This Time It is Different

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

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

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

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

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

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

A Faster, Stranger New World

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

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

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

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

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

The Great Decoupling

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

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

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

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

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

Service Jobs Take a Hit

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

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

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

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

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

Just What Will We Do?

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

I know that I would like to keep working.

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

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

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

Should We Go Down Every Rabbit Hole?

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

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

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

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

I’ll see you down the road.

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

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

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

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Providence Protects but the Machines Don’t Care

“There is a Providence that protects idiots, drunkards, children and the United States of America.”

So said Otto von Bismark, the father of a modern, unified Germany. The quote would suggest that Bismark believed there was indeed something special and different about America.

And so there is. I continue to subscribe to this concept of “American exceptionalism,” even as our great middle class has been hollowed out with the loss of millions of jobs.  I am now convinced that many if not most of the midpay, midskill jobs that were lost will never return.

Yet still I am hopeful that this 21^st century can and will be an “American century.”  Of course, there is a certain hubris to predicting the future, as we will never understand all the consequences of history as it unfolds before us.

But in this blog, as some have discovered, I do make predictions on how things may play out. As a business consultant, I should not be so shy. You see, if I bill myself a “futurist,” I just might command more money and become in greater demand, even if my predictions fall short of reality.  Of course, this is predicated on the belief that few of you will be keeping score.

A Return Performance

So I am in the process of building a rather ambitious speech/PowerPoint presentation that I will give next month at LiveXchange, a forum where site selection consultants and corporate executives meet with economic developers from around the country. I spoke at this event in 2012, and must have said something of interest that warranted me to be invited back again.

Jack Rogers, the editor at Business Facilities magazine, which sponsors the event, said he found my presentation last year to be “zappa-esque,” a reference to the late Frank Zappa. I took that as a compliment, knowing full well that Jack viewed my presentation as weird but somehow satirically biting. 

Generally, I pay editors no mind. They are a tiring, bombastic class of opinionated, shallow-thinking neer-do-wells who should be rounded up and barged out to sea, were it not for a First Amendment. It is but more proof that the Lord protects drunkards and idiots.

I can say that with some authority because I once was a member of this despicable class. But I cannot help but like Jack, because, well, he asked me back.

Without giving away too much of my upcoming presentation, which is a work in progress, I will tell you that I am coming to this not-so-remarkable conclusion that technological change and innovation both creates and destroys, some for good and some for ill.

Now we all know this. Smallpox has been eradicated in the U.S. because of the implementation of a vaccine. Advances in medical technology, particularly when they actually work, is a good thing. A nuclear weapon that could be hijacked and used by a terrorist group or rogue country, now, that’s a bad thing. Let us pray we never see it happen.

A Disturbing Premise

But I am thinking more about how technology both creates and destroys jobs. This has long been happening, but for the first time maybe in world history, I am now wondering if technology may be killing more jobs than creating. Some experts agree with this premise and some disagree. But this will be the topic that I broach at LiveXchange, May 19-21, in Frisco, Texas.

As I reported in my Barberbiz blog of two weeks ago, which I would recommend that you read, Sometimes You Get and Sometimes You Get Got, it is by virtue of technology that we are only now coming to realize just how much vast reserves of natural gas (and even oil) that we are sitting upon here in the U.S.

The Potential Gas Committee, an independent organization of geoscientists and petroleum engineers that is affiliated with the Potential Gas Agency at the Colorado School of Mines,  now estimates the country’s potential natural-gas resources at 2,384 trillion cubic feet. That is a whopping 26 percent increase from the group’s previous calculation at the end of 2010.

That number of 2,384 trillion cubic feet is more than 90 times the amount of gas consumed in the U.S. last year, according to federal data. Hydraulic fracturing, also known as fracking, is the technology that it made this possible. It is the technology, which was pioneered and advanced not far from where I live here in Texas, that has unlocked gas from shale-rock formations all over this country.

Not surprisingly, the shale gas boom has created thousands of new jobs in Pennsylvania and Ohio with the Marcellus Shale and Utica shale plays; in North Dakota, Montana and Saskatchewan, Canada with the Bakken formation; and down here in Texas with the Barnett and the Eagle Ford shale plays.

Right now, there is about $62 billion in plant construction set to get underway in Lake Charles and along the Gulf Coast of Louisiana, driven by the ample supply of cheap natural gas in the Haynesville shale play in northwest Louisiana.

Also, not surprisingly, consulting firms are making bold predictions as to job creation caused by the natural gas boom, again spurred by the fracking technology. IHS Global Insight produced a study for America’s Natural Gas Alliance in 2011 that estimated the shale gas industry could eventually create 1.6 million jobs in the coming decades.

A December 2011 report by PricewaterhouseCoopers and the National Association of Manufacturers said fracking could help add 1 million manufacturing jobs in the U.S. by 2025, whereas a May 2012 study by the American Chemistry Council, which represents the chemicals industry, estimated that increased gas production could create 200,000 jobs in the broader manufacturing sector.

The Skeptics Among Us

Still, some remain skeptical and are taking a more wait-and-see posture. I would put myself in this camp. I have no doubt about the job growth in the energy sector created largely because of technological advances. It’s happening before our eyes. It’s hard to ignore billion dollar projects being announced with now some regularity in Texas and Louisiana.

But I think it may be premature to advance that it will necessarily translate into millions of new manufacturing jobs, although the unlocking of abundant supplies of domestic energy should present U.S. manufacturers with a cost competitive edge. (If only our policy makers in Washington permit.)

