Dean Barber

That Was the Week That Was

In Corporate Site Selection and Economic Development on February 11, 2018 at 9:07 am

Wall Street had its freak-out and a new space race was born. What a week. With a little bit of luck, I can bring these interesting new developments “down home” and show how they may affect us all.

Let’s first look at the wild ride last week on Earth, on Wall Street to be precise, leaving many of us scratching our heads and wondering what was going on.

What we have learned is that good news on Main Street – that the U.S. economy added 200,000 jobs in January and that wages grew at the fastest pace in eight years — can be viewed bad news on Wall Street.

For investors, the long dormant fear of inflation was revived – that bigger paychecks might mean bigger price increases and eventually bigger rate hikes on the part of the Federal Reserve. That would be bad for business and the economy at large, which means most of us.

No doubt, investors had become a bit complacent with the stock market rising and never suffering a bad loss. The Dow and other major stock market indexes hit record highs on Jan. 26. The S&P 500 was up 7.5 percent in 2018, with the Dow industrials up 7.7 percent and the Nasdaq 8.7 percent. Amazon and Netflix had sprinted 20 percent and 43 percent.

But last week was crazy. The Dow average experienced two drops of more than 1,000 points and two gains of more than 300 points. The Dow and the S&P 500 both ended the week 5.2 percent lower, their worst performance since January 2016.

What are We Seeing?

Wall Street uses different words for a drop in the markets, all with different shades of meaning. Are we seeing a “dip,” a brief downturn from what has been a long-term uptrend? Or are we looking at a “crash,” a sudden and very sharp drop in stock prices, which while rare, do happen after a long-term uptrend.

Perhaps we are experiencing what most analysts are calling a “correction,” defined as a 10 percent drop in the market from recent highs. Then again, we might be in the early stages of a “bear market,” a long, sustained downturn in which losses will surpass 20 percent from the market’s most recent high.

I doubt that anybody truly knows right now. I cannot help but recall the words of John Kenneth Galbraith who said, “The only function of economic forecasting is to make astrology look respectable.”

A Lack of Serious Leadership

And while the fundamentals of the economy appear to be very good, I do worry that our nation’s debt, now at over $20 trillion and growing, is not being addressed in any serious manner by policymakers in Washington, D.C.

And therein may be another underlying cause for the jitters on Wall Street – nobody, it seems, is minding the store, the ship of state, in a competent manner. I quote from the New York Times from last week:

“Republicans propelled themselves to power in Washington by promising an end to fiscal recklessness. They are now embracing the kind of free spending and budget deficits they once claimed to loathe.

“Congress is debating a bipartisan spending deal that would blow through the caps imposed by the 2011 Budget Control Act, unlocking $300 billion in additional spending for the military and domestic programs over the next two years. That comes on top of last year’s $1.5 trillion tax cut package and as the White House prepares to unveil Monday a $1.5 trillion infrastructure plan that would require $200 billion in government funding.

“While the White House says it plans to offset that $200 billion through unspecified cuts, none of the other spending is paid for at a time when the nation’s debt already tops $20 trillion.”

Some day the chickens are going to come home roost, and I fear that it’s going to get very, very ugly.

Now let’s go onto something a little more uplifting.

A New Space Race

Somewhere floating out there in outer space is a red shiny 2008 Tesla roadster with a space-suited mannequin named “Starman” behind the wheel. Conceivably car and driver could be up there for a very long time. And the car will probably get a little dusty along the way.

“It’ll probably get hit with something the size of very fine sand every year or so, and get hit a few times an hour with 100-nanometer-size dust,” Andy Rivkin, a planetary astronomer at Johns Hopkins Applied Physics Laboratory, told The Atlantic magazine. “On average, we think it’d get hit by a fist-sized rock every several million years.”

Several million years. And to think, back here on Earth, Consumer Reports says the average life expectancy of a new vehicle these days is around eight years or 150,000 miles.

This Tesla’s life expectancy was extended by its billionaire owner, Elon Musk, the real-life Iron Man whose enthusiastic embrace of technology for technology’s sake and desire to push the limits of what is possible for private enterprise has ignited a new space race.

