More than 150,000 employers in Wisconsin faces the same deadline.

So, the question arises: why don’t we have a Wisconsin jobs report out there for Q1? It’s been two weeks since the department had that data. I assume they have a computer that can add up the numbers in the reports from employers. So what’s the hold-up?

In the past, the federal government has prayed over the numbers, which slowed their release by a couple of quarters. Why? This is state gathered data. Why wait for the feds?

It is also all-important data. The American Dream is now a good job, so all public policy on economic development revolves around job creation, as it should. Policy makers need to jobs information in real time, not quarters down the road.

In the political arena, job creation has become THE issue in the Wisconsin recall elections coming up in 2½ weeks. The union crippling Act 10 was supposed to be THE issue, but it’s not a winner for either side, so jobs resurfaced as THE issue.

Our monthly report from Serigraph couldn’t be more clear. We reported 418 employees for the payroll period that included March 12, including several part-timers.
We are at a stiff 9.8% UI tax rate on the first $13,000 of income for each employee, a rate jacked up to pay off a mountain of UI debt to the feds. That’s results in a UI tax $402,000 for the quarter, a bigger burden than our state corporate income tax.

This heavy hit means that, if anything, employers would under-report rather than over-report their jobs totals. Our report to DWD is accompanied by a DVD that contains the name and salary of every single employee. That is required so the department can audit if they choose.

In short, the UI numbers are hard core numbers. It’s bed rock data.

The whole political brouhaha in the state has been over a monthly survey conducted by the federal Department of Labor (DOL). For years, the less reliable survey numbers generally tracked pretty well with the UI census – until mid-year 2011. For Q3 2011, the DOL survey showed a job loss of 8500 in the state. When the real numbers came out recently from the UI census, Q3 showed a gain of 8786.

Of course, that variance was lost in the political dust, but it does show that something has gone kaflooey with the DOL survey. As one economist said, “Put a box of salt on the survey numbers.”

Gov. Walker’s people finally unearthed the Q4 UI numbers, and they reversed the jobs picture. Instead of losing jobs, the state is gaining jobs. That squares with every other economic metric, such as a falling unemployment rate, lower unemployment claims, rising state tax revenues, rising personal incomes, Manpower surveys that show a pattern of increased hiring and an uptick in housing and auto sales.

Of course, the timing for the Q4 numbers was political. But it is also good policy to have the the freshest, cleanest numbers to work with. So, again, why haven’t the Q1 2012 numbers been made public? DWD has had them for two weeks. Someone should get fired if they aren’t released in the next week or so.

The larger sample from the UI census also has the advantage of being a richer report. Unlike the monthly survey, the UI numbers could be broken down accurately by metro area or county. Regional economic development agencies need those numbers.

The public has a right to know how the state and its regions are doing on jobs in the timeliest manner – up or down, politics aside.

Professor Isenberg

At about 1.5 million in population, Southeastern Wisconsin is deserving of a passing grade. The M7 region has been averaging about one high growth startup per month for the last 3 ½ years, or about a dozen ventures annually.

Forty have kicked off with outside investment money since BizStarts Milwaukee started keeping that metric for the region in 2008.

BizStarts doesn’t count them unless they attract professional investment and have the potential to each $20 million in sales or enterprise value.

That generally squares with Isenberg’s contention that it is companies that hit 50 employees in their first year that drive most job growth in America.

BizStarts has just updated its strategic plan for 2012-2015, and it calls for a doubling of that rate to two per month.

“When we accomplish that goal through our network of more than 2200 players in the regional entrepreneurial space, we will deserve an ‘A’ grade,” said Daniel Steininger, president of BizStarts.

“In ten years, we as a region will have launched more than 200 ventures, and with business creation comes job and wealth creation,” he added. ”We are well on our way.”

Professor Isenberg warned against putting entrepreneurs into a proscribed sector or cluster, saying they are often contrarians who “others see as worthless, impossible or stupid.”

BizStarts again squares with his thinking. It supports a wide variety of ventures that spring from a diverse business base in the seven counties of Southeastern Wisconsin.The 40 companies launched in the region have ranged from advanced manufacturing to drug testing, medical devices, software applications, educational tools and pharmaceuticals.

