This week, the Clinton Chamber of Commerce held its annual strategic planning meeting and the guest speakers were Dubuque City Manager, Mike Van Milligen and Rick Dickinson, President of the Greater Dubuque Development Corporation. Van Milligen and Dickinson have been working in Dubuque since the mid-1990′s. And they really did start from scratch. Thinking back to the 1980′s Dubuque had some of the worst unemployment in the nation. Dickinson described his start as inauspicious.

“In the course of a few weeks of my starting in 1995, the Riverboat Casino in East Dubuque left, a foundry in East Dubuque burned to the ground and the Dubuque Packing Plant closed its doors. People were calling me, ‘The Angel of Death.’ ”

“But, the hard times put fire in the belly of the people of Dubuque,” said Van Milligen.

When talking about the keys to their success Van Milligen and Dickinson came back again and again to two themes: cooperation and preparation. For years, the GDDC leadership has had a standing meeting with City Hall staff every Wednesday at 11 a.m. where they go over everything that is going on in the city and share responsibilities for preparing for initiatives. Further, the GDDC board, which might seem unwieldy with 37 members is also a vehicle for public and private cooperation, Dickinson explained.

The board requires the City the County and the School District to have a member of the Greater Dubuque Development Corporation board. All members of the board must be executives of their organization. This means CEO’s of member businesses, City Council Members, and the School Board Superintendent. Dickinson explained why this is critical. “We need people there who are decision makers, who can give the unqualified opinion of their organization and who can move the ball when opportunities arise.”

The two used as an example, the recent selection of Dubuque by IBM to locate a facility and 1,300 jobs in Downtown Dubuque. When the IBM committee visited Dubuque to consider the city and evaluate sites, they fell in love with the old Roshek Department Store building downtown. The problem was, neither the City nor the GDDC owned the building. They had thirty days to put together a deal to purchase the building and secure the $42 million in funds to restore and build out the facility.

Within 24 hours Dickinson had convened a meeting of the CEO’s of every financial institution in town. He told them< "We need a $25 million line of credit." Dead silence. City Manager Van Milligen then rose and said, "This line of credit will be backed by the full faith and credit of the City of Dubuque." And so the deal was made.

Preparation is also key. The GDDC talks to over 200 local businesses per year and keeps a powerful database of all the existing businesses, their current conditions, needs and plans. The GDDC sponsors a concierge service and subsidises a Distictively Dubuque (PDF file link) program that hosts classes and tours for newcomers.

During the process during which IBM was weighing Dubuque against other cities, each visit by the IBM staff was highly orchestrated and nothing left to chance. By way of example, Dickinson talked about the final stage of the process. The race was down to Dubuque and a city in South Carolina. The decision was up to three IBM divisions: Operations, Facilities and Human Resources. Operations liked Dubuque. Facilities liked South Carolina because they were offering a new building, ready to move in. Human Resources would have to break the tie.

IBM’s Vice President of Human Resources came to visit and was having lunch with representatives of the three colleges in Dubuque. She had already fallen in love with the city’s historic architecture, river expanses and quirky layout, but she expressed some skepticism about Dubuque’s ability to provide the highly-educated, specialized talent IBM would need. A GDDC staffer walked over with a stack of 600 resumes that she had pulled off the Access Dubuque website — all were qualified technology applicants — and dropped them on the table next to her. Game, set, match to Dubuque.

That incredible level of preparation and organization is a critical element of successful economic development activity. How does a city get there? Dickinson summed it up in four words, “Elect talent. Hire talent.”

Clinton has done a lot in the last couple of years to lay the foundation for a major increase in economic growth through strategic investments. But in order to make those investments pay off the community needs to begin to pull together and work smart as well as hard.

But what almost everyone doesn’t know is that this is nothing new. The entertainment industry has decried every technical innovation since the player piano and the Edison victrola as the looming death of their industry. Nate Aderson, over at Ars Technica has a great roundup of historical documents from the entertainment industry, 100 Year of Big Content Fearing Technology, In Its Own Words

In 1906, famous composer John Philip Sousa took to Appleton’s Magazine to pen an essay decrying the latest piratical threat to his livelihood, to the entire body politic, and to “musical taste” itself. His concern? The player piano and the gramophone, which stripped the life from real, human, soulful live performances.

“Under such conditions,” Sousa believed, “the tide of amateurism cannot but recede until there will be left only the mechanical device and the professional executant. Singing will no longer be a fine accomplishment; vocal exercises so important a factor in the curriculum of physical culture will be out of vogue. Then what of the national throat? Will it not weaken? What of the national chest? Will it not shrink?”

It is a truism of human nature that if you have a good thing going, you want to keep it going. Nobody likes to fiddle with their business model. But hey. life is rough, wear a helmet.

One of my favorite quotes about business and technology is from Robert A. Heinlein’s first short story, “Life-Line.” In the story a scientist invents a machine capable of predicting the exact time of a person’s death. He is sued by the insurance industry whom he is threatening with extinction. The matter goes to court and the judge finds for the scientist writing:

There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back.

That quote should be engraved in marble letters five inches high in every boardroom and statehouse in the nation.

Instant payback. Here is what’s going on with Ashford/Bridgepoint this week. First the Good News:

Respected business and investing site Seeking Alpha lists Bridgepoint Education as its number one IPO of 2009 so far.

