Lilly CEO has leaders talking about whether state is doing enough to grow Indiana

David Ricks

There was nothing especially new in David Ricks’ comments to The Economic Club of Indiana on April 20.

The CEO of Eli Lilly and Co. told a lunch crowd at the Indiana Convention Center that, to compete for jobs—particularly technology, life sciences and engineering jobs, Indiana needs to improve its education system, reduce health care costs, embrace diversity, move to greener energy sources and do a better job training its workers.

Policymakers have certainly heard those sentiments before.

But Ricks’ words—repeated on social media by those in attendance and reported by IBJ and local TV stations—have reverberated across the state. In boardrooms. In government offices. On Twitter. In columns and news stories. Even at parties where talk of public policy is, at least in theory, supposed to be at bay.

READ a partial transcript of Ricks’ speech at the Economic Club of Indiana.

John Thompson

“Dave Ricks is trying to drive us to action,” said John Thompson, chairman of the Indiana Chamber of Commerce and founder of Thompson Distribution and other construction-related companies. “He’s firing a warning shot.”

That shot is making waves because it comes from the CEO of a Fortune 200 company with 11,000 employees in Indiana and 58,000 globally—a company that in recent months has announced it would invest more than $3 billion in new factories and research laboratories outside of Indiana. Ricks acknowledged those moves immediately prompted calls from state leaders inquiring why Lilly would invest outside Indiana.

“I give them this speech that I gave you today,” he told The Economic Club crowd.

Fritz French

Fritz French, a life sciences entrepreneur who has started companies in Indiana and sold them, said Ricks’ challenge to state government leaders was “spot on.”

“While Indiana does have many factors in its favor that are attractive to businesses, including low taxes and [low] regulatory burden,” Fritz said in an email to IBJ, “there are many others that are very troublesome, including the ones Ricks mentioned in his speech in which our state performs poorly—education, health care, inclusion.”

“Making real and measurable progress will be a big undertaking,” he said. “To be successful, it means making it a stated priority, with sustained focus, significant funding and accountability for results.”

Scott Dorsey, a co-founder of ExactTarget and now a partner at venture studio High Alpha, said he agrees with Ricks “that we need to aim higher as a state—particularly across education, health care, health of Hoosiers and the environment. And where that really resonates with me broadly [is in] economic development.”

READ Indiana Commerce Secretary Brad Chambers’ response to Ricks’ comments.

Scott Dorsey

Low taxes aren’t enough

At the crux of Ricks’ argument is that Indiana’s focus for so long, over so many years of Republican leadership, has been to create a tax climate and a regulatory structure that is friendly enough to business that companies can’t help but consider Indiana for major projects.

By all accounts, that has been a success. The Washington, D.C.-based Tax Foundation’s 2022 State Business Tax Climate Index ranks Indiana ninth for its overall tax climate and No. 1 in the Midwest.

But Ricks said—as have business leaders before and even more in the days since—that a good tax climate is just one piece of a complex puzzle that determines where companies invest. High health care costs, an under-educated workforce, and a dearth of talent substantially drive up the cost of doing business in Indiana.

“If I had to make a list for the upcoming Legislature, this would be it … to work on K through 12 education and the basic building blocks of how we prepare our workforce for the future, reskilling those that have already left that system but may struggle to find a new role in the modern economy,” he said.

Add more spending on public health (Indiana now ranks near the bottom of states), a greater push toward greener energy (Indiana remains one of the natmore coal-dependent states) and opening the state’s doors wider to immigrants, who can help address companies’ desperate need for workers.

And political leaders say they’ve heard the message—not just from Ricks but from others as well.

It’s one reason Commerce Secretary Brad Chambers, in the job less than one year, has pivoted the agency to focus on many of the issues Ricks spoke about—including sustainable-energy efforts and talent attraction. But he said Indiana is an attractive place to do business, even as it seeks to improve in other ways.

“While discussion about opportunities for improvement are important, they should also be framed in context to relative strengths,” Chambers, who is in Europe this week on a trade mission, wrote to IBJ. “Indiana is strong and getting stronger.”