“Even though the U.S. is more competitive globally, manufacturing doesn’t give you the kind of direct job creation it did in years past,” said Joseph G. Carson, director of global economic research at AllianceBernstein, a Wall Street investment firm, in an interview with The New York Times. “At the end of the day you still want a strong manufacturing base, but there aren’t as many people on the factory floor.”

There aren’t as many people on the factory floor.

Why is that? Were most of those jobs essentially shipped abroad, off-shored to lower cost developing countries? Well, certainly many were, but I am now of the belief that the demise of most of those jobs – most of the people – on the factory floors across America were due to advances in technology.

Yes, there was a movement for cheaper labor by going offshore, but bigger yet was a movement to produce more with fewer people by employing state-of-the-art technology. Machines have long been a part of the process of manufacturing, but in a sense, the machines may soon rule the factory floor. The robots are here, they are getting smarter and cheaper, and they are coming.

There has been much talk of late about a “manufacturing renaissance” in this country. I happen to regard most of it as bandwagon gibberish that editors, the foul group that I was telling you about, permit to be published without casting a critical eye.

The truth is while the manufacturing sector has added 500,000 jobs since the recession ended and the production value of factory output is close to an all-time high, there are still nearly 6 million fewer manufacturing workers today than in 2000. Since the early 1960s, the share of U.S. manufacturing jobs has been on a nearly uninterrupted downward slope. Manufacturing now accounts for less than 9 percent of all jobs in this country.

The Real Job Killer

I used to blame the Chinese as the main culprit. And in many ways, they have not been the best trading partner.

But we did compete and we continue to compete with the Chinese and everybody else by employing more and better technology – robots, automation, new software advances.  You see, that’s the only way for our manufacturing sector to remain viable.

It’s why we must remain an innovation nation. We have to invent new technologies and continue to improve on existing technologies. It’s our only hope at remaining a world power and sustaining this idea of “American exceptionalism.”

And that’s your job killer right there. Advances in technology, almost by its very nature, means pushing the envelope in terms of productivity and efficiency.  It means employing machines to do things that people were doing, particularly repetitive tasks. It means replacing people with machines that can do the job better, faster and cheaper.

Factory floors in this country look radically different than they did not so long ago when “turning machines” were run by hand. The truth is that plants are increasingly devoid of people.

There’s a joke going around in South Carolina that a modern textile mill employs only a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machines.

But if you think that job loss due to technological change has been happening only in manufacturing, you are quite mistaken. It’s happening in service industries as well, much of it driven by how we conduct our lives. We’ll talk more about that in next week’s blog.

I think old Otto was right. Providence protects, as I am reminded by an old Irish fiddle tune, which says nothing about productivity. But the machines don’t care.

“Lord protect us, Saints preserve us. We’ve been drinking whiskey ‘fore breakfast.”

I’ll see you down the road.

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

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

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

Faces, Names and Nuggets Do Have a Way

Now I am no glad-hander – I cannot work a room like a veteran politician — but I do like making new acquaintances and re-establishing contact with old ones.  For most of us, business hinges on relationships with people.

We are, in fact, in the people business, whether we know it or not. As a self-employed consultant, I better know it.

Now I am fortunate to live in the Dallas-Fort Worth metro area, as contingents or packs of economic developers regularly come here to call on site selection consultants. The economic developers, of course, hope to establish a rapport with the site selectors who could possibly bring a capital investment project to their respective communities.

While that is not the single most productive approach to economic development (I would bet most my chips on a robust business retention and expansion program in terms of sheer job creation), I do believe these pilgrimages are worthwhile, both for the economic developers and the consultants.

Tennessee and Kansas Came Calling

Faces, names, and nuggets of information do have a way of coming back to me. And while I do keep rather extensive files on many places across North America (the inventor of the pdf deserves a Pulitzer Prize), I learned some rather useful tidbits this past week in meeting with economic developers from Tennessee and Kansas.

With the Tennessee group, I sometimes watched a Memphis Grizzlies/Dallas Mavericks’ game from a corporate suite at the American Airlines Center. It was my second NBA game of the season. More importantly, I met and learned some interesting things from the economic developers from Knoxville, Memphis, Oak Ridge, Cleveland, and Gallatin.

Down on the court, just before the game started, I got a stark reminder just how tall and athletic these NBA players truly are. I was an awestruck runt.

The next night, I enjoyed a memorable five-course nice dinner with economic developers from Kansas in a nice little restaurant in Dallas.  I re-established contact with economic developers from Topeka and Overland Park, and listened politely as Pat George, the secretary of commerce, so ably made the case for his fine state.

I Never Met a State …

And Kansas is a fine state, but so is Tennessee, and Louisiana, and Pennsylvania and Michigan. I’m like Will Rogers, who said he never met a man that he didn’t like. Well, I’ve never met a state that I didn’t like.

And that goes for California, a beautiful place with a reputation of having a not-so-beautiful business climate, which is why the governors from Texas, Utah and Virginia have gone there on recent corporate hunting expeditions.

California Gov. Jerry Brown, who just got back from China on his own industry hunting trip, called the poaching efforts of Texas Gov. Rick Perry as “barely a fart.”  Gov. Perry has lately set his sights on Illinois.

Governors have this way of thinking that their states are the best states for business. But experienced economic developers have come to realize what is beyond the comprehension of most politicians — that a “best place” is often dictated by circumstances.

