Sink or Swim: Preparing for Climate Change

It was April 1, 1981 and I was a reporter for The Columbus Enquirer, in Columbus, Ga. I was told to go to Hurtsboro, Ala., about 30 miles away, where a major tornado had touched down.

When I got there, I was awestruck by the devastation. Walking around destroyed homes and businesses in the center part of the small town, I remember thinking “this looks like a war zone.”

Two people died that day and 23 were injured. About 300 of the town’s 800 people were left homeless. But it was not my first brush with the destructive power of nature. That happened when I was in high school in Lebanon, Pa. with Hurricane Agnes, which made landfall in Florida on June 19, 1972.

The storm caused some of the worst flooding ever in the mid-Atlantic and is responsible for 122 deaths, of which 48 occurred in Pennsylvania. Agnes was called “the “worst natural disaster in the history of the state,” with 68,000 homes and 3,000 businesses destroyed. South Lebanon Township, where I lived, was particularly hard hit, although my home was spared.

Fast forward to this past week, Hurricane Michael strengthened unexpectedly overnight before hitting Northwest Florida on Wednesday. It was strongest hurricane to strike the United States since Andrew in 1992 and the strongest on record in the Florida Panhandle, a region that I know and where I have friends.

One of them, an economic developer, sent me an email Friday.  “This is when people pull together and show what they are truly made of. Northwest Floridians take care of one another, and this time will be no different!”

Live, Learn and Plan

I absolutely believe in the resiliency of people, especially during and after natural disasters. People come together and pull together. We’ve seen that virtually everywhere in this country.

And as people put their lives back together, they also put their homes and businesses back together with a vow to rebuild. Many economic developers have come to realize, that in the wake of tragedy, economic activity results. (As a result of Hurricane Agnes, I had a summer job rebuilding concrete sidewalks and curbs that had been washed away.)

Not only is there a resulting new construction, replacing what was lost with newer, often improved structures, but sometimes there is also a community reset. Let’s do it right this time. Let’s plan for a better future.

So we live, learn and plan. Building codes are improved, green spaces are expanded. It’s as if the slate has been wiped clean, allowing for new possibilities, a new face for the community to emerge.

In the wake of natural disasters, Americans have a long history of coming together to rebuild and rebuild better, to which local, state and federal government can and have taken a prominent role to ensure.

But I wonder if that is enough. It seems there are bigger forces at work here.

The UN Sounds the Alarm

Two days before Hurricane Michael made landfall at Mexico Beach, Fla., with 155 mph winds, the UN’s Intergovernmental Panel on Climate Change published a report that the world’s temperatures could escalate to catastrophic levels by 2040 and trigger a $54 trillion global economic loss.

These effects include extreme heatwaves, severe droughts, and sea-level rise, which is my primary focus here. Estimates of global average sea level rise vary, but it is becoming increasingly clear that it poses a major risk to coastal populations, economies, infrastructure and ecosystems around the world.

Since the dawn of civilization, people have lived in near coasts for reasons of subsistence (fishing) and logistics (trade and transport). Add to that recreation and cultural activities. Indeed, most of the world’s megacities are in coastal areas.

In the lower 48 states, counties directly on the shoreline constitute less than 10 percent of the total land mass, but 39 percent of the total population. From 1970 to 2010, the population of these counties increased by almost 40 percent and are projected to increase by an additional 10 million people or 8 percent by 2020.

In a nutshell, it means more people are at risk.

An Ominous Uptick

There is mounting evidence that climate changes influences major weather events which have become frequent and severe. Last year, damages from extreme weather hit $306 billion in the U.S. alone.

Climate change unfolds over decades and over very large regions. While it may not have “caused” a huge storm in the strictest sense, it has created a more favorable environment for these storms to take place. It has set the table.

In 2017, the National Oceanic and Atmospheric Administration (NOAA) found that more than a quarter of coastal locations tied or set new records and that coastal flooding is expected to be 60 percent higher in 2018 than it was just over 20 years ago.

In its National Climate report published in May, NOAA said, “As relative sea level increases, it no longer takes a strong storm or a hurricane to cause coastal high tide flooding. High tide flooding causes frequent road closures, overwhelmed storm drains, and compromised infrastructure.”

In short, the worst is yet to come, and not just for people living in coastal areas but inland as well.

Rethinking Where and How to Build

All this should put the onus on government and businesses to be prepared for similar events in the future.

“Human settlements have been designed in a way that reflects a climate of the past, and this increases the likelihood that disaster-related losses will continue to rise,” said Gavin Smith, director of the Department of Homeland Security’s Coastal Resilience Center of Excellence in an interview with The New York Times.

“This also means we need to rethink how and where we build before the storm, as well as how and where we reconstruct public buildings and infrastructure in the aftermath of extreme events.”

But are we? Are we irresponsibly allowing development to take place in places where it should not be allowed now that we are better armed with the facts?

Last year, President Trump rescinded an executive order that required consideration of climate science in the design of federally funded projects. In some cases, it meant mandatory elevation of buildings in flood-prone areas. Earlier this year, FEMA released a strategic plan that stripped away previous mentions of climate change and sea-level rise.

When the North Carolina Resources Commission predicted a 39-inch sea level rise by the year 2100, the Legislature in 2012 summarily rejected the finding.

“The new Legislature … thought this report would kill off tourists and kill our coastal economies and convinced them to throw it in the trash, which they did,” said Stanley Riggs, a former professor of marine and coastal geography, in an interview with The Christian Science Monitor.

Stephen Colbert, in a segment on “The Colbert Report,” rightly made fun of the state lawmakers, saying they had two options, “sink or swim.”

“If your science gives you a result you don’t like, pass a law saying the result is illegal. Problem solved,” Colbert said.

Riggs worked on the original Commission Report in 2010 and on a later version requested by the Legislature. The later report looked 30 years ahead instead of 90, warning legislators the state needed to prepare for up to a 6-inch sea level rise.

When the Facts Change

When we learn of communities that are experiencing 500 and 1,000-year “rain events” in back to back years, maybe that should tell us something. Maybe climate change is not a communist plot but something that we can do something about. At the very least, we can try to adapt in order to save lives and property.

Now I know the knee-jerk reaction that global warming creates among some people. I was once in that camp. While I conceded that climate change might be happening, there was no way to determine its exact influence on weather events, and I refused to acknowledge that climate change might be partly human caused.

I no longer believe that. The preponderance of the evidence suggests otherwise. British economist John Kenneth Galbraith said, “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.”

That is probably human nature. But when the facts change, when new information comes to light, when science persuades me that I am wrong, well, I will change my mind. What do you do?

I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors. BBA helps communities become better places for business and companies find better places for doing business. Visit us at barberadvisors.com

There is a Future for Work

Probably the worst speech that I ever gave was on a topic that most people would find interesting and important. And yet I managed to make it unappealing and boring. Trust me, it took work on my part.

About a year ago, I was invited to speak to a group of economic developers associated with the Greater Oklahoma City Chamber, which includes 10 counties in the metro area. Jeff Seymour, now executive vice president of economic development with the Chamber, and I decided beforehand that I should speak on the future of work.

How I could muff a speech on one of the hottest topics facing us today — how technologies like automation, robotics, and artificial intelligence are shaping how we work, where we work, and the skills we need to work – made me realize that presentation is every bit as important as content.

A Flat Failure

Mind you, I had good content, but my presentation (simply reading text that I had composed) was sorely lacking. I realized halfway through the speech that I was not connecting with my audience, but I still had to plunge ahead. Afterward, I told Jeff, “Well, that went over like a dead cat.”

It’s interesting to note that Abraham Lincoln felt that his Gettysburg Address was a complete flop. It is now viewed as one of the most poignant, powerful, and inspirational words ever spoken by a president.

Upon sitting down after giving his speech, detecting the muted, polite applause, Lincoln turned to his friend Ward Hill Lamon and said, “Lamon, that speech won’t scour. It is a flat failure.”

Save Sinners Quickly

Looking back on my Oklahoma City effort, I now realize how right Mark Twain was when he said, “Few sinners are saved after the first twenty minutes of a sermon.” In short, it you don’t grab your audience’s attention in the first minute or two, you’re sunk.

Somehow, I managed to make a fascinating subject a snoozer by droning on and on about possible scenarios on the future of work that could play out in the next 20 years, each reflecting whether there will be more or less work, and whether work will exist in the form of jobs or fragmented into tasks or “gigs.”

People do not want to hear that it may be this or it may be that. They want a degree of certainty. They want answers. And while I do not always have all the answers, in keeping with the tradition of consulting, I should imply as much.

Something You Don’t Hear Often

This might come as a bit of a shock, but I have changed my mind. How often do you hear that from a politician or a consultant?

When I first started pondering, writing and speaking on the future of work, my views were consistently dark. While I never believed that robots would ultimately kill us all, ala The Terminator, I wondered aloud in front of audiences about the role and relevancy of people in the future. What will we do when the machines will be able do it all for us?