In addition, legislative leaders have been pushing Indiana’s hospitals and health insurance industry to reduce the cost of health care, particularly the cost to companies that provide insurance to their employees. That work has led several health care systems to try to rein in costs.

“Senate Republicans agree lowering the high costs of health care in Indiana is critical, which is why we’ve taken steps to provide price transparency and push industry leaders for action on this important issue,” President Pro Tem Rodric Bray of Martinsville, told IBJ in a statement.

Kevin Brinegar

Kevin Brinegar, president of the Indiana Chamber of Commerce, said Ricks’ comments dovetail with the priorities the group plans to take to lawmakers in the 2023 session (the 2022 session ended in March).

The chamber has been among the biggest drivers of those low tax rates, pressuring lawmakers over the past decades to drive down first this tax, then another.

“To use the Mitch Daniels analogy,” Brinegar said, referring to the former governor who is now president of Purdue University, “we’ve created one of the best sandboxes in the country as far as our business climate … but there are some things in the business climate we still need to work on.”

Much more work ahead

He and other business leaders pointed to areas where the Legislature has failed to act: incentivizing local governments to locate wind and solar farms in their communities, increasing the cigarette tax to deter smoking, approving a hate-crimes law that applies to transgender people.

And there are problems as well, business leaders said, in what the Legislature has chosen to focus on instead. In just the past few years, lawmakers debated making abortion illegal, the way diversity issues are taught in school, whether transgender girls should compete in sports, and whether Hoosiers should obtain a permit to carry a handgun.

“What I’ve come to learn is that the most valuable and scarce resource around the General Assembly is their time and how they choose to spend their time,” Brinegar said.

Thompson, the state chamber chairman and a member of the Indy Chamber board, said he raised the issue of Ricks’ comments during an Indy Chamber meeting this week. He said he reminded the group’s members that “we’ve got to get more involved in the political process to try to solve these things.”

That means finding ways to back moderate candidates in both parties. “The parties are bifurcated—the Democrats have centrists and far-left members; the Republicans have centrists and far-right,” he said. “Business leaders need to elect and work with the centrists.”

Michael Huber

In fact, trying to block legislation that might be bad for the business climate in Indiana can take as much time as advocating for positive policies, some leaders say.

Michael Huber, Indy Chamber president, said engaging private-sector leaders and local lawmakers to talk about what companies need the Legislature to do is a key focus of his organization.

“But also making sure that we play defense against very divisive policies,” Huber said. “Our business coalition fought publicly against legislation that we thought would limit how diversity education is taught in schools. We’re on record for pushing back against that. And so [we need to talk about] things like that, which the business community doesn’t see as helpful in growing and retaining diverse talent.”

‘We’ve got to do something’

But not everyone sees the Legislature or government in general as the primary answer to the state’s problems.

Bill Oesterle

Just three days after Ricks’ speech, while accepting TechPoint’s Trailblazer Award at the Mira Awards at the JW Marriott, Bill Oesterle commended Ricks for speaking directly about the state’s problems. “It was a remarkable list—courageous and objective.”

However, Oesterle said, Ricks “looked to the Legislature and the governor to solve our problems.”

“I disagree,” Oesterle told the crowd of more than 1,200. “I think those problems get solved in this room. Innovation, diversity, inclusion. It happens here.

“David Ricks issued us a challenge. I’d like to say to him, ‘We accept.’”

READ Bill Oesterle’s column: ‘We are going to have to innovate ourselves’

John Wechsler

John Wechsler, founder of Launch Fishers and an Indiana Technology and Innovation Association board member, heard Oesterle’s speech on Saturday. He said the entire tech community must answer the call, which means focusing as well on entrepreneurship and capital investment—two things that can be driven by the business community.

Indiana, he said, ranks near the bottom in entrepreneurial starts and per-capita investment of venture capital. “We’ve got to do something to fix it,” he said. “That’s the critical metric. … It does not bode well for the long term.”