If there was a perfect place for business, there would certainly be no need for me. Every company would recognize the attributes of this nirvana and flock there. But that’s a pipe dream, despite the outlandish claims made on certain ED websites.

Having said all that, there are better places to do business, which should be determined by the specific needs of a company if a site search is to be done with any sort of foresight. Believe it or not, in certain circumstances, it makes quite good sense for a company to have operations in a higher cost state like a California or a New York. Suppliers and customers may dictate as much, as well as talent. (One of many reasons why I largely disregard magazine rankings of states.)

The Reality of Place

Now I have no idea what the brand is or about for Topeka, Kan., and to the horror of horrors to some, I don’t really care. But when the economic developer from there told me that her community built and implemented the nation’s first secondary education course in industrial robotics, well, that made me sit up and take notice.

Here’s my card, Dawn Wright. Nice to see you again.

When the economic developer from Cleveland, Tenn., told me about his new 330-acre industrial park fronting Interstate 75, and that much in-depth documentation had been assembled about the site, with its close proximity to the Volkswagen plant in Chattanooga, well, I also filed that away.

Here’s my card, Doug Berry. Nice to meet you.

Faces, names and nuggets do have a way. After handing me a drink and telling me how brilliant they thought my blogs were (Ok, they didn’t say that), both Dawn from Kansas and Doug from Tennessee informed me about some key assets and the resources in their respective communities.

It was not the promise of place that I found compelling. No, it was the reality of place that caught my attention. And in a nutshell, that’s why I find the topic of place branding so, well, just doggone tedious.

If there is a Coon Dog Hunting Capital of North America, and I don’t know if there is, it would be difficult for me to imagine how that would play out to that community’s advantage in a site selection project. Unless, of course, that CEO has a special affinity for his coon dogs.

I have had some conversations with some CEOs who have thrown me a curve ball on a site selection project. Rest assured, the conversation below never happened, and let’s just hope it never will.

There is One Thing

CEO: Dean, we are very pleased that Barber Business Advisors will be helping our company determine a best location for our next manufacturing plant. This is exciting.

Me: Thank you, sir. It is exciting. We will find that best community for your purposes and thereby save your company millions of dollars in the process. Now would you mind if I recap some of the things that we have discussed today about our site search?

CEO: Certainly, please do.

Me: Per your instructions, I will be working directly with your executive committee – CFO Sharon Brown;  Jim Wetherington, VP of operations; and your VP of strategic planning, Sam Overby,

CEO: That’s correct. You’ll have my best team working with you on this.

Me: Thank you, sir, that’s very important. Now the executive committee has already provided me with some very useful documents and instructions that will greatly assist in our efforts. I now have a much better understanding of the skill sets required at this future plant.

CEO: Well, we must have a skilled workforce. Frankly, that’s been a concern for us at some of our other locations.

Me: And because of that fact, we will want to look at those communities that have a community college/tech school that would be receptive to working with you in developing the needed off-site and in-house training programs.

CEO: I cannot emphasize too much just how important that is to us.

Me: Yes, sir. I have also been provided with information on the anticipated utility loads, and the location of current customers and suppliers, which will permit us to develop a transportation- logistics cost model. There could be some huge cost savings involved.

CEO: Yes, these are all very important things. I’m glad to learn that the executive committee has provided you with this information.

Me: I will soon have an RFP prepared for the review of the executive committee and will seek input on any needed changes. I will not publish this RFP to any economic development organization until or unless I get approval from the executive committee.

CEO: That’s good. I really like your systematic approach which will keep us a partner in this process.

Me: Thank you, sir. I am going to need your help to best help you. Is there anything else that we haven’t discussed today that you think is pertinent to the site selection process.

CEO: Well, there is one thing. I think we need to go to a community with an appealing brand.

Me: Sir?

CEO: You know, some place that is viewed as being cool and forward thinking.

Me: Would you mind elaborating?

CEO: I just want to go someplace that has a reputation of being tech savvy and where I can find a Starbucks coffee and drink a local craft beer. Maybe it’s a university town.

Me: I’ll speak to the committee on this. Certainly, there are some advantages to university towns. Austin has done very well.

CEO: Austin! Yes, that’s it! That’s the ticket! Austin! That’s where we need to be. I’ll inform the executive committee. Gosh, you’ve been of great service to us, Dean.

Me: Wait, wait a second, what just happened?

Thankfully, most corporate clients have wanted an in-depth understanding of a place that would permit for successful, long-term, sustainable operations before committing to go there.  They want to accurately hone in on those functional capabilities and resources that could support a capital investment.

And, again, that is why I like to talk to experienced economic developers, because they get it. They will tell me of the real assets on the ground that could very well make a difference.

So I will gladly go to basketball games and dinners to hear about these things. And yes, I’ll do like “fam tours,” when my schedule permits. Faces, names and nuggets of information can pay off.

To the people of Boston and West, Texas. You are the best of us. You make us proud.

I’ll see you down the road.

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

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

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

 

 

 

 

 

 

 

 

 

 

Sometimes You Get and Sometimes You Get Got

If what I am reading and hearing firsthand from the experts is true, and I actually believe it is in this case, then this may very well be the biggest business story in my lifetime.

And I’m telling you this as a former business editor and now a sage-like business consultant, which means my predictions and assessments are about equal to your average baseball fan.  My advice: Beware of editors and consultants. They often seek to impress but not necessarily to impart.