Two books by MIT professors Erik Brynjolfsson and Andrew McAfee, left deep impressions upon me.

The first, Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy, confirmed what most of us sensed was happening – that we are in the midst of a technological revolution that is radically redefining the word of work.

We see businesses increasingly substituting “smart” machines for people, and with the rapid pace of advancement of digital technologies, we wonder if anyone can keep up.

In their follow-up book, The Second Machine Age, Brynjolfsson and McAfee wrote about the amount of digital information being created and how relatively cheap devices are continually talking to each other and doing things once considered possible only in the realm of science fiction.

Will We Be Needed?

Robots can now scan and identify all the objects in a strange room, allowing them to perform a series of complex physical tasks. Computers can not only read and grade essays, they can write them. The thought of all this frankly scared me. Would there be any work left for us to do in the future? Would people be needed for anything?

My fears were in keeping with that of British economist John Maynard Keynes, who coined the term “technological unemployment” back in the 1930s. Keyes predicted that the displacement of workers by machines would usher in an era of shorter work weeks and increased leisure.

But I have since changed my mind. I no longer believe that advances in digital technologies will reduce the overall demand for labor. I now believe that new technologies will simply shift demands to different kinds of work. Yes, certain jobs will go by the wayside, but new ones will be created, as they always have.

Two reports out this past week confirm as much – that technology will create more jobs than it destroys.

An Industry Evolves

The first report is industry specific. According to data compiled by Bloomberg, of the 13 publicly traded automakers with at least 100,000 workers at the end of their most-recent fiscal year, 11 had more employees compared with year-end 2013.

The automakers had a combined 3.1 million employees or 11% more than four years earlier. Keep in mind that industrial robots have made their biggest mark in the automotive industry, and yet companies continue to hire people in research and development.

As the industry evolves, more people are being hired for software positions than hardware roles to prepare for a future in which more vehicles are communicating with each other and their surroundings.

More Created Than Eliminated

The second report originates with the World Economic Forum, which holds that technological advances in the workplace stands to create almost double the number of jobs for the global economy by the middle of the next decade than it puts at risk of being replaced.

According to the WEF, about 133 million jobs globally could be created with the help of rapid technological advances in the workplace over the next decade, compared with 75 million that could be displaced.

The WEF report confirms what many economists and researchers have been saying — that new technologies have the capacity to both disrupt (destroy) and create new ways of working, similar to previous periods of economic history such as the Industrial Revolution.

Back then, the advent of steam power, electricity, and the internal combustion engine, helped spur the creation of new jobs and the development of the middle class. The the rise of artificial intelligence in the workplace will follow along the same vein.

It means the robots will not be killing us while we lounge around the pool sipping Mai Tais. It means there is a future of work. I hope that makes you feel better.

One More Thing

I will be speaking on the benefits of site certification this coming Thursday, Sept. 27, in a free webinar at 11 a.m. CDT hosted by my friends at the Golden Shovel Agency. I should warn you that I will delve into soil borings, which is pretty racy stuff.

I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors, an economic development and corporate location consulting firm based in Dallas. Visit BBA at barberadvisors.com to learn more. Follow Dean on Twitter @DeanWBarber

What Shop Class Did for Me

Among us boys, Wilhelm Wolfskill gained immediate cult-hero status with a single utterance.

“Willie,” as we called him behind his back, was our “shop class” teacher at South Lebanon Middle School in Lebanon, Pa. I’m guessing the year was 1968 or 1969, and I was in either in seventh or eighth grade.

Willie was showing us the proper way to use a mallet and chisel, and we were gathered around him when he said something in his heavy German accent that will remain with me for the rest of my life.

“Ach du Lieber, who let der schmelly von?” (Translation: Good heavens, who farted?)

Even my father cracked up when he heard that.

In addition to that memorable quote, I have something else that has remained with me from Willie’s shop class – a small, wooden foot bench that I made 50 years ago. It’s not much to look at, then or now.

But it meant a lot to me then to a 13-year-old boy who was much confused about the world. And it means a lot to me today as a 63-year-old man who still gets much confused on occasion. It’s why I have kept it.

Goggles and Aprons

Back then, shops class was formally known as “industrial arts,” and it was mandatory for all boys. (There were no girls in class.) I remember the goggles and the dark blue aprons that we had to wear and how the loud shrieking table saw absolutely terrified me.

I imagined losing control of a piece of wood while guiding it through the circular saw blade and the board snapping back and smashing into my face. I was much more relaxed with a handsaw.

If memory serves me right, my first shop class was strictly woodworking, but I remember being introduced to welding in school (no aptitude there), so I may have had a second shop class along the way. Mind you, this was middle school, before high school.

There was a degree of self-satisfaction in making my simple little foot bench. More importantly, shop class gave me the opportunity to figure out for myself that I was not nearly as mechanically inclined as my father, who was a metallurgical engineer. That realization would help me later make career choices.

Other classmates built things that made my little foot bench look like child’s play. They, too, probably made career choices, at least partially influenced by what they learned about themselves and their abilities in shop class. In that regard, shop class served us all well.

Finding the Good and the Bad

Today in my role as a consultant to economic development organizations and companies, it pleases me greatly when I come across communities that have established robust vocational education and training programs, both at the high school level and in local community colleges.

In my book, that’s always a good thing because it ensures a pipeline of talent for local employer, but it also usually indicates a willingness of educators and local employers to work together.

Likewise, I have been to communities where there is a profound lack of effort or resources devoted to what educators now call “career technical education” or CTE. It may have once been offered, but all such efforts have been seriously eroded or abandoned.

Not long ago, I was in town that had a community college, but all the industrial trades were taught at a sister campus in another town 80 miles away. Lucky kids living there.

Then there was that community college offering courses in aircraft maintenance, which was fine except that there was virtually no aviation presence in the community. The nearest commercial airport was more than 100 miles away.

The head economic developer in another community once told me that he had never had a sit-down meeting with the president of the local community college, that they in fact had no working relationship and barely knew each other.

I can remember a plant manager of metal fabrication plant, one of the largest employers in this town, telling me that while he thought the local high school was offering some fairly good vocational training, the community college was offering none. The exception was cosmetology. There were classes being offered in that.

“They are of no help to us. None whatsoever,” the plant manager said.

Recently, I was in a city with a population of 100,000, where there was no community college at all. I thought that was particularly noteworthy, because the city had a long legacy of manufacturing, a sector that still resonates within the local economy.

Incredibly, that same city had four four-year colleges. When I asked about vocational education, the answers were vague and none too encouraging.

A Caste System in the Making

Even as a kid, I could detect a caste system in place. There was the “academic” path for those of us who aspired to go onto college. It’s what our parents and guidance counselors told us we should do.

Then there was the vocational pathway, which we in the academic track derisively referred to as “vo-tech.” The implication was that vo-tech kids were not smart enough to go to college. They had to go to work.

Of course, it was a stupid and wrong way of thinking, but it was indoctrinated into us. I believe that line of thinking is still pervasive today, although many would deny it. (I resisted somewhat, working in a grey-iron foundry for a year after high school before going to college.)

Looking back, I suspect that many of the vo-tech boys actually had a pretty good idea what they wanted to do. They wanted to be machinists, carpenters, electricians, plumbers and such — whereas most of us on the academic track had not a clue.

My own career path became clear after reading “All the President’s Men” in 1974. Written by Carl Bernstein and Bob Woodward, two reporters at The Washington Post who investigated the first Watergate break-in and ensuing scandal, the book cemented the idea that I would pursue a career in journalism.

As it turned out, journalism school at the University of Wisconsin was largely vocational in nature, which was a good thing. And there were no screaming circular saws.

These Other Capabilities

Baby Boomers with sophisticated machine skills, people of my age, are now retiring in droves. At the same time, many parents, teachers and guidance counselors continue to discourage young people from pursuing careers in the industrial trades, just as they did when I was a boy.

Over the years, we have created an education system where the emphasis is largely on improving standardized test scores and getting students ready for four-year colleges, while building actual job skills is given short shrift. When you think about it, we are so dependent of the people who make and repair and drive and do the sometimes dirty jobs that we cannot or will not do.

“The work of electricians, builders, plumbers, chefs, paramedics, carpenters, mechanics, engineers, security staff, and all the rest is absolutely vital to the quality of each of our lives,” wrote Ken Robinson, Ph.D, wrote in his book “Creative Schools, The Element, Finding Your Element and Out of Our Minds.”

 “Yet the demands of academic testing mean that schools often aren’t able to focus on these other capabilities.”

The No. 1 Business Problem Today

Manufacturers have been telling us for some time now that our schools are not turning out enough graduates with the math and science proficiency necessary to operate and repair computer-controlled factory equipment. It’s about time we listen.

While there are some indications that CTE may finally be gaining new life (last month President Donald Trump signed an executive order aimed at improving vocational education and job training), one of the most important business stories of 2018 is the difficulty that employers are having in finding qualified employees to fill a record 6.7 million job openings.