Isenberg urged regional leaders to focus on value creation instead of solely innovation.

His general theme was that the promotion of entrepreneurship is something like “black magic.” An entrepreneurial ecosystem requires human capital or talent, access to markets, public policy leadership, the right culture, support organizations like BizStarts, and capital.

Steininger said the region is well on is way to developing an ecosystem that supports entrepreneurs, but still lacks sufficient early stage capital.

Jeff Fitzgerald

The impact of the election on Act 10 may be larger in the minds of some voters than political realities portend.

That is true even if the Democrats take back the state Senate and the governorship, because it takes a majority in both houses and the governor’s pen to make or reverse a law.

And, whatever happens on June 5, Jeff Fitzgerald will still be speaker of the assembly. He won’t be speaker after January 2013, because he is giving up his assembly seat to run for the U.S. Senate, but he will be speaker until then.

While he and the Republicans control that body, there is no way they are ever going to agree to undo the key elements of Act 10, especially the limits on collective bargaining at the state and local levels.

Further, with a 20-seat margin going into the fall elections, it is highly unlikely that the Democrats will regain control of that chamber in this cycle. The coattails of Barack Obama may or may not be long in November, but they need to take away 10 more seats. That’s a very tall order, especially since the GOP-controlled legislature wrote the district maps to their advantage.

Nor will there be another recall that involves the assembly. That house is mostly immune to recall, because the seats are only for two-year terms, and members must be in office for at least a year before recall process can start. Unions and Democrats could launch a recall of Republican assemblymen in 2014, but why do that when they are up for reelection in November 2014 anyway?

Thus, Act 10 looks to be around until at least January 2015, the earliest a Democratic majority could take over the Assembly.

Meanwhile, the savings from the escape from collective bargaining continue to mount. They have been estimated at more than $1 billion already in the 3000-plus units of local government. As that total climbs, and it will climb, the electorate will become more interested in its durability.

The first round of savings came from cost shifting to state and local employees in the form of higher contributions to health and pension plans.

A second round came from bidding out health insurance in school districts. Some school districts had reaped that saving by leaving the expensive insurance plan affiliated with the state teachers union years ago. But most hadn’t made the simple move of bidding out their health insurance because it had been bargained in their contracts. Under Act 10, they have been emboldened to do so.

Some are even going to self-insurance plans, which can mean added savings.

A third round of major savings has just begun. That is the move to consumer-driven health plans (CDHP), under which high deductibles are offset by health accounts in the name of the employee. Four of 42 school districts have made the move, and so have six of 72 counties. Four national studies have put the savings from getting incentives in place at 20% to 30%.

A fourth round of major savings won’t be far behind. The West Bend School District has already begun an analysis of putting in an on-site health clinic, because they have watched major corporations lead the way on that new business model for the delivery of health care.

In Wisconsin, major corporations like QuadGraphics, NML, Briggs & Stratton, Kohler and MillerCoors have installed proactive primary care. Once again, typical savings are huge, ranging from 20% to 30%. Company doctors are motivated to find the best value for treatments beyond primary care, and they work to keep company workers out of expensive hospitals.

In summary, a stampede has been unleashed in the management of public employee plans, mostly with no harm done to the quality of health care. Indeed, the argument can be made that the new model delivers better health care.

Could these massive savings and fundamental change in benefit management been accomplished with collective bargaining been in place? Highly unlikely. Change-resistant unions give ground only slowly.

So, whether Gov. Scott Walker survives his recall, or whether the state senate, now in a dead tie at 16-16, flips to the Democrats, Act 10 is going to get a chance to prove itself for at least more three years.

The campaigners will dodge the dynamics of Act 10 over the next three weeks, because the public is split pretty evenly and pretty decidedly on the merits of collective bargaining through public unions. Walker, Tom Barrett and the campaigners for four senate seats will talk job creation, education funding, debts and deficits.

