Lance Morgan Ho-Chunk Inc.
By Julie Sloane; Lance Morgan

(FORTUNE Small Business) – What sets the Winnebago tribe of Nebraska apart from other Native Americans isn't the millions it has made from blackjack tables and slot machines--it's how the tribe has used the dough. By investing $8 million in tribally owned startup Ho-Chunk Inc. in 1994, the tribe now has a $95 million company that employs 350 people. And it has tribe member Lance Morgan largely to thank for that. In a poor, rural corner of the upper Midwest, the Harvard Law School grad created a diversified business, encompassing home manufacturing, construction, grocery and convenience stores, tobacco and gasoline sales and distribution, and telecommunications, as well as websites for distributing news and selling Native goods. Now Morgan, 35, is moving on to phase two: using corporate success to turn his largely empty, undeveloped reservation into a brand-new community of homes, shops, offices, and community spaces. Native Americans have long been the most impoverished minority in the country, but dozens of tribes are now studying Morgan's success in the hope of creating their own. --JULIE SLOANE

Growing up, I had a pretty simple career goal: I wanted to quit being poor. I didn't think about working with the Winnebago tribe as a profession--that was more of a hobby. To be honest, I just wanted to get as rich as I possibly could.

I graduated from law school in 1993, around the same time tribal gaming in this region took off. All of a sudden there was a huge need for business and legal experience that hadn't existed before. A law firm in Minneapolis recruited me out of Harvard. They said they'd done work for our sister tribe in Wisconsin. The next thing you know, I'm doing corporate Indian law, which I'd never heard of a month before.

My first case was for my own Winnebago tribe, and we won quite a bit of money. The state of Iowa had authorized huge competition against our tribe's small casino by allowing brand-new $100 million casinos to be built just 80 miles away from us. In just one month our gaming profits dropped 90%. The tribe voted to use $8 million of the money we won in the lawsuit and invest it in Ho-Chunk Inc., which the tribe owned. I helped develop the plan for that when I was a lawyer, and I really couldn't let it go. I had just turned 26, but the tribe put me in charge. I probably wouldn't have gotten that opportunity were it not for the fact that there were literally no other candidates with business and law degrees.

The mission for Ho-Chunk Inc. is to get out of the casino business. We see gaming as a means to an end, and that end is to create job opportunities that will lead to economic self-sufficiency for the tribe. For a long time we have been very poor. The tribe owns 30,000 acres of land in northeastern Nebraska, but we had essentially been leasing it to non-Indian farmers, so they had all the economic value. The only businesses on the reservation were a gas station and a grocery store, both losing money. The tribe kept them open just for the jobs. Our unemployment rate in 1990 was 66%. My parents are both from the reservation, but they moved to Omaha to find work--as most people did back then. Once the tribe got some gaming dollars, we thought it was our one chance to do something significant.

We purchased a small publicly traded modular-housing manufacturer in Minnesota called Dynamic Homes. We bought 10% of the company, got on the board, and did a management-led buyout--a very sophisticated transaction for a little tribe in the middle of nowhere. We bought a housing company because we knew we had a demand for houses. Then we started a construction company to help us build the modular homes locally. We also own ten grocery stores and convenience stores. In addition, we distribute gasoline and Native American tobacco products to our stores and those of about 80 other tribes all over the country. We started that in 1999, and it should grow to a $40 million business this year. Ten years ago the tribe had fewer than 100 employees. Now it has 1,100 in a town of only 1,500 people. Unemployment is between 10% and 15%.

The tribal government leaders deserve a lot of credit for our success. What's unique about our situation is that the tribe gave up a large amount of control over about 30% of its financial resources and said, "Go make us money." Most tribes interfere politically very quickly, and then something goes wrong. And if you're wrong right off the bat, that typically has a paralyzing effect on economic development for the next couple of years. Many tribes also face pressures to distribute profits annually on an individual basis to members. That's really short-term thinking. It's a pattern going back 100 years--we sold off our land, distributed the money, and now it's all gone. I'm a big believer in having a pool of capital and developing off that, but most people just want their little piece. I think it's naive to think that gaming is anything but a short-term phenomenon. There's nothing of value that tribes have had in the last couple of hundred years that they've been able to keep for an extended period of time. Ho-Chunk Inc. is already twice the size of our gaming operation in terms of revenue.

Being a tribally owned business means there are different considerations. The number of members you have is how many bosses you have. I just got a letter from a tribal member in prison, making about 30 suggestions, some of them pretty good. We have a reporting system to the tribal government. The tribe lets us keep the profits for the first five years to reinvest in growth, and then we have a dividend plan to distribute profits back to it. Another difference is that we aren't necessarily trying to maximize profit. We'll pay workers a little more, we'll offer a little better benefits than a non-Indian company, and we're much more flexible in terms of personal lives. Your mom's sick? Go take care of her. You have to be responsive to the social demands of the community.

Today we're thriving economically, but we still have a lot of the vestiges of the federal government's programs. Our whole system is set up for the poor. If you did well financially, you had to leave government housing, and there is no alternative housing. So the unfortunate side effect was that our best people were forced to leave the reservation and move to the city. We are trying to figure out ways to get middle-income housing to stabilize our community socially. I think several hundred people would be willing to move back if they had adequate housing and job opportunities.

That's why we decided to build a whole new town from scratch. We're putting in the streets and sewers right now, and we'll start on houses in a few weeks. The houses will be affordable for middle-income people because Ho-Chunk Inc. owns the nonprofit that developed the land, the housing and construction companies that will offer discounts, and part of the bank that gives the loans. And we've used our gas tax to pay for the $20,000 down payments, provided people attend a homebuyer's class. Within about five years we should have the community completed--houses, main street, commercial buildings, government buildings, some light industrial, and maybe some townhouses or apartments.

The most satisfying thing to me now is when I've gone out to the mall in Sioux City, and I see some of my employees walk by with their families, shopping, having dinner, going to the movies. I know their paychecks came from our tribal development. We are not trying to take over the world, we are trying to impact people's lives. We're not a town, we're a tribe, and we think in that perspective.