Dean Barber

Speed Dating in the High Desert

In Economic Development on October 21, 2013 at 10:48 am

TUCSON, Ariz. – Be advised that I am now the Tarantula King.

Mind you, I do not have a deep-seated fear of snakes. I will give poisonous ones a wide berth, but have no problem with picking up and handling the non-venomous varieties. Big hairy spiders, now that is a different story. A phobia does dwell within me concerning the arachnid line of critters.

So for me to even suggest that our jeep-driving desert tour guide place “Rosie” – his seven-year-old pet Tarantula — on my shoulder, well, that represented a huge breakthrough for me. For some peculiar reason, I just wanted a picture of Rosie perched on my person. 

I suspect that the Mexican beer, which we stopped for in order to be well-provisioned for our expedition, provided me with the required courage.

The jeep tour in the Sonoran Desert was my only play time last week during my four days at Industry Week’s Roundtable in the High Desert. I think the good folks at Industry Week, and they are good folks (thank you Adrienne, Jessica, Lauren and Michael for your good work), should consider renaming it “speed dating in the high desert.”

That is because in between presentations from the featured site selection consultants, of which I was one, we had these mini-meetings of 15 minutes in which the economic developers had one-on-one discussions to tell us about their communities. Basically, it was an opportunity for them to give more than an elevator speech. I dutifully took notes and nodded respectfully, and even occasionally asked a question.

By my count, I had seven such meetings on Tuesday morning; 21 meetings on Wednesday; and then another seven on Thursday morning, for a total of 35 meetings over a three-day span. Now if I told you that I remembered everything said in those 35 meetings, I am sure you would believe me, right? Notice that I have not made that claim.

But actually these meetings did serve a worthy purpose. I got to see and spend time with old friends and then make new friends, and there is always a value to that. Ultimately, business is built around people interacting with each other. Establishing relationships greases the wheel and makes that all the more easier.

That does not mean that friends get preferential treatment in a  site selection process. But it does mean that I can place a face with a name and know who to turn to if and when the time comes that a project comes knocking. 

So again, I met with economic developers representing 35 different organizations. The first night was Arizona night, as was appropriate. The consultants – which included long-time friends David Dodd, Alison Benton and Brent Pollina – were extolled the virtues and advantages of Arizona. And it was at that dinner at a Japanese restaurant where I learned that Gilbert, Arizona, was the center of the universe. I did not know this.

Apples Don’t Lie

The apple said it was so. In the goodie bag delivered to my room, there was an apple with a sticker attached to it. The sticker said this: “Need more than an apple a day? Gilbert has over 2 million-square-feet of hospital and clinical research space and world class facilities in stem cell, cardiovascular and oncology sciences, regenerative medicine, medical device equipment and pharmaceuticals.”

So Gilbert wanted me to know that it is a preferred location for science, technology, engineering and math (STEM) related industry growth. I got that, as any place that makes algae for commercial use has to be innovative.

You see, Heliae Development LLC recently began producing nutraceutical and personal care products that uses algae. The company plans to expand production on its 22-acre campus in Gilbert in 2014 to include therapeutics and agriscience products and has partnered with Triton Health and Nutrition, a division of San Diego-based Triton Algae Innovations, to do it.

My new friend, Kelly Patton with the Office of Economic Development with the City of Gilbert, touts her city as the “Algae Capital of the World,” which is hard to forget. But it’s here where the utter wisdom of David Dodd shines through, proving that he is the penultimate consultant. For it was David who suggested that Gilbert bill itself as “Scum of the Earth.” Brilliant.

Certainly all the representatives of all the communities with whom I met have attributes worth considering should the right circumstances dictate. And it is by those circumstances that communities are included or eliminated in a site search based on geography. Sometimes Arizona will work, by virtue of where it sits, and sometimes it will won’t based on a whole lot of factors that include location of customers, suppliers, existing corporate assets and even competitors. And you can say that about every place.

Opening the Ball with Jolt

I gave the first presentation of the conference. Rather than repeating drivel that millions of new manufacturing jobs are in our future, I told the truth, which was no doubt a tough pill to swallow. And the truth is that as we are only in the early stages of a new digital age of technology and continue to become more productive in our manufacturing processes, legions of people will be left out in the cold simply because they will not be needed.