Since turning its first yearly profit in 2007, this provider of online education to over 30K students has been on a tear. In 2008, its EPS rocketed to .51/share vs just .06/share the year before and here in 2009 it’s expected to double to a little over a buck a share. Sales growth has been equally impressive with quarter over quarter growth in the last 4 quarters of 183%, 175%, 163% and 127%. Technically, it’s in the process of carving out a new base after more than doubling from opening

Now the Bad News:

Congress is contemplating hearings regarding for-profit universities following a Government Accounting Office report that indicates a much higher default rates of federal student loans among the for-profits.

Rep. George Miller, D-Calif., who heads the House Education Committee, said Monday after the market closed that a Government Accountability Office report on so-called proprietary schools is “extremely troubling and warrant(s) further examination by Congress.”

The GAO report, released earlier this week, found loan default rates of students who receive Title IV money to attend proprietary schools exceed the default rates of students who receive federal money to attend conventional college-level institutions.

The report found that many proprietary schools admitted unqualified students who had a greater tendency than other students to drop out, let students stay enrolled despite a lack of academic progress and also misrepresented themselves to prospective students.

I have looked over the GAO report. The profile of the student body at for-profit schools skews much more towards the non-traditional student. That is, over 25 and financially independent (not getting funds from mom and dad). This is the underserved market that these schools are targeting, so this should not be surprising. For-profits offer Internet-based education that is suited for the needs of this segment.

It should also not be surprising that this segment of students fails to complete the coursework at a higher level than traditional college students. When you are probably already struggling a bit to make ends meet it is going to be comparably much more difficult to successfully complete a two or three year commitment to an online education. Life will get in the way.

Here is a chart from the GAO report:

With that said it is also pretty clear that the default rate differences are pretty startling. With more and more students looking towards the for-profit option those schools need to do a better job of helping them be successful.

The tension here is between the government’s fiduciary duty to the taxpayers who guarantee the student loan program and companies fiduciary duty to deliver profits to the shareholders. The government needs to see to it that federal student loans a) go to students who can succeed and, b) that those loans are paid back so that the system can remain solvent. The universities don’t necessarily care if those loans are paid back. Once a tuition bill is paid, the money is in the company account. The loan company is on the hook.

You couldn’t ask for a clearer example of the need for government oversight of business than this. Without it, there would be very little in the way of incentive — other than a desire to have good student outcomes for competitive reasons, and that can be fudged easily — to ensure that their students succeed and go on to get good jobs and pay back the loans.

BPI closed yesterday at $16.65 a share, down 55 cents.

But, there had to be a but.

Ashford’s parent company, Bridgepoint Education, Inc, had its initial public offering on the New York Stock Exchange on April 15. (Ticker: BPI) . This is an important development for the community but there was no coverage of this by the local press.

Several years ago I mused on whether for-profit, online universities were a sustainable business. The crux of my argument was that there is probably an optimal enrollment size where student achievement, satisfaction and retention are in a good equilibrium with profits. Trying to scale to large will lead to a drop in quality of education product, lessening student satisfaction and retention and thus leading to a nasty churn rate and problems with student loans. A conservative business plan would be to strive for an enrollment level close to that profit-performance equilibrium and then use process improvement to wring efficiency and higher profits as well as modest enrollment growth. This would allow the company to pay consistent stock dividends over long periods and encourage shareholders to hold onto BPI stock long-term.

The fact that Bridgepoint made no secret of its plans to take the company public just deepened my worries. We still live with an investment model that values constant growth in stock value over consistent profits and dividends The pressures on Bridgepint management for quarterly and annual performance stock price gains will drive the company to scale up and up.

Similar pressures led the University of Phoenix — from which many of BPI’s founding members begain their careers in for-profit education — to pay a $9.8 milion fine for fraudulent recruiting practices to the US Department of Education in 2004.

This was all in the back of my mind then when I and other members of the business community took the guided tour of the call center two Wednesdays ago. The tour was conducted by two of the human resources and public relations staff at Ashford. Among the questions asked by another tour member one was rather pointed and to the point: What is your student retention and graduation rate?

I have to paraphrase the reply because I was not taking notes but I remember it well for its shocking lack of knowledge, candor or both. “We are currently calculating those figures, so I don’t have them for you. But they are good.”

My personal opinion is that unless the person conducting the guide was tremendously uninformed about her company that the answer had to be a bald-faced lie. There is just no way not to have those figures, even if they are not the most current, in one’s mind. They are the meat-and-potatoes, the be-all and end-all of the business. It simply wasn’t credible that she simply wouldn’t know. Later I discussed this with a couple of members of the tour group and they expressed a similar opinion.

The obvious conclusion — other than the speaker didn’t know what she was talking about, an option I’m certainly not completely discounting either — is that the company doesn’t want the locals to know.

None if this should be construed to think that I think there is a grand conspiracy going on. Only this. The citizens of Clinton should keep it firmly in their minds that Ashford University is no longer our beloved old Mount St. Claire/Franciscan College. It is run by a publicly traded company headquartered half a continent away in San Diego, CA. It will do whatever it thinks necessary to maximize shareholder value. That is its one and only reason for being. To the extent that Ashford University is a good corporate citizen in this area is a function of the company’s financial success and growth strategy. No more, no less.