Bright Ideas with Lois Quam

Influential Minnesota business leader Lois Quam was the featured guest on the program "Bright Ideas" on October 26, 2010. Minnesota Public Radio's Stephen Smith hosted the live discussion in the UBS Forum at MPR's St. Paul headquarters.

FULL TRANSCRIPT OF EVENT

Stephen Smith: Welcome back to Bright Ideas, fresh thinking on big issues, a new program from Minnesota Public Radio News originating from the UBS Forum Studio here in downtown St. Paul. I'm Stephen Smith.

Each month we invite a guest here to talk about critical issues and ideas facing Minnesota and to take questions from the studio audience with us here today. It's a way of bringing Minnesota public radio listeners into the conversation and into the making of a radio program.

Our guest this time is Lois Quam, a native of Marshall, Minnesota and one of the state's most successful business people. She is a graduate of Macalester College and was a Rhode Scholar at Oxford University.

She's probably best known as an authority on healthcare. Lois Quam helped create and run a division of Minnesota-based United Healthcare, which grew to be a $30 billion business. She was also a close advisor to the Clinton administration in it's early efforts to pass major healthcare reform.

Now Lois has turned much of her attention to what she sees as a massive new business opportunity the new green economy. Please welcome Lois Quam.

Smith: So Lois, the journalist Thomas Friedman in his book "Hot, Flat, and Crowded" quoted you as saying this: "The challenge of global warming presents us all with the greatest opportunity on return on investment and growth that any of us will ever see. To find any equivalent economic transformation you have to go back to the Industrial Revolution.

"And in the Industrial Revolution there was a very clear before and after. After, everything was different. Industries had come and gone, civic society had changed, new social institutions were born, and every aspect of daily work and life had been altered.

With that came the emergence of new global powers. This clean technology transformation that we will be going through, according to your quote in this book, "will be an equivalent moment in history."

So explain what you mean by this massive change facing us.

Lois Quam: Well Stephen, we have used fossil fuels to build our modern economy. It fueled the Industrial Revolution. It's fueled enormous progress in living standards and economic growth.

But it has also created challenges pollution and now the effect of the pollution from carbon which is so significant in causing the temperature in the planet to rise. I've been to the Artic several times, so I've seen where they measure the carbon near the North Pole, and I've seen the effect on the glaciers and know how real that is.

And it creates this opportunity for energy to become local. So if you think about it, in Minnesota we spend about $10 billion a year on fossil fuels coal, gas, oil.

Smith: Billion with a B?

Quam: Billion with a B.

Smith: Right.

Quam: Almost none of it creates a job in Minnesota because we don't have fossil fuels in Minnesota.

Smith: We get the coal in Wyoming primarily.

Quam: We get the coal from Wyoming. We get oil from the oil shale in Alberta.

But one of the exciting things about renewable energy is not only is it renewable and ultimately, I think, very much less costly, but it's also distributed energy. So it means you can produce energy close to where you use the energy. So if you think about Minnesota, say if we take the $10 billion we spent on fossil fuels and used it to develop renewable energy capacity in Minnesota, because we've got great wind. I grew up in Marshall. Very hard to be in a marching band in Marshall.

Smith: Marshall is down in the southwestern corner of the state. It's on the Buffalo Ridge, is it not? Or just near it?

Quam: Just off the Buffalo Ridge.

Smith: And it is windy down there.

Quam: It is very windy. When I was growing up, there weren't any wind turbines, but there are now about a thousand wind turbines outside of Marshall, in Lake Benton, going up and down the Ridge.

We also have really good solar energy in Minnesota. We have about 300 days of sun a year. Interestingly, Steven, solar energy works better in cold weather than it does in warm weather.

Smith: We'll get to that.

Quam: And we've got geothermal capacity that's strong. The hospital at Ortonville is geothermal, the high school in Crookston, the Lutheran Church in Milan just a few examples.

And we're the only state that has a sort of mature agriculture and mature lumber industry with strong access to water. That creates opportunities for next generations of biomass.

So if you think about $10 billion going out of the state, what about $10 billion staying in the state to produce energy and to produce goods and services and capacity that we could export to other states and other parts of the world.

Smith: I want to continue with the Industrial Revolution idea in a minute, but I want to ask this. You know, when I look out and I think when a lot of people look out at the global warming future and the rather dire predictions that we hear about it, we're not thinking, "Wow, what a great business opportunity." It sounds really scary.

Yet your approach to this is not to be scared. It's to be optimistic.

Quam: You know, it is really scary. About a year and a half ago, I went to Ny Alesund, which is one the Archipelago of Svalbard, Spitsbergen, about 700 miles from the North Pole. It's a Norwegian part of Norway. They measure the carbon there because there's no other pollution around, so you get a really pure measurement.

In the post war period they've got the charts, and you can just see this huge impact in the level of carbon in the atmosphere. And then you see the impact on the glaciers.

But it's hard to find solutions when you're scared. And I think we have to approach this challenge as an opportunity for us to create a better future. We have to find those points of momentum that can help us get there more quickly. Minnesota has some unique advantages in that regard.

Smith: In what way?

Quam: Well, we've got all these natural advantages in renewable energy. But secondly, we've been really good in Minnesota at taking ideas that have been developed at the university and other places, and converting those ideas in companies, and then building companies to scale.

Minnesota has 19 Fortune 500 headquarters. We've got more than Boston, more than Los Angeles. The interesting thing about them is they are homegrown. So, Best Buy came out of the Sound of Music store. 3M could have been an old industrial company that kind of went away, but it really reinvented itself as this innovation company.

