When Doug Snarr began recruiting for his new satellite-communications company, he did something unusual for a Mormon businessman: he purposely sought out non-Mormons for key positions. For financial help he turned to Randy Fields, an investor from California whose wife, Debbi Fields, heads Mrs. Fields Chocolate Chippery. He hired a former Twentieth Century-Fox Film Corp. executive from Hollywood as his vice-president of programming. To serve as chief operating officer, he hired a Catholic New Englander and former executive with New Orleans -- based Popeye's Famous Fried Chicken & Biscuits.
"I realized from day one that I'd have to break out of the small circle of Mormons I'd been accustomed to," says Snarr. "I saw right away that it would hurt us if we were seen as a provincial company."
It would more than hurt. Without reaching outside the Mormon community for capital and expertise, Snarr realized that his company had little chance to succeed. More and more Utah businesses face the same problem. The insular Mormon culture that brought economic growth in years past is now a liability for many 1980s business owners. The outcome of this clash of needs with traditional culture may determine the economic future of this state for the next generation or more.
For a century, the Mormon culture has been an engine of prosperity. With its emphasis on loyalty and hard work, it blessed local businesses with peaceful labor relations and steadily increasing productivity; through the 1970s, personal income remained low (45th in the United States in 1979) for one of the most highly educated (in terms of number of years of schooling) work forces in the country. The Mormon belief that "the Glory of God is intelligence" stimulated Utah to spend more than half of its budget on education, keeping student-achievement scores in the upper half of the nation.
If the rest of the nation sometimes seemed antibusiness, the Mormons celebrated capitalism with a passion. Such figures as hotel magnate J. Willard Marriott Sr. came to symbolize a Mormon Everyman-made-good, a businessman who could rise to the top of the corporate world while remaining deeply loyal to his Mormon traditions.
Mormon conservatism, reflected in a deep patriotic streak, also boosted the local economy. Almost untouched by the soul-searching of the Vietnam experience, Utah enjoyed a parade of defense contracts that helped keep employment high.
Then came Zion's day of reckoning. Beginning in the early 1980s, key pillars of the state's economic foundation began to crumble. Foregin competition chewed up profits of the state's mining industry, forcing massive layoffs at Kennecott Corp., the state's leading private employer outside of the Mormon church. Congress drastically cut the MX program, then the Synthetic Fuels Corp. program. And the Intermountain Power Project, which promised to attract companies looking for low energy costs, was shelved. The results were devastating: in some rural areas, the unemployment rate jumped to 30%.
To make matters worse, the state's population grew by 61% during the 1970s, compared with a 33% increase nationally. The state has a fertility rate almost twice that of the nation, and a population with a median age of 24.2 (compared with the national median age of 30 years).
Policymakers saw entrepreneurship as the most promising way to create jobs. Looking to Silicon Valley and Massachusetts Route 128 as role models, they saw the University of Utah as a potential seedbed for company start-ups, especially in technology fields. The university had a good engineering school and perhaps the world's leading bionics laboratory, working on artificial hearts and limbs. Could Salt Lake City become a kind of "Bionic Valley"? The university established its own campus industrial park and small-business incubator, and encouraged faculty members to start companies.
But a funny thing happened on the way to Utah's high-technology dream: many of the same cultural traits that helped the "worker bee" economy hindered high-tech growth. Surprisingly, even the sacrosanct work ethic came under question. "Utah may be a good place to have a lot of docile workers, but it's not a place that encourages going against the grain, which is the essence of entrepreneurship," says James Clayton, dean of the University of Utah's graduate school and member of a blue-ribbon committee on Mormon/non-Mormon relations. Utah's hierarchical, highly cohesive society, he says, may be to blame for the state's tardiness in entering the Silicon Age. And because the state relied for so long on a few large companies, there are not many independently minded executives available to manage the start-ups. "Entrepreneurship here is thriving in terms of innovation; you see a lot of new ideas, but it's such a corporate state that the new projects aren't fostered," says William Sadleir, chairman and chief executive officer of Dayna Communications Inc., a Salt Lake City computer manufacturer.
A shortage of local capital also hinders entrepreneurs. After Sadleir, a Mormon, finished a stint in the Reagan Administration's White House and State Department, he settled in Utah to start his own business. His product seemed promising enough: a device, dubbed MacCharlie, that makes Apple Computer Inc.'s Macintosh computer compatible with the popular IBM Personal Computer. But local lenders yawned. Finally, Sadleir was able to get money through a local private placement.
The same fate awaited Dennis Fairclough. A former IBM Corp. engineer, he returned home in 1975 to teach, and in 1984 founded Icon Systems & Software Inc., a maker of microcomputers and minicomputers. Not only did the banks say no, but his project was also panned by the Utah Innovation Foundation, which helps entrepreneurs bring products to market. Fairclough turned to Tokyo Sanyo Electric Co., which bought a hefty equity position for several million dollars. "Finding the money in Utah," he says, "is an impossibility."
No wonder. The nation outpaced Utah by six times in per capita growth of commercial bank deposits. The dollar size of commercial and industrial loans per capita is less than half the national average, and there are no local venture capital funds.
Large-family expenditures keep bank savings small. What's more, many practicing Mormon families, who constitute 68% of the state's population, give 10% of their annual income to the church. Critics say this is a drain on the state's economy, since the church exports much of that money to build temples and support missionary activities in other countries.
When Utahans do become creative with their capital, the result has often been disastrous. Penny-stock frauds run rampant. Traders have taken to using the name of local Mormon bishops to attract investors to their scams. From 1980 to 1983, according to the Utah U.S. attorney, about 10,000 investors, mostly Mormons, were bilked of $200 million."The church has a problem," says John Baldwin, director of Utah's Securities Division. "How do you tell your people to love their neighbors, but not to trust them with your money?"
Even if more capital materializes in the years ahead, Utahans will have to do better at recruiting talent. Many potential recruits feel like outsiders in the predominant Mormon society. "They knew better than to ask me to move," says Icon System's director of corporate development Andy Olson, who commutes from Los Angeles to Orem, Utah. "It's like living in South Ireland as a Protestant."
For all of the stumbling blocks, Utahans produced two hit stories in last year's dismal technology news. NPI, a small plant-genetics company in Salt Lake City, emerged as one of the few survivors of the plant genetics industry to turn a profit and stave off buyouts by large multinationals. And Dayna's MacCharlie device was the hit of several major hardware conferences, and has booked more than $7 million in orders from Mitsui & Co. alone.
The state's investment community is waking up, too. Commercial Security Bank, the state's fourth largest commercial bank, has made a $150,000 commitment to Utah Venture Fund Number One, a private venture capital fund. It will also receive $1 million from Utah Technology Finance Corp., a quasi-private corporation created by the Utah legislature to foster entrepreneurship. A group of influential Mormon and non-Mormon financiers in Ogden, Utah, known for their clannish but shrewd investments, have begun to take shares in technology-based companies.
These small but important changes may have started to change the perception of Utah. "From my point of view," says investor Randy Fields, "Utah is the society of the future." Perhaps, but for entrepreneurs, Utah's economic promise remains to be seen.