“Business’ number one problem is finding qualified workers. At the current pace of job growth, if sustained, this problem is set to get much worse,” Mark Zandi, chief economist at Moody’s Analytics, said in a statement. “These labor shortages will only intensify across all industries and company sizes.”

It Takes Two to Tango

The only way that I see for us to meet this problem head on is through creating partnerships between business and education. Mind you, that is far easier said than done. That’s because educators and business people, particularly manufacturers, tend to speak past each other in different tribal languages.

For a meaningful partnership to happen, companies must assess their human resources needs in terms of numbers and what skill sets they want future employees to have and communicate that information to educators. It may also entail employers donating equipment, personnel and money to get vocational training programs at schools off the ground.

For their part, educators need to listen, ask questions and truly be responsive in trying to determine the needs of the companies. It may also entail schools hiring additional personnel with backgrounds in the trades to do the teaching.

The point is that if both sides talk, listen and do their respective agreed-upon parts, then real partnerships can be formed. It just takes two to tango.

And the truth is that I have seen this beautiful dance in multiple places. Northwest Georgia is just one example. The Georgia Northwestern Technical College, serving nine counties from six campuses, offers credit and noncredit programs designed to meet the needs of individual companies and consortia of companies with similar needs.

The school seeks out these partnerships. It’s a lovely dance when it happens and it can happen in more places if we only try to make it so. Where there is a will, there is a way.

I’ll see you down the road.

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

What Economic Developers Should Do

The email was labeled “Question.”

It came from an old friend, who is not so old as he is younger than me. My friend was also once my boss when we worked together at the Economic Development Partnership of Alabama back in the 1990s.

Don Erwin’s email was curious by the fact that he is one very knowledgeable and experienced economic developer. He gave me permission to share his email.

“Economic developers are sometimes criticized for confusing “activity” with results. I think, most of the time, they clearly know the difference, but their challenge is how to produce results.

”Trade shows? OK. Visit site consultants? OK. Have a nice website? OK. Woo the state economic developers? OK. But what beyond that? The employees at Mercedes-Benz in Alabama clearly know what they need to do to turn out 1,200 cars/day, but it is much less clear for economic developers what to do. Any thoughts you have about this are appreciated. – Don”

For the uninitiated, economic developers are charged with creating jobs and investment in local economies, although they actually do neither. But that is how they are typically judged. They are part teacher, sales person, cheerleader and evangelist. They are, by and large, interesting people.

First, Get Out of Bed

What to do. We face that question every morning when we get out of bed. Sometimes it only hits me with my first cup of coffee.

In his email, Don mentioned some strategies pertaining to business attraction. He also mentioned “results.” Two things come to mind. First, I have come to realize over the years that there’s much more to economic development than business attraction. Second, focusing on results is, I hate to use this cliche, putting the cart before the horse. I will explain.

Maybe 18 or 20 years ago, I took an IEDC class taught by Laith Wardi, who founded a company in 1996 called ExecutivePulse. That class, more so than any other, revealed to me another facet of economic development other than “buffalo hunting,” which was my job at EDPA. (Never mind that I actually own a long-barreled .45-70 Sharps rifle.)

As most jobs are created by existing industry, I now know that business retention and expansion should be a primary focus for most economic development organizations. Laith preached that gospel and the heavens parted for me.

Later, he introduced me to Erik Collins in Montgomery County, Ohio. Erik puts the theory of BR&E into practice. I am so glad to have befriended these two men.

The Importance of Startups

Over the years I also came to understand the importance of entrepreneurial growth, that is, business startups to a local economy. We know that many large businesses have very humble beginnings, having been started in people’s garages. Apple, Disney and Harley Davidson come to mind. I think it is important to remember that.

Research from the Kauffman Foundation indicates that new and young companies are not only a primary source of job creation in the American economy but also inject competition into markets and spur innovation.

I saw that firsthand during a recent trip to Erie, Pennsylvania, where I spent three days doing what was essentially a mini-SWOT. The trip was made possible largely through the efforts of Laith, who lives in Erie.

No doubt my best meeting during my time in Erie was meeting with entrepreneurs, many of whom I would describe as “techies”, at a 24/7/365 incubator called Radius CoWork in an office building downtown.

Forget that most business startups will fail, successful entrepreneurs rightly figure, “damn the statistics, full speed ahead.” The entrepreneurs that I met in Erie were that gung-ho bunch.

Debunking the Myths

There are many myths about entrepreneurship. One is that most successful entrepreneurs are young. We think of Bill Gates, Steve Jobs, and Mark Zuckerberg, who were in their early twenties when they launched what would become world-changing companies. Those are great business stories.

But research shows that the average age of a successful startup founder is 45. (I started BBA when I was 50.) The truth is that the average entrepreneur has worked in business for years before starting their own business. Despite that, many venture capitalists operate under the mistaken belief that youth is the elixir of successful entrepreneurship.

Another myth is that small business is the employment engine of the economy. As the Kauffman Foundation points out, when it comes to job creation, it is not the size of the business that matters as much as it is the age.

Growing the Growers

So back to Don’s question, as to what economic developers should do. If we know that new businesses create jobs, then shouldn’t we be trying to grow the growers?

There are thousands of early stage entrepreneurship support programs across the U.S. Generally, they fall into four categories — accelerators, incubators and coworking spaces (what I saw at Radius CoWork in Erie), events and competitions, and formal degree or educational programs.

I’m not sure if you can actually teach people to become entrepreneurs, but you can educate them and give them tools that will help them grow their businesses and become better at what they do.

To be sure, there is overlap between these different types of programs out there. I tend to like accelerators, which work with startups for usually three or four months. In addition to guidance, they also offer capital. In exchange, accelerators usually get an equity position in the startup company.

There are four factors that make accelerators distinct from the other models, according to Susan Cohen, a professor of entrepreneurship at the University of Richmond. They are fixed-term, cohort-based, mentor-driven, and culminate in a graduation or demo day.

All the Above

The more you look at it, the more you begin to understand that economic development is a very broad field with lots of moving parts. It is why there are now specialists in the fields of business attraction, business retention and expansion and business startups.

Back in 2012, President Barack Obama spoke of “an all-of-the-above” energy strategy for the 21st century. He was referring to developing and using a combination of various resources to meet energy needs that included nonrenewable resources (coal, crude oil, and natural gas) and renewable resources (solar, wind, nuclear power, hydroelectric power, and biofuels).

Economic development organizations should take heed and develop their own “all-of-the-above” strategy. Economic development is not only about business recruitment. Nor is it only about BR&E or business startups. It truly is about all of the above.

Finally, this all-of-the-above approach requires that economic developers truly become students of business. Surprisingly, I find many who are not.

One Bite at a Time

Don attended the University of Alabama and is a big fan of that school’s football program. Coach Nick Saban, who has won five national championships in his 11 years at Alabama, is a firm believer in focusing on daily progress and not the end results.

Do your work, do it well, and when you find success, do it again and always strive for continual improvement. This is the Toyota Way (kaizen) and the embodiment of Saban’s “process.”

How do you eat an elephant? One bite at a time. Economic development is the elephant. It is a massively big field. No person or organization can master it all, we can only strive to get better. (Saban teams don’t win championships every year.)

That is precisely what economic developers can and should do – work on improving the business environment of their communities and how they do their jobs. If they focus every day on progress, the results, the investment and job creation, will follow.

This is what I told community stakeholders in Erie. This is what I would tell community stakeholders anywhere.

We’ll End with Crass Self Promotion

I am somewhat reluctant to tell you that we can offer communities an affordable “mini-SWOT,” similar to what we did in Erie. It just so happened that Erie wanted me to not only to give my impressions to community stakeholders, but also make my views public by writing the blog.

It was a gutsy move on their part. Certainly, it has sparked debate within the community, which is a good thing.

Some communities, however, might not want to go the “public” route, but would prefer a report made available to stakeholders only. In other words, I wouldn’t write a blog for the world to read.

However, we would still provide that hard look, pointing out the good and the not so good. (All communities have strengths and weaknesses.) Sometimes you need that outside perspective to bring about change.

Of course, we can also offer our full-fledged BBA Action Formula which takes a deeper dive and offers more than an assessment or any strategic plan.

Enough on that. I’ll see you down the road.

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

Erie on the Edge

The Texan accepted his job transfer to Erie, Pa., knowing it was the best way to rise in the company ranks. He arrived in late spring.

Soon thereafter he found a nice and surprisingly affordable house in Millcreek Township, just four miles west of the city. As his neighborhood was near Presque Isle State Park, a seven-mile long peninsula jutting out into Lake Erie, he made a habit of running in the park after work.

He found the views of the Presque Isle Bay stunning. And the summers were far more tolerable than back in Texas.

He took up fishing and began learning the ways of walleye, perch, smallmouth bass, and steelhead trout. He was amazed by the clarity of Lake Erie’s water.

But winter was coming and with it the famous “lake effect” snow. Just got to buck up, he told himself. Texans got grit.