This a mega-trend that’s not just happening in the United States but throughout the developed world. And believe it or not, it’s even happening in China.

To lend balance, I did present the converse side to my argument. As productivity increases, the savings created are passed along to the consumer. If those savings are spent on other stuff, then job creation occurs. Still, I do not believe those job-creating savings derived from greater productivity are supplanting the jobs being destroyed in this digital machine age.

Certainly new technology does create new jobs. Software engineers should be in the catbird seat. But it is currently those lower-skilled jobs that demand essentially robotic, repetitive motion action which are being replaced by automation. It’s happening now and it will only continue to happen more in the future.

The challenge for the economic developers is to build upon an environment where technical knowhow can in essence be manufactured. If you cannot establish a technical brainline baseline from which to operate, then you will not be in a competitive position to win the manufacturing plant of the future. And that plant by its very nature will employ fewer people. But those people are critical as they must be more than technologically adroit, but capable of sophisticated problem solving.

We Do Have an Ace

The good news is that the United States does have some great advantages when compared to the rest of the world. Our demographics are superior to that that of Europe, where fertility rates have plummeted and where an actual shrinking of the marketplace is evolving.

A shale gas revolution pioneered in the U.S. is turning the world on its head and stands to make our country energy independent in just a few years. We are currently the largest energy producing country in the world and will soon begin exporting liquid natural gas.

Our lower energy costs in comparison to the rest of the world (U.S. natural gas prices are $4 per million British thermal units compared to $14 in Britain and almost $17 in Asia.) makes us ripe for direct foreign investment, particularly in manufacturing sectors that use lots of energy such as petrochemical and steel. And no doubt, we will see companies from around the world establishing manufacturing operations here as a result of the energy cost advantages.

The National Association of Manufacturers says the shale boom could add 1 million manufacturing jobs in the country by 2025 if natural gas price increases remain moderate and industry regulation is favorable.

I believe that is a reasonable estimate, but always keep in mind that we lost 6 million manufacturing jobs in the first decade of the 21st century. Between 2000 and 2011, on average, 17 manufacturers closed up shop every day across the country, according to research from the Information Technology and Innovation Foundation. We got creamed.

Those companies that toughed it through the Great Recession simply learned to survive and compete by using fewer people. That overriding trend will only continue as technology advances with continued productivity strides.

Right now, 9 percent of our nation’s workforce is employed in manufacturing, and not 12 percent as reported by another speaker at the Roundtable conference. If that number were to climb by a single point, I would be most surprised as it would go against the long-term grain of history.

But that didn’t stop our speaker from predicting that millions of manufacturing jobs would be created as a result of our energy boom and that the manufacturing sector would rise to an astonishing 15 percent of our entire workforce. It was a fantastic claim to be sure.

While it is becoming more apparent as to advantages of manufacturing in the U.S. for reasons of energy costs and the desire to shorten supply lines and reduce inventory by making products closer to where they are sold, there are also other reasons. A surge in Chinese wages, higher shipping costs, and a desire to protect intellectual property means that U.S. companies now take a more analytical approach to Asian production.

But know this, of the 550,000 manufacturing jobs created since 2010, a tidy gain to be sure, it represents a fraction of what was lost. Of the jobs gained, only about 50,000 can be attributed to reshoring and that number comes from an advocacy group called the Reshoring Initiative.

I’m not so sure that all the offshoring of work has really made a difference in the large scheme of things. If certain manufacturing jobs hadn’t gone offshore then the same if not greater  number of jobs would have been lost to labor-saving technology instead.

The truth is that we are never going to have the mass employment in manufacturing in this country that we once had, because of the march of machines and the tide of history will not allow it. That is not to say that manufacturing is not of incredible importance to our future as a world power. Manufacturing is actually key to our future and makes for a wonderful career for a young person starting out. You will, in short, be part of an elite group with technical knowledge.

Will more reshoring happen and will an energy boon create new manufacturing jobs?  Yes, absolutely. For economic developers, there will be opportunities. Will there be a tidal wave of millions of new manufacturing jobs to come as a result? Only in your dreams.

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 based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

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