How—in the face of frigid winters, relatively high taxes, rising pressure from stockholders, and intensifying global competition over the past quarter century—has the Twin Cities area retained its corporate base?
One word: churn.
New companies have displaced old ones. Others have remained, but undergone sweeping internal transformations. An ever-evolving corporate sector has constantly recharged the local economy.
The effects surface in various measures of economic success. Tom Stinson, Minnesota state economist, notes that per capita personal income grew significantly faster in the Twin Cities area than in the nation between 1983 and 2004. The latest figures from the U.S. Bureau of Economic Analysis show that in 2004, the area’s per capita income of $40,915 ranked 13th highest among 362 metropolitan areas. Only two other regions between the coasts, Denver and Boulder, ranked higher.
With IPOs at a low ebb for now, a broader economic base with potential for diverse spinoffs and start-ups could be what sustains churn.
My first exposure to the churning process here came from the outside looking in. In 1980, as the business editor at the Milwaukee Journal, I traveled to the Twin Cities to do a series for that newspaper on the corporate successes, philanthropy, and entrepreneurism so prevalent here. I titled the series “Treasures of the Twin Cities.” The principal treasure was the concentration of companies headquartered in the region that had done so much to create good jobs, spinoff businesses, and great fortunes.
In 1982, after I joined the St. Paul Pioneer Press, I
launched the
paper’s Pioneer Press 100 to track the ups
and downs of Minnesota’s
100
largest publicly held
corporations, ranked according to their market
capitalization
(share price times the number of shares outstanding).
Generally,
about 90 percent of those companies have been based in the
Twin Cities area.
The Pioneer Press updates the rankings annually, and the 25
lists
published so far tell a remarkable story. Collectively, the 100
corporations in this year’s rankings had a market
capitalization of
$528
billion—after adjusting for inflation,
that’s a sevenfold increase
from the $37
billion represented
by the 1983 list. (Financial companies
and utilities weren’t
included in 1982, so I’m comparing with 1983).
UnitedHealth
Group led the 2006
list at $75.8 billion, eight times the
$9.2
billion of 1983 leader 3M.
But two-thirds of the companies on the 1983 list are gone from today’s roster. Most merged into companies based elsewhere. A few went bankrupt or moved their headquarters to other states. Some don’t carry high enough market caps to make the list anymore.
In most cases, though, the dropouts were replaced by homegrown companies that went public.