And Megan Glover, co-founder of Zionsville-based startup 120Water and another association board member, said Indiana’s struggles securing talent lead to less venture capital.

“That’s one of the number-one questions: ‘What’s the talent like in Indiana?’” she said. Venture firms “love the cost of living, love the economics about building a business in Indiana, but how is the talent pool? And do you feel comfortable that you can get the team that you need to grow this business?”

Oesterle said companies can address those problems better than government. He pointed to Cook Group, a Bloomington-based medical-device company, as an organization that is tackling problems related to workforce and education without seeking help from government.

Cook is preparing to open a manufacturing plant in a challenged neighborhood in Indianapolis where it has partnered with Goodwill of Central and Southern Indiana to provide services to employees who might struggle with transportation or health care. And Cook hired 100% minority-, veteran- and women-owned businesses to construct the building.

It also pays for all its workers to attend school (upfront, not as reimbursements) and has purchased 62 acres of land in Owen County in its efforts to build 300 homes in the region for workers.

READ Pete Yonkman’s column: Core business resources can drive community change

Cook President Pete Yonkman said in an email to IBJ that “government and policymakers have a large role to play in addressing” the challenges Ricks identified at the Economic Club.

“Solutions will come from government, from not-for-profits, from industry and our neighbors,” he said. “If we sit down with a common goal and each bring our best to the table, I am confident we can tackle the challenges Mr. Ricks has identified.”•

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25 thoughts on “Lilly CEO has leaders talking about whether state is doing enough to grow Indiana

  1. As Ricks makes a $700mm investment in Boston 2 months ago…

    Our higher education is as fine as anywhere else in the country. Build it in Indiana, David.

    1. We have good post-secondary institutions, but our public schools, public services, and overall quality of life are awful. People who go to those schools leave for other states and cities because they don’t want to live in a state that only provides the bare minimum and routinely sends itself on social crusades against minority groups.

    2. The fact that they didn’t invest in Indiana should tell you there is a problem with our state.

    3. Ryan, it’s not about the colleges and universities. Yes, ND, Purdue, IU, and Rose-Hulman produce well-educated STEM grads.

      But something around only 30% of Hoosiers have a higher-education degree. Those who don’t, the working folks who form the backbone of the state economy (and business hiring), are graduates of a middlin’ K-12 system. THAT is what Ricks and others are talking about.

      The market is telling Indiana that our high school graduates are fine for Amazon and Walmart warehouses, but not so much for new battery and computer chip factories.

    4. The question is whether or not a higher education degree is even particularly useful, or if it’s merely an indicator of a certain work ethic (which in itself is dubious).

      California should be the wonderland by most metrics, in terms of its labor force and quality of life. It has what are perceived to be world-class educational institutions (again, increasingly dubious) and its big cities are magnets for what they call the “creative class” workforce. Great weather, amazing natural features, a real concern for the environment. Yet it has been hemorrhaging jobs for two decades because of its lack of other business-friendly indicators. We can extend this reasoning up the West Coast, where the next two biggest cities (Seattle and Portland) have been godsends for their respective states…until recently. Even Amazon (which IBJ notes reported its first quarterly loss in years) is scaling back its downtown Seattle HQ due to a rapid deterioration in Quality of Life without a similar dropoff in cost of living.

      Most of the people on here are still applying arguments that were far more credible in 2016 than today. It’s fairly obvious we’re in a massive cultural paradigm shift, the chickens are coming home to roost, and the “cater to the college grads” ethos needs some serious rethinking. Not sure I have the solution, but ramping up “diversity education” in public schools (which, by virtue of being open to all and paid for by all, has a duty to being race neutral) has no credibility. Virginia has been leading the charge in fighting Mein Kampf for Black People and, despite being Dem leaning, elected a GOP governor for this express purpose–and it is ranked #1 in the country using the metrics seen here. Besides, well over 60% of Americans don’t have a college degree and will not get one. It is necessary to develop the workforce sectors that cater to them as well, not just expect them to feed on the table scraps.

