The state of rural America
“Springfield, Vermont, was a community that grew based on innovation of its time. It had the highest per capita income in the state of Vermont for forty years based on Machine Tool, a machine tool specialist. It had the intellectual property to create the tools that would create manufacturing devices. In fact, the small town of Springfield, Vermont, was on Hitler’s bomb list because the IP was so important that they identified it as a critical place to take out in order to disrupt the overall economy of the United States. Things were going well for a long time,the company attracted labor from all over the world which made its workforce quite international. Then, in the 1970’s, Machine Tool started to decline in the US and in Springfield. It continued to to slowly recede until it pretty much went away for good in 2000 and the community collapsed.
They did not have a diversified economy to be able to withstand that kind of withdrawal by a few large multinational companies. It became ground zero for the heroin epidemic in the region. The dealer set up their operations in downtown itself. The economic base just fell out from under it and went to becoming one of the highest poverty rates in the state of Vermont.”
It is stories like these that can be found all over rural America today, and it’s stories like these that motivated Matt Dunne to start the Center on Rural Innovation (CORI) and help rural communities rebuild their towns, neighborhoods and socio-economic infrastructure.
When I sat down with Matt in November 2020, I had the opportunity to learn what has caused the decline of rural America and what we as ecosystem builders might do to reverse this trend in our home communities. In our conversation, we covered
- Reasons for the great divide between rural and urban America
- The rise of digital economy ecosystems
- What we can learn from CORI’s approach to building ecosystems in rural communities
- Changing the rural narrative through storytelling
- Unlocking capital outside and within rural areas, and
- People and organizations doing exceptional work in rural ecosystem building.
The urban-rural divide
“For the last hundred years, rural and urban places have largely tracked each other in terms of economic performance. Until the great recession of 2008 when all the communities in the US came crashing down. Only the recovery was fundamentally different for urban areas quickly climbing well past their pre-recession economic levels.
Recovery for rural communities, however, looked dramatically different. Even as of January of 2020, more than half of the rural counties had not even gotten back to their pre-recession levels. This division was driven by three major forces: One was the automation of traditional rural jobs. The second was globalization both in policy, but also in technology that allowed for a supply chain that no longer had to be within a drive time but could allow companies low cost labor anywhere in the world. And the third is the decline of entrepreneurship for the 30 years prior to the recession that took place in rural America.
We know the entrepreneurs of today are the employers of tomorrow.
Automation was moving at a pretty fast clip coming into the recession. The economic hit just made it go even faster. The same held true in terms of globalization when companies were looking for lower cost ways to produce goods and services: When the recession hit we didn’t have the farm team of new companies to be able to fill in when some companies leave the market place altogether due to an economic event like a recession. Hopefully, you’ll have the new ones who are coming with new approaches that can fill that void and take the economy to a new direction. And that just didn’t happen.
As a result we had this huge divide between rural and urban America. We could account for most of the difference with digital economy jobs because automation and globalization created a lot of jobs in urban places and took them away almost exclusively from rural places.
Add to it the opioid epidemic in the U.S. which was a fundamentally rural experience. You also lost a lot of civil society infrastructure: Newspapers went under, television stations went under, so rural communities and smaller micropolitan areas lost their voice in the American civil discourse. And you see the result of that playing out in all kinds of different ways.
We believe it’s just a fundamentally unhealthy place for the country to be in and we need to get on top of it soon because that economic downturn becomes harder to be able to stop – let alone reverse – with each month that goes by because we’re losing that infrastructure. And unfortunately, the pandemic accelerated a lot of that: Automation was happening fast before just based on people wanting to save money and reduce labor costs. Add to that avoiding the transmission of a virus and our work becomes imperative.”
Digital economy ecosystems
“When we talk about the digital economy we’re talking about the jobs that are created by automation which are largely programming-related. We believe those are going to be the growth sectors moving forward and skill sets that will have the most applicability even if the particular occupation might get automated itself. This skill set can continue to grow and evolve.
We also talk about scalable tech companies to create that new generation of wealth that can take place anywhere as long as you have a good internet connection.
I’ve been told over and over again that we should really just focus on one thing and my response is always the same: It will fail because none of these can thrive in isolation. We have seen programs like a coding academy in rural places where graduates with really high proficiency levels move away because they have no job opportunities locally. All you’ve achieved is an acceleration of that brain drain further exacerbating the problem.
The same happens if you only focus on supporting tech startups. If they don’t have the community of technologists to work with, to hire and bounce ideas around with, they’re going to either die on the vine or move away. So you need to do both at once and that’s why we talk about it as an ecosystem, as a living breathing thing.
You need to have training that is inclusive. You need to have remote work for people who want to come to a rural place but might not have a job immediately available. You need to support tech startups through accelerators and pitch competitions. And you need to provide access to early-stage capital to allow for those companies to get the investment they need to grow.
The 3 Bs of rural economic development: Broadband, Blues and Beer.
Lastly, and most importantly, you need to build a culture of trust, serendipity and collaboration because if you don’t have the meetups and the social events that allow creatives of all kinds (including technologists) to come together, you’re not going to create that energy and excitement! We sometimes joke that the key to economic development or the three b’s: broadband, blues and beer. If you have those three then you can actually create the kind of energy and ecosystem needs to thrive.”
