Betting a Third Wave Could Restart Middle America

By ART CULLEN

Steve Case, one of the richest men on Earth, is putting his money where his mouth is. The former CEO of America Online is placing a “contrarian bet” that a third wave of digital revolution will disperse wealth and job creation across the country — if first the capital is sown.

Three quarters of the venture capital pours into three cities, essentially: New York, Boston and San Francisco — half of it goes to California. Meanwhile, up and down the Mississippi River old manufacturing haunts hulk dark as jobs flowed south to Mexico or east to Asia or anyplace but Clinton or Keokuk, Iowa.

“A lot of people feel left out because they have been left out,” Case says.

It wastes opportunity, creates division and ignores clear assets: smart people everywhere. So he created a venture capital fund expressly to invest in areas outside the mega tech hubs.

Case lined up an all-star cast of investors over the past four years to launch a fund of more than $300 million, sparking 200 start-ups from eastern Kentucky to Iowa City. His Rise of the Rest Seed Fund claims luminati investors from Jeff Bezos of Amazon, to former Google CEO Eric Schmidt, to author JD Vance, whose “Hillbilly Elegy” was a memoir of Appalachian dysfunction.

Case chronicled the three transformational eras of the Information Age in a book five years ago, “Third Wave.” The first was the creation of the Internet and access to it (America Online), then came the software and app wave that led to the rise of Amazon and Google. The third wave is now, where technology permeates every economic activity, from food to pharmaceuticals to renewable energy and a smart grid.

That takes money. Case is eager to brag up early success stories: AppHarvest is the country’s largest greenhouse produce company that created 300 jobs in Kentucky coal country with a market value of $3 billion, and is launching another dozen greenhouses near metro areas for fresh vegetables. PearDeck of Iowa City was founded by school teachers who help integrate tech into curriculum. Case says they are just the seeds of a renewal in places that feel abandoned.

Rather than three metroplexes sucking up most of the wealth, Case envisions 30 or more innovation hubs in this wave. There’s health care in Rochester, Minn., and Cleveland. There’s food and agriculture in Des Moines, Kansas City and Wichita. There’s renewable energy in Ohio, and whole new transportation industries in Michigan, if the ideas are capitalized and realized.

We’ve long held hope since the first wave of the 1990s that somehow it would allow the Midwest to plug its fabled brain drain, where we built the finest schools only to realize you can’t keep ’em down on the farm. We could rewire things. People would come home. But that never really happened. The digital highway never gave rural Iowa that on-ramp, much less Kansas or Nebraska.

The pandemic might change that. Or hasten a trend that Case says was establishing itself already: Housing costs and climate stress have Californians re-examining their situations, if full flight has not yet ensued. Rep. Ro Khanna, a Democrat from Silicon Valley, says tech companies have to reach out to the heartland to feed exponential increases in skilled job supply. He is trying to help sprout digital “forges” in Iowa, West Virginia and Ohio in partnership with community colleges and tech firms — locales provide the talent for coding, Silicon Valley supplies jobs paying more than $60,000 a year. In rural Iowa, $18 an hour is the prevailing manufacturing wage. My two-story house 200 yards north of the lake is assessed for $90,000. Cheap land and educated labor are attractive.

Case notes Seattle was listing before Bill Gates dropped out of college for Microsoft. “Bill Gates wanted to go home. Jeff Bezos followed him to pick off engineers,” Case says. It has become Start-Up City.

Millionaires and billionaires are created who do enrich their communities by founding yet more enterprises.

“We gotta get the flywheel going,” Case says.

The impediments are many. First, no money to start with. Second, Iowa ships out half its college graduates each spring, a real brain drain. Third is culture: There was a bank in my county that didn’t make a loan before, during or after the Farm Crisis of the 1980s. We grow corn to feed to hogs. The Midwest is built on a solid foundation of rich natural resources and inertia.

Money greases the machinery that makes it all start. Case sees opportunities in agriculture and food, health care, and artificial intelligence. He recently was joined by erstwhile Democratic presidential candidate John Delaney, who made a fortune financing small health care companies before serving in Congress from Maryland.

“We’re looking at taking some big swings,” Delaney says, carbon capture from the air and sequestration being among them. “This is the single most important initiative outside government to get capital flowing inland.”

It will take that sort of targeted money, in partnership with an aggressive Biden infrastructure agenda, to revive hope in those places all over Middle America that bid their young and best prospects farewell as a ritual of spring. Case believes we are in something of a 10-year wave that could serve to drown out at least some of the resentments feeding our deep national discord. The lights can come on up and down the Mississippi again if the capital is there to ignite the ideas. Case is putting good money on it.

Art Cullen is the publisher and editor of The Storm Lake Times. He won the Pulitzer Prize for Editorial Writing in 2017 and is the author of the book “Storm Lake: A Chronicle of Change, Resilience, and Hope from a Heartland Newspaper.” Cullen can be reached at times@stormlake.com.

From The Progressive Populist, April 15, 2021

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