The first snow came in November during the night. The next morning, he was up early in his pajamas and slippers, staring outside at the blanket of whiteness. Maybe I’ll get to work today, he thought. Maybe not. He shuffled back into the kitchen for another cup of coffee. The idea of a leisure morning at home was appealing.

But then he heard scraping sounds outside. Looking out his front window, he saw his neighbors, some in suits, digging out their driveways with snow shovels. Some were already in their vehicles backing out into the street. “Damn, these people got grit.”

Minutes later, he too, was out in his driveway with shovel in hand. And he got to work on time.

My Mission

Full disclosure. I was hired by Emerge 2040, a group funded by public and private monies, to come to Erie and give my assessment in terms of economic development. They wanted me not only to speak to stakeholders about my impressions, but also write about them in my blog.

I said I would, so long as everyone understood that I would tell it like I saw it. You won’t be getting a “puff” piece from me. They agreed, and I made the trip last week, arriving on a Sunday, leaving on a Wednesday. Not a lot of time, to be sure, but enough time to get a feel for the place.

Also, it should be noted that I did not see much of Erie County. I did travel about 20 miles northeast of the city to see some of the 12,000 acres of vineyards within the county. Many are within eye-shot of Lake Erie.

During my stay, I met a lot of very nice people, saw and heard a lot of things. Some good, some not so good. Being that I am a glass half-full kind of guy, let’s start with the good.

Almost an Island, Almost a Dump

Erie, Pennsylvania’s only Great Lakes port, is located on the southeast shore of Lake Erie in a natural bay formed and sheltered by the aforementioned Presque Isle Peninsula, a recurving sand spit. Presque Isle means “almost an island” in French, and the peninsula has been a real island at least four times since 1819 when waves have broken through the neck to isolate the main section of the spit.

Not too long ago, Erie’s bayfront was a rather nasty place. It was used solely for industrial purposes and as a dumping ground. People would throw their junk — including old refrigerators and stoves — from the top of a bluff into a ravine below. Industrial waste and sewage found their way into the bay.

Said one long-time resident, “The bay area had a kind of a funky smell back then.”

Transforming the Bayfront

That all began to change with water (cleanup) remediation in the 1980s, the building of the Bayfront Parkway and Bicentennial Tower in the 1990s, followed by the $44 million, 145,000-square-foot Bayfront Convention Center in 2007.

Surrounded by water on three sides, the Center spawned a $60 million, 200-room Sheraton Erie Bayfront Hotel in 2008, and a $54 million, 192-room Courtyard Marriott Erie Bayfront Hotel in 2016. Both hotels are waterfront properties that connect to the convention center.

And more commercial development is in the works for the bayfront. An eight-story Hampton Inn & Suites is now under construction, part of $150 million development that will likely include (more) restaurants, offices, residential units, an indoor market, parking, bicycle trails, parks and green space.

Tourism has become a major and relatively new industry in Erie, employing 16,000 during the summer, 12,000 in the winter, with about $1 billion in direct visitor spending. The jobs and the development happening are all due to the transformation of the bayfront.

Every evening I sat outside on the patio of my hotel and watched the sunsets over the bay. During those tranquil moments, I also came to appreciate Erie Brewing Company’s Railbender Ale as a regional asset. A community without craft beer is not entirely civilized in my eyes.

However, the bay is not just a recreational playground for boaters and fishermen. The Port of Erie is a working industrial port serving ocean-going freighters that traverse the Great Lakes and the Saint Lawrence Seaway. Donjon Shipbuilding and Repair, capable of dry docking 1,000-foot vessels, occupies a 44-acre site at the port with 4,000 feet of pier space.

Focusing on Downtown

From the bayfront, it’s only a 10-minute walk up State Street to Erie’s downtown which sits on a higher elevation. There I saw a 346,000-square-foot office building under construction. It is an expansion of the corporate headquarters for Erie Insurance, a home-grown, publicly-held company that provides property and casualty insurance.

Erie Insurance, the dominant employer and force in the community with 3,500 workers, has been has been acquiring and developing properties to enlarge its campus footprint in the downtown area.

About 1,200 employees will work in the new building, 500 existing employees with another 700 to be hired. CEO Timothy NeCastro says the company will likely create 1,000 new jobs over the next several years.

NeCastro is also the chairman of the newly formed Erie Downtown Development Corp. Modeled on the Cincinnati Center City Development Corp., the EDDC aims to use money from local investors to undertake large-scale projects. To date, more than $25 million has gone into the EDDC’s Erie Equity Fund for downtown redevelopment.

The EDDC has engaged the Urban Land Institute, based in Washington, D.C., to make land-use recommendations on a street-by-street, corner-by-corner basis. One key goal is to establish housing and amenities downtown that will make it attractive to young professionals, like those Erie Insurance plans to hire.

Of course, the EDDC is an evolving story, but it’s good to see local businesses investing in the downtown core. That’s putting your money where your mouth is. That’s a vote of confidence.

The Little Engine That Could

The best business stories are of home-grown companies doing the “impossible.” The Lake Erie College of Osteopathic Medicine (LECOM), sitting on a 53-acre campus, is such a story.

When sister and brother Silvia and John Ferretti launched LECOM in 1992, self-preservation was the motivating factor. “The best way to survive was to train the physicians we needed,” said John Ferretti, president LECOM Health.

At the time, it was the first newly-created medical school in the country in 25 years, Ferretti said. LECOM’s medical school is now the largest in the U.S., with campuses in Erie, Greensburg and Bradenton, Fla., graduating more than 530 students per year. (The average medical school graduates about 100 students per year.)

LECOM has also become one of the larger employers in Erie County with more than 2,000 employees, with 3,500 indirect jobs created. The financial impact to the community was estimated at $186.million in 2016. Nationwide, it’s more than $1 billion.

In addition to the medical school, LECOM also confers degrees in pharmacy, dentistry, health services administration, and biomedical sciences.

LECOM was the little engine that could. But today, it is not so little and is making a big impact on the Erie area.

Healthcare and Education Grows

In some ways, Erie resembles a mini-Pittsburgh in that the healthcare sector has become a dominant employer. The area has seven hospitals. Of a labor force of 128,000, about 29,000 people are employed in education and health services, making it the largest job sector.

In the fourth quarter of 2017, the Pennsylvania Department of Labor & Industry identified UPMC Hamot and Saint Vincent Health Center as the No. 3 and No. 4 largest employers respectively in Erie County. UPMC Hamot, a 424-bed hospital, employs about 3,300 while Saint Vincent employs about 3,000 people.

Erie County has four universities — Penn State Behrend, Gannon, Mercyhurst and Edinboro — which combined employ about 3,000. During my three days in Erie, I visited Mercyhurst University, where work underway on a $1 million cybersecurity lab. Made possible by a donation from the Cleveland-based tech company MCPc, the lab will be part of an expansion of Mercyhurst’s cybersecurity program.

To say that cybersecurity is a growth industry is an understatement. Watch for spinoff companies in the community as a result of the Mercyhurst program. This is another stay-tuned story.

Place Your Bets

Without a doubt, my most positive and inspirational meeting was at Radius CoWork, a 24/7/365 facility full of tech talent, designers, and young entrepreneurs located in an older office building downtown. It is “where Erie’s freelancers, startups, & remote workers share a community driven space to get work done and have fun doing it.”

Again, these were young entrepreneurs, mostly “techies,” who embody the attitude of “lead, follow, or get the hell out of the way.” They are committed to the city’s future and making their businesses go. Older people, including yours truly, could actually learn from them.

A common theme to their remarks was that Erie was big enough to offer the cultural amenities that they liked, but small enough to not get lost in the crowd. It was easier to make friends and connections here, and the cost of living and doing business was much lower than big cities where tech reigns.

These young people are the next generation of Erie’s business leadership. I would bet on them in a big way.

Not All is Peaches and Cream

But just as there were many good things that I saw and picked up on Erie, there are certain weaknesses, even bad things, that must be addressed.

The good news is that all of these things are fixable. It’s not all peaches and cream in Erie, which is an understatement, but improvements can and will come if the focus is on daily progress rather than end results.

Erie sits in the heart of what has been pejoratively called the “Rust Belt” but rebranded of late as the “Trust Belt.” This region, more so than any part of the country, took a beating with the loss of millions of manufacturing jobs and only now is recovering in the aftermath.

That said, manufacturing still plays a prominent part in Erie’s economy, accounting for 22 percent of the local GDP, but its largest manufacturing employer, General Electric, continues to lose jobs in dribs and drabs. GE employment in Erie now stands at about 2,500, whereas back in the 1950s, it hovered between 15,000 and 20,000.

With the loss of manufacturing jobs has come a loss in population. As of July 1, 2017, the city’s population was estimated to be 97,369, down from 98,289 a year earlier, a decline of about 1 percent. But the big takeaway is that Erie’s population has been falling for the past five decades, from a high of 138,000 in 1960.

Jobs are what draw people to a city and if the jobs aren’t there, well, they go elsewhere. It boils down to economic opportunity, which has historically been a downward trajectory in Erie for a long, long time.