No doubt because of my journalistic roots, I am and always will be a skeptic. I don’t buy everything told to me as fact.  I don’t necessarily think that all the dogma out there is done out of malice, to fool you into believing something that is not true.

Rather, I think a herd mentality often dominates, characterized by “informed” people just repeating what they have heard (a manufacturing renaissance is good example) without a lot of critical thinking. One magazine editor criticized me for using the word “hype” in last week’s blog and then went on to defend “renaissance” as “the perfect word.”

No matter the evidence that such a term is premature, my advice to the editor would be, when you’re in a hole, stopping digging.

But good things actually are happening, even if we continue to see anemic GDP growth and high unemployment. Never forget that we have 12 million unemployed people in this country, not counting those who have become too discouraged to look for a job. For them and the millions of underemployed, the Great Recession, which supposed to have ended in 2009, still lingers.

But despite all that, to coin a cliché for my own purposes here, we just might be the cleanest dirty shirt in a bag of dirty laundry when compared to the rest of the world.

To our good fortune, we find ourselves almost suddenly awash in underground seas of natural gas. And that, folks, should give us a competitive edge, particularly in manufacturing, in what has become a very competitive world. I hate to say it, but this really could be that game changer.

The Vast Seas Below

I have always been of the belief that we really don’t know how much oil and gas that we are sitting on. That’s because the technology of extraction keeps advancing and the numbers thereby keep changing.  We make educated guesses and those guesses are revealing that we are in pretty good shape in comparison to the rest of the world.

The Potential Gas Committee, in a report published last week, pegged the country’s potential natural-gas resources at 2,384 trillion cubic feet. That is a whopping 26 percent increase from the group’s previous calculation at the end of 2010.

Their estimate of 2,384 trillion cubic feet represents more than 90 times the amount of gas consumed in the U.S. last year, according to federal data. And as I suggested, the increase is driven by technological innovations such as hydraulic fracturing, also known as fracking, that have unlocked gas from shale-rock formations all over this country.

There are a surprising number of shale plays in this country. I can think of four off the top of my head here Texas. Most of you have probably heard of the Marcellus Shale, which stretches across Pennsylvania and into New York, Ohio and West Virginia.

You may have also heard of the Bakken formation, a subsurface rock formation that stretches 200,000 square miles beneath 12 counties in North Dakota and parts of Montana and Saskatchewan, Canada. It was first discovered on North Dakota land owned by a farmer by the name of Henry Bakken.

Some Farmer Logic

Now I will impart upon you an old farmer’s saying, one that Henry may have even repeated: “Sometimes you get and sometimes you get got.”

We’ve been in the “get got” camp for a long time. The 1973 oil crisis, in which Arab members of OPEC proclaimed on oil embargo on the United States, revealed just how dependent we were on what they had.  One could argue that our dependency on foreign oil has been an underlying aspect to much of our military misadventures around the world.

I believe that history will one day show just how costly our dependence on dirty foreign oil to our country in terms of blood and treasure.  I say “dirty” because the amount of CO₂ produced by natural gas is about 30 percent less than gasoline, diesel and fuel oil.

The good news is that we seem to be lessening our dependency on dirty foreign oil. Fracking not only has unleashed a torrent of natural gas, but crude oil production in the U.S. is rising as a result.

U.S. output is expected to top 8 million barrels per day (bpd) by the end of 2014, according to the EIA, the statistical arm of the Energy Department said. That would be the highest level since 1988.

U.S. oil output has surged from less than 6 million bpd in early 2011 to above 7 million bpd currently. Since late 2010, a combination of higher production and falling demand has slashed the need for imports from just under 10 million bpd to less than 8 million bpd, according to EIA data. That’s the good news.

But we still continue to have reliance on more expensive crude from overseas, which is why is why we are flinching at the pumps. That could change, would change, if policy makers in this country would only do the right thing and embrace the energy policy recommendations by T. Boone Pickens.

I think he’s got it right. He thinks Washington has it wrong.

The World According to Boone

“When I started the Pickens Plan in 2008, there were about 200,000 vehicles on natural gas in the world; now there’s about 16 million. That growth’s coming from everywhere but the U.S. Places like Iran and Argentina. China’s already got 40,000 trucks on LNG [liquefied natural gas], and they import the stuff. And here we are in the U.S., with more natural gas than any other country in the world, and we aren’t doing a thing about it. It’s just amazing to me that these dumb f-‍-‍-s in D.C. don’t see this opportunity and try to capitalize on it.”

Pickens wrote that earlier this month for Bloomberg Businessweek. Now I must admit that I am partial to just about any man, including a billionaire, who would refer to our nation’s policy makers as “dumb f—s.”

Pickens is rich and he is old and can afford to tell the truth. I am getting old (but certainly not rich) and trying my best to tell the truth with the possible foolish belief that it may actually help my site selection/economic development consulting business.

Now I’m going to quote some more of Boone Pickens, because this is my blog and I can.

“Transportation in America accounts for two-thirds of all oil use. There are many options, but to me, the one that makes the most sense is natural gas as a fuel substitute for OPEC oil/diesel/gasoline, with a focus on the heavy duty and fleet markets.

“We are now a nation awash in natural gas, so much so there’s a push to allow the export of America’s natural gas to Asia, Europe and elsewhere where it sells for up to four times as much.

