No Place for the Faint of Heart

As a site selection consultant, I like to think that I have a practiced if not discerning eye.

I am not RoboCop. I will not pick up everything about my surroundings, but I generally get a good idea about a place after I have been there for a few days.

But I find Alaska somewhat confounding. It pushes and pulls me in opposite directions at the same time. It’s an incredibly interesting place, and I am attracted to it for a variety of reasons. But it’s a tough nut to crack.

Now there are some obvious things that stick out in my mind. This is an economy built largely around extraction – pulling oil and gas and minerals out of the ground, pulling fish out of the sea, pulling tourist dollars out of purses and wallet.

It’s an isolated place, and when Alaskans proclaim that they inhabit the “last frontier,” well, they are not kidding.  A frontier grit is alive and well here where 82 percent of the communities are accessible only by air.

The Alaskan Railroad Corporation, owned by the state, operates a rail system that is totally self-contained within state borders. No track connects with a Canadian railroad, and therefore there is no rail linkage between Alaska and the lower 48.

What’s more there is only one road, you read that right, just one road constructed during World War II, linking what would become our 49th state to its brethren states below.

It took me awhile to figure this out, but I soon concluded that Alaska really is an island because of this lack of land-based connectivity. And that factors strongly in it being a high-cost place to live and do business. Virtually everything – foodstuffs, cars and consumer goods — is imported, 80 percent of it through the port of Anchorage.

Wages are higher but so too is the cost of housing. Even a dumpy one-bedroom apartment in Anchorage will go for $900 or more. Houses will typically sale for more than $300,000.

If there is anything low here in terms of costs, it is taxes. Alaska has no sales tax, no inventory tax, no gross receipts tax and no personal income tax. Anchorage has no sales tax, which I noticed when I bought my obligatory T-shirt at the Glacier BrewHouse after stuffing myself with grilled King Salmon and drinking the local suds on my first night on the ground.

It was Tuesday night, May 14, and I immediately knew that I liked this place.

Four Days Later (A Journal Entry)

It is supposed to be springtime here in Alaska, and we are supposed to be going to a farmer’s market this morning. This is our last day here, our “fun day” to do touristy stuff. But from my window on the 16^th floor of Hotel Captain Cook, I see snow on the city streets below.

I didn’t bring a warm coat, didn’t think I needed one. It’s Saturday morning, May 18, and even the hardiest Alaskans are displeased with the unseasonably cold weather.  I am reminded by what Bill Popp, president and CEO of the Anchorage Economic Development Corporation (AEDC), said at a dinner the other night, half in jest but half not.

“This place is not for the faint of heart. At least once a year, Mother Nature will try to kill you.”

It could be black ice on a highway or thin ice on a river. Or it could be a mother moose or mother bear with young nearby, and you just so happen to be in the wrong place at the wrong time. Let’s just say you got to be aware of your surroundings here and act accordingly.

I got a better idea of Alaska living and the sheer scope of things the day before while touring the Matanuska-Susitna Valley (known locally as the Mat-Su or The Valley), an area spanning 25,000 square miles (about the size of West Virginia).

The Valley starts only about 35 miles north of Anchorage. If there is going to be any significant manufacturing in Alaska, it will likely take place here because Anchorage has essentially run out of viable sites.

Port MacKenzie, a deep water port designed for export of natural resource commodities, which will soon get rail, and a 160-acre industrial park should prove advantageous for future development. A proposed bridge across the inlet linking the Valley to Anchorage, new natural gas pipeline, and a new hydro-electric dam are all being discussed or in the planning stages, representing billions of dollars of infrastructure investment.

The dam and the pipeline projects have greater local support, the bridge less so. Whatever projects are built, big changes are coming to the Mat-Su Valley. This should be the focal point for future growth.

If I Were a Young Man

As a young man, I may have thrived here. I could have gone traipsing out in the woods in September with rifle in hand to get my moose. I could have been mushing across the countryside with a team of dogs in January, or racing snowmobiles with friends at 80 mph across frozen flats in February.