That has left its mark on the people. I think it would be too much to call it self-loathing, but several residents referred to a “scarcity mindset,” characterized by a loss of confidence and resentment.

You Blew It

I wrote a story for Site Selection Magazine, published in May of 2011, detailing the intricacies of General Electric selecting Fort Worth, Texas, for a new $100 million plant to manufacture locomotives. Prior to that announcement, all GE locomotives had been built in Erie, and I contend the same would hold true today were it not for the stubborn refusal of a union to make concessions to GE management.

The truth is the United Electrical, Radio and Machine Workers of America dug in its heals and company called their hand. Those great manufacturing jobs went to Fort Worth, because of a 1950s mentality and when the country was still reeling from the Great Recession. Last year, GE said it would move all locomotive production from Erie to Fort Worth. So there you go.

“You blew it,” I said in a meeting with Erie officials last week. I could detect physical discomfort, squirming, in the room.

Sadly, certain public officials still cater and court organized labor. Coming off the heels of other Great Lake states, Michigan, Indiana and Wisconsin, becoming right to work states, I would tell them to wake up and smell the coffee. This is not your father’s manufacturing climate anymore and clinging to the past will not impress companies that would consider Erie and the surrounding area for corporate investment.

Just saying.

Connecting People to Resources

It is heartening to know that Erie celebrates diversity and welcomes immigrants trying to build a new life in this country. The American Dream is rooted in immigration and opportunity for a better life. In the past five years, nearly 1,900 people in Erie County have become U.S. citizens, hailing from 74 different countries.

But the fact remains that a sizable segment of Erie’s African-American community feels disenfranchised and alienated, as if they do not have a voice.

Lower incomes, educational attainment, and home ownership among black Americans, as well as higher poverty, unemployment, incarceration, and mortality all contribute to racial inequality. We know this to be true. The numbers show it.

Last year, 24/7 Wall Street, a financial news and commentary web site, compiled a list of worst cities for black Americans. Not surprising to some, Erie ranked No. 1, the absolute worst. USA Today published the story on Nov. 7, 2017.

To their credit, the first meeting that my hosts took me to in Erie was with Marcus Atkinson, an African-American minister and executive director of ServErie, which according to its website has the mission of “Restoring communities by connecting people in need to resources.” Much of the work is spearheaded by local churches.

Rev. Atkinson took me to a poor section that his group was targeting, East Side Eagles Neighborhood, where he said there was frequent “activity” – drug dealing, prostitution, shootings. While some of the homes were in decent condition, others were in states of decay.

I learned that Mayor Joe Schember, a former banker who took office in January and viewed by many as the visionary leader that Erie needs, has been knocking on doors trying to make connections with residents in some of these challenged neighborhoods. No doubt, they were surprised to see him as little attention has been shown their way in the past.

Despite the good works and good intentions, much remains to be done to bring Erie’s underclass into the wellspring. I hope the churches and the city continue this mission to make a difference in people’s lives, because it is the right thing to do.

I’m going to end my blog on Erie focusing on three fundamental aspects of economic development. And this holds particularly true when it comes to business/industry recruitment. In each area, Erie falls painfully short.

Vocational Training a Must

The first is vocational training. A skilled workforce is an absolute must for companies and that need transcends all industry sectors. In short, companies need people that can do the work and they will go to places where that is offered.

In the past few decades, community colleges have taken on the role of training people for the jobs that they may take. Some community colleges are very good at this, some not so good. But the fact is that many companies are now expecting that community colleges will do the bulk of their vocational training for them.

Incredibly, Erie does not have a community college offering workforce training. That is especially puzzling because of its manufacturing tradition. Unless or until the city ups the ante on providing jobs skills to its people, economic growth will be inhibited. It’s really that simple.

And So Are Buildings and Sites

Also, you cannot get around the fact that there is a real estate component to economic development. If companies are to grow and expand, they need buildings and/or sites. Without them, they are going elsewhere because they have little other choice.

In short, Erie needs to develop an inventory of buildings and sites, preferably with standalone industrial/business parks to be built near good transportation infrastructure. Public/private partnerships may be the best route to get this started.

Pay to Play

Economic development is a pay-to-play operation. If you are not devoting money to it, you are not in the game. One reason why Texas does so well in economic development is because it is well funded on the local level.

Look, the state can only do so much. Ultimately, it is up to the local community to command the necessary funds on a sustainable basis if it wants to compete in the economic development arena. This is your story to tell. Nobody else’s.

The Japanese have a saying: “Business is war.” It’s all about fighting for finite business resources and investment. You cannot fight without ammunition.

The bottom line is that funding economic development is a necessity to compete and win. You cannot do this on the cheap.

A Coming Together

Erie is on the edge of something greater. It is quite evident that good things are happening. Just look at the activity along the bayfront and downtown.

There is a certain optimism in the air, a turn-the-corner feel as if the community is finally coming together. Mind you, much work remains to be done, but it can be done, and I expect will be done, because these people have, well, grit.

I’ll see you down the road.

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

No Other Sure Foundation

The most consequential words in American history is a simple if not astounding phrase that “all men are created equal.” In our Declaration of Independence, it strikes to the very heart of our nation’s identity.

Ratified the Second Continental Congress on July 4, 1776, the Declaration of Independence immediately set America apart from the rest of the world. It further held that all men “are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

And while it was a beacon of hope, there is no mention of a right to education. This may have troubled Thomas Jefferson, the document’s principal author. Three years later, in 1779, Jefferson introduced Bill 79 to Virginia General Assembly, proposing a system of public education to be tax-funded for “all the free children, male and female.”

Jefferson’s “Bill for the More General Diffusion of Knowledge” was far-reaching and radical for its time, but was restrictive.  Jefferson was a slave owner, and slaves were not treated as people but as property. Women were not given the same rights as men.

Still, Jefferson was a proponent of public education, at least for some. In a letter to fellow Virginian George Wythe in 1786, he wrote, “No other sure foundation can be devised for the preservation of freedom and happiness.”

A Foundation Eroded

Fast forward to today. Reading and watching the news, one could easily construe that this foundation for freedom and happiness has been eroded.

Jefferson believed that the purpose of education is to make a better us. Not only should our schools teach the fundamentals reading, writing, science and mathematics, but prepare our children for a life beyond the classroom.

And yet we learn of public school districts that have not given school teachers, the very people whom we place the responsibility of educating our youth and transforming them into future citizens, a raise in 10 years.

We read of classrooms where children must wear coats in the winter for the lack of heating, where they page through aged textbooks that fall apart in their hands, and where teachers, many of whom have to resort to second jobs to make ends meet, buy classroom supplies for their pupils.

Wages Have Fallen

We know that teacher’s wages and compensation continue to fall relative to comparable workers. When adjusted for education, experience, and demographic factors, teachers earned 4.3 percent less than other workers in 1996, while in 2015 the teacher wage gap had grown to 17 percent, according to a 2016 study by the Economic Policy Institute.

The Great Recession was particularly punishing to public schools. Most states cut funding, yet in 2015, the latest year for which comprehensive spending data are available from the U.S. Census Bureau, 29 states were still providing less total school funding per student than they were in 2008, according to the Center on Budget and Policy Priorities.

As of the current 2017-18 school year, at least 12 states have cut “general” or “formula” funding for elementary and secondary schools by 7 percent or more per student over the last decade, according to the CBPP.

What Would I Tell a Company?

The question begs itself. When we see teachers (and parents) demonstrating for better pay and better school funding in West Virginia, Oklahoma, Kentucky, Colorado and Arizona, what should we take from that?

I was recently asked a variation of that question by a newspaper reporter from Tulsa, Oklahoma. He wanted to know how I viewed the issue of school funding as a site selection consultant. Was Oklahoma getting a black eye because of the teacher demonstrations?

And what would I tell a company that had engaged my consultancy, Barber Business Advisors, for purposes of location advisory about this issue of funding for public education? Well, I would probably say something like this:

“Well, money matters. Poor kids who go to better-funded schools are more likely to graduate from high school and gain skills and make better wages, whether they learn a trade at a community college or go on to a four-year university. Common sense tells you that, but the research also shows it.

“So if you truly believe that people are your greatest assets, then let’s look to those places that support public education. Mind you, they don’t have to be “rich” communities, but places that have a tradition of providing good education to kids. We know that grades k-12 are the integral ‘learning years,’ which will prove vital in developing your future workforce, your future pipeline of talent. Let’s never forget that.”

Unfortunately, I’m not so great with sound bites. I didn’t tell the reporter anything like this. I think what I said was that if we were looking at a state during a site search project where teachers were demonstrating for better pay and increased school funding, “we would take note of that. It may very well be of primary concern.”

An Honorable Profession

I should have also told that reporter that school teachers don’t become school teachers to make a lot of money. They want to change lives for the better. They want to help young people grow and become improved versions of themsevles.

Now some teachers are quite effective at this. They’re really good at imparting knowledge and prompting us to want to learn. We tend to remember those teachers well into our adulthood as they made a difference, even if a small one.