In creating the new clean energy economy, this new green economy, what we need to do is take innovations that come from research, build them into companies, and then be able to build those companies at scale. And that's what we've done historically here.

Smith: You have created a new company called I'm going to get this wrong. You tell me.

Quam: Tsyvar.

Smith: Called Tsyvar, and it is a company that is based in Minnesota and in Norway.

Quam: Yes.

Smith: So explain that, and help us understand how a Minnesota Norway connection is going to lead us into a new green economy with changes like a new Industrial Revolution. Quam: Yeah. As an entrepreneur, what I like to do is take on challenges and to say, "OK, as you're trying to build a solution or you're trying to build a company to solve a problem, how do you create momentum? How do you make something happen?"

As I looked at the new clean energy economy, I realized that Norway plays an incredibly important role. Now, why is that? Norway is an arctic oil producing democracy. And so Norway really gets the challenges around climate change because it has this big arctic region. It really understands energy because it produces oil. It produces natural gas. It also has a significant solar energy company and other capabilities.

And it has taken it's wealth from the oil industry and put it in a fund for future generations. And that fund now has about $550 billion in it. With that, Norway now owns about two percent of all of the companies that are publicly traded in the world. It's the second largest pot of money to Abu Dhabi. And it's a democracy, so there's a really interesting debate going on in Norway about how does it invest the money to kind of create the future we want.

So Norway has this knowledge and capacity, and they have a lot of small, interesting clean energy companies that want to expand in the US. What I discovered is that their first thought on expanding was to go to Silicon Valley or Boston or something.

And I think the best place for them to come to expand is Minnesota and the Midwest. We're good at building companies. We also, quite literally in some cases, speak their language.

Smith: You do, as a matter of fact. You have a Norwegian background.

Quam: Yeah. Yep.

So I decided to set up Tsyvar to be firm that's sort of Norwegian culturally and linguistically my partners in the business are actual Norwegian citizens who live here in Minnesota but has that sort of American sense of "can do" so that we can help Norwegian companies that are important in the clean energy economy expand in the US.

I have predicted our offices is in St. Paul here in Bandana Square that someday Bandana Square will be a Norwegian speaking office building and serving extremely strong coffee.

Smith: Yeah.

Quam: Maybe Lufsa.

Minnesota I think, as the kind of Norwegian Diaspora, can help Norway play a commercial leadership role in creating this new green economy because of our unique expertise in how you build things to scale combined with their insights and capacity as this arctic oil producing democracy.

Smith: So this is, at the moment, a consulting firm.

Quam: Yeah. We advise Norwegian companies on how they can expand.

Smith: So what are the most promising technologies that are over the horizon that you see? I mean, we have in Minnesota, we have ethanol plants that are cooking along. We'll talk about those in a bit. We've got wind turbines that are spinning like crazy all over the place. We also have nuclear power plants and coal plants and as you say there's geothermal.

What is it we don't know about yet that you do?

Quam: Well, the biggest form of renewable energy and the most promising is energy efficiency. The state that uses the least energy per capita of any state in the country is California. They have the best investments in energy efficiency. So they haven't really sacrificed lifestyle for that, right?

So, we could use about 30 percent less energy in the United States if we had better energy efficiency. So, it's a smarter grid, it's better insulated buildings. So, that's the kind of first easy piece.

Smith: Frankly, it sounds a little bit boring.

Quam: Yeah, and a lot of the most important things sometimes are.

Then, secondarily, they have these forms of renewable energy, whether it's wind or geothermal or next generation biomass. Thirdly, there's what I call clean technology, which is, how do we make everything in a way that uses less energy?

In Minnesota, one of the things we've done that's really effective there is our window industry has been very much on the forefront. So, we have Anderson Windows and Marvin Windows and a lot of window technology. And companies in Minnesota are looking at how to make smart windows, so windows that let in heat during the winter and keep out heat during the summer. And you can imagine that being really important then in how to use less energy.

So, kind of everything that's created, whether it's windows or a car or food, how do you do that in a different kind of way? And then lastly, in some of the more active discussions in Europe and not so much here is how do you take carbon that's already in the atmosphere and capture it in carbon sequestration and storage? For example, Holland and England are taking carbon from the atmosphere and putting it in rock formations under the North Sea. And that's a little bit more experimental.

Craig Venter, who's a prominent scientist and businessman, is looking at...

Smith: The guy who started us on the path to mapping the genome.

Quam: Yeah, exactly. So, he's focused now on using biology to find ways to sort of eat carbon out of the atmosphere. And there's an interesting company in Norway that we're working with that is looking at ways of developing algae based fuels to run cars, so that the more you drive, the more carbon you would take out of the atmosphere.

So, I think that's what the scope of the opportunity is. It is so diversified, and therefore, it's a really exciting growth opportunity and a way to solve one of the biggest challenges we have.

Smith: You're listening to Bright Ideas: Fresh Thinking on Big Issues. Each month, we've invited guests down here to Minnesota Public Radio News headquarters in Saint Paul for a conversation about key issues before a live audience. I'm Steven Smith. My guest this time is entrepreneur Lois Quam, and we're talking about the business potential of the new green economy. You think a lot of people are going to make a lot of money solving our green problems.

Quam: I think we're going to create a lot of jobs solving our green problems, and through that, we'll create real opportunities for the American middle class. And that's really needed. If we think about one of the reasons why this recession is so hard, is it comes on top of really 30 years in decline in middle class incomes in the United States. So...

Smith: Because manufacturing has declined.

