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Boost South Dakota’s CNBC Business Rank: Invest in Schools, Roads, and Science

CNBC takes away South Dakota's #1 ranking for business, and KELO-AM's Greg Belfrage, who inclines Daugaard-ward more than I, says our drop from #1 to #11 may say "less about South Dakota than it does about the accuracy and reliability of these endless media rankings."

Given that GOP-soothing grain of salt, let's look at CNBC's business rankings for our neighborhood in detail:

Overall 4 6 10 11 12 21 33
Cost of Doing Business 10 38 22 6 7 18 12
Economy 11 5 7 20 18 41 38
Infrastructure & Transportation 18 5 10 31 25 12 25
Workforce 16 30 8 6 37 18 46
Quality of Life 8 4 5 10 20 16 11
Technology and Innovation 40 11 49 50 29 46 45
Business Friendliness 3 15 7 2 9 8 42
Education 19 12 22 30 22 12 21
Cost of Living 21 28 12 16 12 33 25
Access to Capital 35 11 45 26 49 35 27

South Dakota's in a competitive neighborhood. Three of our neighbors are top-ten states. All but Wyoming are in the top half on the overall ranking.

Yeah, it looked better with just one 1. How're we gonna fix that?
Yeah, it looked better with just one 1.
How're we gonna fix that?

As I noted this morning in response to a Republican spokesman, South Dakota's weak points on this scorecard, three areas where every neighboring state outperforms us, are education, infrastructure, and technology and innovation. Hmmm... when we see happy rankings, we gloat, buy a banner in the Minneapolis airport, and tell businesses those rankings indicate good reasons to move to South Dakota. When we see grim rankings, do we pout? Do we ignore them? Or do we tell ourselves those rankings indicate good reason to fix South Dakota?

Why might we be lagging in those three categories? Consider that education, infrastructure, and technology and innovation are the three areas in CNBC's methodology where improving a state's score hinges most on doing something, on spending money. We can't deregulate our way to good schools and roads and inventors. Investing real money helps all of those things happen. And investing real money gives South Dakota lawmakers the willies.

Zooming back out the nationwide dataset, CNBC's rankings provide a chance to look for relationships. Which of the above factors go hand in hand, and which run appear to run opposite?

  • Rankings for business friendliness and the economy seem to have the least to do (mathematically, the lowest average correlations) with the other factors on CNBC's business scorecard.
  • The cost of living and the cost of doing business are, predictably, closely associated (on a scale of 0 for no relationship to 1 for perfect relationship, the two factors correlate at 0.88).
  • The next strongest correlation is between tech/innovation and access to capital (0.66). Again, we'd expect that: folks starting more high-tech businesses and pumping out more patentable inventions probably have more venture capitalists around to support their efforts, along with the state resources that CNBC considers.
  • Rankings for quality of life and cost of living have a notable relationship, but it's negative (–0.62). Read this carefully: states ranking higher for quality of life tend to have lower rankings for cost of living. For instance, Hawaii is #1 for quality of life but 49th (as in worse, more expensive) for cost of living. Kentucky is #1 (as in best, cheapest) cost of living but 42nd for quality of life. Hmm... does money buy at least a little happiness?
  • None of the other correlations on the grid crack 0.60 (which is an arbitrary cut-off, but hey, a blogger has to take a break somewhere, right?), but education shows two mild correlations of interest. Seven of the top ten states for education (New York, Connecticut, Massachusetts, Maryland, New Jersey, Pennsylvania, and Vermont) are among the ten states with the highest business costs (taxes, utilities, commercial rent, etc.). Six of the states with the lowest business costs (Oklahoma, Louisiana, Mississippi, Idaho, and South Carolina) are in the bottom ten for education. A similar pattern arises from the rankings of education and cost of living: states where folks pay more to get by tend to have better-ranked education systems.

CNBC's state business rankings may be just one more arbitrary set of numbers, to ignore or embrace as fits the narrative of our choice. But if we embrace those numbers as signs that South Dakota is doing well, we should consider giving them equal consideration when they point to things we can fix. And the things CNBC says we need to fix—our schools, roads, and research and development—won't fix themselves. Just as in business, if we want to grow, if we want to get back to #1, we have to invest.


  1. Joe Loveland 2014.06.27

    Projecting into the future, education and technology and innovation become even more important. Nobody is every going to beat third world nations in a "cost of doing business" race to the bottom, so we better invest in areas where we can beat them.

  2. caheidelberger Post author | 2014.06.27

    Good global observation, Joe. Do we try to be Mississippi and Thailand, or do we aim for Silicon Valley and Finland?

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