And invariably there are those teachers who are not cut out for the work. They probably should have chosen other professions even if their intentions were good and honorable. They usually figure this out for themselves and leave the profession.

(I’m quite certain that I could never control a classroom of second graders, unless I had a sufficient supply of rope. And that ultimately wouldn’t work so well.)

A Loss of Trust and Respect

It’s also apparent to me that some legislators and policymakers must hold teachers to a degree of contempt. How else can we explain such an erosion of funding and respect? I have to believe that in some places, public education truly is under assault.

The Center for Michigan reports that enrollment in schools of education in that state have dropped by more than 50 percent in the last few years. The upshot, fewer people want to be teachers. It’s not the vaunted profession that it once was.

This follows a general trend, shown in polls, that Americans have lost trust in their institutions, which have served as the pillars of government and capitalism. We now have a jaundiced view of our public schools, courts, banks, businesses, political parties and the media. The exception is the military. From an NPR/PBS NewsHour/Marist poll in January, 87 percent say they have a great deal of confidence in our military.

Parting Thoughts

In the last few weeks, I have met with economic developers from Kentucky and Oklahoma. Some have told me privately that they very much sympathize with the teachers’ plight over pay and school funding.

These same economic developers understand the connection between education and workforce preparedness. Many companies, particularly manufacturers, complain that they cannot find enough people with the job skills needed to fill certain openings.

This should concern us all. It is our duty as a society to prepare future generations for what may come.  Jefferson understood then what apparently too many elected officials do not comprehend now — that public education is the answer.

No other sure foundation can be devised.

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

A Story to Remember

The founding fathers of this country were of the belief that history, above all other subjects, was the most important for people to study. History gives us insight as to who we are, where we have been and where we are going.

I love to read history and believe that it can be a gauge to the future. That said, I realize that even those who know historical facts are still liable to repeat the mistakes of that past.

Indeed, we often view history much as we do current events, through a very subjective lens. Those things that support our beliefs, we latch onto. Those things that don’t, we conveniently ignore. In short, we tend to cherry pick.

In telling this story, I’ll do my best to be objective and keep to the facts. Now is an especially good time to remember what actually happened.

A Wealthy Businessman

Our story begins with a wealthy businessman, a man with no elected office experience, running for president. Despite that, he easily won the Republican Party nomination. During his campaign for the presidency, he was known to frequently insult African-Americans and scapegoat Mexican-Americans.

But Herbert Hoover, the former mining engineer once quoted as saying, “If a man has not made a million dollars by the time he is forty, he is not worth much,” won the presidency in 1928. Hoover defeated Democrat Al Smith, with the Republicans maintaining comfortable majorities in both the House and Senate.

Less than a year later, the Wall Street Crash of 1929, also known as Black Tuesday (October 29), happened, signaling the beginning of the Great Depression.

The Farm Crisis of the 1920s

In some respects, the Great Depression came a decade earlier for American farmers. While most people were enjoying relative prosperity in the 1920s, farmers were finding it a tough going.

Horses and mules had been replaced by expensive trucks and tractors. With up to one-quarter of farmland previously devoted to feeding horses and mules freed up for production, supply soon outstripped demand, and commodity prices dropped by as much as 60 percent.

In his bid for the presidency, Hoover promised to help farmers by increasing tariffs of agricultural products. At that time, about one-third of American families were living on farms.

True to his word, soon after taking office in March 1929, Hoover called a special session of Congress to ask for an increase of tariff rates for agricultural goods and a decrease of tariff rates for industrial goods.He said he wanted to keep the overall tariff burden even.

Lobbyists immediately got to work, and it soon turned into a special interest feeding frenzy with every industry seeking protection. The result was increased tariffs on both agricultural and industrial goods. Even tombstone makers got an increase in tariff protection with the bill that passed the House in May 1929. The Senate refused to act on the issue of tariffs before adjourning in November.

A Congressman from Oregon, A Senator from Utah

1930 was a pivotal year. The worm had started to turn with the economy worsening. On a lighter note, 3M began selling Scotch Tape in January, and Mickey Mouse was born in a comic strip. In February, Elm Farm Ollie became the first cow to fly in an airplane. (She also became the first cow milked in flight.) And in April, Hostess Twinkies were invented.

Also in April, the Senate, feeling pressure because of the deteriorating economy, passed a bill that increased tariffs, albeit less than the House version. A conference committee then reconciled the two bills, mostly favoring the House version.

The result was the Hawley-Smoot Tariff – named after its sponsors, Willis Hawley, a congressman from Oregon, and Reed Smoot, a senator from Utah. The legislation, calling for the highest set of tariffs in American history, became a testament to economic isolationism of that era.

Vicious, Extortionate, and Obnoxious

To be sure, many people were opposed to the bill. No fewer than 1,028 prominent economists signed a petition in May 1930 asking Hoover to veto the bill. Henry Ford spent an evening in the White House trying to convince Hoover to veto Smoot-Hawley, which Ford called “an economic stupidity.”

Wall Street banker Thomas Lamont, a partner at J.P. Morgan, said he came very close to groveling. “I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff,” he recalled. “That Act intensified nationalism all over the world.”

Hoover actually didn’t like the bill, calling it “vicious, extortionate, and obnoxious,” noting that it would undermine his commitment to international cooperation. Despite that, he yielded to the pressure from his own party and signed the bill into law on June 17. The Tariff Act of 1930 as it was formally known raised U.S. tariffs on over 20,000 imported goods.

Hoover’s reservations were well founded. Countries that began warning of retaliation in 1929 followed through with their threats in 1930. In May, Canada, the U.S.’s most loyal trading partner, imposed new tariffs on 16 products that accounted for about 30 percent of U.S. exports to Canada.

(When Hoover was elected president, Canadian Prime Minister, Mackenzie King wrote in his diary that it might lead to “border warfare.”)

Disastrous Effects

While most economists don’t believe Smoot-Hawley caused the Great Depression, it certainly did not alleviate it and may have made it worse. Certainly, Smoot-Hawley failed to lower unemployment. In 1930, the unemployment rate was 8 percent. It would jump to 16 percent in 1931 and peak at 25 percent in 1932-33.

The Tariff Act also poisoned the well in terms of international relations with other countries. The League of Nations, of which America was not a member, had talked of a “tariff truce,” but Smoot-Hawley killed that idea.

In the aftermath, world trade collapsed. American exports, which had been $5.24 billion in 1929, were worth $1.16 billion three years later, a 78 percent decline.

And Hoover, Smoot, and Hawley paid the price. They were taken to the woodshed by the voters, all three being decisively defeated for re-election in 1932.

Today there is a broad consensus among historians and economists that the Smoot-Hawley Tariff only made a bad situation worse. As a result, most economists today view protectionism as a blunting force to economic growth and that it often harms the very people it was meant to help.

It Could Get Very, Very Bad

In the fall of 2016, I was saw the Trump signs posted in farm fields throughout rural America. They were the size of school buses in western Nebraska and eastern Colorado.

And now farmers are waking up to the realization that a president who they helped put in office is instigating a trade war with China, the second largest economy in the world, and that it is they, the farmers, who will pay the price.

Trump last week instructed the U.S. Trade Representative’s Office to consider tariffs on an additional $100 billion in Chinese imports, bringing to $150 billion the range of Chinese goods under consideration.

China, which had proposed duties on $50 billion in American goods including aircraft, soybeans, corn and other row crops after the first U.S. move, has said it will respond proportionately.

“This could get very, very bad,” an economic developer from Iowa told me last week. Iowa is the No. 2 U.S. agriculture state in terms of farm cash receipts.

A wide swath of the U.S. farm economy could be impacted if China goes ahead with tariffs on soybeans, cotton, corn, wheat and beef. China buys roughly half of the U.S. soybean exports, or about $14 billion annually, and is the second-largest buyer of American cotton. In all, U.S. agricultural exports to China represent almost $20 billion annually for American farmers.

History can be a great teacher, but only if we allow it so. History tells us that no one wins in a trade war, and that working people on the ground get hurt. Like Hoover, President Trump is ignoring the warnings from the experts. He is certainly ignoring the warnings from the past.

I’ll see you down the road.

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

In an AI Future, Watch the Machines … Carefully

We will always be curious about the future. People wonder, which is generally a good thing, until they go and ruin it by making predictions.

I could provide you with a litany of quotes from people viewed as thought leaders who said things that are laughably wrong.

One of my favorites: “Two years from now, spam will be solved.” — Bill Gates, World Economic Forum, 2004

That alone should have me resist pontificating about the future, at least in public. And yet, when I have an audience, I cannot resist.

No doubt, when the Southern Economic Development Council meets in Dallas in about two weeks, and I will be on a consultants’ panel discussing manufacturing, I will point my index finger skyward and say, “I believe …”

Which reminds me of an old Steve Martin standup routine (abbreviated):

“I believe in rainbows and puppy dogs and fairy tales.
“And I believe 8 of the 10 Commandments.
“And I believe in going to church every Sunday, unless there’s a game on.
“And I believe in equality, equality for everyone … no matter how stupid they are, or how much better I am than they are.
“And … I believe that robots are stealing my luggage.”