“We want a new space race,” Musk told a press conference in Cape Canaveral after the launch of his SpaceX’s Falcon Heavy rocket into deep space. “Races are exciting.”

Mind you, the original space race was between the old Soviet Union, which took an early lead with the launch of Sputnik 1, the first artificial Earth satellite, on October 4, 1957, and the United States, which came roaring back with NASA’s Mercury and then Apollo programs, which resulted in man setting foot on the moon.

Competition is the American Way

Last week’s launch of the Falcon Heavy, now the most powerful operational rocket in the world, underscores that we have entered a new era in which companies and not just governments are competing for a place in space.

And it comes at a time when the Trump administration is looking to restructure the role of NASA, ensuring that private enterprise and international partners work closely with the space agency. Musk is forcing the issue whether NASA likes it or not.

“He’s being Elon again. I’d call it competition, and competition is the American way of life,” said John Logsdon, professor emeritus at George Washington University and founder of the Space Policy Institute told the British newspaper The Guardian. “SpaceX has challenged the traditional launch industry in the United States and in Europe and in China and in Russia.”

Elon, Jeff and Richard

Now billionaires and their companies have ambitions well beyond government contracts but the commercialization of space itself. Virgin Galactic, the space company founded by Richard Branson, and Amazon founder Jeffrey P. Bezos’ Blue Origin are hoping to fly humans for the first time this year on suborbital jaunts that could reach the edge of space.

Blue Origin recently opened a facility at Kennedy Space Center in Florida to build the New Glenn reusable rocket system, named after John Glenn, the first American to orbit Earth, which will be even bigger than the SpaceX Falcon Heavy rockets. In a tweet posted Tuesday night, Bezos congratulated Musk on the launch with a “Woohoo!”

Branson, founder of airline Virgin Atlantic, established Virgin Galactic back in 2004 with the goal of provide suborbital spaceflights to tourists and suborbital launches for missions into space. There are also plans for orbital human flight.

“Elon is absolutely fixated on going to Mars and I think it’s his life mission,” Branson said on CNBC “Squawk Box” in October 2017. “Jeff and ourselves [at the Virgin Group] are more interested in how we can use space to benefit the Earth.”

So 49 years after the first man set foot on the moon, we have entered a new era, a new space race where the private sector may take the lead. While this may alarm some of the traditionalists at NASA, I believe this is a very good thing in the long run.

Along Florida’s Space Coast, most of which lies within Brevard County, there is a renewed excitement

“No question that other companies around the world, they are looking at establishing facilities in Florida so they can be near the center of space activity,” Space Florida President and CEO Frank DiBello told the Orlando Sentinel. “We want to drive all of those to create tourism and job opportunities for next-generation engineers and the space workforce.”

Musk was right. Space races are exciting.

I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Dean is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at http://www.barberadvisors.com to learn more.

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The U.S. Emerges as an Energy Superpower

In Corporate Site Selection and Economic Development on February 5, 2018 at 2:13 pm

No doubt you have heard the expression, “that which does not kill us makes us stronger.” That might be in essence the story of America’s oil and gas industry. Not surprisingly, Texas, where I live, has figured prominently in it.

From 2000 to 2008, the price of oil saw an unprecedented spike, going from under $25 per barrel to almost $150 per barrel. In response, U.S. drillers began in earnest to employ hydraulic fracturing, a technology pioneered by Mitchell Energy in the early 1980s near Fort Worth. In short, fracking — blasting water and sand deep underground to free oil from shale rock — gave the drillers access to once inaccessible shale gas reserves.

That development did not escape the attention of Saudi Arabia, which soon recognized this “fracking revolution” to be a potential threat to its hegemony around the world. Faced with the prospect of ceding market to these upstart American wildcatters, the Saudis convinced other OPEC nations to increase production, figuring that plentiful supply and lower oil prices would devastate the U.S. industry.

And it did. The price of oil dropped from over $100 a barrel in the summer of 2014 to $26 a barrel in February 2016. Most U.S. oil and gas producers were scratching and clawing just to survive, and many did not. More than 100, nearly half of them in Texas, went bust. The oil patch workforce in Texas dropped from 300,000 in December 2014 by 192,000 workers by September 2016.