Quam: Yeah, yeah. It really... And so, we need to, rather than sending all this money, in essence, overseas to import oil, 10 billion out of Minnesota, we need to use these resources to create really interesting and important industries that provide power, and provide us with those expert opportunities. And it's a real diverse set of jobs.

And one of the reasons I think Minnesota is so well suited to be a leader in this opportunity is the same reason we've been effective at building companies to scale over time, whether it's Medtronic or 3M or Best Buy. And that is because we have a good education system.

Because what this opportunity requires, as those did, are people from all walks of life, at every level in an organization, who can see a future that doesn't exist yet and then work hard towards getting there. And I think that's what we're good at.

Smith: The idea of it being an engine of jobs, though, it would seem to me that a new green economy would be largely a knowledge based economy, would be relatively low on the manufacturing side. So, how does that actually create the kinds of jobs that have gone missing, those jobs that typically have not required a college degree or anything beyond high school?

Quam: Well, it's a mix of a knowledge economy and a manufacturing economy. And I think we do have to worry that the manufacturing side gets done overseas in China and other places. And China is moving incredibly quickly in this space.

It was really interesting. The first time I went to China on a clean energy trip, I met with some entrepreneurs there who are building wind farms in Inner Mongolia. And I mentioned in passing that I was from near the Buffalo Ridge, and I had grown up there. And the conversation sort of stopped and they sat up a little bit sharper and they said, "You've been to the Buffalo Ridge?" And I said, "Oh, I grew up on the Buffalo Ridge." And they said, "Some of the best wind in the world." And I don't think I've ever gotten that response in the Twin Cities.

Smith: Well, no, typically. Yeah, I'm from the Buffalo Ridge. They're thinking, Wyoming?

Quam: Right.

Smith: Right.

Quam: So, I think it is an insight based economy. You have to see things in a new way. But if we do it right, and we have to do it right, there are all kinds of jobs in retooling buildings. There are jobs in new industries, in making everything we make now in new ways, everything from the chairs we sit on to the food we eat to the cars we drive. And the question then is, does that get made here or does that get made somewhere else?

And I think the opportunity we have in Minnesota is sort of linked to our historic opportunity. We've got this great position on the Great Lakes. We've got ample water, which is in short supply in a lot of other parts of the country. We've got this opportunity to take, like if you think about a city like Cloquet, that has had this important paper industry but isn't that far from the agricultural area, to make biomass out of the waste products in paper.

So, we have to work to try to create these opportunities here, and make sure they don't simply go to other parts of the world. And that's going to take business leadership. It's helpful to have good government policy to go with that. But we've got to make it happen.

Smith: You've talked about this transformation that you believe we're facing into a new green economy as being the equivalent, in terms of size and scope, with the Industrial Revolution. If I remember correctly, there weren't a lot of I may be wrong about this, but there weren't necessarily a lot of government subsidies for the Industrial Revolution.

How deeply will government have to subsidize this transformation? Is it something that the market can do on its own, or does it have to be... I mean, obviously, you've talked about the Norwegian fund. What about government investment here in the United States?

Quam: Well, there are a couple challenges. Fossil fuels have a lot of government subsidies now. So if you look at the way the oil companies are taxed, if you look at the treatment of their capital investments. So, one of the challenges we have is that traditional fossil fuel energy is subsidized, so it's hard to compete against something that's subsidized if you don't have subsidies.

It's also, there are big upfront fixed costs. For example, one of the challenges on the Buffalo Ridge, it's 170 miles from the Twin Cities. So, you really need the energy in the Twin Cities, but the wind is 170 miles away, is you have to create lines to bring the power in. And so, you have to create that kind of infrastructure and connectivity.

You also, when you start a new industry, you have to solve the problems that that industry brings. Now, solving those problems one person's problems is another person's job creates jobs. So, one of the challenges in wind is it's not windy all the time, and then sometimes it's too windy. So, what you'd like to do is you'd like to store the wind energy and release it in a smoother way, so that you don't have surges and you don't have...

Smith: You want it to be reliable.

Quam: You want it to be reliable, yeah. And some of that technology really isn't in place very well. I went and visited one company that makes these batteries and they're sort of the size of buildings. It reminded me of the first fax machines that [laughs] took up half the room. But when I talked to mayors in those communities, I mean those are opportunities to solve those problems and they are opportunities to work with the university.

So, these changes aren't smooth, and they don't move in a straight line. But because of the cost of fossil fuels, both the direct costs and the national security costs and the climate change costs and all that, we're going to move there over time. And the most effective movers are going to be ones that get the best jobs.

Smith: Now this program is called "Bright Ideas, " and so, we're interested in how people come up with some. You spent most of your adult career in the healthcare industry.

Quam: Yes.

Smith: And with United Healthcare here in Minnesota. Then you decided to go in sort of a different direction. How did you do that? When did you think, light bulb on, new green economy? What was the process?

Quam: Well, I like important challenges. I like to feel like I'm making a difference.

And I had asthma as a child, and my family had insurance coverage. And I could see what a difference that made. When I missed six weeks of kindergarten, and then my parents found a specialist here in the cities that I could go to. And it made all the difference for me. So, when I got out of high school, even, I really thought I would like to work on making insurance available to everybody. And so, I was just...

Smith: When you got out of high school?

Quam: Yeah, yeah.

Smith: Oh, come on! Really?

Quam: Really, yeah, yeah. I did. I was really motivated by that. And so, then I was really glad I had both the opportunity to work in the public doing that, sharing the healthcare access commission here that created Minnesota Care, and then working for Hillary Clinton, and then to build a company around how to solve those challenges.

Smith: And a company that did phenomenally well.