“While I fully support the producers’ right to sell into higher price markets, I think it shortchanges America’s energy future. Why rebuild another country’s economy on the back of our cheap energy? Wouldn’t we be better served by rebuilding our own with our own natural gas?”

I swear that Boone possesses the logic of a farmer. Rebuilding our own. Now I do like the sound of that. No more being the world’s oil police. (Our military spends nearly $6 billion a year keeping the Strait of Hormuz open, of which we get about 15 percent of that oil passing through it).

Another “R” Word to Consider

Wisely using and (conserving) the vast natural gas resources that we are blessed with would not only liberate us from buying dirty foreign oil from people who largely don’t like us, but could give, should give, manufacturing in this country a substantial competitive advantage.

As you well know, I have been critical of the use of the word “renaissance” in describing the modest growth in the last couple of years. But I would like suggest another “R” word for your consideration. Revolution.

What is currently happening with our domestic with oil and gas industry could be revolutionary if the “dfers” in Washington would only permit it.

Rebuilding. Revolution. And, yes, even Renaissance. It’s all within our grasp.

I’ll see you down the road.

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

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

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

Is a Manufacturing Renaissance Real or Hype?

For awhile there, I was feeling like a voice in the wilderness. I was going against the tide and still am to some degree. But I no longer feel so much alone.

Now others, with more credibility than me, are saying what I’ve been saying in this blog for more than a year. It was a Wall Street Journal last week from which I felt some vindication. Here’s the headline: “Signs of Factory Revival Hard to Spot.”

And here is the first sentence or the lead, which states it better than I ever have: “The idea that American manufacturing is on the cusp of a renaissance is everywhere these days – except in the hard numbers.”

As my friend Paulie on the Lower East Side would say, “badda bing, badda boom.”

But forget Paulie. He doesn’t read the Journal, but the Daily Racing Form. Let’s hear from Daniel Meckstroth, chief economist with the Manufacturers Alliance for Productivity and Innovation. This is what he told the Journal: “There’s simply no statistical evidence of a broader renaissance at this point.”

Now I’m not an economist, and I have never played one on TV, but that is what I have been saying, to the ire of some. More than a year ago, when I was taking this line of inquiry in my blogs, I received an email from some muckety-muck who said he had “lost respect” for me for not jumping on the renaissance bandwagon.

My reply to him was: “So you lose respect for those you disagree with?” If I took his extreme position, I might not respect myself, as I have been known to change my mind on occasion. I wonder if he can?

Remember What Was Lost

It is true that manufacturers have added more than 500,000 jobs in the United States since early 2010, but economists see those gains as too small relative to what was lost in previous years to suggest a full-blown revival. Let us not forget that U.S. factories lost nearly 5.7 million jobs from 2000 to 2010.

(By the way, of the those 500,000 jobs, only about 50,000 were due to “re-shoring,” according the Chicago-based Reshoring Initiative.)

Add to that the recent claims of the National Association of Manufacturing (NAM), which states that the U.S.-based manufacturers operate at a 20 percent cost disadvantage compared to our largest trading partners because of the current tax and regulatory climate that exists in this country. Now if your costs are 20 percent higher than your competition, you have a serious problem.

The advocates of a U.S. manufacturing renaissance suggest that low domestic energy prices, largely due to the shale oil-gas boom and the associated technologies with it, increasing productivity, and rising costs overseas would invigorate the production of goods in this country.

A Potential Game Changer

I actually do believe that our energy cost advantages can pose to be that game changer and will spark increased industrial investment in this country. Wood products, refined petroleum, and basic metals are manufacturing sectors in which energy is an overwhelming driver of costs.

It is therefore most economical to locate production in the places with the cheapest energy, even if the labor costs are high. Just look at the multi-billion dollar projects being announced with some regularity in Texas and Louisiana.

Despite the good news, yet another economist, Goldman Sachs’ Jan Hatzius argues that all of the signs reflect a recovery that is “squarely cyclical” and not structural.

“Evidence for a structural renaissance is scant so far,” writes Hatzius. “Measured productivity growth has been strong, but U.S. export performance — arguably a more reliable indicator of competitiveness — remains middling at best. And at least so far, there is not much evidence for large positive spillovers from the U.S. energy cost advantage to broader manufacturing output.”

If you look at the share of manufactured goods purchased in the U.S. that are imported, you would think that a revived U.S. manufacturing sector ought to be grabbing more of its home market. But there is no statistical evidence showing that happening, at least not yet.

Manufactured Imports Continue to Rise

Imports accounted for nearly 40 percent of the manufactured goods consumed in the U.S. in 2012 – slightly more than the year before. The share of imports has been rising for years. It was a mere 9 percent in 1967, when the government began tracking this measure.

Hatzius’ report would indicate that the strength in U.S. manufacturing output reflects more the relative weakness of Europe and Japan, rather than a long-term positive shift in the U.S. itself.

“Over the next few years, the manufacturing sector should continue to grow a bit faster than the overall economy,” notes the report. “But the main reason is likely to be a broad improvement in aggregate demand rather than a structural U.S. manufacturing renaissance.”

There have been a lot of studies in the past year on the state of U.S. manufacturing, where we are and where we are going. My favorite to date was published in November by the McKinsey Global Institute. It shows the importance of manufacturing to our future as a nation, but it also shows that what we usually think of as a traditional manufacturing job isn’t coming back.

A Reduced Need for People

Robotics and other technologies are eliminating the need for people. In the newest factories, you may see only a small number of technicians staring at computer screens, monitoring the work of the machines. Manual labor is nowhere to be seen.

