Newsletter #25: Minnesota, the Land of 10,000 Underestimations

*Note: This newsletter has been in development for several months.  While we normally only publish our newsletter monthly, recent events in Minnesota compelled us to publish February’s newsletter early.

Not long after the initial European settlement of Minnesota at Fort Snelling in the 1820s, Scandinavians began immigrating to the territory.  Partly attracted to the agricultural promise of the land, they also found the climate similar to their homeland: humid summers and oftentimes frigid winters.  By the 1850s, large and consistent waves of Scandinavians arrived and built villages in places such as Scandia and Chisago Lakes, magnetizing further Scandinavian immigrants to Minnesota through the 1930s.  Even now, a full 175 years after those first large waves of Scandinavian migration, a recent American Community Survey (2023) reported that 43% of Minnesotans who reported multiple ancestry today identify as Scandinavian.

Along with those Scandinavian immigrants came their uniquely Scandinavian cultural values, which permeate society in Minnesota today.  These norms discourage boasting (“Jantelagen”); inspire a strong trust in institutions (“Institutionellt fortroende”); encourage a preference for silence and blunt honesty (“Rakt pa sak” or “uppriktighet”); and promote child-centricity (barncentrerad”).  Scandinavian culture also prides itself on being reserved. 

To that end, a joke frequently told in Minnesota goes: “How do you know you are confronted by an aggressive Norwegian?  He stares at YOUR shoes.”

As a long-time resident of Minnesota and from a family of Swedish descent, I find that joke encapsulates the state’s reputation: understated, regularly underappreciated, and constantly underestimated by outsiders.  In the rare instances in which the average American even thinks about Minnesota, it is through a lens of underestimation.  Some of the factors which encourage those underestimations include:

• References in popular culture. “Fargo,” the (confusingly-named) famous movie about the state of Minnesota, fanned the flames of underestimation for the state.  Whether it was Francis McDormand’s Oscar-winning performance as unassuming Brainerd chief of police Marge Gunderson, or The Bulwark’s review of the film as “they really made those people look like idiots,” the Coen Brothers’ screenplay was the opposite of a hype reel for their home state.
• Success rates in Minnesota sports. Given that the Vikings, the Timberwolves and the Wild have never won league championships; and the Twins haven’t won a World Series in 35 years, Minnesota sports franchises are regularly disregarded on the national stage.
• The weather. Twin Cities region indeed has the coldest average temperature of any major metropolitan area in the United States.  National TV meteorologists regularly cite the frigid temperatures in Minnesota, and recent erroneous social media posts about phenomena such as “exploding trees” add to the narrative that no sane person should want to live someplace so cold.

Given the cultural mores prevalent in the state – and the rampant underestimation of its citizenry - the unfortunate national spotlight and scrutiny that Minneapolis received in recent years (the George Floyd riots, the murder of two state representatives last summer, the recent DHS and ICE agent fiasco, etc.) startled many.  And once again, Minnesota was underestimated – with some assuming the strongest response the populace would muster would be to stare at YOUR shoes.

In reality, people constantly underestimate Minnesota – to their own peril. 

Minnesota is underestimated for its civic-mindedness.  Minnesotans are deeply proud of what their community stands for, and are extremely civic-minded.  While they are relatively trusting in government institutions, they regularly have amongst the highest voter turnout in the nation, and boast nation-leading levels of volunteerism.  Minnesota has a large veteran population, ranks amongst the top five states in the country for national guard recruitment, and has an ethos of civic responsibility that goes way back: in fact, the state was the first to send soldiers to fight for the Union in the Civil War – despite only becoming a state three years earlier.

The strong level of education amongst Minnesotans is underestimated.  Scandinavian child-centricity encouraged the development of a strong education system, particularly in the years following the Second World War.  Today, the state ranks in the top 10 in percentage with high school diplomas, and percentage with bachelor degrees, and ranks at the top in the country in literacy rate. 

Minnesota is underestimated as a cultural center.  Minneapolis has one of the most vibrant arts scenes in the United States.  Not only does Minneapolis boast the most theater seats per capita of any city in the country (including New York City), it has amongst the highest per capita public funding for the arts, ranks in the top ten music cities, and boasts several world class museums.

And perhaps most relevant to the nature of this newsletter, the strength of Minnesota’s economy is underestimated.  The following data might surprise most readers, including some from Minnesota:

• The Minneapolis-St. Paul metro has the highest concentration of Fortune 500 companies, ranking 1st per capita among the 30 largest U.S. metros.
• 17 Fortune 500 companies are based in Minnesota, ranking it 10th highest in the nation for total count.
• An abundance of natural resources encouraged the creation of businesses in a broad and diverse range of industries. This economic diversity made it more resilient than most other geographic areas:

• Minneapolis was founded as a mill town, adjacent to St Anthony Falls on the Mississippi River.  As such, food and agricultural companies founded in Minnesota included General Mills, Land O’ Lakes, Mars, Cargill, etc.  Soon thereafter, to support all the mill workers, retailers sprung up such as Dayton’s (now Target), Sears Roebuck, etc.
• Rochester was formed around the Dakota wars clinic founded by the Mayo brothers, leading to the establishment of Minnesota as a leading healthcare center.  Healthcare companies naturally sprung forth, include Mayo Clinic, UnitedHealth Group, HealthPartners, Patterson Companies, Medtronic, Guidant (now Boston Scientific), and many others.
• The Iron Range of northern Minnesota, coupled with the Duluth harbor on Lake Superior and the railroad hub of St Paul, drove a boom in manufacturing.  Companies included 3M (formerly Minnesota Manufacturing and Mining Co), Ecolab, Honeywell, and many others.  Of note, 75% of current iron ore production in the US still comes from the Mesabi Range in Minnesota, and 90% of the steel used in all the skyscrapers in New York City originated from Minnesota iron.
• Many large financial services firms were also founded in Minnesota to support the strong economy.  These included St Paul Companies (now Traveler’s Insurance), Norwest Corporation (which acquired Wells Fargo and changed its name), US Bank, Ameriprise Financial, Thrivent Financial, Piper Sandler, and others.

These varied and powerful economic drivers allow the state to have high labor force participation rates and a consistently strong economy.  In fact, Minnesota business ranks #4 overall in the country by US News and World Report, and ranks #10 in the nation for business by CNBC. 

And yet Minnesota's ranking for entrepreneurship varies widely depending on the metric.  On the one hand, Minnesota ranks in the top 10 for startup creation and business survival (including the highest one-year business survival rate in the country), and continues to be a leader in patents per capita.  It also regularly appears as a top 10 business-friendly state due to infrastructure.  On the other hand, Minnesota is woefully underserved (shall we say, underestimated?) by the venture capital industry to the point of being largely ignored by the large, national venture firms.  But not entirely: there are several venture firms that appreciate the current and future opportunity for startup companies located in the state- and a number of Minnesota-domiciled firms that understand the opportunity, particularly in the healthcare sector.  In fact, it was one of those local Minnesota venture firms (Capita3) who urged me to post this newsletter now rather than next month.

While I may refer to Minnesota as “the Land of 10,000 Underestimations,” at Ocampo Capital we like to think we are also among those that fully appreciate the opportunity in the state – with a specific focus on serving consumer businesses.  My apologies to those who feel I am defying the cultural norm of Jantelagen by boasting on behalf of the state in this article – but during times like these, Minnesota deserves the support.