Firing on All Cylinders

But late 2016, the Saudis came to the realization that these crazy Texans were in it for the long haul and would not go away. OPEC then decided to cut production and the price of oil rose to where it is today at about $65 a barrel.

Now that prices have stabilized, the Texas economy is “firing on all cylinders,” projected to add about 366,000 new jobs in 2018, according to Keith Phillips, senior economist for the Federal Reserve Bank of Dallas.

(The gross domestic product of the state is $1.6 trillion. If it were an independent country, and it once was, it’s economy would rank 10th in the world. My apologies for the apparent bragging about Texas. As a New York Times writer noted, “You don’t just move to Texas, Texas moves into you.)

Doing More With Less

Texas oil production is projected to reach 1.42 billion barrels a day this year, beating the 1972 record of 1.26 billion barrels. But it is worth noting that oil companies will do that with 75,000 fewer workers than at the peak in 2014 when 300,000 worked in the industry in Texas.

Efficiency is now the watchword. In short, the drilling companies have learned they can do more with fewer people. And that, too, has the world watching.

U.S. shale is “seemingly on steroids,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London, told Bloomberg. “The market remains enchanted by the ability of shale producers to adapt to lower prices and to continue to grow.”

And while the oil and gas industry remains a key economic driver in certain cities in Texas, Midland and Odessa would be examples, it represents less than 1 percent of the workforce in the Dallas-Fort Worth Metroplex. Statewide, it is less than 3 percent.

Explosive Growth

In his first state of the union speech last week, President Donald Trump, not surprisingly used the word “strong” to describe the state of the nation (all presidents do), all the while taking credit for an economy that appears to be doing very well.

Notwithstanding the Dow loss of 1,100 points last week in what most analysts says was a self-correcting response, the Labor Department on Friday reported that the economy added 200,000 new jobs in January, up from 160,000 in December.

Wages saw their biggest year-over-year increase since June 2009, rising by 2.9 percent over January 2017.

Other than saying, “we have ended the war on American energy,” Trump touched little on that subject. But prior to his speech, he has talked not only of energy independence for the U.S., but energy “dominance” in the world. There are indications that this might be actually happening.

U.S. oil production has surged above 10 million barrels a day for the first time since 1970, and the International Energy Agency says the U.S. is poised for “explosive” growth in oil output that will push it past Saudi Arabia and Russia this year.

Exports of crude oil and petroleum products have risen 20 percent in 2017 in the past few months to 7 million barrels per day. Natural gas production has also hit a record of more than 93 billion cubic feet per day.

“For the last 40 years, since the Arab oil embargo, we’ve had a mindset of energy scarcity,” said Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University and a former Obama administration official in an interview with Bloomberg. “As a result of the shale revolution, the U.S. has emerged as an energy superpower.”

That is also the assessment of Dr. Daniel Yergin, author of “The Prize: The Epic Quest for Oil, Money and Power.”

“This is a 180-degree turn for the United States and the impacts are being felt around the world,” Dr. Yergin told the New York Times. “This not only contributes to U.S. energy security but also contributes to world energy security by bringing new supplies to the world.”

Trump no doubt will claim credit for this relatively newfound superpower status, but the shale fracking revolution took place mostly during the Obama administration. The ban on crude exports from the U.S. was lifted in 2015, also when President Obama was in office.

Environmental Concerns

Much to the ire of many, the Trump administration supports opening 90 percent of the outer continental shelf to oil drilling as well as the Arctic National Wildlife Refuge where there is an estimated 11.8 billion barrels of recoverable crude.

Alarmed at the prospect that an offshore spill could devastate tourism in their respective states, governors of states along the Atlantic and Pacific coasts are seeking the same exemption that Florida Gov. Rick Scott (R) apparently got from the administration that would keep the offshore drilling ban in place.

Truth be told, there is not much planet sensitive about the current administration’s energy plans. Many environmentalists argue that shale drilling only extends the life of fossil fuels, much to the detriment of the planet.

It should be noted that the last three years have been warmest in 138 years of record keeping, resulting in, what scientists point out, the decimation of coral reefs, thawed polar ice at an unprecedented rate and raised global sea levels.

