Jeff Smulyan delivered the line almost as a throwaway, but it had a sting.

Speaking at an Economic Club Luncheon in Indianapolis, Smulyan, the founder and CEO of Emmis Corp., referred to the Indiana General Assembly’s obsession with punishing a small minority of Hoosiers.

Smulyan said he didn’t think the 6.5 million people living in Indiana had any reason to fear the 500 or so transgender children living and attending school in the state.

The line drew applause—as it should have—from the crowd, but Smulyan was on his way to making a larger point.

He said the state’s legislators and its business leaders were at odds in a way they never have been before. This makes it difficult not just for businesses to thrive, but also for Indiana to respond to the real needs of its citizens.

More applause.

Again, as there should have been.

Smulyan is one of the most successful entrepreneurs in Indiana’s history, a brilliant and thoughtful guy with admirable qualities of foresight and perception.

One of his competitors once told me, “Jeff is a genius. He is the guy who can see around corners. He spots both opportunities and dangers faster than anyone I’ve ever seen.”

Given that, when he utters a word of caution, it’s wise to listen.

Smulyan’s warning is intriguing for at least two reasons.

The first is that it highlights a change that is historic in nature.

For decades, Indiana’s dominant political party—the Republican Party—touted its determination to build a business-friendly environment in the state.

The Hoosier GOP’s focus every legislative session was on delivering whatever happened to be on the business wish list. One year, that might be passing right-to-work legislation that crippled labor unions. In another year, it could be a big tax cut. Still another, the easing of some regulations.

The relationship between the business community and Republican lawmakers was not a partnership of equals.

Some years ago, I ran into a Republican member of the Indiana House of Representatives who just had emerged from a caucus meeting with lobbyists from the Indiana Chamber of Commerce. I asked what the meeting’s agenda was.

“Same old same old,” the GOP legislator said. “They said, ‘We own you,’ and we said, ‘We know.’”

That has changed now.

It’s hard to know exactly who most Indiana Republican lawmakers listen to, but it no longer is the state’s business leaders and community.

If the legislators were listening to business, they wouldn’t be spending so much time telling workers and customers who aren’t straight, white, and male that Indiana doesn’t want them. Hoosier businesses are hungry—desperate—for both labor and markets, the very things Republican lawmakers seem dead set on driving away.

This leads us to what I think was the second point of Smulyan’s brief analysis.

If Republican legislators aren’t listening to their traditional sources of counsel—and the evidence strongly suggests they aren’t—then it’s hard to see how Indiana meets many of the challenges before it.

After all, the decline of business as a voice of influence doesn’t mean that other forces in the state’s life such as labor and education have begun to occupy the vacuum. Instead, mean-spirited campaigns of persecution have rushed forward to fill the void.

That is a strategy for disaster.

A government that does not reflect the will of the people it serves loses not just legitimacy but effectiveness. The government in a free society is supposed to be the place where people resolve differences and find ways to live together.

Our government now, though, seeks to exacerbate differences and widen divides.

Worse, it’s doing so at a time when the worldwide competition for labor, in particular, grows more and more intense with each new day.

That’s why it’s worth listening to Jeff Smulyan.

The man can see around corners—and some of what he seems to be seeing now isn’t good.