I am sure that I would have dip-net fished for late-run sockeye salmon on the Kenai River in July. I would have ventured deep into Denali’s trail-less wilderness in August, all the while wearing “bear bells” on my backpack and person so as to not walk up on and surprise any grizzly bears lurking nearby.

(Those experienced in the Alaskan backcountry recognize the difference between black bear and grizzly bear scat. Black bear droppings are smaller and often contain berries and leaves, whereas grizzly droppings will often contain small bells.)

Yes, if I were a young man in Alaska, I might have tried my hand at “living off the grid,” at least for a while, subsisting on what I harvested from nature’s abound all the while disdaining the creature comforts of civilization. Heck, I might have even knocked out a great Alaskan novel, ala Jack London, or panned for gold.

But as that old Texas gambling song goes, “the river ain’t whiskey, and I ain’t no duck, so I’ll play Jack O’Diamonds and rely on my luck.” The fact is that I’m an old man now, a mere visitor to this strange land.

No, I don’t believe I could hack it here, not now.  Would not be a good bet at this point in my life. If I tried my luck at this late stage, they would probably find me in a snow drift come spring, curled up in a fetal position.

This is no country for old men (unless you came here young).

Poor Ron

I actually felt sorry for him. Ron Ruberg was one of three site selection consultants invited on this Alaska familiarization tour by the AEDC.

“I’ve been to Maine four times and four times I was promised that I would see a moose,” said Ruberg, a partner with Location Advisory Services. “I have yet to see a moose.”

There were three of us — Ron, and Dan Levine, also of New Jersey with MetroCompare – and then me, the shivering Texan who was constantly being reminded that Alaska dwarfed the Lone Star State. My retort was lame, but it was all that I could think of. “Well, we’ll just see about that if you ever melt.”

But this moose thing was really getting under Ron’s skin. He even started to question if moose actually existed in the wild at all as we traversed some pretty rugged ground with no moose in sight.  Arriving at the airport to catch my departing flight home after five days in Alaska, I took pictures of two moose mulling about in the FedEx parking lot. 

I emailed Ron pictures to prove to him that yes, moose, really do exist, if not in the wild, at least at airport parking lots. I bet he yelled at the computer screen.

Live, Work and Play

Anchorage is not the first city where I’ve heard this phrase. Until now, I considered it a worn out cliché. But here in Anchorage, it has real meaning. Because of the harsh realities of Alaska, you need a balance to life or you just won’t last. You have to purposely pursue life here or you are going to fold your tent and go home, back to the lower 48.

So I was constantly hearing from my hosts that there were always plenty of things to do here in Anchorage, even in the dead of winter, much of it centered outdoors. I think this live, work and play is a mantra for survival.

It was striking to all three of us consultants that the real evangelists for Alaska were mostly transplants – men and women who chose to come and build lives here. They were all pioneers of sorts, all very much entrepreneurial, betting on a future on the frontier.

And that has to be a strength for Alaska, this unrelenting entrepreneurial drive to make a business and a life work. It supersedes all, including costs. Businesses bank on this sheer determination. It’s the reason why they exist. Heck, it’s the reason why Alaska exists.

Work will get you farther. “People don’t make it here on their mouth, but what they do. If you work hard, you are recognized for it,” one businessman told me.

There are no country clubs in Alaska, and I doubt if there ever will be.

The Life of a Box

The airport intrigues me. I sense there is something very big here, waiting to happen.

Well, it’s already big. The airport in Anchorage is the fourth busiest air cargo hub in the world, serving 49 cargo destinations and accepting on average of 500 widebody cargo aircraft landings per week. It operates 24 hours a day and never closes for snow.

And Anchorage is one of only two places in the United States that allows for foreign-based shippers to unload cargo from one plane and put it on another plane. That transloading process might provide for opportunities in sorting and assembly at nearby facilities, but so far that has not happened.

