Robert E. Wright, Nef Family Chair of Political Economy, Augustana University
For the Young Professionals Network, Sioux Falls Chamber of Commerce, Sioux Falls, SD9 November 2015
I’m an historian because I want to peer into the future. History is the study of change over time, after all, and I believe all those clichés about not being able to know where you are going if you do not know where you have been. And the longer one looks back, the better. If you look at just the last year or decade you might think you see a trend where one does not really exist. You might recall that a decade ago many Americans believed that quote housing prices never go down unquote. It turns out they were wrong and, worse, would have known they were wrong if only they had paid attention to what financial historians were saying.
It isn’t that history provides a crystal ball that predicts future events with perfect accuracy. Heck, any serious student of history knows that human paths are not predetermined, that slight changes in circumstances can lead to outcomes vastly different than expected. Just ask anyone involved in the American, French, or Russian revolutions or any major war for that matter.
One valuable piece of human capital that history creates is experience, which is something that nobody ever has enough of, but young people like yourselves especially need. By definition, young people are experientially challenged but you all can gain vicarious experience by studying the past, and the more deeply the better.
History also provides expertise, nuance, intuition, and sensitivity to context. At the very least, it can help us to eliminate certain paths from serious consideration. It is highly unlikely, for example, that the Dodd Frank Act will prevent another major financial crisis in the United States because that piece of legislation, enormous as it is, does not address the key cause of financial crises, which are asset bubbles.
But that need not directly concern us here in South Dakota, which weathered the last several recessions, including the one associated with the subprime mortgage crisis of 2008, with little difficulty. If anything, another crisis could help the state by highlighting its strengths. Yes, South Dakota has strengths, some surprisingly important ones.
Foremost, South Dakota has one of the highest levels of economic freedom of any of the states or provinces of North America. It is, in lay parlance, a quote unquote business friendly state, a place amenable to business innovation and entrepreneurship. In fact, South Dakota has been a very entrepreneurial place throughout its history. That is an important thing to know because entrepreneurship and innovation beget more entrepreneurship and innovation. People are much more likely to be self-employed, to form their own businesses, or to innovate in the workplace if they know someone else who is self-employed, owns his or her own business, or makes improvements in his or her job.
While it remains to be seen if there is an actual genetic component to entrepreneurship, there is some evidence of various risk-taking genes. Of course taking risks in the wrong situation is a good way to end up dead. Natural selection certainly did play a role in the state’s early history; the least quick witted were most likely to perish from thirst, fang and claw, or arrows. It is not clear, however, that risk lovers would have had a selective advantage, that they would have been more likely to survive and reproduce.
Cultural selection, by contrast, certainly occurred; the least risk-loving settlers were the ones most likely to leave the state. The stickers, as the ones who stayed behind called themselves, were the ones who could adapt to rapidly changing economic or climatic circumstances. Whether by birth or education, they were innovators.
Once the state had a reputation for economic freedom, of course, it attracted yet more innovators and free spirits, like shepherd turned author Archer Gilfillan, who called South Dakota quote A great land! A free land! unquote because it gave him quote the opportunity to live his own life in his own way unquote. Conversely, statists and socialists have tended to eschew the state, a memo that I wish my colleague Reynold Nesiba had received.
The stickers and freedom loving immigrants like Gilfillan naturally voted for politicians who were freedom loving stickers too, or in other words people who saw value in innovation, entrepreneurship, self-reliance, and self-employment. So South Dakota lawmakers tended to be friendly towards business, especially small business and local business. That is the deeper context and background of South Dakota’s business friendliness or relatively high level of economic freedom today.
As a result of its business-friendly legal and political atmosphere, the history of South Dakota can be told as the history of one quote unquote BIG THING after another. What I propose to do today is to survey the state’s BIG THINGS in the hopes of ascertaining what might be coming next. For the sake of exposition and your sanity, I’ve broken these down by century and decade instead of providing precise dates. Note at the outset that these Big Things did not disappear completely but rather have stuck around to the present, albeit in smaller ways. For example, the first Big Thing, dating to about 10,000 years ago, was BIG GAME HUNTING AND PROCESSING. Those activities still occur in the state today, they just are not as important to the overall economy as they once were. For example, archeologists tell us that on Firestone Creek in present day Mitchell there once existed a site where an unknown number of Indians processed bison remains into pemmican that was sent down the Missouri River to Cahokia, near present day St. Louis, for purposes of trade or tribute. By 800 AD or so, RIVER VALLEY HORTICULTURE AND LONG DISTANCE TRADING were probably even more important than big game hunting. South Dakota’s river valleys were by then already part of a corn belt and the ecotone, or transition zone, between the woodlands of the east and the plains of the west, was an important zone of long-distance trade, as shown by the artifacts recovered from the Blood Run site along the Big Sioux River just outside of Sioux Falls. By about 1325 AD, if not earlier, SLAVE RAIDING and TRADING was also a Big Thing, as evidenced by the skeletons at the Crow Creek massacre site near present-day Chamberlain, which included examples of both genders and all ages … except young women.
