jobs. That's three times as many as second-place Waukesha County. Milwaukee County lost 19,000 jobs in the same period.
For anyone who still sees Madison as a cossetted government town — well, they need to think again. Kennelly's report shows that the private sector is driving job and wealth creation in Dane County. "Our government workforce is effectively flat," he says.
Even better, the growing industries here support good-paying jobs, namely in the biomedical/biotechnical and information technology business clusters.
"The Madison area is really an economic engine for Wisconsin," Kennelly says. "State policymakers sometimes like to pick on Madison. A more constructive approach would be to say: 'What are they doing right, and how can we replicate it in other parts of the state?'"
Where is the puck going?
Kennelly shouldn't hold his breath waiting for that to happen.
Reality is that the Legislature's focus on right-to-work and on mining in northern Wisconsin last session seemed to suck the oxygen out of the room for anything else.
There are modest strategies that might fire up the tech economy across the state and fan the flames even brighter in Dane County. But they seldom get a hearing.
"Wisconsin needs to take a look at noncompete laws," says Stangler of the Kauffman Foundation. He says state laws here are "fairly restrictive" and keep scientific and tech workers from striking out to start their own companies. "This is a major issue for entrepreneurs," he says.
Tom Still, president of the Wisconsin Technology Council, has a laundry list of low-cost steps that could help power up the 21st century economy. This includes creating a "benefit corporation" entity that might appeal to startups that otherwise would organize themselves as nonprofits.
The Legislature could act to encourage "the sharing economy" to spread across the state in new and varied forms other than just ride- and room-sharing, he says. Even altering the fee schedules for unemployment and worker's compensation could help cash-pressed startups, he suggests.
For Still, it comes down to the Legislature: "They need to focus on building jobs where job growth is expected — not where old sectors are limping along," he says. "It's the old Wayne Gretzky 'skate to where the puck is going to be, versus where it was' philosophy."
Catching the healthcare wave
That is precisely why the report of Epic opening the door to apps caused a stir. A lot of smart people think that Wisconsin, and Dane County in particular, is well situated to catch the next big wave in healthcare: gleaning treatment insights from terabyte mountains of medical data and devising apps that simplify medical care and empower consumers.
Bakken, who took Epic-focused Nordic Consulting to 500 employees and $100 million in revenue in five years, has now turned to venture investing in digital health startups. "I can't emphasize enough that Wisconsin has national credibility," Bakken told the Wisconsin Innovation Network last month.
Epic had put Madison and the state on the map, he said. The fact that every Epic client — including elite institutions like the Cleveland and Mayo clinics and Kaiser Permanente — send their staff to Verona for training is an extraordinary boost to the visibility and viability of the local tech scene.
One would think such opportunities would penetrate the granite walls of the Capitol. One would be mostly wrong, and the exceptions should be noted. A painfully modest, state-created $25 million venture capital fund approved in 2013 at least planted the tech flag. And the frequently criticized Wisconsin Economic Development Corp. just promised up to $9 million in tax credits to Exact Sciences, a breakout Madison area biotech company that has pioneered a noninvasive test for colorectal cancer.
Such moments of forward thinking are rare. We are left instead with the champagne-popping celebration over the breaking of the unions...and the barely audible tiptoes of the pols skulking away from last session's cause célèbre: massive open-pit mining in northern Wisconsin.
What were the opportunity costs of WMC and the Republican leadership going all out to advance a quintessential 19th century resource-extraction industry only to have the project almost predictably collapse a few years later?
If you're concerned about advancing the 21st century economy in Wisconsin, it's enough to make your head explode.