It is interesting to note that airport authorities to a large degree do not know what is in the boxes or the process of how they ultimately got to Anchorage. Once they figure out the life of a box, well, maybe they can plan accordingly and create economic development opportunities.

The airport exemplifies Alaska. You know the opportunities are here and that they can be big. It’s just putting the pieces together and making it work.

At the AEDC, the focus may shift from recruitment to BR&E – business retention and expansion. I think that is the smarter strategy in the long run. Not only are more jobs created by existing industry, but businesses seem committed to this place. They are here for a reason and they are going to tough it out.

There is a code here. You never pass by someone who is in need of help. That can have life or death consequences.  A helping hand, a solutions provider, is always welcomed, which is what BR&E is ultimately about. It works just about everywhere, but it should especially thrive here on the last frontier.

A special thanks to my guide Will Kyzer with the AEDC, who never got me killed, and Don Dyer, with the Matanuska-Susitna Borough, who enlightened me on sustainable living, Alaskan style.

One last thing, there is no law school in Alaska. I think other states could learn from that.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or at dbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

 

 

Surprises Galore at the Edge of Nowhere

SIOUX FALLS, S.D. — In the Lone Star State where I live, there is no shortage of “braggin’ rights” about the valor, vision, pride, and perseverance of Texans. To be sure, the mystique of Texas is promulgated with a certain amount of swagger. It’s pretty much a cottage industry here.

Baseball pitching legend Jay Hannah “Dizzy” Dean was not a Texan but he should have been. He was fond of saying, “It ain’t braggin’ if ya can back it up.”

South Dakota, where I have been this past week, is a curious place in that in many ways, it really can back it up, but where there is scant tradition of bragging. I theorize that this is due to the fact that most of these people come from German/Scandinavian/Lutheran stock. They place much value on work, and will celebrate and suffer quietly.

There is strength and humbleness that resides here, even if most people believe they have it better than other parts of the country. You just don’t crow about it. You put your hands on the plow, do the best you can, and save your money. Providence protects.

Apparently so. The Great Recession was little more than a blip in South Dakota, where the unemployment rate was 4.3 percent in March compared to the national rate of 7.6 percent.

Meet Dennis

Now it’s not every day that you actually get served by a governor. I’m talking about being literally served.  I was among a group of site selection consultants who ate lunch with Gov. Dennis Daugaard, who walked around the table handing out plates, stopping and talking to every person with an outstretched hand.

There is something different about this man, a modesty that I found compelling. He seemed  not smitten by power, almost normal. I like that. I like that a lot.

His background may provide some clues as to his manner. Daugaard was raised on a family farm near Garretson, South Dakota by his mother and father who were both deaf.  Sign language was the main method of communication at home.  Like many in the area, his family stock was from immigrants from Denmark, Norway, and Sweden. He went to a one-room country school.

After attending the University of South Dakota, Daugaard would periodically hop a friend’s egg truck bound for Chicago to attend law school.  While there in the big city, the future governor drove bus to pay for his schooling.

Last fall, South Dakota recently made the cover of Barron’s, the Dow Jones financial weekly, as the best-run state in the nation. The state earned the top spot due to its low debt by keeping spending in check and responsible pension funding. Most governors would puff up and take full credit. Not Daugaard.

“This is great news and a reflection on governors and legislatures, long before me, who understood the importance of debt avoidance, sound financial decisions, and making only commitments that can be kept,” he said.

Not More Taxes, More Taxpayers

While he is a true believer that South Dakota does offer a superior business environment with low taxes, greater productivity and a reasonable regulatory climate, Gov. Daugaard was hesitant to be boastful about it while visiting with companies in California.

“I felt somewhat guilty pointing out the differences,” he told the consultants.

Keep in mind that South Dakota has no corporate income tax, no personal income tax, no personal property tax, no business inventory tax, no inheritance tax. The overriding philosophy: Not more taxes, but more taxpayers. Business has taken notice and people are migrating to this right-to-work state.