During the sixteenth, seventeenth, and eighteenth centuries AD, after trading and then direct contact with Europeans, the FUR TRADE became the next Big Thing. That included bison and bear hides and elk and deer skins for sure but also the pelts of beavers and other small furbearers.
The 1870s of course witnessed the BLACK HILLS GOLD MINING BOOM. The placer prospectors actually did not find much gold compared to what would eventually come out of the Homestake Mine but various businesses found it lucrative to supply the miners with what they needed, which ranged from clothing, food, and shelter to … ahem quote unquote entertainment. Keep that lesson in mind: sometimes it is better to supply the producers of the next Big Thing than to be directly involved oneself. Cisco Systems is still around while Boo.com, Boxman.com, Clickmango.com, Etoys.com, and thousands of other tech startups live on only as examples of irrational exuberance in various blog posts.
The 1880s witnessed the Great Dakota Boom, the rapid expansion of EAST RIVER FARMING. Efficient farmers and railroads were the big winners here, along with successful town boosters in places like Aberdeen and Huron. The boom ended with the rains so some South Dakotans in the 1890s turned to FINANCE, especially COMMERCIAL and MORTGAGE BANKING, and also CORPORATE LEGAL SERVICES. That might sound odd but the state tried to unseat New Jersey as the corporate charter capital of the country, only to lose the contest to Delaware after South Dakota’s lightly regulated chartered corporations gained an unsavory reputation among investors for fraud and chicanery. South Dakota officials have made noises about making another run at Delaware and I’ve publicly argued that it is possible it could win so CORPORATE LEGAL SERVICES could become a BLAST from the PAST.
So, too, could RANCHING, which was the Big Thing of the first decade of the twentieth century, especially WEST RIVER, where the open prairie was enclosed by barbed wire fences for the first time, forcing small scale operators like Bruce Siberts out of the free range cattle and horse game.
In the 1910s and 1920s, WHOLESALING was the Big Thing as companies like Brown Drug Company of Sioux Falls cropped up and grew by supplying various RETAILING establishments throughout the Northern Plains. Competition was intense, especially as automobiles proliferated, which they did amazingly quickly in a state terrorized by its own vast spaces. The number of trade centers in South Dakota, where most retailers naturally located themselves, declined by just one during the 1920s. Turnover, however, was 50 percent. In other words, half of the little towns in existence in 1920 were gone by 1930; the retailers that inhabited them went under or moved on to the next trading center.
That brings us to the 1930s, the decade of the Great Depression, when the Big Things, and I kid you not here, were the PUBLIC DOLE and PHEASANTS. When people think of the Great Depression on the Great Plains, they think of the Okies of John Steinbeck’s Grapes of Wrath. A higher percentage of South Dakotans, however, were on the public dole than the residents of any other state in the union. Meanwhile, pheasants, which had been introduced in the 1910s and 1920s with mixed results, thrived in the state’s many uncultivated fields, supplementing the diets of many a rural family with cheap protein and cementing the state’s reputation as one of the world’s premiere pheasant regions.
The 1940s brought World War II and renewed prosperity that manifested itself in many ways, the most important of which was EAST RIVER FARM MECHANIZATION AND CONSOLIDATION. Steam tractors had appeared on the prairies in the 1880s and modern gasoline ones in the 1920s but it was not until the 1940s that it was clear that pack animals would soon completely disappear from the state’s farms, replaced by efficient but expensive mechanized critters that devoured farmers who were not shrewd businessmen as well as keen agriculturalists. Innovations included the proliferation of so-called sidewalk farmers who lived and worked in town during the week and tended their farms on evenings and weekends and also suitcase farmers who, like giant mechanical geese, worked multiple farms in multiple states by following differential seeding, weeding, and harvesting schedules.