But, be not fooled; Act 10 is dominant issue. It caused the political earthquake in Wisconsin. Voters will be animated by their like or dislike of Gov. Walker and the tactics he used to pull off Act 10, by their like or dislike of the recall process and by other issues, but it is the contents of the act itself that will be driving most voters’ decisions.

They are right. It is a big deal here and for the nation. Nothing less than the solvency of government at all levels is at stake.

As for Fitzgerald, he is running third of fourth in the polls for the GOP senate nomination, but did come close to winning the endorsement of his party last weekend because of his championing of Act 10. Whether he wins or loses, his shadow will hang over Wisconsin politics for a long time.

The whole premise of the recall was that Republican Gov. Scott Walker over-reached with Act 10 when he emasculated the unions by stripping them of most collective bargaining rights, requiring annual recertification of union standing, pulling the plug on union dues collection and raising contributions for pension and health care benefits.

Now, though, with the polls showing very divided public opinion on the union issues, they are no longer in the center ring of the recall campaign circus. Here are findings on the ambivalence toward Act 10 from a recent Marquette University poll:

• 73% favor its increase in contributions by public employees toward pension and health costs.
• 46% say job education is the state’s biggest political issue, while 25% say it is defeating Walker in the recall and only 12% cite the restoration of collective bargaining rights.
• 44% have favorable view of public employee unions vs. 40% unfavorable.
• 49% favor collective bargaining for public employees and 45% oppose.
• 52% favor a special session of the legislature on restoring bargaining rights vs. 39% opposed.

In short, there is not a lot of political gold to mine on either side of the union issues. Ergo, other issues are jumping to the forefront of the campaigns for governor and four state senate seats now held by Republicans.

Democrats are attacking Walker for anemic job growth, even though Democrats Barrack Obama and Milwaukee Mayor Tom Barrett also bear responsibility for economic development. It is the right issue – for a general election, but not a recall. Else President Obama would also be up for recall.

Other issues are also getting play. The Democrats are concocting a “war on women,” and they are decrying the deep cuts to education that Walker used to balance the deep deficit handed to him by his Democratic predecessor.

Less visible in the debates are new laws passed by the Republicans on socially conservative issues, such as concealed carry of guns, voter ID, anti-abortion measures and the castle doctrine.

So, summing up, Act 10, the very issue that animated the recall and almost two million signatures gathered has been muted in the campaign. What gives?

In the process, normal governance has been upended, citizens don’t know who’s in charge and we face the possibility of a regime change mid-stream in a four-year election cycle.

Should Walker be voted out, a whole new cabinet will be drafted and installed on short notice. The state’s budget-making process, which starts this fall for 2013-2015, will start from scratch. It will be pandemonium at worst, unsettling at best.

Citizens in Wisconsin have almost no idea on what laws and tax regimens they will be operating under for the next couple of years. Would a Democratic winner raise taxes on the well-off to balance the budget if he wins? They have hinted at that option. They have talked about restoring education cuts, without saying where the money will come from.

Will business and property taxes go back up? Hard to know.

One thing is certain. The turmoil and uncertainty don’t help the business climate and therefore job creation.

Would we not be better off with a referendum solely on Act 10, under which the singular and divisive issue of union powers could be decided? That’s how Ohio and Switzerland do it. It’s relatively easy to haul a new law in front of the voters in those two jurisdictions. They decide the divisive issue of the day without disrupting the whole flow of government.

Of note, when the collective bargaining issue went to referendum in Ohio last year, the citizens rejected Act 5, the Republican bill curtailing union powers, by decisive majority of 63%-37%.

The polls in Wisconsin suggest a referendum here would have a closer outcome.

In any case, the time may have come to consider more direct democracy in Wisconsin. Our recall process is busted. We need to move toward our constitution to a referendum process so the people can directly decide the big issues.

A major benefit of direct democracy would be to reverse the impact of the obscene amounts of money poured by both sides into our elections, especially this recall election.

Wouldn’t we rather have the citizenry decide major issues than bought-and-paid-for politicians?

Take Wisconsin. Everything was cut in the current two-year budget – everything except Medicaid. Education was cut at all levels: university, technical college and K-12. Environmental programs were throttled back. Aids to municipalities were slashed. The Medicaid budget rose more than a billion dollars in a budget where state revenues were $14 billion. That jump in expenses crowded out just about everything else we care about in our society.