“Manufacturing cannot be expected to create mass employment in advanced economies on the scale that it did decades ago,” concludes the McKinsey report.

Today, at least 30 percent of the new manufacturing jobs are things that would look to most people like white-collar service jobs: sales, engineering, and design. Lab coats have replaced lunch pails.

The manufacturing sector continues to be a mainstay of our nation’s economic productivity, generating $1.8 trillion in GDP in 2011 (12.2 percent of total U.S. GDP). U.S. manufacturing firms lead in exports. The $1.3 trillion of manufactured goods shipped abroad constituted 86 percent of all U.S. goods exported in 2011. Moreover, manufacturing has a larger multiplier effect than any other major economic activity – $1 spent in manufacturing generates $1.35 in additional economic activity.

Why Manufacturing Matters

“Manufacturing matters because it’s simply impossible to have a vibrant national economy without a healthy globally traded sector, and manufacturing is America’s most important traded sector,” wrote Rob Atkinson, president, Information Technology and Innovation Foundation in his Feb. 20 blog.

I have talked to Rob on several occasions and I think he usually nails it. We pick up from his blog:

“As Gene Sperling, Chairman of the White House National Economic Council, explained last year, ‘If an auto plant opens up, a Wal-Mart can be expected to follow. But the converse does not necessarily hold.’ Moreover, if the auto plant closes, the Wal-Mart will likely downsize or close as well. This is why studies have shown that every lost manufacturing job means the loss of two and a half additional jobs throughout the economy. Indeed, the anemic overall performance of the U.S. economy over the last decade can be tied directly to the loss of U.S. traded sector, and particularly, manufacturing competitiveness.”

Manufacturing’s value can be measured in many ways, but at the most fundamental level, it provides that we remain an innovation nation. As I have quoted two economists in this blog, I might as well quote a business professor from Harvard in support of my view that manufacturing, essentially, keeps us smart.

“Having a strong domestic manufacturing base is vital to the United States maintaining its world leadership in innovation,” wrote Willy Shih in his blog from last month. “That is because advanced manufacturing provides an important institutional foundation for learning and developing process skills and capabilities that are increasingly intertwined with core R&D in some of the industries most important to the country’s economic future.

In short, we have to make things to innovate and we have to innovate to make things.

As long as we can remain an innovation nation, we will stand a better chance for a revival, not just in manufacturing but in our hollowed-out middle class. That’s the renaissance that I am hoping for, a dignity restored to and wealth creation for the middle class. Manufacturing lends itself to that.

I’ll see you down the road.

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

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

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

Guilt by Suspicion and the Big Hoax

I should not begrudge them. Certainly a bigger me, a better me, would not. But this other me often emerges, viewing the competition with a level of distrust and even contempt.

That is not a commendable attribute. I noticed my Conan the Rotarian tendencies when I was the business editor of The Birmingham News. In the same building, was the newsroom of the now defunct Birmingham Post-Herald. In those days, we had a joint operating agreement (JOA).

Essentially the Post -Herald leased space in our building and the use of our press, and there was some revenue split with the advertising dollars. JOAs were once common in a newspaper industry, which is now a shell of its former self. But there was never a sharing of news, no collaboration with the enemy across the hall.

I didn’t want to just beat the Post-Herald, I wanted to lay waste to all their efforts and aspirations. I was not their friend.

The Post-Herald eventually went belly up, and The News would be gutted (The once largest circulating daily newspaper in Alabama now publishes three days a week). Looking back, I recognize the Post-Herald reporters and editors were not the enemy, but that I created them to be so. I was one crazy dude.

You would think that I would have mellowed, and I have, but I still have these tendencies to create straw dogs to keep me going. The rational side of me (yes, I actually have one) recognizes that even consultants deserve respect and recognition for their good work … if they actually do it.

Guilt by Suspicion

Not long after moving to the Dallas-Fort Worth area, I attended a conference of the Texas Economic Development Council. I was talking to a local economic developer who I had reached out to on LinkedIn but she had not responded. I’ll always remember what she said: “I saw that you were a consultant. But now that I’ve talked with you, I will add you to my network.”

“Well, thanks,” I said.

She was telling me, in essence, that she viewed me with suspicion precisely because I was a consultant.  I understand where she is coming from.  I frequently hear a tone of resentment, if not outright complaints, from end users, especially economic developers, who have paid sometimes big bucks to consultants, only to get questionable products – fat studies and reports, laden with tables and graphs, that actually say very little, or say things that are off the mark. (More call centers, you say?) Too often what is said in 150 pages could have been said in 10 or 15 pages.

The Language of Consultant Speak

True story. When I was an economic developer, I was giving a site selection consultant a familiarization tour. During the course of our travels, he offered a “thematic mapping survey” that would tell me just about everything that I would ever need know about my region.

I remember how button-downed smart he sounded. The language that he used was not plain English, mind you, but it was impressive, if not a bit vague. I now refer to that language as “consultant speak,” designed to impress but not inform.  A few months later, a colleague of that same consultant apologized to me for the $200,000 number thrown my way.

“Well, I did think it was a bit high,” I said.

So I understand the trepidation. Truly I do. If there could be a single consultants’ motto, I think it should be the same as emblazoned on many police department patrol cars – “to protect and serve.”

