About the Author: Mike Draper is the founder of Des Moines-based RAYGUN and author of “The Midwest: God’s Gift to Planet Earth.” Released earlier this month, the book takes a humorous look at the history and culture of RAYGUN’s beloved homeland, the Midwest. The excerpt below is from a portion of the book that examines the region’s role in the U.S. economy. For more on Draper, see the note that follows this post.
Reports of our economic demise have been greatly exaggerated
History can be a crafty fox. It’s misleading because it likes phases and doesn’t often spend time looking back at how silly its old hairstyles once were. In the 1970s, history was wearing bell-bottoms and snorting coke at Studio 54. It opted for hammer pants and a boombox on its shoulder in the 1980s. Today it hasn’t shaved for two months and sports a tank top and skinny jeans as if those hammer pants never happened.
The idea that the Midwest in the Twentieth century is divided into a rising phase before 1950 and a falling phase after is an easy arc to get your mind around. I went a public high school and even I can understand it: “‘Mer’ca used to make things, now we don’t make nothin’ and that’s the problem. Give me a factory and a tractor and we’ll make this region great again!”
The “rise and fall of the Midwest” arc isn’t total bulls—, but it is a good 78% bullsh–.
Today, the Midwest is tied with the South when it comes to most companies represented in the top 10 Fortune 500 companies — Berkshire Hathaway out of Omaha, General Motors and Ford out of Detroit. The South has Wal-Mart, Exxon, and Conoco; the Northeast has General Electric; the West has Chevron and Hewlett-Packard.
The Midwest still has massive manufacturing companies and these are some of the biggest companies in the country — larger than Apple, larger than Google, larger than all of America’s commercial banks.
In 2008, Congress handed billions of dollars to the banking industry at the start of the Great Recession, then hesitated to give a fraction of that to the auto industry. Jon Stewart may have best described the difference between bailing out a manufacturing industry and bailing out banks when he said of Congress: “You won’t bail out the people who make cars, you only bail out the people who make car loans — wait — not even car loans! The people you bailed out make derivative paper transfers speculating on the future value of enormous groupings of said loans to China … At least when Detroit loses money, we get cars!”
After the recession, some of the Midwest’s biggest companies are more profitable and productive than at any point in their history. “We find,” wrote Anthony Carnevale and Nicole Smith in their 2012 study of the Midwest for Georgetown’s Center on Education and the Workforce, “that while agriculture and manufacturing employment continue to decline in the aggregate … output in these industries will grow, mostly from increases in productivity.”
The steel workforce in Gary, Indiana, is 10% of what it was at its peak in the early Twentieth century, leaving the city far from its population peak. But Gary produces more steel now than ever. Michigan’s Global Engine Manufacturing Alliance in the 2000s was making more than 800,000 engines per year with a staff of 562, about a third of the staff needed for an older engine plant that produced fewer engines.
A writer like Dick Longworth, in Caught in the Middle, may see this as the Midwest hanging on to lost industries — even as they become more efficient, they are dying. The future is in services, in technology, and in alternative energy.
Perhaps. But the Midwest is not behind in any of these fields. For instance, in a developing sector like health care, San Francisco’s McKesson Corporation is one of the largest in the field and the fourteenth-largest company on the Fortune 500. But Ohio’s Cardinal Health, Minnesota’s United Health, and Indianapolis’ WellPoint are McKesson’s main competitors, holding places 21, 22, and 45 on the Fortune 500.
Likewise, although Silicon Valley took the lead in technological headquarters, Midwestern minds have been at the forefront of digital ascendance. Google’s cofounder, Larry Page, grew up in Lansing, Michigan, and went to college in Ann Arbor. Alongside Page are the founders of Twitter, the founders of Square, and the founder of Zynga. Before that came the founder of Netscape and the founder of Intel.
As the tech industry boomed, it expanded far beyond Silicon Valley — most notably in Chicago, with tech companies such as Groupon. Founded in 2008 by Andrew Mason, Eric Lefkofsky, and Brad Keywell, Groupon is just the tip of the tech iceberg in Chicago. Lefkofsky and Keywell have been working together since 1999, founding Starbelly, InnerWorkings, and Echo Global Logistics. They have since leveraged successful IPOs to become major investors in the Chicago tech world by cofounding the investment engine LightBank — which declares “you’re not in the valley anymore” on its homepage. The two joined Chicago Magazine’s list of “Most Powerful Chicagoans” in 2012 as the 10th and 21st most powerful, respectively.
