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Why should some medical cities be happy about Occupy Wall Street

Chris Seper on December 19, 2011 Source: MedCityNews.com

I wrote last week that the pro-Occupy Wall Street crowd could mean big trouble for some of the country’s life sciences capitals.

But a few people pointed out that there’s a reason for some med cities to love this development. Specifically, the regions without public policies that fund investors or life sciences startups.

The gist of my earlier piece was that an increasing number of pundits, 1 percenters and even entrepreneurs are attacking the idea that investors and entrepreneurs create jobs. Instead, they argue that it’s consumers who create jobs by purchasing goods. And, they say, the current economic system is undermining the day-to-day consumers, making it impossible for them to create jobs.

Venture capitalist John Hanauer states: “I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.”

“That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small,” Hanauer added. “What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive, and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.”

At first blush, this is bad news for many elite medical cities. Cities like Cleveland, Minneapolis and Philadelphia are in states that created programs with public dollars that give tax breaks and cash to early stage and institutional investors. This money then trickles into scores of early stage companies. And many of these startups are life sciences businesses.

Legislators (and voters) support this system because they buy the argument that investors and startups create jobs.

So if more people believe in consumers as the No. 1 job creators, the public subsidies for investing and startups would disappear, angel investing would slow down significantly and some of the venture funds that opened offices in states that offered them public dollars would also leave.

But startups are still going to start. Also, research institutions are better than ever at tech transfer and they’re not going to stop doing it even if there are fewer publicly funded angel groups just around the corner. The research institutions still get a return if their startups succeed in another state.

Companies are going to need to follow the money no matter what state they’re in. Early stage investors, generally, will never be comfortable investing in startup companies that are far away. So these life sciences companies — usually made up of only a handful of people, anyway — will need to relocate. And if it means a CEO must move from one med city to another (which has the same robust customer base and healthcare economy), most startup leaders will be fine with that.

So why wouldn’t a Research Triangle Park or other medical cities that have few to no state incentives for investment welcome such a re-leveling of the playing field?

I believe that in the next few years, the national rivalries and company-swiping will only intensify. There is already a need for human talent and others resources necessary to make startups grow. That talent and capital deficit is going to increase dramatically in some medical sectors.

Regions that have human capital — coupled with investment dollars — will be ahead of other markets.

So for some regions, cheering on the 99 percent — while undercutting another regional competitor’s advantage — could be in their best interests.

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