Lessons for rural ecosystem builders
“Make sure you create opportunities that include the entire community. Your technology and coding training needs to be accessible for people who have nontraditional education backgrounds. Make sure that you’re inclusive of all folks so that, for example, women feel welcome going into computer and IT careers. Especially in a context in which we have a small population to begin with, we cannot afford to exclude huge chunks of the population.
If you’re not inclusive, you’re setting yourself up for failure.
Another piece of advice is this: Get comfortable with the risk that’s inherent to a startup culture. This can be the hardest thing for rural communities who are not used to those kinds of risky endeavors. They tend to see the failure of a company as some kind of personal embarrassment or as a poor reflection on your family. Approach any potential startup in a way that is responsible, transparent and deeply ethical. But for startups to succeed, we need to feel comfortable trying things and being willing to support folks who are taking an ambitious leap. In a lot of rural places here in the U.S., we encounter a structured hierarchy stemming from occupational histories over a long period of time. When someone who is not a part of that hierarchy decides to go out and try to do something, folks need to make an extra effort to celebrate that.
In Springfield, people recognized that Machine Tool was not coming back and that they were actually not the high-flying envy of the rest of the state. They realized they needed to reinvent themselves in a way that was still committed to their core values and roots, and that made good use of their unbelievable physical infrastructure that was in place: the buildings, the brick and the granite. We realized that we were able to build on the foundations of their past to renew the local economy in a way that was future-focused.”
Changing the rural narrative
“Part of our effort lies in helping not only investors see how much unlocked potential lays dormant in rural communities, but within rural communities themselves.
We have now 18 communities advancing down the digital economy ecosystem path. With funding from the Walmart Foundation and Siegel Family Endowment we have started to do film narratives and it has been so much more successful than I would be ever imagined. We had a great team that went out and we started with the community of Cape Girardeau, Missouri, which is this fascinating small community on the Mississippi River. Folks who had never set foot anywhere other than the coast understood for the first time what we were talking about, including the unique nature of that particular community.
What’s more: Seeing their community through the eyes of a film crew gave them permission to envision their own future. Telling these stories doesn’t only shift investor mindsets but it allows communities themselves to see what is possible for them.
Among their core activities, CORI launched the CORI Innovation Fund to foster entrepreneurship in rural areas and invest in underestimated startups:
We stopped waiting around for traditional venture capitalists to see the light and started doing it ourselves.
“We needed to understand what the deal flow looks like and find out whether there really are overlooked, high-value early-stage companies that would be exciting to be in any portfolio. So we stood up the CORI Innovation fund. So far, we’ve deployed capital to a wonderful group of five companies that are in different rural locations and are the kinds of early-stage technology companies that anyone would want in their seed fund. We’ve looked at over 200 deals from rural places in a year and were quite surprised to find that many promising companies at different stages of maturity. We’re excited to see where this can go.
The LPs who are invested in the fund pay close attention to the reports we send out about these companies. They’re involved in lots of other investment vehicles so just getting their attention and a little bit of skin in the game will bode well for what comes next.
On top of that, we’ve heard from a number of folks in communities that there is capital in rural America. There are people who have resources – usually from very successful legacy industries such as forestry, manufacturing or large-scale agriculture – and they want to invest in future companies in their area, but they have no experience investing in something that’s largely intellectual property or a scalable tech company. But we’ve heard over and over again that if someone else with that expertise can take the lead, then they would feel more comfortable in following along. We are hopeful that we will see that kind of unlocking of local capital and an educational process for folks who want to use investment as a way of local community building.
On Matt’s radar
- Kevin Scott is the CTO of Microsoft. From rural Virginia himself, he wrote a book about the future of rural America in the age of AI. Reprogramming the American Dream came out just as the pandemic hit so it might have gotten missed.
- Read Hoffman was our early supporter and is the co-founder of LinkedIn. He is really taking on this piece of the puzzle for creating a nation, that is cohesive.
- The Siegel Family Endowment, which is led by Katy Knight. Their first work was standing up Scratch, a program to allow kids to learn computational thinking and programming because they firmly believe that having a democratized ability to those skill sets is going to be important to the economy. They realize they need to do more than just provide a platform, but actually do it early on. They’re supporting us because they knew if they were not reaching rural places they were not going to be successful in their mission.
- The Walmart Foundation and the MasterCard Center for Inclusive Growth have also been great leaders in that effort.
- Beth Ford, president and CEO of Land O’Lakes has been incredibly outspoken on the issues of broadband and digital economy jobs in dairy counties. She understands investment in rural communities as being critical for their future as a large dairy cooperative because if those farmers end up having to sell out to massive conglomerates, the whole business model of supporting independent operators and giving them a market for their food milk collapses.
All of these people and organizations are coming out of the woodwork with an incredible amount of energy to try to solve this problem. They’re not throwing up their hands and giving up because it’s a hard problem. They see the assets that are there to be able to make this work happen.”
Hartland, Vermont, USA
Founder and executive director. Advocate for small town America. Lifelong Vermonter.