Why Wisconsin Lags in High Tech Economy

Wisconsin stands as an interesting exception when it comes to building a new economy. As I noted in my first story in this series, Wisconsin ranks poorly in rankings of the density of high-tech startup businesses by the Information Technology & Innovation Foundation (ITIF) and Kansas City’s Kaufmann Foundation. All of Wisconsin’s cities rank below the national average in these rankings, which is bad news for this state.

But in theory, Wisconsin should rank above average. As Silicon Valley venture capitalist Paul Graham has argued, such high-tech firms are more likely to appear in places where there is tolerance for odd ideas and voting liberal is a proxy for this tolerance.

To test this theory, I created the chart you see below. The horizontal axis is the percentage of voters choosing the Democrat in the 2012 presidential election. The vertical axis is the Information Technology and Innovation Foundation’s ranking of the states on its “New Economy” scale. As you can see, there is a definite relationship. On average, states voting Democratic scored higher on the New Economy scale.

 

At the very least the data are consistent with the argument that (1) innovation flourishes in an environment that tolerates odd ideas, (2) liberals are more tolerant of odd ideas, and (3) therefore, places voting Democrat are likely to get more innovation.

However, the amount of scatter in the data shows it is hardly the whole story. Graham refers to “false positives,” states that may vote Democratic for reasons other than greater tolerance of odd ideas. Does Wisconsin fall into the false positive category? Despite having almost the same vote breakdown as Wisconsin, Minnesota is 18 places ahead of Wisconsin on the New Economy scale. Both states are well within the error limits for the model (the two blue lines mark the 95 percent prediction limits).

In statistical terms, the percent voting Democratic is known as the independent variable and the score on the New Economy ranking is the dependent variable. When apparently similar independent variables generate very different dependent variables, one place to look for an explanation is to question whether the two independent variables are really the same. In other words, how similar is Wisconsin’s liberal base to that in other states, particularly when it comes to tolerance for odd ideas and friendliness to new businesses?

In a recent article, Slate’s Matt Yglesias argues that education reform, not “populism” divides Democrats. Yglesias adds, “Now you have a group of politicians (Barack Obama, Cory Booker, Rahm Emanuel, Michael Bennet, George Miller) who adhere to education reform ideology and another group of politicians (most Democrats in Congress) who do not.”

Wisconsin Democrats have largely resolved this divide at least when it comes to the legislature. In primaries immediately preceding and following the 2010 Republican takeover of state government, Democratic supporters of education reform (who favored school choice, charter schools and reforms of public schools) were defeated. It seems likely that if Obama, Booker, Emanuel, Bennet, or Miller were in the Wisconsin legislature they would also have been targeted for defeat in Democratic primaries based on their position on education reform.

For purposes of this analysis the point is not to argue who is right (although personally I think the reformers have the better of the argument). Rather, the inability to tolerate a difference of viewpoints suggest that Wisconsin Democrats are less tolerant of differing viewpoints than those in areas of the country where the people Yglesias mentions were able to succeed politically.

Singling out the Wisconsin Democratic base for its effort to enforce ideological conformity on one issue may seem unfair when compared to far more extensive efforts on the Republican side. The Heritage Action website has pages and pages of “key votes” where voting the wrong way could trigger a primary challenge from a Tea Party candidate. However, the efforts by Heritage Action and similar organizations are national in scope, rather than particularly concentrated on Wisconsin, and thus don’t explain why Wisconsin is different.

In this regard the opposition expressed on liberal websites to Democrat Mary Burke’s candidacy is telling. Part of it references suspicion that she is an educational reformer, as reflected in her support of the McKinsey study of the Milwaukee public schools and her financial support of a Madison charter school.

But a second issue comes through as well, an instinctive dislike of business, reflected in negative comments towards her Trek connection. Some of these comments have been repeated with great gusto by Republican groups (see, for example, this site). For many members of Wisconsin’s liberal base it appears that “corporate” is a dirty word—that, in their view, Wisconsin’s problem is not the lack of high-tech startups. Trek’s very success as a Wisconsin-based company calls into question her Democratic bona fides.

Successful businesses become successful by creating value and solving problems for their customers. As one example, consider the issue of climate change. Among companies that gain success in the future will be those that find ways to respond to that challenge. But if Wisconsin becomes polarized between climate change deniers who love business and those who accept the science but think that business is inherently grubby, where will these new firms come from?

Coming Next: How Wisconsin’s conservatives hurt efforts to create a New Economy