Sioux Falls, the state’s largest city with a population of about 156,000 and an MSA of 232,000, picks up about 2,500 new residents annually and has historically driven most of the state’s population growth.

One of the recent transplants was Jason Engle, the CEO of Legacy Electronics Corporation. He moved his company from San Clemente, Calif., to Sioux Falls in 2011 so as to reduce costs and be able to compete with Asian companies that also made high-density memory modules and printed circuit boards.

He said his company has realized a cost savings of about 30 percent by making the move to South Dakota.  Soon after the company began operations in Sioux Falls, the governor came calling.

“He made a point to specifically introduce himself to every employee. He would stop, shake their hand, look them in the eye, and ask questions of each one of them.”

Later one of the Legacy employees received a two-page handwritten letter on governor’s office stationery. It was signed “Dennis.”

We Get Sh-t Done

On the city website, he is referred to as “Mayor Mike.” With a background in marketing, Sioux Falls Mayor Mike Huether is none too shy about calling attention to his city.

“We should make the top two or three with every project you have,” he unabashedly told the assembled site selection consultants.

My experience is that a company will often have pretty good ideas on where it needs to be, as was exemplified by an email that I received from a CEO on Friday. My job, of course, is to refine those ideas and then find the best place, based on a whole lot of tailored criteria, where the risks are minimized and the chances for success are optimized.

I’m sorry to report to Hizzoner that Sioux Falls will not always make the finalist list. There are certain practicalities specific to a project that will simply prevent that from happening. I know it’s hard to imagine, Mr. Mayor, but sometimes your city will not be the best fit.

But I do believe the mayor, truly I do, when he passionately states that red tape doesn’t stand much of a chance in his city, with expedited permitting guaranteed. “We get shit done,” he said.

I only wish there were more like him.

Said Matt Healy, operations manager with Glanbia Nutritionals, now building a cereal ingredient processing plant in Sioux Falls: “The city and the state have been remarkably supportive. They have been exactly who they said they were.”

Separating the Wheat from the Chaff

As a site selection consultant, I tend to remember statements like that by Healy. Often it is not what you say about yourself that resonates with me, but what others say about you. I will take all with a certain grain of salt, knowing full well that there are underlying truths and half-truths about every place under the sun. My job is to separate the wheat from the chaff.

Probably what surprised me more than anything about Sioux Falls was the size and scope of the financial services and health care/medical research industries.

Citibank set the stage in 1981 for bigger things to come when it moved its credit card operations center to Sioux Falls prompted by a change in state law. Fast forward to today and the state now ranks No. 1 in the country in total bank assets valued at $2.5 trillion. Yes, it’s true, about 18 percent of the country’s total bank assets reside in South Dakota.

Now who would have thunk?

Jerry Nachtigal, senior vice president of public affairs for Citibank, said the bank’s workforce in South Dakota, which numbers about 3,000, is 15 percent more productive in comparison to the bank’s other operations around the country.

Engle, the CEO at Legacy, noticed that as well.

“People who come to work in South Dakota genuinely want to work. They enjoy working and they give it their all. And that is a breath of fresh air from an employer’s standpoint,” he said.

Health care was also a huge surprise. There are two dominant players, both engaged in medical research the likes of which I have never seen in a community without a major research university.

Sanford Research, part of Sanford Health, the largest rural, not-for-profit health organization in the United States with a presence in 111 communities, eight states and three countries, is housed in state-of-the-art facilities at the Sanford Center.

I was simply wowed by what I saw in this 300,000-square-foot building, which formerly housed Hutchinson Technology, a computer parts maker that shut down in 2009. Today, much of the focus is toward finding a cure for Type 1 diabetes and breast cancer. Space does not permit me to tell you about a Sanford sports complex now being built, but it will be key component to Sioux Fall’s quality of life picture.

I was equally impressed with the Avera Cancer Institute, which was designed with the input of patients in mind and opened in 2010. This was a feel-good place, where hope was purposely brought into play. If I lived in Sioux Falls, I think I would come here just to eat lunch and be inspired. This place touched me in a way that I cannot fully explain.