Having said all that, I do believe in (some) consultants and will turn to them on occasion – people that I know and trust – to add their expertise in a collaborative effort to better serve a client. In a corporate site selection project, for example, I will serve the role as a general contractor and sub out certain functions to other consultants who have specialized knowledge that I do not have. (Anybody who says they know it all, watch out.)

So I will hire a GIS and thematic mapping expert, a logistics and transportation specialist and a tax analyst to better serve a corporate client during the site selection process. Most corporate clients will see and appreciate the logic behind this approach. I will also team up with other consultants on certain ED projects if doing so brings true value.

By turning to others, I am following the advice of a legendary business consultant Peter Drucker, “Do what you do best and outsource the rest.”

Get Off My Lawn

Last week, I got an email from a young economic developer (I am not making this up) with less than two years experience asking how he, too, could become a consultant. I told him that he needed to put some miles on the odometer before considering such a drastic if not stupid move. Then I told him to get off my lawn.

Of course, there are exceptions. Anatalio Ubalde, the CEO of GIS Planning Inc.; ZoomProspector.com; and SizeUp, started consulting in his late 20s. I like him even if he is young, successful and smart.  Now a wizened old man in his early 40s, Anatalio just came out with his second edition of “Economic Development Marketing.” But even he revealed his desperate side by including one of my blogs in his book.

My section in the book is entitled “Local Investment as Marketing and the Myth of Branding.” The original Barberbiz blog was called “Build Your Own Golden Triangle.”  Anatalio agrees with me that there’s a lot of bogus hocus pocus pitched by some consultants all in the name of brand. If you listen to them, they’ll give you a new do and all your dreams will come true just like the preacher said on TV if you just send that check.

I don’t know how many hours, days I have spent with corporate executives in search of better fit places. Our conversions centered around the conditions and assets (or the lack of) that we had either witnessed with our own eyes or have been provided with credible documentation and deemed true. Brand never entered into the discussion. Not once.

What Brand Will Never Do

Let’s face it, no promise of brand will bring down the homicide rate in Detroit or increase high school graduations rates in Nevada.  It is not your brand that is offering 3-D printing or a robotics programs at your local community college. Brand will not mean whether you have fully-served, shovel-ready industrial sites. Rather, it’s you getting off your duff and doing something about it.

“The idea that you can hire some consultant and be rebranded, that is a hoax,” said Ubalde. “That’s just someone wanting to make money off an economic development organization. There are a lot of snake oil salesmen out there.”

Shout it from the mountain, brother. Tell it like it is.

Here’s the deal: Now you can talk the talk or walk the walk. The truth is that your brand matters not to me or my client. We are looking for what is, not the promise or the claim of what is. We are looking for reality, assets on the ground that can be leveraged for purposes of establishing and sustaining profitable business operations for the long term.

Now many factors are involved in determining that optimal location, and they vary according to the specific needs of a company, but your brand surely is not one of them. As far as I am concerned, it’s just white noise.

Last week, a city in Canada, a place that I have been to several times and liked very much, “launched”  its new economic development brand.” The mayor said this, and I am not making this up. “The new marketing strategy rebrands and repositions xxxxx Economic Development brand as a forward-thinking, creative, dynamic catalyst for business success. The new brand identity will drive our business development tactics in the coming years.”

If you are going to put out a press release on your rebrand, what else are you supposed to say? By the language used, you have to wonder if this was a community of backward dullards before.  There will be a print campaign that will highlight this city’s “unique potential of raw human energy.” Sounds like a great location for mixed martial arts.

Look folks, you can spend your money on the packaged blah blah or you can spend your money on actually fixing things, investing in yourself and getting things done. By the way, do you mind driving me out to your tech school so that I learn more about your robotics program?

Here are two links where you can buy Anatalio’s book, which I would recommend:

http://www.amazon.com/Economic-Development-Marketing-Anatalio-Ubalde/dp/0692018778/

http://www.iedconline.org/book-store/economic-development-tools-and-trends/economic-development-marketing-2nd-edition

Have a Happy Easter and I’ll see you down the road.

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

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

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

 

 

 

 

 

 

Project Yum Yum Revealed the Not So Dumb Dumb

People continue to surprise me. I wasn’t sure how this thing would turn out. Privately, I had my doubts, but I put a brave face on it, because I figured, “What else can I do?” Besides, I was being paid. I had to buck up and make the best of it.

So I just got back from Tallahassee, Fla., where I spoke to Leadership Florida. As speaking engagements are a part of what I do as a consultant, I’ve learned over time to become more at ease with audiences. But I never tried the suggested mental exercise of imagining all members of my audience being naked. Nope, not gonna go there.

A substantial amount of work was done before arriving on the scene in preparation for what we were about to do. My assignment was to present a mock industrial project to a group, I would guess 50 or 60 business people, who were broken up into five teams representing five different regions of Florida.  Keep in mind that these were not professional economic developers.

The kicker was that someone from one region of the state would likely represent a different region. The Miami region or the Tampa region or the Jacksonville region or the Central Florida region could be assigned to be a member of the Northwest Florida team or vice versa.

Per the instructions from my good sponsor, Gulf Power Company, an operating subsidiary of the Atlanta-based Southern Company, which is THE electrical power company for 4.4 million customers in the Southeast and makes some of the finest voltage that money can buy, I explained what I did as a site selection consultant. My job is to help companies find optimal locations for future operations when they expand or consolidate. And I briefly detailed to my audience how that process worked.

