Brian Gongol
Business is often conducted quite differently in the American Midwest than it is in other parts of the world -- and even from different parts of the United States. On occasion, people have acknowledged this sort of difference and tried to identify some of the causes. The department of economics at the University of Chicago, for instance, forged a very different path than other institutions that some within the department have attributed to the city's geographic isolation from other population centers. Others, notably Jeff Matthews in his book "Pilgrimage to Warren Buffett's Omaha", have speculated that being physically removed from the psychologically and physically faster pace of markets in places like New York turned Buffett into a more deliberate, patient investor than others. Matthews refers to Omaha as a place where it's "easier to think" than in busier, more populous locations.
While the nature of geographic isolation surely does have an effect on the way that Midwesterners approach things, having lots of wide-open spaces around is only a contributing factor -- not the decisive one -- in causing business to take on a different character in one part of the country than it does elsewhere. If isolation alone -- room to think, perhaps -- were enough, then North Dakota and Wyoming and Alaska would be full of wealthy people. That is obviously not the case.
There are at least three factors that may not be unique to the Midwest, but certainly do have an effect on the way that native-born Midwesterners think, particularly about business:
- First, we learn to place tremendous value on reputation. To use the Omaha example, the entire state of Nebraska has just 1.8 million residents. In a state of that size, everyone knows everyone else, particularly when they are in the same field of business. It's often joked -- and with no small measure of accuracy -- that if the rest of the world runs on six degrees of separation, the Midwest runs on two. In an environment like that, people don't just know their neighbors, they are closely connected by reputation to almost everyone in their state and region. While this scrutiny of everyone knowing everyone else (and their personal business) may be felt most intensely in small towns, even a place like Omaha or Des Moines or Sioux Falls -- the largest in their respective states -- is too small a market for anyone to become known for dishonesty or dealing in bad faith. As just a small example, the commercialization of rye whiskey based on a Prohibition-era recipe from Templeton, Iowa, caused controversy among those who still regretted -- even in the 21st Century -- that their community was known for flouting Prohibiton laws, seventy years after those laws had been overturned.
- Second, due to the natural environment and our close links to agriculture (even for city-dwellers), we gain an acute awareness of the unpredictable recurrence of big events. Living in Tornado Alley tends to have the effect of making Midwesterners uncommonly aware of the fact that big, catastrophic events happen frequently, even if unpredictably. Places subject to natural disasters like earthquakes and hurricanes certainly have some awareness that major events come and go, but those disasters tend to be infrequent. A year with multiple severe earthquakes is almost unheard-of, even in California, and the incidence of major hurricanes along the East Coast of the United States is commonly overlooked. New York City has been hit by hurricanes and earthquakes in the past and will again, but those risks barely seem to enter the public's attention. By contrast, Iowa alone averages four dozen tornadoes a year. Not all cause much damage, but nearly every one is covered at length on television and radio, and some, like the Parkersburg tornado, are so devastating that they are impossible to ignore. It's really not too much to imagine that growing up in a place where tornado sirens are heard several times a year might have an effect on the way that Midwesterners perceive catastrophic risks. It ought not require much imagination to understand that this experience might, for instance, have influenced Buffett's notorious aversion to debt and appetite for having lots of cash on hand...just in case something awful happens.
- Finally, there is a heightened sense of trust in the Midwest that seems to be absent elsewhere. It's likely reinforced by (and has a reinforcing effect upon) the strong emphasis on reputation, but it means that people are eager to be taken at their word and deeply defensive of their reputation for honesty. As a result, business is often conducted on a handshake and a verbal agreement on deals where people in other places might bring out a six-page written contract full of terms and conditions. Nobody wants to be known as the person who cheats -- and nobody wants to earn the reputation as one who preemptively accuses others of planning to cheat (which is how it can be perceived when one party wants to do a deal on a handshake and the other wants to issue a six-page set of contract terms). This sense of trust undoubtedly greases the wheels of commerce, at least for those on the inside, since it cuts out lots of deadweight costs in many transactions. Few Midwestern businesses are in any market with more than about a dozen local rivals -- and usually the number is much lower; thus, even competitors are nudged towards mutual honesty and friendly competition.