Others on that list point to Chicago’s rise in general, growing for years, and capped with Barack Obama’s election in 2008, sending a Midwesterner to the White House with Chicagoans like Rahm Emanuel and Hillary Rodham Clinton.
Dick Longworth authored Caught in the Middle from Chicago’s Council on Global Affairs, and noted that many had left the city for dead in the 1980s. The Economist wrote in the mid ’80s that the city’s skyscrapers were “a facade” that hid the urban decay. But in 2006, The Economist wrote a special section called “A Success Story” about Chicago. “Chicago,” it wrote, “is undoubtedly back … the city is buzzing with life, humming with prosperity.”
The city is the unofficial capital of the Midwest and has an identity distinct from other American centers like New York or Los Angeles. It was born at the nexus of agricultural commodities from the central Midwest and iron and copper from the northern Midwest. It cradled the industries those commodities spawned and sent goods outward in all directions.
Its grid pattern is like a big, Midwestern city. But it is also the home of the skyscraper. These towers rise above sandy beaches along Lake Michigan. Chicago is, as Frank Lloyd Wright said, “The greatest and most nearly perfect city.”
And though it’s fast-paced for most Midwesterners, compared to New York or LA, it still has that No Coast charm. When travel writer and New York native Stephanie Rosenbloom visited the city in 2012, she wrote that as she left the coffee shop Filter, “I headed for the door, which a man on his way in stopped to hold. I thanked him and a curious thing happened: He didn’t grunt or mumble ‘Welcome.’ Instead, he looked at me and said, ‘It’s a pleasure.’ … That’s my kind of town.” Our Midwestern niceness mixed with a big city’s culture kept Rosenbloom on her toes. While drinking in RockIt Bar and Grill on Hubbard Street, “A dark-haired stranger turned to me. ‘I love your dress,’ he said. Was it a come-on? Or just another friendly comment? In Chicago, you never know.”
Chicago’s sports teams reflect the mix of Midwest personality. On the one hand, the Midwest’s blatant superiority is encapsulated in teams like the 1990s Bulls — possibly the greatest basketball dynasty in history — and the greatest football team of all time — from playing to players to coaching to style — the 1985 Bears. But Midwestern laid-back style and humility finds a home in the Chicago Cubs, a team that likes relaxed afternoon games, and hasn’t won a championship in 103 years — the longest championship drought of any professional sports team. This piss-poor performance is taken in stride by fans such as famous Chicago humorist Mike Royko, who looked on the bright side of this streak in the 1970s: “Being a Cub fan prepares you for life. If anything bad can happen, it will happen to us.”
As the city has risen, stars like Emmanuel have returned, and Lefkofsky and Keywell founded Chicago Ideas week in 2011 to showcase the city, national speakers like Bill Clinton, and some regional stars including Des Moines’ Ben Milne, who runs our city’s most prominent tech company, Dwolla.
Milne is an Iowa native and part of the tech world that is diffusing even further from major U.S. cities. I met Ben in 2008 when he was just starting out, and he explained the simple idea to me: build a network that allows money to be transferred for a flat fee, not a percentage like credit cards or PayPal. With smart phone technology, customers could pay for their items in RAYGUN using Dwolla, saving our company thousands a year in credit card fees. “We’re building the next Visa,” Milne explained, “not the next PayPal.”
Along the way, Milne has demonstrated the advantages that Midwest tech can have. He started cheaply and built a network of local businesses first. Dwolla not only secured initial funding from the John Deere-backed Veridian Credit Union, but Veridian also used its clout as a regional banker to implement Dwolla’s products.
By 2011, Dwolla was projecting $350 million worth of transactions in the following year, and in 2012, Milne landed a spot on Inc Magazine’s “30 Under 30” list and got $5 million in funding, some from the high-profile actor and investor, Ashton Kutcher. Kutcher explained that in Iowa there is a level of honesty and integrity that will make a financial company successful. “Dwolla can only be built here,” he said at a press conference in April of 2012.
In Des Moines, Dwolla is growing among giants such as Wells Fargo Financial and among smaller outfits such as the savings-based SmartyPig.
For Dwolla, local connections both built a solid foundation and attracted attention from outside of Iowa. This may be the example for others to follow.
About the author: Born and raised in Van Meter, Iowa, Mike Draper left in 2000 to study history at the University of Pennsylvania and St Andrews University in Scotland. He returned to Iowa to found RAYGUN in 2005. In 2010 RAYGUN expanded its retail locations to Iowa City and spun off its print/design side into sister company, 8/7 CENTRAL in Des Moines.