Professor Myles Shaver Uncovers Why Business Works in the Twin Cities
It all started because he couldn’t answer one question at a dinner party. Or the next 12.
Over and over again, when friends and family would ask Myles Shaver, professor and Pond Family Chair in the Teaching and Advancement of Free Enterprise Principles, to explain why the Twin Cities was such a great place to live, he’d try to explain.
“What are you doing in Minnesota? Aren’t you ready to leave?”
Shaver would explain that he and his wife wanted to move closer to their families as they started a family of their own. They wanted to live somewhere they could both be happy in their careers, and the Twin Cities has a really strong business community.
“What are you talking about?”
He’d tell them that there are 17 Fortune 500 companies in the region, and go on to say that in addition to the corporate headquarters of privately held companies, the Twin Cities was home to big divisions of other large companies.
“What’s the big industry cluster?” people would ask.
Shaver would tell them there isn’t one. The businesses in the region are amazingly diverse, and there is no geographically bound natural resource that companies draw upon.
“You must have really low taxes. Business incentives?”
Minnesota has neither.
So why does the region foster so many successful businesses?
Shaver himself started to wonder. In 2011, he decided to dedicate a sabbatical to uncovering the answer to that elusive question: Exactly why is the Twin Cities such fertile ground for growing corporations into financial powerhouses?
What he uncovered was so fascinating and informative that it was recently published as a book, titled Headquarters Economy by Oxford University Press.
A Long History of Growth
Shaver began his research by comparing two data sets—the 2010 U.S. Census and the 2011 Fortune 500 list. While the Minneapolis-St. Paul metro area might not have more corporate headquarters than all U.S. cities, both the number of headquarters and the migration pattern of professional managers have a story to tell.
“As general populations have moved more to the south and the west, we see business headquarters there also,” Shaver says. “But here in the Twin Cities, we're in neither the south nor the west, and we’ve increased the number of Fortune 500s over the last 60 years. In that way, we look different from every other major Northeast or Midwest state.”
For example, in 2011, Shaver notes that Minneapolis ranked sixth in a list of U.S. metropolitan areas for the number of corporate headquarters located here, on par with San Francisco—with more corporate headquarters located here than in Washington, D.C., Detroit, Atlanta, Philadelphia, Seattle, Boston, St. Louis, or Denver.
When ranked by population, our region clocks in at number 16 in a list of U.S. cities. Per capita is a very different story. In a list of number of corporate headquarters per million people, our city ranks third in the U.S.—right behind Bridgeport, Connecticut, which is part of the Greater New York City metro area; and San Jose, California, a.k.a. Silicon Valley, which is part of the Bay Area metro.
Shaver dove into the history of business in the Twin Cities area, tracking the history of Fortune 500s in the region since the inception of the magazine’s list in 1955. In the first list, the Minneapolis-St. Paul metro area boasted nine companies that called our region home—but only two from that original list are still here and still ranked.
The evolution from nine to 17 is more complicated than that, Shaver writes, and he discovered that between 1955 and 2011 our region added 40 Fortune 500 companies and saw 30 leave the region—either by dropping off the list or relocating. Adding 40 companies of this size is considerably more significant than adding 10.
And when the list is expanded to include privately held companies, the picture grows even richer. On Forbes’s ranking of privately held companies, Minneapolis-St. Paul is number six with five incredibly large private companies, including the largest in the U.S.—Cargill. In fact, our ranking on a list adjusted for per capita puts us higher than New York City, Chicago, Atlanta, Miami, San Francisco, and Los Angeles.
Then there are the “hidden headquarters:” companies with operational, divisional or regional headquarters in the Twin Cities, but officially headquartered elsewhere. Companies such as Medtronic, Pentair, Thomson Reuters, Wells Fargo, Honeywell, and Boston Scientific.
According to Shaver, this dynamic is important to understanding the region because many of the Fortune 500 headquarters exits from the Twin Cities region stemmed from changes in corporate control resulting from mergers and acquisitions.
"When we think about the contributions of the University to the local economy, not to disparage or discount anything that my colleagues in engineering and the medical school do in terms of technology and therapeutics, but the real contribution of this institution is the human capital that we train and send into our economy.”
Once Shaver had established that our region was, in fact, notably beneficial for large companies, he set out to figure out why.
“That’s when I realized that any story about corporate headquarters is not about the buildings or the desks—it’s about the people,” Shaver says. “The one type of talent that's in every headquarters is actually professional management, because those skills are applicable across different industries.”
In fact, because of the variety of industries in Minneapolis-St. Paul and the proximity of the various corporate headquarters, professional managers tend to cross industry lines—a lot. In most places, it’s not unusual to switch jobs and switch companies—but here they’re switching industries.
“In New York, if you're in media, you stay in media,” Shaver explains. “If you're in banking, you stay in banking. Here, I've had former students that worked at 3M and General Mills and Medtronic. Completely different businesses but applying the same types of skills.”
Shaver became very interested in the idea that when senior managers move, their skill sets tend to cross-pollinate and they share management practices that would not happen in other places. Could it be this pool of talent that helps large companies succeed?
He assembled a very senior group of very senior human resource managers from the big companies in the region. Their reaction? Shaver says: “The managers said, ‘Oh, we hadn't really thought of it but yeah, I think you're onto something.’ Then they told me story after story about their talent pools, and that just reinforced it.”
Talented Managers, Rooted in the Region
“When I talk to executive recruiters, they all say one thing: ‘It's really hard to get people to move to Minneapolis, but it's about impossible to get them to leave,’” Shaver says. “The Twin Cities grows its base of professional managers not because more people move here, but because they don’t leave.”
Once Shaver identified the root of our region’s abundance of highly skilled professional managers, he dove in to understand why.
In the next phase of his research, Shaver surveyed professional managers at 23 Minneapolis-St. Paul companies—from large, publicly held headquartered firms and hidden headquarters to large privately held headquartered firms and mid-sized headquarters and other firms. He received and analyzed nearly 3,000 responses to a survey with more than 100 questions.
Here’s what he discovered:
- Of the survey respondents, 85 percent were married, and nearly 70 percent have a spouse with “career responsibilities and aspirations.”
- More than 90 percent hold college degrees, and more than 40 percent hold advanced degrees.
- Nearly 25 percent earned their undergraduate degrees in Minnesota, while 60 percent earned their graduate degrees locally.
- Most were married with children. More than 80 percent had children, and nearly 50 percent had school-age children living at home.
- 85 percent of those school-age children attend public schools.
- Nearly 60 percent of the workforce was raised in Minnesota, with only 5 percent being raised outside the United States.
“What was interesting about the data is that only 15 percent of the people surveyed were born, raised, and educated in the Twin Cities area,” Shaver says. “It appears that a lot of people will spend part of their careers or their education away, but then move back. So it’s not like they’ve lived here and they’re stuck here, they’re choosing to be here at some point.”
Thanks to the University of Minnesota
Of the nearly 3,000 professional managers that Shaver surveyed, nearly 30 percent earned at least one degree at the University of Minnesota. Knowing that these professional managers are the key to the financial success of companies in the region, this speaks volumes, according to Shaver.