Avera is the health ministry of the Benedictine and Presentation Sisters, 300 locations in eastern South Dakota and surrounding states. They are good folks doing incredible work.

Living on the Fringe

Slater Barr, president of the Sioux Falls Development Foundation, tells the story of a reporter with The Economist who proclaimed that Sioux Falls was “in the middle of nowhere.”

To prove to the contrary, Slater proceeded to show the reporter a population density map of the United States. That elicited a modified response from the reporter who said that Sioux Falls was on the “edge of nowhere.”

But being a “fringe city” on the edge of greater population density does have it benefits, exemplified by growth that has taken place. To be sure, the site selectors wondered aloud if the labor market was too tight to support a large project.

My take on the people of South Dakota may be somewhat in error. They may not be that humble crew after all. While at the airport waiting for my return flight home, I walked into a gift shop and spied a hunter’s ball cap. It was florescent orange with a camouflaged brim. Embossed on the crown were the words “South Dakota,” below which was a drawing of pheasant in flight.

And then the most memorable proclamation: “Big Cock Country.”

I bought that cap and took it home to Texas, where I hope to muster up the courage to wear it one day. Well, maybe not.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or at dbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.

This Time It is Different

While he never came out and actually said it, the gentleman was in essence calling me a Luddite.

Now I have been called a lot worse, and while he did make some valid and reasonable arguments in response to my blog last week, I reject the charge that I am afraid of technology, even if I have yet to figure out how to program my big screen HD TV to do stuff that I probably don’t need it to do.

The Luddites, by the way, were a threatened bunch of textile artisans in 19^th century Britain. They took to bashing the automated looms that they perceived (correctly) were taking their jobs. A few hangings here and there stopped their vandalism.

Now I am not about to start bashing any computers, robots or even software engineers. I am peaceful man who shuns violence. If there is any group, however, that is deserving of persecution, it would be editors for their boneheaded views on just about any subject. Let us hope that robots do take their jobs.

But before I get into the meat of the subject, which is how this new machine age of digital technology has created both winners and losers in terms of our economic future, let me say that the purpose of this blog is not to necessarily garner your support and agreement for my views, although those of you who do will go onto the bonus round.

No, the purpose is to simply get you to think, which is beyond on the scope of computers and, of course, most editors.

A Faster, Stranger New World

One could rightly argue that as long as man has been shuffling about upright, we have been entering a strange new world when it comes to advancing technology. But things are a whole lot faster now. Today’s Playstation is more powerful than yesterday’s military supercomputer.

It’s an age of increasing productivity but fewer jobs. Since 2001, U.S. gross domestic product has risen 20 percent, while the number of jobs have increased by only 1.9 percent.

Wages, too, have taken a hit. Adjusted for inflation, the average U.S. household now has lower income than it did in 1997. Wages as a share of GDP are now near an all-time low at a point in history when corporate profits are near or at an all-time high. 

Now most economists used to believe that if you just keep increasing productivity, everything else kind of takes care of itself. But as Erik Brynjolfsoon and Andrew McAfee point out in their book “Race Against the Machine,” there’s no economic law that says everyone has to benefit equally from increased productivity.

It’s entirely possible that some people benefit a lot more than others, which is what has been happening for about the past 15 years or so. The pie has gotten bigger courtesy of productivity, but most of the increase in income has gone to less than 1 percent of the population. I have to believe that this was a root cause for the Occupy Wall Street movement that we saw sprout up in 2011. Their slogan: “We are the 99 percent.”

The Great Decoupling

According to McAfee and Brynjolfsoon, there has been this “great decoupling” between productivity growth and employment growth. Economist Jared Bernstein calls the gap that’s opened up “the jaws of the snake.” It shows no sign of closing.

Now one could probably argue that our laws, regulations and government tax policy played a large part in creating this gulf that exists, and I won’t argue that point.  But I believe, as Brynjolfsoon and Andrew assert, that digital technology is the primary mover and cause. For what it’s worth, these two fellas work at a little community tech school that you may have heard of called MIT.

