Making Lemonade

Making Lemonade

There’s been a lot of fretting lately about funding reductions for the UW system, including the flagship campus in Madison. There is no doubt that anything that reduces the real or perceived quantity and quality of either the research or educational output of the UW system has negative implications for Wisconsin’s economy. How much is a debate I won’t jump into. Instead, I’ll argue that the law of unintended consequences works both ways: that in some cases, including this one, the unintended consequences can be positive.

The situation with UW funding reminds me of something that happened in the Raleigh-Durham, NC area in the early 1990s. The “Research Triangle” as it is known, was at the time dominated by big companies (including IBM, whose RTP workforce was second in size only to the corporate HQ in Armonk) and the “Big Three” Universities (UNC, NC State and Duke). These organizations, public and private, seemed like permanent parts of the landscape. The high impact entrepreneurship and venture capital scene was very small: why take the risk, most people thought, of starting a new business when there were so many huge, established and prestigious places to work?

As part of that small early 1990s RTP entrepreneurial community, I remember something in the way, I guess, of gallows humor that made the rounds. What was needed for the entrepreneurial community to really take off, we said (albeit mostly to ourselves), was for IBM to lay off 5,000 employees. That, we thought, would set a bunch of smart folks looking for other things to do, like start new companies. Further, it would send a message to folks at the other employment leviathans that in the modern economy no employee could safely assume that their job was secure just because they worked for a huge organization. Maybe some of them would, in the face of that realization, think again about quitting and starting, or joining, a new business.

Well, as it turned out IBM did lay off 5,000 people in RTP. And in fact it was a huge spur to the growth of the high impact entrepreneurship community in the area. I actually worked with and invested in a group of four IBM folks who started a high impact company, a company they sold five years later for almost $200 million. By the late 1990s the RTP region was well on its way to having a vibrant, self-sustaining, entrepreneur-driven, innovation economy. And IBM’s layoffs were very much a part of that story.

Now I am not going to argue that the IBM layoffs of the early 1990s were a wonderful thing. Neither am I going to argue that reductions in funding for the UW system are a wonderful thing. But, as they say, when life hands you a lemon, don’t leave it to rot in the fields: at least make some lemonade.