“We’re warming up pretty much at the rate we anticipated a decade ago,” Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies, told Bloomberg. “Basically, all of the warming of the past 60 years is attributable to human activities.”

Whether you agree with that assessment, held by most scientists, or not, the environment would appear to be a low priority with the Trump administration.

What Does This Mean?

So what does the shale revolution and America’s rise as an energy superpower mean to most of us? Lower energy costs, at least compared to much of the world, is likely one result, which can and should be a boon to certain industry sectors, particularly manufacturing.

Will there be a movement away from renewable sources of energy, such as solar or wind? Possibly, which would not be in the nation’s long-term best interests. But in the short-term, the economy is very much cooking with gas.

I’ll see you down the road.

Dean Barber is principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Dean is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at http://www.barberadvisors.com to learn more.

In Pursuit of Business and Deer

In Corporate Site Selection and Economic Development on January 23, 2018 at 9:23 am

This much we do know – that economic development is business development. And business development means, in some form or fashion, outreach.

If we are to further break it down in the simplest of terms, and I think there is value in doing that, then it follows that much of what economic development organizations should be doing is about reaching out to businesses.

This holds true whether businesses already exist in a community or are outside a community. One forms the basis for business retention and expansion (BR&E), while the other is the bedrock for attraction.

And yet despite stating what might seem the obvious, I’ve come across more than a few economic development organizations that are not so accomplished at business outreach. They don’t know where to start. They don’t know how to start.

This past week, I was engaged by the Lake Martin Economic Development Alliance in Alabama to show them the wheres and hows. Using my laptop computer, I sat down beside Denise Walls for most of a day and showed her how to cross reference and hone in on potential prospects using a variety of methods that I have learned over time. We identified prospect companies, decision makers within those companies and then “scraped” for phone numbers and email addresses.

The following days I would be looking for scrapes of a different sort.

Develop Your Base

Years ago when I was a newspaper reporter, I somehow came to understand that it was vital for me to develop trusted sources who would tell me things, sometimes on the record and sometimes off the record.

I was only as good as my sources, people to whom I developed relationships with over time. Years later, when I became an economic developer, I took that journalistic model of developing sources and applied it to building a network of business contacts.

Periodically, not too often as to be annoying, I would “touch” my contacts – sometimes by telephone, sometimes by email — to see how they were doing, if there was anything new happening with their company, and inform them of things that I thought might be of interest.

And that approach worked. I found projects, some of which resulted into substantial capital investments by companies. It’s a system that I have never abandoned but have only refined now that we have social media such as LinkedIn, Twitter, Facebook and host of other platforms.

Now, too, we have the benefit of digitally-based CRM and research tools at our fingertips that can help us determine who the corporate decision makers are, where they went to school, and even their hobbies.

Where to Start

The Lake Martin Economic Development Alliance is not unique in the fact that it has been largely dependent on the state to bring it projects, to which I would quote Dr. Phil: “How’s that been working out for you?”

That is not a cut at the Alabama Commerce Department, but rather a declaration that all local economic development organizations, no matter where they are, will have to tackle business development on their own.

You got to start somewhere and slowly but surely building a base of contacts, inside and outside your community, is a pretty good place to start. Indeed, I would argue that it is foundational, just as it was for me as a newspaper reporter in developing my sources.

If you are an economic developer and are not on LinkedIn, then I have to wonder what in the hell are you doing. I’m serious. And if you don’t have at least 500 contacts on LinkedIn, are you being serious about business development?

But here is a cautionary note and one that must be said. Business development is very time consuming and is far from being a perfect science. I’m not sure it’s even an art so much as a methodology. Mistakes and miscues will be made. Rejection comes with the territory. There are no guarantees.

Then What?

It might take me three minutes to find a CEO’s email address and direct phone number or it might take me three hours. Or I might not be able to find it at all using all my tricks of the trade. And even if I do find the desired contact information, then what? How do I best make contact and what is my message?

The hard truth is that business development is a rocky road to travel, which was the subject of a blog that I wrote in 2015. Since then, I have come up with a more refined way of developing contacts, to which I am willing to share to those so interested. (Using LinkedIn is only one segment.)

But the basics are that you must build your base of business contacts, you must continually expand and update your base (people do leave jobs), you must periodically touch base with your contacts, and you must develop a tailored message approach that clicks with people.