Quam: Yeah. I worked with such a talented group of people. And we really took on really hard challenges, like we worked for the Medicaid program in Arizona. And they had huge problems in getting care to people who lived in rural areas and inner cities. And they asked us to help them and we took that on.

We saw that a lot of people who were the frailest elderly in nursing homes were so often in and out of the hospital, and with their loved ones having to come, and it was just... And we reorganized the way care was delivered with a team of nurse practitioners. And it started with just a few people here at the former Bethesda Hospital. And when I left, it operated in 26 states.

Smith: OK. So, you've done all this. You're an expert. You're at the top of your game, and you decide to take on global warming. So, where did that bright idea come from?

Quam: So, part of my family in Norway lives in the Arctic in Tromso, which is about eight hours drive above the Arctic Circle. And so, I've been there. We took a family vacation to Iceland and Greenland one year.

Smith: Why not?

Quam: If you're Nor--

Smith: If you're from Norway, boy, that's...

Quam: Hey, you know, yeah, it's the...

Smith: It's the Riviera. It's the Croatian Coast.

Quam: Yeah, yeah. Exactly, exactly. So, why go to the Mediterranean when you could go to Greenland?

And it's quite startling to see the change, where there were glaciers then there aren't, and the rivers kind of coming off the glaciers in Greenland. And it really bothered me. So, I thought I would like to join the board of a nonprofit working on these challenges to make a difference.

And so, when I met with people from nonprofits, what suddenly hit me was that the whole arena, someone, one of these people in the nonprofit said, "You know, we really need our people who can build companies to scale and who can figure out how to work with policymakers." And I thought, "Well, that's what I do." And so, then it was a little bit, like it ate away with me if I was really serious about this. What about that?

And then, on a super cold day, I had Will Steger over to the house.

Smith: Well, who wouldn't?

Quam: Yeah.

Smith: If it's a cold day, you've got to have a...

Quam: Yeah, Will Steger over.

Smith: Arctic explorer over.

Quam: Yeah, yeah. And I said, "Aren't you depressed?" because he's telling me all these things. And he said, "No, I think capable people will figure this out, and I think that it's important that people who have a business background work on these things." So, then I felt more like... And I like to take on interesting and important challenges. So, I decided to change and kind of change big.

And so, I have continued to be involved in some things in healthcare. I'm a Senior Fellow at the Center for American Progress in Washington. So, I've helped where I can, but I've been very invigorated by the importance of this challenge for us. And I think we can find the solutions. I do. Smith: Genuinely.

Quam: Yes.

Smith: The industrial revolution, which you have cited, was obviously a long process, and it was a process that involved great social change, great opportunity, and great dislocation. And Tom Friedman, who is somebody you know and whose work you admire, has said, "We need a revolution. We need a green revolution in this country, but have you ever seen a revolution where some people didn't experience pain?"

And he's actually describing what's going on now as a Green Party a costume party, he even calls it. Not a revolution. So, I want you to go to the dark side here, Lois, and tell me about who is going to suffer? Who is going to lose, in your view, in this new green revolution?

Quam: I saw the areas really that benefited were hurt by in the Industrial Revolution in England. It was really interesting when I was a student there in the '80s. And I remember visiting North Wales, where fewer people live there now than they did in the Industrial Revolution.

Smith: The famous coal mining region.

Quam: Yeah, yeah. And there are going to be new powers that emerge in the world, economic powers that emerge in the world, cultural powers that emerge in the world, who lead in these changes. Just as we saw England emerge as a seemingly invincible power because of the role they played in the Industrial Revolution. You know, the sun never sets on the British Empire, and all that.

And how this country, with its combination of natural resources, the opening of the American West and industrialization emerged then as a global power. So, there are going to be global powers that emerge, and other countries and regions of the world are going to really slip. And that will have a huge and direct impact on the living standards and the health of the people who live in those regions.

And that's why I want so much for this region to use our innovative skills and use our historical strengths and kind of grab this and go with it. And what can be challenging about that is you're sort of going towards the unknown. But what we see time and time again is that's where success leads. And so, what we need to do is take those steps and innovate and adapt as we go. But, yeah, there are going to be real sections of the world that don't succeed. But areas...

Smith: Is it possible that our section of the world will be one of them? I mean, politically, we're at a moment now where it seems like we can't get much done on a big scale. And we're obviously in a lousy economy. Is it possible that America will be one of those places that just can't get it together in time?

Quam: Yes. Nothing's assured. I think when you look at what happened to Britain, and some of it was because of the second World War, and winning the second World War and not getting the Marshall Plan. It's some, but not to the same degree and not the costs of British leadership, which is a whole longer question. But at one point, you could have never imagined Britain declining the way it did.

When I lived there, the mass unemployment, and you could go to parts of Britain where people had never left their town, because they never had money to go anywhere. And we don't want that to happen to this country. And we have such huge advantages, but we need to realize them. And I think, in this region especially, because of the confidence we should have here, in our education, research, and our ability to build these companies, we should get on with it.

Smith: So you've described in some of your writing that there's four major areas in which you expect to see the new green economy demonstrate itself. What are they?

Quam: The first is energy efficiency. So how do we use less energy, and what kind of products and services help us do that. The second is renewable energy. So it's non fossil fuel forms of energy solar, geothermal, et cetera. The third is clean technology. How do we manufacture everything we make in ways that use less energy, that pollute less, and that don't have to be disposed of in ways that use a lot of energy. And then the fourth are ways of capturing carbon from the atmosphere and kind of putting it back into the Earth.

Smith: How realistic do you think number four is? It sounds a little more hopeful than I find practical.