Total state and federal funding for Medicaid in Wisconsin is now running at $7 billion a year, with the state sucking up about $2 billion. Back in 1998, one in 12 Wisconsinites were in BadgerCare (our name for Medicaid); now it’s one in five. That’s a staggering 1.2 million people.

Even that enormous budget increase for Medicaid proved insufficient. Midway into the two-year budget cycle, the state is still running in the red because Medicaid needs another $129 million by June 2013.

So, what to do?

The Republican response in Wisconsin is to push people off Medicaid. The latest rendition would eliminate 17,000 from the rolls and raise premiums for a lot more. The Republicans wanted more, but the reductions had to be negotiated with the federal government, run by the Democrats.

The Obama team’s response is to fight enrollment cuts, add more poor people to the rolls under ObamaCare and, for the most part, use debt to pay for the cost over-runs.

It occurs to neither party to bring management expertise to bear. It never occurs that the Medicaid economic model is busted and is therefore unsustainable. They don’t look to successful reforms in the private sector for guidance. It doesn’t dawn on them that innovation is a necessity. They miss the root cause of their problem, the hyperinflation of medical costs. Their inaction is drowning them, even though they have the advantage of government-imposed price controls.

Here are a few just dead plain obvious first steps to fix the busted Medicaid model:

• Turn the program over to the 50 states. There’s no way Medicaid can be boldly managed when there is joint federal and state control, where every innovation has to be negotiated until it dies. Send the federal money (about 60% of the tab) to the states in bloc grants so innovation can flourish.

• Set up incentives and disincentives to drive out the rampant abuses in the dysfunctional Medicaid system. When care is free (when anything is free) it is over utilized. Give the poor Americans a health reimbursement account (HRA) that they can draw against for care. Let the account build up year to year if recipients control their spending. No more will recipients call 911, order an ambulance to the ER for a sore throat – not when it’s their money. (More than one-half of U.S. companies, including the giant health care companies and insurers, use such plans. This is proven stuff.)

• Where there is a critical mass of Medicaid recipients, put in free primary care clinics to keep people healthy and out of expensive hospitals.

This is not rocket science. It’s not political science (obviously not working). It’s all about management science. It’s about managing behavior change on the part of recipients and providers.

That’s something we’re pretty good at in this country – at least in the private sector.

If the politicos would enable innovative management, they wouldn’t have to cut as many poor people off the rolls.

Dr. Shaker

In the last decade, when Carlos Santiago was chancellor of UW-Milwaukee (UWM), he opined many times that a region needs to do at least $300 million in academic research and development to be considered a major R&D player. It seemed like a mission impossible.

Well, we have arrived. In 2010, institutions in the M7 region of southeastern Wisconsin collectively exceeded $300 million. Here’s the breakdown:

• Medical College of Wisconsin (MCW): $192 million
• UWM: $71 million
• Marquette University: $14 million
• Blood Center of SE Wisconsin: $17 million
• Milwaukee School of Engineering: $4 million
• UW-Parkside and UW-Whitewater at a couple of million a year.

The totals for MCW, UWM and Marquette are new highs, and that momentum creates great promise for the creation of innovation-based businesses and the high-end jobs they create. Big time congratulations to the leaders of those institutions for pushing the research agenda!

The M7 total for academic R&D is now respectable in relation to the $1 billion at UW-Madison, one of the world’s research powerhouses. The combined $1.3 billion in Wisconsin R&D constitutes an industry of its own. Employment in university labs across the state has been estimated at 35,000 jobs, a total that exceeds may other economic sectors in the state.

Also on the positive side, this is one area where the state does well on getting back its fair share of federal dollars. In most other areas of federal spending, we are a donor to other states.

And, good new3s, there is much more to be gained in terms of economic impact and prosperity in the M7 region. The biggest economic impact goes beyond patents and license revenue. It should eventually come from commercial spin-outs from what’s discovered in academic labs.Therein, though, lies a major disconnect.