Your goal is making an emotional connection, developing a relationship of trust. Without that, you’re just making noise.

Study Up

Tailoring a specific message to a specific contact or contacts that will create a favorable impression is one that many economic development organizations struggle with. Your message to senior executives in the food processing industry will be and should be quite different from that of automotive suppliers. One size, one message, will not fit all.

What that means is that it is incumbent on economic developers to develop a deep knowledge of their target industries and about business in general. In short, it means studying up on the subject matter, knowing the players, the drivers, trends and challenges, of any particular industry sector.

At Consultant Connect’s annual Economix event last month in New Orleans, it was revealed that economic developer’s No. 1 gripe about site selection consultants was the frequently imposed short deadlines for submitting information on projects.  Their No. 2 complaint — that many consultants come off as arrogant know-it-alls, to which I would agree.

Default Contacts

A primary criticism that site consultants lodge at economic developers is that they (the economic developers) are not particularly good students of business. Too often, they have no deep understanding of their target industries; hence, they are unable to talk turkey to them. I would also agree with this assessment.

This lack of study, lack of industry knowledge often results in economic development organizations limiting their marketing efforts to only site selection consultants at the exclusion of prospect companies. It’s precisely because of their lack of knowledge that economic developers see the consultants as their default, go-to contacts.

To make matters worse, much of the material sent to the consultants is marginal at best. On almost a daily basis, I will get an email from ED group that should never have been sent to me, but rather should only have been directed to internal stakeholders within the community.

Come to our community breakfast next week and hear animal control officer Bob Jones speak about recent coyote sightings at local craft breweries.

“He walked right in liked he owned the place. But he couldn’t belly up to the bar and ask for a pint, because, you know, they’re short little fellows.”

Do No Harm

I got an email today inviting me to a four-hour jobs fair for hotel and restaurant workers in a city in Virginia. I remember that my first job as a teenager was as a dishwasher in the kitchen of a hotel restaurant, but I no longer have aspirations to work my way up to busboy.

These why-in-hell-are-they-sending-me-this emails used to irritate me as it was apparent that the offending ED group had made no attempt to sort its database for marketing purposes. Now I take it more in stride, knowing full well that I can always unsubscribe if things get too out of hand. (I don’t like to do that but have.)

Just as in the Hippocratic oath, when it comes to email marketing, which is always a bit of precarious undertaking, I would advise economic development organizations to do your best to do no harm, knowing full well that you will always get some unsubscribers. Again, rejection comes with the territory.

Back in Bama

I had a good time in Alabama last week, a place where I lived for 23 years. The state is coming off some big wins of late, the $1.6 billion Toyota-Mazda in Huntsville, gunmaker Kimber to build a $38 million plant in Troy, and strong indications that Canadian-based Bombardier may build a new aircraft assembly line in Mobile.

Then there is that national championship with Nick Saban and the University of Alabama. Intangible but notable nonetheless.

My trip was both for business and recreation. After showing Denise how to build a contact base by identifying prospect companies and decision makers within those companies, I subsequently joined old friends for a two-day deer hunt on a beautiful, remote piece of property that revived my spirits.

Exercises in Pursuit

We stayed in a small farmhouse, where there was no TV, no internet service, not even a cell signal for my phone. After dinner each night, there was chopped wood and a fireplace to enjoy, along with craft beer and whiskey. With that came, good fellowship and meaningful conversation. The hunt was just a backdrop. Just an excuse.

I saw plenty of deer but never took a shot, because it wasn’t the right shot or the right deer to take. But spending time alone in a serene natural setting gave me time to think.

Business development and deer hunting are both exercises in pursuit. In business development, you want to be noticed by your quarry, to even get their full attention. But it is the pursued that largely calls the shots on what eventually happens.

In deer hunting, you want to go unseen, unheard and unscented. You don’t want your quarry to know of your presence or the fact that you even exist. And then, if circumstances permit, you take the shot. Or not.

Pondering on that while sitting in a ground blind, a rifle on my lap, I nodded off asleep.

I’ll see you down the road.

Dean Barber is principal of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. Dean is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com. Visit us at Barberadvisors.com