    5. Lauren, you missed the entire point, until your last few lines: “well over 60% of Americans don’t have a college degree and will not get one. It is necessary to develop the workforce sectors that cater to them as well, not just expect them to feed on the table scraps.”

      When K-12 education graduates are better-educated, then businesses bring better jobs than the Amazon and Walmart warehouse scraps. Like the battery and chip factories announced for three neighboring states (who all rank higher on the story’s chart).

    6. Chris B, perhaps it isn’t willful on your part (we have long been programmed into College = GoodGoodGoodGoodGood), but that’s what I’m saying. I agreed with you until a few years ago. Then realized I just might be wrong (probably am).

      We have produced too MANY college grads nationally, and part of the colossal paradigm shift is a growing realization that the white-collar professional class is in surplus, as evidenced by the staggering number of college grads who are working retail and barista and restaurant jobs. While living with their parents and struggling to pay off even the interest on their loans. And the blue collar folks are sometimes getting less, since we’ve squeezed out the manufacturing that was the lifeblood until the 1980s. But we haven’t found a suitable replacement that can sustain a large middle class.

      Indiana is not going to be a well educated state by the metrics you and these muckety mucks are using. There simply isn’t the need for a high proportion of academic elites everywhere in the country (they stop being elite if they become too numerous), and the places that have become the hotbeds (nice weather, pretty landscapes for this are increasingly facing colossal problems all their own.

      At a certain point, this is me arguing against “trickle-down” (much like the left does) because the reality is that there’s only so much a national economy can sustain of high-paying white collar service sector jobs, when it is producing too many workers in that industry, many have to travel far to find work, and the places where there is a glut of high-skill work are increasingly staring down the barrel of a gun: namely, their high cost of living isn’t offset by a high quality of living.

      California is both a very rich and a very poor state. It has high proportions of both. But so do places like Brazil, Argentina, Equatorial Guinea, Nigeria. Heck, even Haiti has an elite. What distinguishes a robust developed economy is the fact that a middle class remains the sizable majority…which increasingly isn’t the case in CA, and other creeping third-world indicators are making it an increasingly difficult sell, even for rooted industries like motion pictures. ’cause it still costs a fortune.

    7. Yet as companies relocate from the West Coast to places like Texas, where do they relocate to? Places like Austin which are the highest tax places in Texas. Places with culture and a vibe.

      For all you who love to throw back at me things I said years ago, a reminder these CEO’s are saying the same things I have for some time now.

      The solution to what Indiana is facing is rather simple – properly fund K-12 education, roll back the higher education funding cuts made a decade ago and tie that funding to an increase in in-state enrollment… in majors that are useful. And do more programs like the recent READI grants paid for by the Biden administration to increase quality of life for all citizens.

      But that would require the Republicans to raise some taxes, so it will never happen.

    8. Joe B, a quick look at Texas reveals the folly of thinking that progressive policies matter for business growth. Facebook announced a major expansion in Austin after the state passed a controversial new law restricting abortion. Texas also has a RFRA act. Public policy is far less determinative of the economy than either conservatives or liberals would like us to believe.

    9. I’m speaking to the amenities and the sense of place that are drawing people to Austin. I guess I don’t think properly funding education is a progressive policy.

      Witness Indiana’s efforts to replicate the Research Triangle Park area in Boone County. I don’t think that’s progressive, I think that’s economic development.

  2. The fact that Ricks had to tell these “leaders” the list of problems Indiana has, is in fact
    the problem. But yea, guns guns for everyone.!!!!