It’s that last point where I think he might be onto something.

AI Will Change Us

My “I believe” statement, which I may make at the upcoming SEDC conference, is that artificial intelligence (AI) will not only transform manufacturing, but it will change all of lives for the better or for the worse, depending on we how control it. And we best control it.

AI is the ability of machines to be “smart,” to learn, imitate, and dramatically accelerate or replace human decision making and behavior. Machine learning refers to teaching computers how to analyze data for solving particular tasks through algorithms.

Data is the lifeblood of AI. Almost every enterprise generates data in one way or another: think market research, social media, school surveys, automated systems. Machine learning applications find hidden patterns and correlations in the chaos of large data sets to develop models that can predict behavior.

But the machines in themselves cannot distinguish between good and evil, and there are bound to be some people who are feeding them with data and instructing them with tasks that have unsavory motives.

It’s precisely for that reason that more than 100 leaders of AI companies, including Elon Musk, have signed an open letter to the United Nations, voicing concerns that companies building AI systems could convert the technology into, I am not making this up, autonomous killer robots.

This goes well beyond stealing your luggage.

Is There a God?

The fact that there could be malicious use of AI, probably would be, was the warning from the late Stephen Hawking. In a 2014 interview with comedian John Oliver, the world-renowned theoretical physicist displayed a wonderful sense of humor.

“There’s a story that scientists built an intelligent computer. The first question they asked it was: “Is there a God?” The computer replies: “There is now.” And a bolt of lightning struck the plug so it couldn’t be turned off.”

Still, there are “experts” (people who point their fingers in the air and say, “I believe ….”) who contend that the threat of AI is not real and that an AI Terminator is perhaps hundreds of years away, if at all.

We know that AI is not a matter of just installing software. It requires certain levels of expertise, vision, and information that few of us possess.

And certainly, very good things can come from AI, from self-driving vehicles, drones overhead, traffic management, preparing tax returns, identifying and treating rare cancers, setting up meetings. The list goes on and on and will invariably grow.

But bad things, mischievous things can also result. We know of videos generated by machines that have President Barack Obama saying things that he never said. We know that machines can learn from news, social feeds and just from listening to us around the house, (Alexa, I am unplugging you) and thereby deliver targeted ads aimed directly at us, based on our likes and dislikes.

Determining what is true and what is not may become only become more difficult as “fake news” will proliferate beyond the realm of our traditional news media gatekeepers.

Industry 4.0

Some “experts” (finger pointers all) say we are currently in our fourth industrial revolution. The first, beginning in the 1760s, was characterized by mechanization, water power and steam power; the second, started in the 1870s was characterized by mass production, assembly lines and electricity.

The third industrial revolution got its start in the 1950s with computers and automation; and now we’re in the fourth, aka Industry 4.0, characterized by artificial intelligence and deep machine learning.

In every one of these industrial revolutions we have had the loss of jobs and the creation of new ones. In that regard, disruption is not new. Somehow, we have always been able to figure it out, to adapt.

But this latest industry revolution may be different in that the technology we unleash may be somewhat mysterious even to its creators. And there is a chance, and I know this sounds outlandish, that we could lose control of the machines. More on that in a moment.

Dramatic Improvement

Will AI change your job? Yes, probably so. Will it be slow and gradual? Well, I’m not so sure. Most AI experts agree that they would never have thought any of the major achievements in AI would have happened so quickly.

“The rate of improvement is really dramatic, but we have to figure out some way to ensure that the advent of digital super intelligence is one which is symbiotic with humanity. I think that’s the single biggest existential crisis that we face, and the most pressing one,” warns Musk.

Which begs the question, should we not be imparting to the machines a certain level of human ethics? Algorithms may not be free of the biases of their programmers, but should we teach, guide, and provide socially acceptable boundaries for the AI systems that we use? In short, can we, should we, input some basic goodness into the machines so that they will not, well, turn on us?

Those might sound like ridiculous questions on their face, except for the fact that no one really knows how the most advanced algorithms work. Now here is where it gets spooky.

Alien Behavior

Will Knight, a senior editor for AI at MIT Technology Review, tells the story of a self-driving car developed by the chip maker Nvidia that didn’t follow a single instruction provided by an engineer or programmer.

Instead, the car relied entirely on an algorithm that it taught itself by watching a human drive. The researchers working on the project found that a bit, well, unsettling.

The CEO of DeepMind Technologies Limited, a British AI company owned by Google, reported in December that his company had developed an algorithm, called AlphaZero, that achieved within 24 hours a superhuman level of play in the games of chess and shogi (Japanese chess) as well as Go, and convincingly defeated a world-champion program in each case.

AlphaZero made moves unthinkable to a human chess player, said Demis Hassabis, the founder and CEO of DeepMind and an expert chess player himself.

“It doesn’t play like a human, and it doesn’t play like a program,” Hassabis said at an AI conference in Long Beach, Calif. “It plays in a third, almost alien, way.”

Last year, Facebook shut down an experiment after two AI programs appeared to be chatting to each other in a strange language that only they understood. The two chatbots created their own changes to English that made it easier for them to work – but which remained mysterious to the humans who were there to oversee them.

This raises the spectrum and poses a question: Could we actually lose control? Could something akin to Hawking’s lightning bolt happen in which we could not unplug?

As AI becomes more commonplace, “I believe” (I am pointing my index finger skyward) that machines will learn to talk to each other, drive cars, beat, dream, filter applicants for a job, paint pictures, tell stories and help make scientific discoveries. They may also do corporate site selection, an area of focus for me. These are all things the machines have already started to do.

And in the process, they may also confound us, their human creators, with mysterious “alien” behavior. We should watch for that very carefully. I know I do not want to lose my luggage to some larcenous robot.

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

 

 

A Trade War Would Be A Bridge Too Far

We live in a world at risk. That should be obvious to anyone who pays even a modicum of attention to the news.

Last week, Vladimir Putin was boasting that Russia had developed a new batch of “invincible” nuclear weapons that could foil any defensive system employed by the United States, cold war rhetoric to be sure.

There are a slew of other big risks that could, by extension, threaten the world economy. They include territorial disputes in the South China Sea, major cyber-attacks, war on the Korean Peninsula, an escalation of proxy conflicts in the Middle East, a big drop in oil prices, and the withdrawal of countries from the Eurozone.

Another threat emerged last week, which I hate to say, could be precipitated by the U.S. — a full-blown trade war, the costs of which could be very, very bad.

Mind you, we’re not there yet. But we could be if things escalate, which is the nature of these conflicts.

A Simplistic View

It is obvious that President Donald Trump views trade in very simplistic terms as a win or lose proposition, disregarding the nuances that come with it. Most concerning was his statement on Twitter, one day after announcing tariffs of 25 percent on steel imports and 10 percent on aluminum imports, that “trade wars are good and easy to win.” History would show that is far from the case.

It should be noted that the tariffs in themselves are not signs of a trade war but could be a catalyst to spur one on if other countries choose to retaliate. Already, the tit-for-tat threats have emerged.

Electrolux, Europe’s largest home appliance maker, said on Friday it would delay a planned $250 million investment in Tennessee in reaction to Trump’s announced tariffs. The European Union is now considering duties on U.S. imports worth about $3.5 billion if the White House pursues its plans.

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans — Levi’s,” European Commission President Jean-Claude Juncker said, according to Reuters news service. “We would like a reasonable relationship with the United States, but we cannot simply put our head in the sand.”

Trump naturally could not let that go unanswered and lashed out on Twitter Saturday, saying the U.S. may levy a 25 percent tax on cars exported from Europe.

My point is that trade skirmishes can snowball into an all-out trade war. And contrary to what the president may believe, there are no winners in that scenario.

A Consistent Message

Trump’s abruptly announced statement that he would go through with tariffs caught Washington and Wall Street off guard, with markets reeling as a result. But it is consistent with what the man has been saying since the 1980s — that America is being “ripped off” by other countries, hurting U.S. jobs and factories.

In his bid for the presidency, Trump made the renegotiation of the North American Free Trade Agreement (NAFTA) a hallmark of his campaign, calling it “the single worst trade deal ever approved in this country.”

Signed into law by Democrat President Bill Clinton in 1993 with Republican support, NAFTA created a managed trade zone among Canada, Mexico, and the United States. In his third presidential debate with Democratic nominee Hillary Clinton, Trump said what he had been saying on the campaign trail:

“We’re going to renegotiate trade deals. We’re going to have free trade . . . But we have horrible deals. Our jobs are being taken out by the deal that her husband signed, NAFTA, one of the worst deals ever. Our jobs are being sucked out of our economy. You look at all of the places that I just left, you go to Pennsylvania, you go to Ohio

“. . . Our jobs have fled to Mexico and other places. We’re bringing our jobs back. I am going to renegotiate NAFTA. And if I can’t make a great deal—then we’re going to terminate NAFTA and we’re going to create new deals.”