We don’t get early enough startup ventures from intellectual property developed on campus. That’s true here, in Madison and on most campuses in the country. We’ve got to figure it out. Part of the problem is not enough entrepreneurs armed. Another is not enough early stage capital. We need more of both.

Our campuses are almost all broadening their entrepreneurial programs, offering more majors, minors, business plan contests and programs. The plenty of entrepreneurs are out there already – deal flow in the region is strong — and we are creating more of them each year.

There are plenty of funds in the region. We just spend them on a multitude of projects that don’t create jobs. The funds need redirection. The state has helped with the Act255 tax credits (25%) for startup investments, but more matching funds would be a boost.

Invariably, the researcher with the good idea is not the one to take it to market. Super angels who have money and know-how are the best answer. They can grab a new technology, figure out where it fits in the marketplace, develop a business plan that makes sense, recruit the management team, raise the money and help land the all-important ingredient – customers.

That’s what happened recently with Aurora Spectral Technologies, which spun out of UWM. Super angel Jeff Rusinow and seasoned entrepreneur Tom Mozer were hooked up with researcher Valerica Raicu to bring a better protein microscope to market.

It’s happening right now at the Medical College with Somna Therapeutics. Super angel Tom Shannon and his partner Jeff Harris have teamed with CEO Nick Maris and Dr. Reza Shaker, the inventor, to bring to market a non-invasive device for the control of acid reflux.

Those two launches show we know how to do technology transfer from our campuses. We have the model.

The region made a run at a similar model in the last decade through an organization called TechStar, created by five universities and partly funded by state government. It pulled 15 companies out of the universities in just a few short years.

One of them, born at MCW, was Prodesse. It developed a test for swing flu and became a big success with a $72 million cash-out in 2009. It alone recouped all the initial investments in TechStar. Some of the other startups are still in business.

TechStar’s demise in 2006 was caused by a lack of long-term support and vision at the state and regional levels. Let’s not make that mistake again.

Both the MCW and UWM have revved up their technology transfer shops. MCW President John Raymonds and UWM Chancellor Mike Lovell want to see ventures like Aurora and Somna replicated many times over. They are recruiting faculty who with an entrepreneurial bent.

They know that startups have made Stanford one of the most highly endowed institutions in the world. Its graduates (sometimes drop-outs) become wealthy entrepreneurs and then generous donors. It’s a virtuous circle.
With long term, high level commitment, the M7 region can follow that path and become a whole lot better at getting a bigger return on its $300 million in R&D investment.

The burden for spin-outs rests not alone on the universities, though they could help on the funding side through their foundations. It also rests on business leaders. Shannon and Rusinow have shown the way. Each has invested in a dozen or more startups with the proceeds from their successful startups and exits.

Can’t we clone them in one of our university labs?

Most of the districts that are reducing staff have taken a pass on reforms of bloated health costs – reforms that have already been thoroughly proven out in the private sector.
Those districts shifted 12.6% of health costs to their employees through premium hikes, as enabled under Act 10 passed by Republicans last year 12.6% of costs. That helped offset the cuts to K-12 education imposed by the GOP-controlled legislature, but that’s pretty much as far as they went. They went only from their own end zone to their ten-yard line in terms for benefit management.

They didn’t adopt consumer-driven health plans that couple higher deductibles with off-setting personal health accounts – a plan design now adopted by nearly half of private companies. Savings average 20% to 30% because of more intelligent utilization and purchasing by the newly minted individual consumers.

They didn’t move aggressively to install on-site primary care and comprehensive prevention, wellness and chronic disease management programs. Savings can be as much as one-third by keeping people out of dangerous and expensive hospitals.

Most didn’t go to self-insurance, which smaller corporations are now adopting in droves to harness costs.

Fortunately, there are a few exceptions in Wisconsin, such as the West Bend, Elmbrook, New Berlin and Greendale school districts, which have saved millions through such innovations as going self-insured, raising premiums and adopting consumer-driven plans. Greendale put in an on-site clinic to keep its people healthy.

They have not relied on huge staff reductions to balance their budgets. They got innovative and aggressive in managing benefits. Further, their employees will lose no health coverage. Indeed, they will love their new plans.