Quam: I think that it is realistic. I think that there is some very interesting work done in Europe in Rotterdam in the UK. The UK government announced just this fall a major initiative in this area.

The Norwegians and the Dutch have put carbon underneath the north shore rock formations for a long time now. They've done it for different reasons. The Norwegians did it to sort of more efficiently pump oil out. The Dutch did it to provide heat for their greenhouses.

But I think that it is feasible. It is costly, but I think we have to be creative. A lot of things that we have initially developed have had very high costs and very uncertain futures and have panned out.

I think the important thing when we approach new business areas like this is to learn and adapt all the way through to be able to monitor, adapt, adjust. Obviously, not everything works, and the sooner we can figure that out and turn a corner the more effective we'll be.

Smith: What do you think of the ethanol industry and how it's played out? There are some, I think including Tom Friedman, who believe that it was essentially a unregulated or an unsupervised experiment that turned out to have unintended consequences, among them raising the price of corn, raising the price of food, and possibly being a real destabilizing agent.

Is ethanol an example in your view of something that we should have made that kind of quick adjustment that you're talking about and gone in a different direction?

Quam: Well, it's interesting. I remember being on a farm in Canby the night that Jimmy Carter made his speech his famous speech in the sweater about the oil embargo.

Smith: The so called malaise speech.

Quam: Yes.

Smith: Right.

Quam: Then this big sort of concept that came out of that era, that let's not get energy from the Middle East. Let's create it in the Midwest. And then through the farm crisis in the 80s, that became not only, "Let's get oil from the Midwest rather than the Middle East, " but it also was a way to build the farm economies, and it became very important.

In that era, while some scientists were thinking about carbon, it wasn't in the general discussion. What we know now is that the initial ways, the traditional ways that ethanol was produced is very energy intensive. So if what you're trying to do is reduce carbon pollution out the atmosphere, it's a tough way to do it. It's also had impacts in food prices and other areas.

But when you look at what's happened in some of the ethanol producers, is they are showing a lot innovation in moving to the next generation. Let me give you two examples.

There is a farmer's co op outside of Benson, Minnesota that was a traditional ethanol producer corn ethanol, used oil to make the corn into ethanol, now uses waste products. So corn cobs and other kinds of corn waste and farm waste and really only on a limited basis uses oil.

Smith: Is it as efficient? I mean, does it make as much?

Quam: Yeah. It can work well. They are very much on the cutting edge. And so there are ways of improving that.

Secondly, there's really interesting work out of Dartmouth and companies that have been built out of that on how do you make biomass out of other forms. So, for example, the waste of the paper industry or waste in the food industry.

And then there's really interesting research that David Tillman and others have done at the University of Minnesota around what are other non food grasses that can make biomass.

So I think that what we often see is that when we start out doing something that we learn over time and we develop new and better ways of doing things. I think that will be true in biofuels and biomass. The last time I was in Norway, I saw a presentation on using salt water to create algae and crops to create fuels.

So think we're going to see lots of advances over time, and that what we need to do is kind of constantly learn and adapt and adjust, and then be nimble about how we can start to build some of these things to scale.

Smith: What are some of the ideas floating out there that you think don't make much sense, that aren't bright ideas if you will?

Quam: Yeah well, some things are just so small scale that I think they just... In the end, energy is about scale and it's about reliability.

Smith: So it's got to be big, and it's got to be steady.

Quam: Yeah. It's got to have the potential to be big, and it's got to have the potential to be steady.

Smith: OK.

Quam: I guess what I'm struck with, with your question, is what I've seen is so many companies that have promise but they maybe don't have the management capacity to be able to bring it to scale, or they're just doing one thing so they're very, very vulnerable.

You can kind of get this sinking feeling when you're meeting with them, that there's kernel of an idea in there, but they're so vulnerable to changes in the marketplace or changes government policy. And they don't really have the quality of the management team to figure out how to maneuver something this complicated.

So one thing that I'm interested in is when you look at what 3M did. When you think about how they transferred from being a sort of mining, very traditional company to this incredibly diverse company is how do we build diversified green energy or clean energy companies.

So that you have companies that have different products and services and different types of revenue streams and different types of risk profiles, so that one thing is kind of solid and steady and another thing is high growth. And while one thing is really vulnerable to changes in the marketplace or changes in government policy another thing is a little steadier or has a different profile in that area.

I think it's going to be really hard for there to be tons and tons and tons of tiny, tiny companies in this space. That it's going to be important over time to develop diversified companies that are of scale. They don't all have to be huge.

I think, potentially, they could be in some very different places than the existing companies are. Which, when you think about the Industrial Revolution of course, didn't happen in London. It happened in places that were very small and then became very big as a result.

And I think if you look at, for example, Western Minnesota, if you look at the corridor from East Grand Forks down to Pipestone, there are some real natural advantages, or if you look at the area around Culcay in that area, there are some real advantages that some regional centers have in this space. So the question is, is it going to be us who takes the leap and grabs the leadership on this? This is a question Friedman, a St. Louis Park High School grad, asks in his books. Or is it going to be China or some other part of the world?

Smith: And within the United States, I'm not sure that Tom Friedman has identified Minnesota, necessarily, as the hotbed of the new green economy. Who is our natural competition here within the United States?

Quam: Well, there's a tremendous amount of investment energy around this in Silicon Valley. I think they could actually be quite a good partner for us. Silicon Valley is a really exciting, interesting business environment. There's a lot of focus on technology. There's a lot of focus on trying new ideas. There's not a lot of focus on that kind of reliability at scale, and I think that you will see some ideas come out of that region that we could, in this region, play quite an important role in commercializing.