Trump’s message resonated with American workers, which catapulted him, to the shock of many, into the White House. And now as president, he is acting on his perpetual belief to the consternation of most economists, who contend that such protectionist measures could damage economic growth worldwide.

Some NAFTA Progress

Believe it or not, some progress actually has been made in negotiations between the U.S., Canada and Mexico to rework NAFTA, a 24-year-old, $1.2 trillion treaty which Trump has threatened to walk away from unless major changes are made to benefit American interest.

In the latest (and seventh) round of negotiations which began last week in Mexico City, the three countries have agreed on regulatory best practices. With that done, on top of work on anti-corruption measures, rules for small- and medium-size businesses and for competition now done, it’s taken six months to complete four of the roughly 30 chapters likely to form the updated deal.

Rules of Origin Stumbling Block

And while nobody thinks these negotiations will end anytime soon (An eighth round of talks is being planned for Washington later this month), as long as the parties are at the table, well, progress is progress.

But there remain big hurdles ahead. Agreeing on new rules of origin for autos is just the latest. Under the current treaty, 62.5 percent of the net cost of a passenger car or light truck must originate in the NAFTA region to avoid tariffs.

Trump wants that threshold raised to 85 percent, and add a U.S.-specific requirement of 50 percent.

Again, reflecting his binary view on trade as win or lose, the president last week said the U.S. was probably losing $130 billion a year to Mexico. The U.S. 2017 trade deficit in goods with Mexico was $71.1 billion and $17.6 billion with Canada.

A False Assumption

Apparently, the president is under the belief that if trade deficits go down, economic output rises. Most economists say it doesn’t work that way. Having a trade deficit — which happens when a country imports more than it exports — reflects more about robust U.S. consumption than about unfair trade.

When calculating a country’s Gross Domestic Product, it is true that economists will count a trade deficit as a negative, but that is more a matter of accounting. Most economists believe a trade deficit does not cause GDP to be smaller.

Unintended Consequences

What they will also tell you that raising import taxes on goods (which is what tariffs are) can have all sorts of unintended consequences. Research by economists Nicholas Bloom, Mirko Draca, and John Van Reenen indicates that while exposure to Chinese competition did destroy U.S. jobs, it also forced U.S. companies to innovate faster and become more productive.

Erecting trade barriers and protecting domestic industry groups tends to inhibit innovation. In other words, the shielded companies get fat and lazy while consumers pay more for goods and services.

To be sure, corporate America was happy to see a reduction in the corporate tax rate from 35 percent to 21 percent. We have not seen a spate of new capital investment because of it yet, but it is still early. U.S. companies have also been quite happy with the Trump administration’s attitude toward reduced regulation.

But a trade war would be a bridge too far. Let’s hope we don’t go there.

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

 

Let Us Keep the Essence of America

There is a robust African community in Dallas and my wife has been on a kick lately for Ethiopian restaurants, to which there are many. Being that we are married, well, I get to tag along.

The last restaurant we went to was not Ethiopian, but Eritrean, which was a part of Ethiopia but broke away in the early 1990s after a decades long civil war. After our meal, the owner approached us to ask if we liked our meal.

We assured him that we did, and then the topic of how and why he opened his business came up. It turns out that he and his wife came to the U.S. three years ago via the Diversity Immigrant Visa program, a government lottery program for receiving lawful permanent residency, informally known as a “green card.”

The Essence of America

He was a lawyer and a judge back in Eritrea. While I will not use the same terminology as our president in describing any country (President Lyndon B. Johnson referred to Vietnam as “that damn little pissant country.”), I can tell you that a casual reading about Eritrea indicates that it is a very repressive country, rivaling that of North Korea.

But what impressed me most about our host was his positive outlook about this country and becoming an American. To him, America was still very much the land of opportunity, of freedom, and where hard work would pay off for him and his family. He had every intention of living the American Dream.

Back in the car driving home, I told my wife, “My God, we need more people like this in our country, not less. This man represents the lifeblood of America, the essence of what this country is about. We cannot lose this or we will lose ourselves.”

Nativist Movements

If you look at our history, we have had our share of nativist movements. The subscribers of this organized xenophobia hold a shared belief that immigrants pose a threat.

During the late 1840s and the early 1850s, there was The Know-Nothing Party, also known as the American Party, empowered by fears that the country was being overwhelmed by Catholic immigrants who were hostile to American values and controlled by the Pope in Rome. The Irish in particular were singled out. (Watch the movie Gangs of New York.)

In 1875, Congress passed the Page Act, also known as the “Asian Exclusion Act,” and in 1882, it passed the Chinese Exclusion Act, which was renewed in 1892 and 1902. In 1890, Wisconsin passed an act known as the “Bennett Law,” which threatened to close hundreds of German-language elementary schools.

In the 1920s after World War I, the nativists focused their attention on Catholics, Jews, and south-eastern Europeans. A book by Madison Grant, The Passing of the Great Race, gained notoriety, in which Grant argued that the American racial stock was being diluted by an influx of immigrants from southern and eastern Europe.

In the 21st century, the Tea Party shifted its primary focus from deficit reduction to immigration, declaring President Obama’s decision to enact immigration reform through his executive powers as “amnesty for millions, tyranny for all.”

Which brings us to today’s political climate.

Stubborn Things

But before I go there, how about a few facts to chew on? President John Adams said, “Facts are stubborn things,” and, indeed, they are. But sometimes, they show us the way.

Analyzing data for 2017, the Center for American Entrepreneurship found that 43 percent of Fortune 500 companies were founded or co-founded by an immigrant or the child of an immigrant. CAE found that the occurrence of first- or second-generation immigrant founders is significantly higher among the largest Fortune 500 companies – accounting for 52 percent of the top 25 firms and 57 percent of the top 35 firms.

Immigrant-founded Fortune 500 firms are headquartered in 33 of the 50 states, employ 12.8 million people worldwide, and accounted for $5.3 trillion in global revenue in 2016.

These American powerhouse companies founded by immigrants or their children include Dow, AT&T, DuPont, Levi Strauss, Anheuser-Busch, Pfizer, Goldman Sachs, Sun Microsystems, Google, Yahoo, eBay, YouTube, PayPal, Tesla, Facebook, and LinkedIn.

What the heck, let’s name a few more – Home Depot, United Parcel Service, Northrup Grumman, General Dynamics, Procter & Gamble, Comcast, Kraft Heinz, Lockheed Martin, Merk, Costco, Apple, Walt Disney, and the current holiest of holies, Amazon.

Job Creators on Main Street and Wall Street

Immigrant entrepreneurs have also made their mark their mark on Main Street. Among small U.S. businesses, almost 20 percent were founded by immigrants.

At a time when the number of new firms as a percentage of all firms has fallen near a four-decade low, immigrants are twice as likely as native-born Americans to start a new business. Though just 14 percent of the population, they account for a quarter of all business owners.

According to an analysis by U.S. News and World Report, immigrant small businesses are responsible for 10 million jobs in this country. If you extrapolate that to large businesses, it means immigrants and the children of immigrants are responsible for 50 million jobs. That’s 40 percent of all jobs attributable to less than 14 percent of the population. That, my friends, is economic development.

Think about that Eritrean restaurant owner in Dallas for a moment. The idea of leaving one’s home country to go to a different country, with a different language and culture, that in itself is the epitome of risk taking. That takes, forgive me for using a rather course but accurate Mexican-American slang word, cojones.

Pushing Entrepreneurs Away

In his State of the Union speech, President Trump stressed the need for a “merit-based immigration system — one that admits people who are skilled, who want to work, who will contribute to our society, and who will love and respect our country.”

And yet, the Trump administration is considering rescinding the International Entrepreneur Rule (IER), which allows foreign entrepreneurs to build their businesses in the United States if they meet certain criteria and are vetted by the Department of Homeland Security.

In a letter to the president, the National Venture Capital Association, along with 31 other business groups, urged the president not to rescind the IER.

“Twenty years ago, our country’s share of global venture investment was 90 percent, but that number has dropped precipitously to 81 percent in 2006 and to 53 percent in 2017. In 2016, China was home to six of the 10 largest venture capital investments in the world. If we continue to push entrepreneurs overseas, our share of global investment will continue to decrease.”

In a recent analysis of a immigration reform plan offered by the White House, the Cato Institute concluded, “The plan would cut the number of legal immigrants by up to 44% or half a million immigrants annually—the largest policy-driven legal immigration cut since the 1920s. Compared to current law, it would exclude nearly 22 million people from the opportunity to immigrate legally to the United States over the next five decades.”

Note that we are talking about legal immigrants.

Final Thoughts

Nativism, the basis of which is prejudice against immigrants due to their color, ethnic and religious backgrounds or country of origin, does not make logical sense. It certainly makes no economic sense.

And it is also counter to who we are as a people. I actually believe in American exceptionalism. I believe in the everlasting dream, the promise of America. If you take that dream away, we are no longer what Ronald Reagan called “that shining city on a hill.” We’re just another country.

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.