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Original article URL: http://bridgemi.com/2012/11/guest-column-michigan-needs-counterweight-to-autos/

Guest commentary

Guest column: Michigan needs counterweight to autos

By Todd Anson

I love my Michigan. I have spent my entire career in California, but I love my home state. It is painful to watch the state’s economic struggles. She sorely needs a plan.

Thirty years at the epicenter of the tech revolution in California as a tech lawyer, businessman and investor, plus my experience as father of two recent University of Michigan graduates just entering the work force, provide me with a unique perspective.

Gov. Rick Snyder is doing a terrific job with his “Reinvent Michigan” program, but I still see the same crutches that have debilitated the state for decades.

At a recent UM alumni event in Petoskey, where the university presented some of the most promising science under development, the panel of UM experts was “talking autos” by the second sentence and patting itself on its collective back with the $41 million invested statewide in venture capital investments in 2011.

Todd Anson is co-founder of Cisterra Partners, the first company in the world to partner with tech companies to build and own its corporate campuses around the world. A law graduate of the University of Michigan, Anson is a venture investor in California and Michigan and a passionate Wolverine fan.

Michigan’s future cannot be solely — or even mostly — “about autos.” Autos are a bad bet, but they always have been Michigan’s easy bet. Michigan long ago became too comfortable with the ebb and flow of the cyclical auto sector. It never demanded more.

Since the 1970s, each time the sector has rallied from a decline, it has done so with less vigor. The truth is the auto sector has been a bad bet for Michigan since the 1970s, as the sector has globalized, drifted to the South and automated itself from 416,000 jobs in the 1970s to 139,000 jobs today in Michigan and from 922,000 to 602,000 jobs nationally.

So what has Michigan done in response? Mostly, cross its fingers and pray. And wait. It certainly has not acted strategically.

The paltry $41 million in venture capital investments last year is an absurd sum for a state desperately in need of a future. It is modest by the standards of many personal investors.

In 2012, roughly $7 billion was invested nationally each quarter. California, ground zero for VC investing, invested $5 billion, or 70 percent of the amount invested in the U.S. Michigan’s $41 million ranked it 28th.

Tech entrepreneurs, often under the age of 30, personally invest more than Michigan’s $41 million in states like California.

What’s lacking in Michigan? The environment is not conducive to entrepreneurship because venture money is not available in state and the state has lacked the foresight to benchmark itself against its competition. Why hasn’t Michigan committed to getting on the venture investing map? Why doesn’t it commit to moving the state from 28th to 15th over a five-year period and into the top 10 within 10 years? A commitment like this from the top would provide direction from top to bottom in the state for decision-making that supports entrepreneurship. Ideas need capital to commercialize.

Michigan needs to benchmark the balance of its economy against autos. It needs to commit to a plan that delivers new economic impact to the state equal to the auto sector in 10 years. Doing so will be tough. It will require “doing what it takes” to jump-start new sectors and to say no to the sector that “brought it to the dance” (autos) when it comes with its hand out.

The government saved General Motors. It’s likely the private sector had a solution, too. Michigan should leverage the boost given it by the federal government by committing to a 10-year plan to create and jumpstart the economy of tomorrow- the economy to complement autos.

It will start with some brutal honesty about how the state is really doing and where its future lies.

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan.

4 comments from Bridge readers.Add mine!

  1. Charles Richards

    Mr. Anson places far too much faith in planning. The venture capital industry in California is the result of naturally occurring, unplanned events. It was not the result of planning. It is relatively easy to observe what has happened in the past and understand how it occurred. It is a far more difficult task to specify in advance what should be done to achieve success in the future. Michigan has had little success in investing in new industry, as witnessed by the failures of battery, solar and other “green” ventures. It is true that Michigan has attracted very little venture capital, but that is because it lacks the critical mass of highly educated, talented individuals that is required. After all, it is no accident that he spent his career in California rather than Michigan.

    1. Todd Anson

      Charles-
      I could not disagree more fervently. I did not merely observe the California experiment, I participated on the front lines of it, let my entire career ride on it it and lead various aspects of it. If what you say is true, that the Silicon Valley is nothing more than the most incredible sequence of haphazard events then how is it that it has been replicated in the East Bay, City of San Francisco and the peninsula as well as “exported” to San Diego, Orange County and now, even LA? How about Boston? DC? Austin? NY? As one who participated directly in the expansion I can assure you that these California and other cities have aggressively and thoughtfully planned to make their marks in the sector and have.

      Tech industries tend to cluster, these clusters tend to spawn new technology and new companies. So, how about Michigan’s planning to make its mark and then doing the things that need to be done to get the ball rolling? Do you suppose that if UM mandated that any VC firm looking to “partner” with it and commercialize technology evolving out of the university must have a fulltime Ann Arbor presence that VC’s would start to populate Ann Arbor? Do you suppose that a VC with an empty plate whose career success depended upon successfully commercializing new ideas discovered in Michigan might work pretty hard (and take some risk) to find new ideas to stand behind to fill up his plate? Do you think that ideas generated close to the VC money sources get more attention? Have a better shot at being backed? The answers are all “yes.” This is not simple stuff. Neither was placing a man on the moon, and this is far easier than that was. It starts with a desire to first be a factor, then be a significant factor and then to be great at it. My piece is not intended to be “The VC Manifesto.” It is intended to underscore the point that the auto sector, as important as it is to Michigan, is shrinking. Make a commitment to something else! And be audacious about it, as Michigan was in the first half of the last century.
      Todd Anson

  2. Neil

    There are venture capital funds in Michigan. Auto suppliers and the defense industry have been diversifying since 2008. Entrepreneurship is now generally part of the curriculum in many Michigan colleges and universities, but not in grade or high school. In K-12 entrepreneurship is taught through Junior Achievement. But Junior Achievement is not a class offering or after school club in many Michigan K-12 schools.

    So, the counterweight to autos is there, but maybe the boost it needs is not all in venture capital funds.

  3. Jeff

    Mr. Anson. there was no private sector answer to saving General Motors. GM tried that first.

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