Dean Barber

Lessons from the North Country

In Uncategorized on March 18, 2012 at 6:40 am

As many of you already know, I’m a manufacturing kinda guy. I grew up in a home in which both of my parents were employed in manufacturing. My father was a metallurgical engineer, a foundry man. My mother worked in cut and sew. We had a good life.

And despite the fact that I have the manufacturing skills of a common day laborer, which is none too common these days in manufacturing, I cannot help but be drawn to industry that makes tangible things.

It is manufacturing clients whom I principally serve in my site selection consulting business. Call me shortsighted, but I do not get a thrill from a potential client that wants to site a call center operation that pays – how should I say this delicately? — crummy wages.

Now you can make the case that in today’s economy, with so many people hurting, that a job is a job is a job. I cannot argue with you. But in addition to serving a corporate client well, I want to build wealth in a community.

And in keeping with my adept foot-in-mouth talents, I recently told an audience in Florida that any local economy that doesn’t have at least a seed of manufacturing present is built upon a house of cards. The thing is, I really believe that.

My Prejudice

But let’s clear the air. Just as you know that I have a bias in favor of manufacturing, I must confess to having a great suspicion of people who make wealth, especially great wealth, by means of financial instruments that, as I see it, game the system.

I am thinking of derivatives, with their complexity and lack of transparency, which resulted in underpriced credit risk and spawned subprime mortgages and then a near meltdown of our financial system. Other than that, I’m fine with those devious people who came up such a scheme.

Making money from money is a tradition that predates the Bible. Of course, we need lenders. Of course, we need investors and venture capitalists. Of course, we need people who are willing to take risk. But things got strange and disconnected.  Wall Street remained the epicenter for capitalism, while Main Street was where most of us participated in commerce.

And it’s Main Street where I take heart, where business practices are grounded in common-sense reality and an ethic of playing by the rules. I don’t believe that about Wall Street. It is there where the greedy bastards reign and plot their financial devices. Now is that totally fair and accurate? Probably not, but it’s more true than we would like.

I don’t know what exactly happened, but I do know that greed is a moral failing that has been with us since time immemorial. As a proponent and defender of capitalism, I have to think that certain guiding principles were perverted along the way by some Wall Street insiders who became obsessed with building their own personal wealth at the expense of the real needs and desires of their customers.

Satisfying a Frog and a Pig

And so when I read this past week of a resigned executive with Goldman Sachs, Greg Smith, who may be the disgruntled employee, as some would assert, or might just be a man who wants to lay his head on a pillow at night and sleep. In a New York Times op-ed that ran last week, Mr. Smith did not hold back.

“It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail.”

Now get this, the defenders of Goldman Sachs would suggest this is a prevalent attitude on Wall Street today. Well, that makes me feel a whole lot better. How about you?

Having such an arrogant disdain for your customers probably would not cut it most manufacturing scenarios. That is not to say that there are not ever present quality issues with product failure resulting. Lemons still can and do happen. But if you are going to make it manufacturing today, you typically must make your products per the requirements of your customers or you do not make them at all.

Miss Piggy and Kermit are really that demanding.

Back to the Basics

Now I do not much care for the term or even the concept of “best practices.” What may work and be a “best practice” in one place for one organization does not necessary translate well for another. The same can be said for countries. If you haven’t noticed, we fell short at exporting Jeffersonian democracy to Iran or Afghanistan.

But maybe, just maybe, there are some fundamental truths when it comes to business. Maybe it’s time we get back to the basics. And I am not talking about Luchenbach, Texas, although that is one fine place. No, I’m talking about our steady and resolute neighbor to the north.

It was several weeks ago that I was talking to a Canadian manufacturing executive. Somehow the subject got around to the respective differences in our economies and banking systems. My friend suggested that we – Americans — were more run and gun, more out there in terms of the risks that we are willing to take.

I was not offended but intrigued. Now I do not care to hear some snooty Europeans upbraid us for having a “cowboy” mentality or remind us of our failings as a people. Certainly our history confirms that our American experiment has proved difficult along the way, resulting in the persecution and mistreatment of entire races and groups of peoples, all while celebrating freedom and independence, a cowboy culture so to speak.

Europeans need not remind me of that. And I should not have to remind them that were it not for our flawed cowboy culture, the dark clouds of fascism may still be lingering over their enlightened continent.

Despite Our Wicked Ways 

But it’s different with Canadians. For the most part, they would never be so rude as to point out our shortcomings. And they actually like us despite our wicked ways that they do not understand. We’re their often noisy neighbor – we laugh too hard and we drink too much and we put pink flamingos in our yards – but somehow they’re with us.

Maybe they are just being practical. They know they have to live with us, so why not make the best of it. Still, I cannot help but like Canadians. They are a very sensible people. And for the record, I do like Europeans, even the snooty ones.

My Canadian manufacturing friend said that when we in America boom, we really boom and when we bust, we really bust. Whereas in Canada, things are more or less on an even keel. Business there is a bit more conservative, less flashy and ultimately less destructive. Sticking to the basics is what it’s about.

Sure enough, when I started delving deeper into this, I found that the last bank failures in Canada happened in 1985, with the demise of two banks. There have been two in the United State so far this month. (92 in 2011.) So what gives?

Well, for one, we’ve got two different banking systems. (Deep analysis there, Dean.) Canadian banking is not dominated by so many regional players as you find in the United States. Rather, there are national banks there, banks that essentially do business the same way in every province. Five big national banks dominate.

A Case for Prudence

More importantly, Canadian banks, profitable ventures to be sure, appear not to have gone off the deep end and be blinded by greed.

“Our banks are very prudent lenders,” said Maura Drew-Lytle, a spokesperson for the Canadian Bankers Association.

“We didn’t have any of the subprime mortgages that you had in the states that caused a lot of the problems. We never did anything like that. Banks here would only lend to you if they thought you could pay it back.”

Whoa, what a radical departure, proof again how our well-meaning but delusional neighbors to the North are flirting with socialism. But there are some interesting facts along the way to be considered.

Canada is ranked as having the most sound banking system in the world for four years in a row now by the World Economic Forum. But apparently it’s not just bankers and economists that believe that. About 85 percent of Canadians express confidence in their banking system, according to a 2009 PriceWaterhouseCoopers report.

Unlike here in the US where so many people remain upside down on their mortgages, the amount of home equity in Canada stands at 66 percent of total home value. Canadian lenders tend to hold the mortgages that they originate, whereas US banks use an “originate to distribute” model.

Bottom line: Canadian banks have a much greater incentive to be prudent because they bear the consequences of making bad loans. As of November 2011, just 0.38 percent of mortgages were in arrears in Canada. The rate of arrears in the US is more than ten times higher.

So what does this all mean? Should we ship our Wall Street bankers off to Canada to be indoctrinated and trained in special camps? No, that probably will not be necessary, although the idea is kind of appealing.

Maybe our big Wall Street banks should simply revisit sound banking principles and quit being obsessed with nickel and diming the public on fees or employing the next exotic financial instrument that nobody understands.  Or maybe they should just talk or visit community bankers on Main Street who have a better understanding of us muppets in flyover country.

There is something to be said for being prudent and taking risk in business and in life. Maybe our cowboy ways will sometimes pull us more toward risk. Still, I’ve always thought of cowboys as being honest and forthright. You see, my heroes have always been cowboys, and I’ve always been partial to Miss Piggy.

Need a partner in results-oriented site selection? Contact Dean Barber at 972-890-3733 or at Barber Business Advisors, LLC, is a site selection and economic development consulting firm based in Plano, Texas. Please visit our website at


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