    1. What does our second constitutional right have to do with these unrelated issues?

    2. What we all wonder when the Legislature focuses on gun rights instead of what we’re talking about here.

  3. Kudos to Bill Oesterle for smacking this nail square on the head and driving it flush in one swing! The “Highs and Lows” chart makes an interesting general case that those states with favorable “Cost of doing business” scores (OH, KY, IN, TN) tend to score low as you move right in the chart, until the last column “Cost of Living” where Indiana and Tennessee score as well as they do in Cost of business, with Ohio and Kentucky dropping somewhat. Very favorable Cost of doing business and Cost of living is evidence our legislature has structured a climate for business, commerce, and opportunity for good quality of life. The same business leaders that make a case for wanting our state to do more for education, healthcare costs and training likely are asking the states that have unfavorable “Cost of doing business” and “Cost of living” scores to address those issues. As Ryan H. above states, our higher education system is second to none … IU, PU, IUPUI, Notre Dame, Ball State, IN State, Butler and on and on. It is the responsibility of the resident STEM Corps. to recruit and employ the grads of these universities so they stay in Indiana. While the metrics of that same chart are fuzzy with a column like “Life, health and inclusion”, our state political and business leaders should take a hard look at healthcare costs and identify policy changes to lower those costs for all Hoosiers. With that said, we would all be better served if business and elected leaders adopted a Mitch Daniels approach to leadership … “Lead by Example”. He takes action to improve peoples lives such as the unprecedented action to hold tuition costs at Purdue for ten years running … and partnering with Duke Energy to pioneer the application of proven, safe, small-scale nuclear energy to deliver needed electrical power that is kind to the climate. We owe a thank you to CEO Ricks and others for initiating conversations on business, governance, and quality of life matters. Next move is to get them on board to understand that more government intervention is a very small piece of the solutions they seek and that they are the much larger responsible players to improving outcomes. It may be appropriate for Mitch Daniels to conduct a “CEO 101” class.

  4. There needs to be an acknowledgement that items like green energy cut both ways. High margin businesses like Lilly want to focus on achieving ESG goals and so are very pro-green energy. For many lower margin businesses, utility costs are a major expense. Indiana’s previously low electricity rates have been going up a lot, and it is no longer the low-cost energy state it used to be. The Indiana Chamber did a study on this not long ago:

    https://www.indianachamber.com/new-indiana-chamber-study-provides-needed-direction-for-state-energy-plan/

    Further green energy development could be a positive for the state, but it’s important to keep an eye on energy costs for the average citizen, as well as for energy intensive companies.

  5. Its not just about how much money you have in state coffers and your credit rating. Quality of life, good roads, schools, sidewalks, etc.
    Quit trying to see how “right” our legislation can be..

  6. Honesty is hard sometimes. The fact is that outside of Indianapolis and a few other pockets of the state Indiana is just not attractive to motivated individuals 25 and younger. The state needs to focus its efforts on changing that dynamic or it will continue to flounder.

  7. We can all learn a lot from the education format and system in other countries. The focus is not on everyone going to College, instead the focus is to prepare the student, starting at about the 9th grade, to enable the student to select an area they want to pursue (e.g. a baker, a mechanic, a hair stylist, a banker, a stock broker, a computer technologist, a programer, testing/QA, a scientist, a doctor, a nurse, a radiologist, etc.). From the 9th thru the 12th/13th grade, their career path is focused on learning a skill that business want to hire for the types of jobs they offer today and in the future. Post high school, the student follows one of two tracks – traditional college or a “trade” school. The” trade” schools further prepares the individual for the types of job openings (the trade schools are usually 3, 6 or 9 months in length). Not everyone wants to go to college nor does everyone require a college degree to do a job that business’s are screaming to fill the 11M+ current job openings in the US. Colleges in the last decade plus have produced “worthless” degrees with little to no demand for the skills taught. Alarms should be going off in our leaders that the education system is “broken”. Personally, I have hired over 5000 technical resources in less than 90 days (design, build software, test, QA, architects, etc.) to design and build world class systems operating in dozens of countries. You cannot accomplish this task in the US today in any state! If we sit and do nothing, businesses will not just look outside of IN, they will look to other countries, whose education system is preparing their workforce for the jobs that businesses need. The clock is ticking away and time will soon run out, if we do nothing.