There is a huge amount of energy and activity in Colorado. There have been companies that have moved from Minnesota to Colorado.

Smith: And the reason for that is just the nice mountains?

Quam: Actually, when you talk to some of them, it's a very attractive place to live. Now, I'm a cross country skier. I like the flat skiing, so I think this is a whole lot better. But they've had a lot of energy around how you create a hub of activity, so people think there are related companies together. I think we need to do more.

It's really interesting. There's a St. Paul Central High School grad, Javid Karim, who was one of the three founders of YouTube. He's at Stanford now. And I said, "Would you like to come back here?" He said, "Yeah, I might. I like it in both places. But one of the challenges in Minnesota is I don't know the coffee shops to go to where I can sit down and brainstorm about these ideas."

Smith: Because there are these famous places in Silicon Valley where overly bright people are drinking too much coffee.

Quam: Right. And you drop in, you talk about these things. You might meet somebody you'll be working with. I think we need to create a little bit more here of that kind of entrepreneurial climate. I'd really like to see more investment funds that are established here. Doug Cameron is one of the great scientist entrepreneurs in the state. He was a chief scientist at Cargill. He was a chief scientist at one of the top Silicon Valley firms, Coastal Ventures. He's now here, looking at setting up a new fund. I think that's important. I think we need lots of those kinds of activities in place.

Smith: We're going to get to questions from the audiences in a minute, but because we call this program Bright Ideas, we're also interested in how people come up with ideas in terms of what they read every day and what they consume in terms of media. So what's your daily media diet like?

Quam: I listen to NPR, and I listen to BBC Online. I read the local papers, the Pioneer Pres and the Star Tribune, for local news.

Smith: Do you get those delivered, or do you read them online?

Quam: I read those online. I get delivered The New York Times and the Financial Times. I love the Financial Times.

Smith: But not The Wall Street Journal.

Quam: No. I actually think The Wall Street Journal has really declined in the Murdoch era and that the Financial Times has much better global business news. They're shorter stories. They're more interesting stories. They're things that don't get covered anywhere else.

Smith: So, magazines? Quam: You know, I don't do as much in terms of magazines. I read a lot of books.

Smith: Blogs? What about the relentless churn of information? How do you keep track of that?

Quam: I'll look around on the Internet to British newspapers, Aftenposten the main paper in Oslo, Dagens Nyheter, the business paper in Oslo. It's important for me to keep up with that. I probably am more old fashioned in that way.

Smith: You sound a little Industrial Revolution about all this! You read books.

Quam: I read books, yeah.

Smith: Name the two things you've been reading recently that really excited you.

Quam: Right now, I am reading a book about the Blitz in Britain. It's a really interesting book about the experience of people during the Blitz. I am interested in how people rally around a crisis. There's a great scene in it where Churchill says, "Bring all your pots and pans, " so we can melt them down for things. And there's this outpouring where people brought their pots and pans to this huge collection center. And one of his aides says, "So what are you going to do with it?" He said, "I have no idea! But I needed to engage people." That's the only way that they could do it. It's really kind of interesting to think how you engage people in something.

Smith: So if I bring my old combustion engines over to your house -

Quam: A little pile of things? We'll make them into wind blades, right. I just read an interesting book about the AIDS epidemic in Africa. I read a wide range of things. I read a lot of history. Some of my favorite books are Jared Diamond's Guns, Germs and Steel how do some regions of the world succeed and others struggle? I read a lot of history.

Smith: And then, any guilty pleasures? People Magazine? Quam: Izzy's ice cream. Does that count?

Smith: That's not media, though.

Quam: Yeah.

Smith: Will Ferrell movies?

Quam: Yeah. Mr. Bean.

Smith: OK. And then finally, where is the most effective place for you to do your thinking?

Quam: So I'm not one of these people who needs to get to a quiet place to think. It may be being a mother of three children. I go to Dunn Brothers coffee shop. I go to Kopling, which is a very Norwegian coffee shop is St. Paul. That's one spot. I do cross country ski. If I really need to think out a challenge and it's winter, that's what I'll do. I'll go down to Crosby Farm or Fort Snelling State Park. Or I sit at the kitchen table.

I tend to think and work in a very sharp burst, and then I take a bit of a break, and then I come back to it. I think it's because whether it's being home with three kids -

Smith: Three boys.

Quam: Three boys, or running a company, you have a constant set of interruptions. Yet at the same time, what's so crucial is not to just be taking things as they come and handling them. You've got to anticipate what the future's going to look like and how you provide the leadership to your organization so you get there first, that you are constantly proactive about creating opportunities and solving problems.

I think one of the biggest and most important, essential things about leadership is that proactiveness. The most important things don't come to you in an email. No one calls you on the phone or sets up a meeting. It's really how you think about what are the unfulfilled aspirations of the world, what are the big challenges of the world, and then is there some way we can build the capabilities to address that?

I think if you say, "Well, I'm going to get to that when I get some quiet time and space, " you never do. But if you've got 15 minutes, then you can really think about it and go on to do something else and come back.

You can make a lot of headway.

Smith: I think I'll read this. You're listening to Bright Ideas: Fresh Thinking on Big Issues with Lois Quam, an entrepreneur from St. Paul who's talking with me about the business potential of the new green economy. I'm Stephen Smith, and let's bring in some folks from the audience here on the UBS forum and their questions for Lois. Raise your hand, if you would. Don't be Norwegian. Tell us your name and where you're from.