The same story has played out at the state level, where the Wisconsin health plan put in the higher premiums, but not much else.

The result is a still under-managed plan for state employees. The taxpayer share per employee, after the premium hike, is an es
timated $13,000, compared to about $8,400 for best practice large private employers. Wisconsin is about $2,000 above the average for four neighboring states for public employees.

The price tag for Wisconsin state employees runs about $1 billion, so there are hundreds of millions to be saved – beyond the cost shifting.

Under Act 10, benefits are no longer a bargainable issue, so all that’s missing is the guts to do what the private sector has already done.

The case can certainly be made for a minimum tax that makes the millionaire earners pay the percentage the average Joe pays. Proposing that move in the name of equity will sound good, even though it doesn’t raise a lot of dough for either treasury. That revenue ineffectiveness is Problem One with that piece of political rhetoric. Nailing the rich won’t balance the budgets.

Problem Two is that the top earners already pay a huge share of the nation’s taxes at the federal level and in states like Wisconsin. Both income taxes are very progressive.

At the federal level, the households with incomes over $200,000, about 3% of payers, paid 68% of the total in 2010. Those below $50,000, about two-thirds of the payers, paid only 8.5%.

At the Wisconsin level, the top bracket of 7.75%, which was raised one point by Democrats in 2009, ranks 11th highest among the 41 states that levy an income tax. Filers with incomes above $100,000, about 10% of total, paid 73% of total personal income taxes.

So, the question arises, how much more progressivity is “fair.”

When all taxes are thrown in, households with incomes of more than $250,000 are paying more than half their income to the federal, state and local governments. Isn’t half enough?

The Warren Buffets and Mitt Romneys of the world aren’t paying their fair share, for sure, because most of their income comes in the form of capital gains or dividends, both now taxed at the 15% rate at the federal level. Than can be fixed by setting the alternative minimum tax at a higher level for people making a million dollars a year, as the President propounds on the campaign trail.

But, Problem Three then comes into play. That is that the political debate is losing what is called “True North” in business strategic planning. True North means setting the organization’s top goals and then working from there, so that all strategies, tactics and activities align in reaching those goals. True North in the United States today is job creation, and dinking around with the tax code distracts from that cause. Indeed, ham-handed changes for political sound bite purposes can do a lot of harm to job creators.

The job creators are entrepreneurs and their investors. So, it makes nothing but common sense to let the entrepreneurs and their financial backers stay at the 15% capital gains rate. Go ahead and raise the rate on investors in public companies if it needs to be part of a deficit and debt reduction package. Put in flat tax of 25% at the federal level for higher earners and lesser flat rates for lower earners. Then Warren Buffet will pay at least the same rates as his secretary, or higher. Eliminate capital gains treatments for people involved in transactions, like the managers of buy-out funds like Mitt Romney was.

Not so incidentally, President Obama and his wife paid 20.5% in 2011 on an income of $788,000, probably a lower percentage than Buffet’s secretary as well. The flat tax or higher minimum tax should apply to the prez, too. (He could voluntarily pay the difference if he feels so strongly about a 30% rate for million-dollarm earners — or near-million dollar earners.)

But leave people launching new companies alone. They are the nation’s heroes. They are doing patriotic work.

Problem Four is that high rates drive out high earners and people with high net worths. Wisconsin does a great job of that. For comparison sake, Minnesota has 21.4% of households with incomes of $100,000 or more, while Wisconsin has only 16.3%. The point is that unreasonably high rates backfire when it comes to raising tax revenue. People move. The missing high earners are paying taxes in other states. (I know dozens of people who have moved from Wisconsin for tax purposes.)

Another part of the political debate over the next six months has to be about Problem Five, the changing rankings of corporate income taxes that have left with the United States with the highest stated rate in the world at 34%. Other countries have dropped their corporate rates sharply, ranging from 12-20% on the other side of the Atlantic. And, unlike most countries, most states here slap an additional corporate tax on top of the federal. In Wisconsin, it’s 7.9%. Not many corporations pay the full 34%, because there are many forms of credits and deductions, but the U.S. still high and therefore loses competitiveness.

