Why do you think the Heartland gets short-changed in the national dialog?
The ranks of pundit and journalist ranks tend to be dominated by people who operate on both coasts. They gravitate to the larger media markets, to the centers of financial and political power. They want to play on the big stages, and they end up becoming part of big stage dynamics. Because they seldom venture to the Midwest, to the Heartland, except during primary season every four years, they make assumptions that people where I live think like they do. By doing so, they miss the pulse of a large part of the nation. I take that pulse every day, and I would like to convey the straight talk from the Midwest to audiences here and elsewhere.
Does the Midwest get short-changed in other ways?
Federal dollars flow out of the Midwest to other parts of the country. Wisconsin, for example, gets back only 86 cents for every dollar sent to Washington D.C. It isn’t like the Heartland has fewer problems that other parts of the country. Cities like Detroit, Cleveland, Buffalo and Milwaukee are the poorest in the United States. We deserve our fair share of federal dollars coming back.
Give us another example.
Similarly, 40% of the nation’s venture capital is raised in the Midwest, from pension funds and other portfolio mangers, and only 4% is invested in new ventures in the region. Well, there are a lot of smart, innovative, hard working people in the central strata of the country. More of those dollars need to put into new ventures here. Many of the great university R&D shops are in the Midwest, such as UW -– Madison and the University of Michigan, which usually rank two or three in the nation for total R&D dollars. There is a huge trove of intellectual property here. Stems cells were first patented at UW – Madison. Those venture capitalists need to venture to the Heartland to help us launch companies.
What drove you toward consumer-driven health care?
After a steady and indigestible diet of double-digit increases in health care costs all through the 1990s, my company, Serigraph Inc., was desperate for answers. We were looking at a projected 15% increase in 2004, which meant an $800,000 up-charge that we couldn’t afford. Reggie Herzlinger, a business professor at Harvard, wrote a book that called for consumerism and market disciplines in health care. Her ideas resonated with me. So did the early trial by Humana with HSAs in 2003. They used their own employees as a test case, and stunningly held their costs in 2003 to a 4.5% increase. That was good enough for me, and we took the plunge to a consumer-driven plan on Jan. 1, 2004. It deploys a high deductible that is offset by a personal health account. Individual responsibility came back into play, excess utilization disappeared, and we also have tamed the beast of hyperinflation in health care. We have held our costs increase below 3% for the last seven years.
Can the Heartland survive the loss of manufacturing jobs?
We need to reinvent ourselves. I am truly sorry to conclude that not all the manufacturing jobs that were lost in the Great Recession are coming back. Manufacturing production will hold its own, but like agriculture over the last 50 years, it will need far fewer people. Productivity keeps rising, spurred by the use of lean disciplines, and that means fewer workers in that sector. Off-shoring may have run its course, but most of the jobs that were moved to low cost countries will stay there. So let’s re-make the Heartland with innovative new companies. Entrepreneurship is in our DNA. We just need to rekindle it. All net new jobs in the nation come from young companies.
So, what are you doing about it?
I am no longer CEO of my company; I’m now chairman. So I have time to help entrepreneurs get going. I’ve done angel investments in a half dozen high-growth ventures and helped found BizStarts Milwaukee, a support group for entrepreneurs. We are creating an entrepreneurial ecosystem. It’s similar to what JumpStarts has under-taken in Cleveland. My conclusion after some early trials and errors is that we can make great things happen in the center of the country. We just need to launch new companies in a systematic way. In the past, it was episodic. Nonetheless, some of those lucky strikes became our great employers of today. Time change, and some of the old companies become dinosaurs. They can be replaced with new enterprises rooted in innovative products, processes or business models.
Learn more about John’s book The Company That Solved Health Care here.