Technology has always been creating and destroying jobs. Automatic threshers replaced 30 percent of labor force in agriculture in the 19th century. But it happened over a long period of time, and people could find new kinds of work to do.

But this time it is different. Digital technology, which allows you can reproduce things at close to zero marginal cost with perfect quality and almost instant delivery, is affecting virtually every industry.

Consider the person who writes software. You can take that software and replicate it a million times. And while the person who created it does very well, the people who previously did that job are less important or maybe not even necessary. TurboTax is an example. You’ve got a human tax preparer being replaced by a $39 piece of software.

Service Jobs Take a Hit

Sophisticated scheduling software has eliminated the need for many office assistants and secretaries. Labor Department statistics show a loss of 1.1 million such jobs in the decade between 2000 and 2010. The number of bookkeepers fell 26 percent, word processors and typists, 63 percent; travel agents, 46 percent; and telephone operators, 64 percent.

Online banking services have wiped out many teller jobs; self-service checkout lanes have whittled away at cashier jobs. Utilities have installed smart meters that eliminate the need for meter readers .

These are what McAfee calls the routine cognitive workers, and they are taking hits big time. No sector is spared or will be spared.  The idea that automation has been a job killer solely in manufacturing is simply wrong. Just wait until the day comes when some high-paying professions start seeing job erosion because of digital technology. When doctors and lawyers start getting displaced, you will hear the howls.

I happen to believe that we are still only in the infant stages of robotics in manufacturing. In a PowerPoint presentation/speech that I am currently working on for LiveXchange to be held later this month, I will talk about Baxter, a new creation by Rethink Robotics.

Baxter learns new tasks by observing human performance, usually within 10 minutes. No in-depth reprogramming is required. And “he” costs just $22,000, less than half the price of other industrial robots.

Just What Will We Do?

If an army of future Baxters or his descendants are coming, and I think they are, then I can conjure up a question that may sound a bit outlandish and absurd to some of you, but I think it deserves some consideration.  If machines, which have yet to exceed humans in intelligence but are getting intelligent enough to have a major impact on the job market,  become capable of doing most of the work, just what will we do?

I know that I would like to keep working.

The economist John Maynard Keynes addressed this issue in 1930, when he wrote, “The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption.” Keynes imagined 2030 as a time in which most people worked only 15 hours a week, and would occupy themselves mostly with leisure activities.

Moshe Vardi, a professor of computer science at Rice University, writes for The Atlantic magazine that he doesn’t look forward to that kind of future.

“I do not find this to be a promising future. First, if machines can do almost all of our work, then it is not clear that even 15 weekly hours of work will be required. Second, I do not find the prospect of leisure-filled life appealing. I believe that work is essential to human well-being. Third, our economic system would have to undergo a radical restructuring to enable billions of people to live lives of leisure.”

Should We Go Down Every Rabbit Hole?

So this poses another question. Should we ever relinquish or at least consider not to pursue a certain technology on the basis that it could somehow come back to haunt us? Historians debate whether the development and use of the atomic bomb during World War II may have saved more lives that it took. The alternative was a land invasion of Japan, where the casualties could have been much higher.

But is the world safer today with Pakistan having the bomb and with Iran and North Korea having inspirations of developing nuclear weapons? And the nightmare of nightmares is a terrorist group somehow getting their hands on such a device.

In the end, did the pursuit of that particular technology serve us well? More importantly, should we go down every rabbit hole that presents itself? Frankly, I do not have an answer for that one. I’m not sure you can cap it in the long run.

Maybe the ages will tell us, but maybe well after we are gone.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or at dbarber@barberadvisors.com

If you work for a company seeking site selection consulting or an economic development organization in need of counsel, ask for our separate brochures (pdfs) outlining how we can help. All requests for information will be considered confidential.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Dean Barber and Barberbiz with specific direction to the original content.