It would be entirely appropriate, though, to apply the minimum tax concept to corporations, as well as to individuals. The armies of tax lawyers and accountants at the big corporations find and lobby for every deduction and exemption known to man. Some big corporations, very profitable corporations, legally pay zip or next to zip, while the smaller firms pay full rates. That’s just not right. Either get rid of the corporate tax for all companies — or even the playing field.

Mature companies don’t create a lot of net new jobs, but they maintain the job base and the supply chains that entrepreneurs sell into. We need them to want to expand here. Besides, most economists agree that most corporate tax gets passed on to individuals in the prices of products and services. The major action on tax revenue is always at the individual level.
Republicans aren’t doing enough for entrepreneurs, but the Democrats don’t seem to under their impact on the job base at all. At least, the Democrats in Wisconsin are not saying so on the campaign trail as they lump the innovators with the wealthy. All four governor candidates assailed “trickle-down” economics.

They don’t get that there are all kinds of wealthy people and all kinds of ways to make a buck. Some are born on third base. Some get rich by entertaining or playing ball. Some get rich by playing with other people’s money; they do transactions. Some earn advanced degrees and earn professional salaries. Some write books like the president. But some create new products or processes or business models and start companies that reinvent the economy. They don’t trickle, they rain value on citizens.

They are where True North lies for job creation in the U.S. economy.

Finally, a tax code that points to True North could unite the country. The Democratic campaign theme on taxes is about dividing the country, an adoption of the Rovian wedge politics mastered on the other side of the aisle.

Brian Thompson

Carlos is gone from UWM now, but he did his thing by laying out the vision of a second great research and development campus for Wisconsin. He knew that UWM had to become a great urban university that engaged the innovation economy if the Milwaukee region were to reinvent itself. He saw clearly that the manufacturing base of the city, which had produced prosperity for decades, could no longer carry the whole load.

He knew, as did Chancellor Nancy Zimpher before him, and Chancellor Mike Lovell today, that UWM had to step up.

There were only a couple of patents issued to UWM professor six years ago – rather remarkable for a 127-year-old institution with more than 800 professors. R&D wasn’t part of UWM’s view of itself.

Santiago, David Gilbert, head of the UWM Foundation, and Colin Scanes, vice chancellor of R&D and economic development, made some bold moves to change that picture. They created the UWM Research Foundation. They called for new PhD programs, shooting for a total of 30. They asked the governor and legislature for construction money and cranes. They engaged the business community in creating a culture of innovation, an initiative that has been fully supported by the likes of Rockwell, JCI, the Bader Foundation, the Bradley Foundation, the Blood Center, WE Energies, Badger Meter and A.O. Smith.

They dared to think big.

Soon, cranes will be sprouting over UWM – over a campus for a new College of Fresh Water Technology; a new Innovation Campus for the UWM College of Engineering, which will allow a closer collaboration with the next-door Medical College of Wisconsin, and a new College of Public Health. Two new student dorms have been added to the campus, and a striking new student union is in the works.

As of today, the research foundation has produced significant results in just a short five years: five patents issued and 19 pending; seven license deals struck; four start-up companies out of UWM IP, one of which has received angel funding; and $2.7 million awarded in 44 research grants.

Academic R&D hit $71 million in 2010, a new high. That contributed greatly to a new high for the M7 region of nearly $300 million, almost one-third of the $1 billion at UW-Madison, the third largest research institution in the country.

You can see a reinvented university emerging. You hear the UWM drum beat for innovation.

The major challenge going forward for Gilbert, Lovell, and Brian Thompson, president of the research foundation, will be to turn the growing trove of intellectual property housed at UWM into more prosperity for citizens. Patents and licenses are great, but the real pay-off from a university is startup companies. That’s where wealth creation and job creation come to life. That’s where the taxpayers get their return.

Even UW – Madison falls short on launching companies – relative to its immense intellectual property (IP) portfolio. Technology transfer is still a developing competence.
Some universities are coming to the conclusion that they can do much more in that domain. For example, Ohio State University and Ohio University have teamed up to create a $35 million venture fund to invest in entrepreneurs at their campuses.