  8. For those of you who missed it, Mitch Daniels made an excellent point in his recent Opinion in WAPO. The problems with our education system begin with the basics and Indiana has failed to establish and accomplish requiring the basics of education K-12. 40% of college freshmen must take at least one or more remedial classes, before they can proceed with their “higher education”. Think about that- a graduated high school senior has to take what amounts to a middle school math or reading class before they can take college accredited courses. That’s embarrassing for the kid and the school system from which they graduated. If you’ve checked out at a cash register in the last few years, you have no doubt encountered a young adult who couldn’t make change for a dollar and we expect them to be ready for the high tech jobs our economy is demanding?? Here’s the perfect example of how poorly our kids are prepared for life in the workforce: a recent Indiana high school valedictorian was ten minutes late for graduation practice. When the teacher asked her why she was late, her response was “You said practice was at a quarter after 9. A quarter is 25, so I am on time.” She was the valedictorian- received a full ride academic scholarship to a state college and doesn’t know how to tell time or what a “quarter” truly means! Think about that. This is what we are producing for our workforce and we wonder why Lilly took their business to Boston and Raleigh. We can fix the problems that all of these CEO’s and President Daniels have identified, but it MUST start at the most basic level. This generation has a world of knowledge in their hands, but they are getting dumber by the year. They have no problem solving skills, no coping skills, very little curiosity and even less desire to do anything that requires effort- mentally or physically. There are always exceptions to the rules. There will always be a handful who truly have the entire package. But if you haven’t met or spent time with teenagers and young adults lately, outside of your family circle, I challenge you to do so. You may see where we need to start to find these solutions.

    Here’s the article for your reference: https://www.washingtonpost.com/opinions/2022/02/14/lemon-law-for-rotten-college-educations/

  9. A good start would be to classify computer programming as a foreign language class. Instead of Spanish, teach Python. It could be just that easy. It could inspire thousands of Hoosier kids to go into tech.

    1. Computer Science, which meant we spent the year creating and writing programs, was a requirement for me in 1985, why isn’t it still? This shouldn’t be an option, make it mandatory. If it doesn’t inspire them for a career, at least they will have the basic knowledge to understand how it works. The IT world is no longer an option, like a foreign language – it is part of our daily lives. These kids need to understand how that thing in their hands operates.

  10. Ricks’ comments were meant to be thought-provoking but at least for some they appear to have been reflex-provoking instead. Some folks headed straight for comfortable zones where they have their talking points already worked out — college is the answer, no, college is the problem… quick, get me my California-bashing stick… green energy, no, not green energy… Texas is great except for Austin, no, Austin is great except it’s stuck in Texas… and so on. What’ll be a lot tougher, but maybe would be closer to what Ricks was getting at, is having serious conversations at a statewide scale and also in our local communities about (a) what future we would like to see for Indiana, and whether the present looks like that or not and in what ways, (b) what assets we have that are not merely exploitable in the short run (location, low costs for some things including some forms of labor) but can be a foundation for and a bridge toward that future, (c) what are we currently doing that’s getting in the way of our advancement toward that future, and can we stop doing it, and (d) what aren’t we currently doing that will need to get done in order for us to move toward the future we’d prefer. This’ll take a little while, and some patience, and we’ll all have to check our pet “simple-as-that” solutions at the door. Maybe one of our universities could host and facilitate the conversations (I think if one of our companies or our state government did so it might put some folks off of participating — but maybe people will feel that way about a university too — suggestions welcome), maybe Lilly Endowment could provide whatever modest funding such an undertaking would require (one or more facilitators, some refreshments, parking costs if applicable so that wouldn’t be a reason not to attend), and maybe the discussions could take place in various locations around our state and be remotely available in order to make them more nearly accessible. We need to develop some kind of roadmap and, to the extent possible, do it together. Then all of us could keep it in view when we’re listening to candidates and deciding on our policymakers. Comments? Suggestions for improvement?

  11. Many good points have been made and yes we always need to be getting better in order to compete. Education could be better, the roads are atrocious and the city just isn’t well kept. What do people think driving through Indy during visits looking at trash, terrible roads, etc… All this aside my biggest criticism of this article or maybe the people quoted is that it always seems to be about catering to special interest groups. How about we all get out there, roll our sleeves up and get the job done.

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