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.
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.