Scott Strand: Scott Strand, from St. Paul. Lois, you mentioned that good government policy was an important element in bringing about the new green economy. What did you mean by that? What are the key components of good government policy in this area?

Quam: Well, I think there are a couple elements. One is what would fall under the heading of industrial policy, which is thinking about how you foster innovation and capital investments in the new clean energy economy. Particularly important in the kind of recession that we're in. Secretary Chu in the energy department has talked about innovation centers. If you think about health care, how important the NIH has been in funding innovation in health care -

Smith: National Institutes of Health.

Quam: better treatment for patients, and spurred what have become really important industries in Minnesota and the country. So how do you have those innovation centers that help give opportunity for researchers and for beginning companies to incubate and go on. I think that's one important area.

A second important area is, for a long time, we've had government look at pollution and ways of stopping the spread of pollution. I remember growing up, just some of the really awful examples. There was Love Canal and some of the other things where pollution really hurt people and really hurt people's health. Both at the state levels, we've looked at our water quality, at the federal level, we've looked at the quality of air. It's been so important.

That continues to be important, whether it's the Environmental Protection Agency or the Pollution Patrol Agency. I think we've learned a lot over time. We've learned that carbon represents one of the most damaging forms of pollution that we have. But also, we need to look at nitrogen and phosphorus and the whole spectrum.

Smith: The things that pollute the water more than anything else.

Quam: Yeah. John Foley, who's at the University of Minnesota's Institute on the Environment, published this really important article in Nature and Scientific American with a group of colleagues in Sweden that looked at how you measure the seven dimensions that impact how pollution affects the world. If you think about what's happening now, we've got a set of resources and we've got this exploding global population, and we've got consumption increasing around the world. This country has always consumed much more than any country in the world, but there are rising living standards in many parts of the world, dramatic rising living standards in some parts of the world, resulting in increase in population, increases in consumption, and increases in pollution and scarcity of natural resources comes as a result of that.

There are different ways to deal with that. You can have regulatory controls or you can set a price on the pollution to make it more expensive to emit carbon and therefore a disincentive to do that. I think we would benefit in this country both from having an industrial policy that's kind of like the National Institutes of Health in terms of clean energy economy so that we're able to develop these jobs and compete successfully in the world, and address this pollution in the way that we've addressed pollution in the past, either by regulation or by setting a price on carbon.

Smith: So incentive on the front end and pain on the other end. Another question? Tell us who you are and who you're from.

Salman Mehta: My name is Salman Mehta, and I'm from Egan. I wanted to follow up a little bit on your comment about fostering innovation. Can you talk a little bit about how we can foster innovation, both within the university system and perhaps even outside.

Quam: Central to fostering innovation is to create the space for people to think about how to solve problems in new ways. That starts in education, which is about how you learn to answer questions versus just memorizing things. Then it's really important in our higher education centers, whether it's in vocational schools the vocational school in Canby, for example, has developed specific expertise around problems in wind energy all the way to the research capacity that we have at the University of Minnesota.

And then within the economy, it's important to have opportunities where entrepreneurs can start working on new ideas. What entrepreneurs need for that is capital, which is why developing different kinds of investment funds or industrial policy that supports seed money for people to be able to get started is important. It's also about culture, to have people that you can bounce ideas off of and learn from and exchange from.

Someone said that one of the things we don't do quite as well here in Minnesota is we'll develop a huge business plan and then think we'll roll that out, versus something that's really adaptive. When you plan, you're always going to get it wrong. The best laid plans. You can't think of everything. Rather, you have to think about how do I have a plan, but then how do I test my assumptions, how do I adapt. Adaptation's not a failure. It's a way of innovating.

Smith: I think I read somewhere that the papers of General George Marshall were important to you at some point, especially in respect to the Marshall Plan rebuilding Western Europe after World War II. Tell me how that factors into this. Is the adaptability one of the lessons you drew from that?

Quam: Yeah. I got interested in George Marshall because of the Marshall Plan. When you think about U.S. foreign policy, it's amazingly effective. When you think about the legacy of it, you just have to look around Europe and what's been created. I was then asked to be on the board of the Marshall Foundation, and through that, I got to know General Goodpaster, who had been Marshall's chief of staff, and the researchers working with his papers.

It was interesting. I had dinner at one of the board meetings with General Goodpaster, and one of the things he pointed out to me was that when Marshall took over the army, he fired all the generals and replaced them, because he was concerned that the generals coming out of World War I would be trying to fight the last battle and wouldn't be looking at the new set of circumstances.

Sometimes we really struggle with that, and I think that can be a barrier for us in seeing opportunities. We're so focused on, "Well, this was successful 10 years ago, " or "This is how a company was built." Actually, the circumstances in the world are so dramatically different now. Innovation is about looking freshly. Sometimes that takes new leadership. Smith: It's about a posture rather than a procedure, it sounds like in some ways.

Quam: The other thing about Marshall is he had a rule of never making big decisions after two in the afternoon. He went home at lunch and took a break and came back. And he enforced vacations for generals in the Second World War. He took them out. So he also had this really interesting thinking about how to get rest and reflection and why that was important.

And then the papers are also really interesting in terms of how he challenges Roosevelt in discussions, which felt quite healthy.

Smith: Another question for Lois Quam.

J. Drake Hamilton: This is J. Drake Hamilton. I live in St. Paul. You make such a compelling case that I agree with, that we need to move very quickly to clean energy at scale. It helps elevate the conversation around the general fear that people are infused with because of the economic crisis. However, we have an old energy economy right now that is at scale, and I'm wondering what your advice and recipe would be for helping to move most of us, who are still in that old energy economy, much more quickly to the clean energy economy. How do we speed up that transition, and how do we ease that transition for those of us who've known it all our lives?