In the 1950s, the federal government stepped in to provide the next Big Thing, the RENEWABLE HYDROELECTRIC ENERGY produced by the dams of the massive Pick Sloan Missouri River improvement project. To this day, South Dakota gets well over half of its electricity from its hydroelectric dams, something this old boy from Western New York, which gets most of its electricity from Niagara Falls, surely appreciates.
Aided by another federal project, the interstate highway system, TOURISM was the Big Thing of the 1960s. The state of course had always attracted visitors, especially to the Black Hills. At first many came by rail but in the postwar period the automobile reigned supreme. And the motorcycle. The 1960s was when the Sturgis rally really began to take off as a national event. Pheasant hunting was big and the great lakes formed by the Pick Sloan project began to attract notice as one of the Midwest’s premier fisheries too.
In the 1970s, MANUFACTURING grew by leaps and bounds in the state, though admittedly from a low base. Between 1969 and 1984, about 100 manufacturing businesses left Minnesota for South Dakota to reduce their tax and wage bills. Litton, Sencore, Grant, Raven, and others built everything from air balloons to microwaves to motorcycle helmets in the state. Some folded, moved, or were bought out, but others, like Trail King Industries, took their places.
The 1980s saw the revival of the state’s FINANCIAL SECTOR with the entry of Citibank and other banks into the CREDIT CARD PROCESSING INDUSTRY. Well educated, hardworking, inexpensive workers without strong accents located in the center of the country was a dream come true for Citibank executives, who actually decided to move operations to Sioux Falls before the state dropped its usury cap. Ironically, liberal do gooders with no understanding of history, business, economics, or even rudimentary arithmetic are currently trying to cap interest rates in South Dakota once again. If they succeed, the next Big Thing might be businesses that work around their silly little law.
In the 1990s, HEALTH CARE was a big growth industry in South Dakota. That was the decade when Sioux Valley Hospital, now Sanford, Avera McKennan Hospital, and Regional Health in Rapid City began to rapidly expand and consolidate. By the first decade of the twenty-first century, agriculture was once again on a solid footing, after terrible troubles in the 1970s and 80s, because of improved techniques and technologies but also due to SPECIALIZED “NEOAG” PROPERTY RIGHTS that separated land ownership from agricultural rights and hunting rights. Because of this intricate system of contracts, an octogenarian living near Madison can lease land he owns in western Miner County to a resident rancher, a nearby farm operator, and a hunter from Sioux Falls, thereby maximizing both the use of the land and his income. ETHANOL is another recent Big Thing thanks to bumper crops of corn, POET, and government subsidies.
So, finally, we have reached the present and can start to think about what might be the state’s next Big Thing. Certainly OTHER FORMS OF RENEWABLE ENERGY, ESPECIALLY WIND have to be on the short list because of the state’s history with hydro and ethanol and its seemingly never ending supply of moving air. Many of the first jokes about the state referenced its wind, which allegedly required that South Dakotans scream at each other to be heard and that they double stitch the buttons of their shirts lest they be ripped off. Seriously, no where else in the country, at least east of here, do weather announcers call winds between 20 and 30 miles per hour quote unquote breezy.
In any event, another possibility is that entrepreneurship itself will be the state’s next Big Thing. In other words, DIVERSIFIED ENTREPRENEURSHIP, A LITTLE OF THIS AND A LITTLE OF THAT might be what drives the state in the 2020s. If anyone outside of South Dakota would read my book, Little Business on the Prairie, and discover the worlds of opportunity available here, entrepreneurs and innovators might start to flock here at least to get started, much like Gateway computers did before it slunk off to California and sold itself to Acer. Institutions like The Bakery, a new 8,000 square foot small business incubator in downtown Sioux Falls, combined with the state’s business-friendly atmosphere and culture, might make South Dakota the next BIG PLACE TO START a new business in the Midwest or even the nation.
MEDICAL RESEARCH could also be the state’s next Big Thing. The healthcare systems that emerged forcefully in the 1990s have matured and are now looking not just to practice medicine but to advance the frontiers of medical knowledge in areas like genomics and genomics counseling and some other specialties.
A closely related and certainly not mutually exclusive possibility is that South Dakota’s next Big Thing will be AUGUSTANA UNIVERSITY, if it can transition from a liberal arts college into the state’s FIRST GREAT PRIVATE RESEARCH UNIVERSITY. That will require more institutions like Sanford and more individuals like Rudy Nef, who endowed the chair that I hold at Augie, to step up and donate resources. It will also require people such as yourselves to enroll in the graduate programs that Augie is in the process of rolling out. Good, private research universities like Stanford, MIT, and others of course drive innovation in high tech industries but also across a broad spectrum of economic activity. Harvard, for example, originated many famous business consultancies while NYU, for better or worse, helped to create the nation’s modern financial system.