Ohio State hired Brian Cummings vice president at the University of Utah, which has led the nation at turning university patents into startups. Utah has recorded 110 startup companies in the last seven years, attracting $300 million in capital. OSU president E. Gordon Gee said moving more university IP into the marketplace “will create jobs, keep talented people in Ohio and attract more people and businesses to a state that clearly believes values research and innovation.”

To that end, UWM is launching a Technology Entrepreneurship Hub. For, without entrepreneurs, IP isn’t worth much. Further, without capital, the entrepreneur can’t get traction. Our Wisconsin universities need to examine the emerging Ohio model.

The authors of a new book, Rainforest, who reveal the secrets of Silicon Valley, contend that it is the network of resources, smart people from different disciplines that makes all the difference in creating a deal-making ecosystem. Such teams combine break-through ideas with market smarts to create new products and companies – and the resulting good jobs.

We have that network growing in the M7 region now, and UWM is marching smartly to the front of that parade.

Apollo in Bangalore

But 8% of the traffic comes from medical tourists from the Middle East, Africa, Europe and the UK. There is “a trickle” from the U.S.

That’s interesting, because Apollo was the test site for a medical tourism experiment by Blue Cross and my company, Serigraph, two years ago. There were no takers, even though surgeries like hip replacements are so inexpensive that we offered them free to any employee who made the 8000-mile trip.

The bundled India price is about $5000 for a new hip, plus $5000 for a travel package that includes high-class hotels. That total is about one-third of the going rate in the states. In the Milwaukee region, the bottom-line, all-in price for a new hip ranges from about $23,000 to $43,000. Mine cost $23,500.

The wide variation on prices in the states demonstrates an undisciplined marketplace – or rather the absence of a marketplace.

The marketplace is at work in India, where only 5% of doctors work for the government at public hospitals for the poor. Most primary care is out-of-pocket to consumers.

The advertising in the lobby of Apollo, a public, for-profit company, is filled with signs, banners and materials to portray the hospital as cutting edge. It advertises a 320-line CT scanner (far beyond what’s needed for daily practice), its first heart transplant in 1995 and off-pump or “beating heart” bypass surgery for more than 90% of bypass operations.

Those facts demonstrate that Apollo is competing, as should any hospital, on quality, not just price. Apollo spokesmen mention often that the Joint Commission International accredits the Bangalore facility and that many of its doctors trained in the west, including at Harvard.

This kind of quality competition from Apollo, however, is nowhere near where leading-edge providers are going in the emerging marketplace in America.

The heart operations at Aspirus in Marshfield, Wisconsin, and the Heart Hospital of Wisconsin in Milwaukee now show patients and payers their low rates for infections, readmits for bad outcomes, deaths and clots.

The Orthopedic Hospital of Wisconsin in Glendale goes further. It shows those metrics – infections are down to 0.2% of procedures. It has even offered a warranty to one large payer. If a surgery goes wrong, the re-do is free. Serigraph will be asking for the same kinds of warranties. That’s our brand of value-based competition.

That’s what can happen in a marketplace when a hospital is confident in the consistency of its outcomes. You don’t give warranties if you have a shoddy product.

Back to Apollo. It displayed a thick brochure on its quality and lean efforts. All the templates were in place and the descriptions about its quality/lean journey since 2009 were there.

Missing, though, was the data on outcomes, as now offered by some Wisconsin providers.

Apollo chooses to compete on its tall reputation, and clearly not on its edifices, standard practice in the pricey United States. Its sign on the front entrance had lost its “O” and read “AP_LLO.”

Apollo doctors’ offices are small. Multiple patients are assigned to rooms, though there are some executive rooms at $140 per day. The emergency room was packed.

Price is the main draw for foreigners. A coronary bypass goes for about $8000, about 20% of retail charges here. Apollo’s concierge service for catering to foreigners has a great reputation.

That’s a great buy if you are looking for price only. But value is the combination of price, service and quality.

The Bangalore hospital would be unbeatable if it published quality outcomes equivalent to those of the specialty hospitals of Wisconsin.