Cooler By The River: Yan Ness, CEO of Online Tech

About six years ago, Yan Ness got tired of everyone talking out of turn. Talking about Michigan. Talking bad about his home. The 48-year-old, raised and educated almost entirely in Ann Arbor and step-father of two teenage sons, isn't the type of person to listen to that sort of thing and do nothing.

The entrepreneur, job creator and CEO of Online Tech got involved with the Small Business Association of Michigan, thinking nothing could change his home state's fortunes faster than more entrepreneurs and the successful companies they create. Ness is an avowed proponent of economic gardening - policies that help small firms like his, a data center company with 25 employees, grow organically and sink deep roots.

"If you look at that group, it's the only one that creates net jobs over a long period of time," Ness says. "I am a believer of economic gardening. It's a concept where you grow your own companies. I'd like to see us grow more Domino's Pizzas and Strykers. Domino's isn't leaving. Pfizers come and go, but the Dominos and Strykers and the furniture industry, they stay. We should be growing them."

It takes a long time for economic gardening to take root and really flourish. How far along that curve are we right now?

It's probably a 20-30 year process because you have to change the thinking and prove it. Once you prove yourself then you can scale it. I would say we're halfway through proving it and when we prove it, we'll be 5-6 years away from scaling it.

Everything today is accelerated. Could that learning curve be accelerated, too?

Yes. That 30-year model was a 100-year model a century ago.

What makes economic gardening more than a piece of fad policy and fashionable buzzword?

The data shows it has staying power. The term is probably a fad, unfortunately. I hope that doesn't diminish what really needs to happen. The data is clear that net job growth happens with companies that have less than 500 employees. That's where the job growth comes from.

Your kids are coming of age. What would you do to make sure they and their peers stay here?

I am a big believer in competition. I would sure make this place is competitive. At the end of the day, people want to work. A wonderful quality of life where you aren't very productive is a bit of an oxymoron that is reserved for the retired. I'd like to see us focus on second-stage companies that are fun to work for. It's where wealth and jobs are created. I would tell them to go to wherever they would feel the most fulfilled. I am hoping, and believing, it's here.

What aren't we doing that would allow young people to seize that opportunity?

We're doing a lot, especially considering what the new administration has done. I am big fan of Gov. Snyder and what he's doing. We needed to stop double-taxing our growth. Whoever is paying for that, I feel sorry for them, but it's really the best investment we could make. Taxing growth is just counter-intuitive.

Taxing growth sounds counter intuitive, but I have never heard anyone say I didn't become a millionaire because the taxes were too high.

That's a really good point. Let me put it this way. As an entrepreneur there is nothing they put in front of you that you won't overcome. There are 10 or 20 other things that you're trying to overcome, but why put it there? Eighty percent of start-ups fail. Why wouldn't we do what we could to make that a 22-or 25-percent chance of success?

With the rise of cloud computing, are there opportunities for local startups and entrepreneurs that didn't exist before?

Cloud computing has enabled companies like Groupon to emerge and do $1 billion in revenue. Cloud computing presents a fantastic opportunity, and Ann Arbor and Michigan are well positioned to take advantage of it.

If cloud computing is the latest evolution of data storage, name the next big change we should be looking forward to when it comes to storing or utilizing our data?

It feels like it's a really big circle. In the '70s and '80s when I was at the University of Michigan, we used mainframes that did all the storage and computing. Then microprocessors came, and computing became so cheap we could give everybody their own computer. Then the management of it all became a problem and we went back to a centralized system. The next phase will probably be when the cloud computing goes away and we have super computer handheld devices that are hyper connected. I wouldn't be surprised if we did that circle again once or twice in my lifetime.

Will we ever see permanent data storage, something that can be tucked away in a drawer or safety deposit box?

No. There is too much money to be made in changing the medium. Everybody will go from cassette to CD to iTunes. There is also too much dramatic growth in the creation and consumption of data. You're going to need medium changes to support that.

Is raising capital to grow a local start-up really as hard as the conventional wisdom suggests?

It's not as hard as it was a few years ago and its not as hard as they're saying. Raising capital should be hard. It's other people's money.

You are a guest lecturer at the U-M Ross School of Business. Is getting more university graduates to stay a question of convincing them or does the state need to offer them economic incentives?

I am completely against economic incentives. You don't have to give us any money but don't double tax us. If we have a lot of fun, cool places to work, they'll stay and they'll stay for the right reasons. They'll give their heart and soul to it and they'll convince other people to stay. If it's a vibrant, productive, profitable business environment, those who want that will stay.

Downtown Ann Arbor is becoming more and more in demand for tech companies looking to set up shop here, however, the city's resistance to change has made building anything new in the downtown area a long, arduous process. Is this a situation where the stagnant size of the pool (downtown area) will limit the size of the fish (local tech companies) inside of it?

This is a good example of the city needing to modernize the way people can build and do things downtown. That's a good example of Gov. Snyder's philosophy of making it easier to do business here.

They city has been trying to do that, but hasn't enjoyed much success. How do you break that logjam?

I hate to say this because they're well-meaning people, but you would need completely new leadership. It's very, very difficult, no matter how great of a leader you are, to dramatically change a culture.

Your company used to be known as Online Technologies Group but downsized its name to Online Tech. The names for new companies are often pretty verbose. What advice would you give to a new firm choosing a name?

Two syllables or less if you can. Look at all the great names, Pep-si or Goo-gle. Say what you do but not in a long phrase. Simplicity is critical.

What should we should be doing a better on job on regarding making Michigan more attractive?

Telling our great stories.

Example?

Quicken Loans, ePrize. When I tell people that Quicken Loans or ePrize or Stryker are Michigan companies, a lot of people say, 'Really? I didn't know that.' I believe in the groundswell. Build great companies and tell everybody how great it is to do it here.

Ann Arbor sits right alongside the Huron River but our daily interaction with it is pretty limited. How do you think the city could better leverage the river as major facet of our community?

It would be cool to use that water to cool a data center.

Really? I never thought of that, but it makes so much sense.

We spend a ton of money on air conditioning. I would get some power out of the river and some cooling out of it.

So how do you get the cooling out of it? Do you build a bubble at the bottom of the river and put servers inside?

There are a number of ways you do it with heat exchangers. If you have fresh-flowing, cold water that is 55 or 60 degrees, you can use heat exchangers to pull a lot of heat out of a data center. The city wouldn't even let us think about doing it. I wouldn't even try.

Really? Why?

They wouldn't treat me like a customer. They would try to be my parent, and tell me how to do it. It would take me a long, long time.


Jon Zemke is the News Editor for Concentrate and its sister publication, Metromode. He is also the Managing Editor of SEMichiganStartup.com. His last feature was Garbage In, Energy Out: A Q&A with the Founders of ReGenerate 


All photos by Doug Coombe

Photos

Yan Ness at the Online Tech offices in Ann Arbor during and after the interview

Contact Doug here

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