Quam: That's such a good question. I think the first thing is really embracing it as an opportunity. Really letting it sink in, the fact that we can reduce this pollution, we can keep this $10 billion that we're sending out of state that costs jobs, and keep it here. First, there's an opportunity.

So then, there are a lot of things we can do in our own lives to use less energy, but to do it at scale requires us working in more of a system. Excel is, of all the utilities in the country, the one that's moved the furthest on energy efficiency and wind. We should just do more.

Smith: Is that because the state, among other things, put together great incentives to go that direction?

Quam: The Minnesota legislature really did an excellent job in putting together the incentives to move to renewable energy. Therefore, creating a different culture in the utilities, to say "OK, now we respond to this challenge, and we're going to start working on these challenges. And that's an example of how policy and change can move together.

We need to do more of that. We need to look for more opportunities for policy and change to work together effectively. Then, I think that we have a number of very interesting small companies, and I think it's going to be important that... You can't push a button and build an industry, but you can do lots of things to do that.

So, we've got small companies. We need to help those small companies get linked up with investors. And we need to encourage big companies to look at these opportunities in these spaces. So, there are opportunities for us as consumers to pick products and services that fit in this area, and that sends big messages to the companies that produce them.

There's an opportunity for us to use less energy. There's also an opportunity for people to do what I did, which is say, "OK, I'm going to take skills I've developed in one sector and I'm going to find opportunities to do it and create it in these other kinds of sectors." I think we have to do all of the above.

Smith: We have a very elaborate system of hand signals in this business. And so, Stephanie held up this two. And what that means is I'm going to take two more questions. Who are you and where are you from? Tim Mahoney: I'm Tim Mahoney, and I'm from Saint Paul. And I actually have two questions.

Smith: So give us one of them.

Tim: Well, I will phrase it this way, then. Lois, you spoke about more venture capital. And the state has done a very good job with the Angel Capital, and we have a very good large venture capital group here. How do you get, or do you have any thoughts on that middle group, or the Valley of Death, as it's called? And then, how do you divert that $10 billion from old energy to new energy?

Smith: What's the Valley of Death? I'm not in the venture capital world, so that I don't swing those terms around.

Quam: You don't, yeah. So, there's a real challenge for companies when they're trying to build to reach their full potential. They'll get some early money because they need a couple hundred thousand dollars or a couple million, but it's sort of manageable. And then, later on when they're profitable, they can either meet their own capital needs or they can have a public offering, or get capital in other ways.

But there's this in between period when they need money and they're not quite profitable, and they're growing. And you can't get from here to there without going through that period, and that is called the Valley of Death because it's often really hard to get money in that period.

Smith: OK.

Quam: And Tim Mahoney, who asked this question, knows a lot about this because he chairs the committee. He's a member of the House of Representatives and chairs the committee that's looking at these problems.

We have an entrepreneurial capacity here that is much greater than the investment capacity in Minnesota. And we really need to build a broader investment capacity. So, that means investment funds and the people who manage them, who are interested in funding these companies early on and when they're medium size, before they're in a position where they can fund themselves.

Smith: So, how do you draw those people to, jeepers, nice old Minnesota, when they're probably looking at the Silicon Valley, or the brain trust up by Boston, or other parts of the country?

Quam: We buy them breakfast repeatedly. That's been... [laughs] So, what I've done is I have looked for really capable people in other parts of the country who have a tie to this region or would like to live here. It's a really great thing to be able to have your kids go to public schools, which you can't do in those locations in a lot of places. The quality of schools isn't the same. So, there are a lot of things about the quality of public life, of life in Minnesota, that's really attractive to people.

And we have this opportunity that if you can get through this period to be a large enough company, we have a lot of companies you might partner with in Minnesota, Cargill, 3M, Best Buy, United. So, if you can get through that, you've got the opportunity to be there. So, it's an attractive place to be.

So, there is this hard work of recruiting key talented individuals to come or to stay, and then looking at policy incentives to put things together. And then, I think there's this other piece, which is a little bit intangible, but building a climate where there is a very robust discussion about these challenges and opportunities in coffee shops, in restaurants, in university settings, in business settings. And I think we all need to do more to foster that.

These things, building a new economy is about a lot of building blocks coming together versus flipping a switch. And so, there are things that can create momentum. One is state policy, like it's happened in the past, and one, I think, is Norwegian know how and resource.

Smith: The old Norwegian know how. Final question.

Dan Hubbard: Hello. I'm Dan Hubbard from Brooklyn Park. A question I have is, what do you see as the best nurture opportunities in the emerging green economy for existing Minnesota businesses and new start ups, and how do we seize them?

Quam: Well, thank you. I think some of the most interesting opportunities here in Minnesota are in areas that are at the intersection of biology and energy. So, whether that's biomass or it's how to reduce the use of water and energy in agriculture, there are just incredibly important opportunities there. And it builds on what has been some of the state's historic strengths.

So, there's a network, particularly in the western part of the Twin Cities, of small, very interesting companies in the biologics and chemical space. I think that's a very promising huge growth potential that builds on our knowledge based economy.

Smith: Thanks very much for being here, Lois Quam.

Quam: Thank you.

Smith: You've been listening to Bright Ideas, a new program from Minnesota Public Radio News that presents fresh thinking on big issues. Our guest today was Lois Quam, founder and chair of a new company based in Saint Paul and Norway, called Tysvar, a consulting firm focused on the new green economy and universal healthcare reform.

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Transcription by CastingWords

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