South Dakota’s Indian Reservations may prove to be a superior asset. We all know that some tribes near major cities got rich from their casinos but that the Indians of South Dakota did not because of the tyranny of distance and the state’s relatively liberal non-Indian gaming laws: you know, Deadwood and all those electronic casino competitors. But there are plenty of other stupid laws that the state’s Indians could help to subvert. You might have heard, for example, about the marijuana lounge opening up in Flandreau. Because of fuzzy jurisdictional lines, the state’s Indian tribes have more policy leeway than non-Indian governments do and hence could help Americans to dodge Dodd Frank and Obamacare, among other policy monstrosities, and make a bundle in the process.
By design, the possible next Big Things just mentioned are tied closely to South Dakota’s unique history. But of course the state is part of larger regional, national, continental, hemispheric, and global economies, any of which could spark an exogenous Big Thing in the Mount Rushmore State, much as the Eisenhower administration did with the Pick Sloan project and the interstate highway system. Of course I can’t pretend to know every new trend and fad throughout the world, but I do know of some movements that tie in nicely with the state’s history. For example, due to the rise in sex trafficking over the last few decades, prostitution and pornography have become major political issues again. Some policymakers and pundits want to abolish them completely while others think that they should be decriminalized, taxed, and regulated. I don’t want to take a position on the matter here today, I just want to remind you that prostitution in Deadwood was effectively decriminalized, winked at in common parlance, until the early 1980s. To my knowledge, the state has never been a serious producer of pornography but of course that could change. After all, the state has not always been a bastion of family values. In addition to rampant prostitution, in the late nineteenth century South Dakota was a haven for rich folks who wanted to get a quick and easy divorce by the standards of the day.
Folks from the East think that we South Dakotans already have flying cars because of our 80 mile per hour speed limit and generally light traffic conditions but real flying cars are finally here! Well, almost. They have been just two years away for about five years now, but that is better than predictions of them landing half a century off. Over a century ago, South Dakota rapidly embraced telephones, automobiles, and airplanes because they helped to shrink the state’s vast expanses. Flying cars will do the same. They will be expensive at first but the entrepreneurial opportunities are seemingly endless if combined with services like Uber or Zipcar. Imagine flying to Pierre to harangue legislators in person in just two hours door to door, without a stopover in Minneapolis or being probed by the TSA. Or heading up to Waubay to fish or Chamberlain to hunt and returning the same evening. Some models of flying automobile will require an airport in which to land and takeoff but the state is already home to 75 public airstrips and many more private ones. Building airstrips could become a Big Thing as could selling, leasing, and servicing AeroMobil or Terrafugia flying cars.
Speaking of flying cars, attitudes towards death are changing in the Western world. Not everyone wants to spend their last days depleting their estates clinging to an increasingly painful and immobile existence. Assisted passage to the next world, if legalized, could be the next Big Thing, especially given growth in elder care in the state. Imagine passing peacefully, on one’s own terms, looking at Harney Peak or Crooks Tower at sunset or the Missouri River from the bluffs above during the harvest moon while listening to Stairway to Heaven or Free Bird.
Postmortem body disposal is also an emerging issue. Many folks do not want to be cremated or buried in a box but open burial is a big health risk in densely populated areas. West River, however, could host quote unquote corpse ranches where people like myself, who want to return our bodies to Gaia as soon after we are done with them as possible, could be laid out on platforms to be eaten by eagles.
Of course I make these suggestions partly tongue-in-cheek. Adam Smith once claimed that all that was necessary to turn a barren desert into an opulent state was quote peace, easy taxes, and a tolerable administration of justice, all the rest being brought about by the natural course of things unquote. South Dakota has those three things and is better than a barren desert, most years anyway, so all that is left is for the natural course of things to occur and that means for you to discern the next Big Thing and go for it. Most of you will be wrong, of course, but even in failure you will gain in valuable experience and professional contacts and maybe even make a little money, or at least not lose too much. If South Dakota retains its economic freedom, you will witness five or ten new Big Things before you join me in the Great Beyond and will surely gain from at least some of them. So, like Vikings, sally forth and explore but, unlike Vikings, remember that in the long run trading is more profitable than raiding.
May innovation pour from your every pore every day. Thank you!