Then We Lowered the Boom

Then we lowered the boom on them. We passed out a mock request for proposal (RFP) for Project Yum Yum, a $40 million food processing project, employing 110 people with an average production wage of $17 an hour. We went over the RFP with our audience and then opened it up for questions.

When I say “we”, I should tell you that Cliff Krut, a 20-year veteran of economic development and a representative of Gulf Power’s economic development team, was my co-conspirator in this exercise. Cliff was “Bob,” an anonymous senior executive with the anonymous company that I was representing. Bentina Terry, vice president of external affairs and corporate services for Gulf Power, served ably as the master of ceremonies and kept things moving along.

After 15 minutes of taking questions (very good questions by the way), the Florida Leadership teams, armed with the printed RFP, the answers to their questions, and links to websites of the regions that they were to be representing, went off to separate rooms to deliberate on Project Yum Yum. We gave them about 30 minutes to come up with a plan and then come back to give us their best shot – oral presentations on why their respective regions should remain in the hunt.

The teams were told that Project Yum Yum was also considering South Georgia and LA (Lower Alabama), and that Bob and I would only visit two finalist regions in Florida. Their goal then was to not be eliminated from the site selection process.

While the teams were off doing their thing, Cliff (“Bob”) suggested that we add a nasty if not realistic little twist. Let’s add the emotional element — Bob has an Aunt Millie who owns a condo in Destin (Northwest Florida). Because of this, Bob is privately pulling for Northwest Florida. As the site selection consultant, I had to be cognizant of my client’s bias.

The Iceman Cometh

So our pilgrims came back, eager and ready to present. Each team was given seven minutes, which was not fair to them, but our exercise was not designed to put them at ease. I was the cold and calculating consultant, the iceman cometh sort of guy. Bob was there to ask each presenting team as to how far their site was from Destin, which should have told them something.

Northwest Florida was the first team to present. Besides calling me “Dale” throughout their presentation, they did a most credible job. But the subsequent presentations only got better. Each team laid out in surprising detail the assets of their region, including workforce development and training, specifics on the greenfield site being offered, infrastructure, logistics, even financing and incentives. (We were offered free land in some locations.)

I was blown away by how good the presentations were from these laymen. I told our audience afterward that they could pass themselves off as experienced economic developers on TV. (That was a compliment.) But keep in mind that these were very astute and competitive business people. Some presentations actually rivaled what I have heard from certain economic developers, if you can imagine that.

When Bob and I announced our finalist locations that we would be visiting, it was no surprise that Northwest Florida remained in the uncut category. The Central Florida region would also be getting a visit. Bob finally fessed up to his family connection in Destin. No one threw fruit or dog cussed us as a result.

The Right Fit or Not?

Was this exercise realistic or fair? Well, yes and no. As a site selection consultant, I would have already known much of the information that was presented to me by my own research. I would have known that the $17-an-hour wage level would not qualify for incentives under Florida law in many communities because it was simply too low.

In short, we would not have opened it up to all five regions of the state, but concentrated on those rural places where $17-an-hour jobs would be above the median age. It would be in those places where incentives might come into play (although incentives should never be the dominant driving factor in location decisions.)

Cliff/Bob and I were hoping that at least one region might opt out. In other words say thanks but no thanks. But that didn’t happen. They all got their competitive dander up. They all wanted to win.

And therein might lie some truth for all of us, including experienced economic developers, to ponder. Not all projects will be a good fit for your community, so there are times to compete and there are times to gracefully bow out. Times to hold them and times to fold them.

Besides offering what would have been a lower wages for some areas, Project Yum Yum, as a food processing project, would have used a substantial amount of water and waste water. It would not have worked in some communities for that very fact, much less for the wage factor.

The point is that all communities, big and small, should know what they can do well and what they cannot. That might sound obvious, but as a consultant who also provides counsel to economic development organizations, I can tell you that some places have yet to figure that out.

Every community should know its strengths, weaknesses and opportunities, as well as possible threats that could arise. Then you try to move the dial.

There is No Nirvana

As I told my audience, there is no perfect place for all businesses. There is no nirvana. Rather, that are better places for certain businesses, where the risks are lessened and the chances for success are enhanced. As a site selection consultant representing a corporate interest, these are the places where we will want to hone in on based on a company’s specific needs.

In my other role as an economic development consultant, my job is to advise communities on how to better leverage strengths and address certain weaknesses when they can be addressed. (If your community is 50 miles from the nearest interstate highway, well, that’s just a fact. We cannot change that. But we can address those issues that we can change.)

If there is anything that comes out of our exercise with Leadership Florida, I hope it is this: I hope our participating business leaders, who seemed to have thoroughly enjoyed the exercise, go home with a greater appreciation for the work of their local economic development organizations. In some ways, it’s a thankless endeavor.

A community can do all the right things and still not win a recruitment project. I think our participants may now understand that. Project Yum Yum revealed a group that was far from being dumb dumb.

The Perils of the Job

During my trip to Florida, I heard stories of very experienced and talented economic developers coming and going, largely because they got caught in the crosshairs of a local politician or a business interest with whom they somehow irked. This happens everywhere as many economic developers lead the lives of itinerant coaches. Many will get the boot because of unrealistic expectations from their boards. Again, this happens everywhere.

I submit that if you are doing your job in economic development, you will on occasion ruffle some feathers. Telling the truth can get you in hot water. That is one reason why economic developers hire consultants, like me, to say what they cannot say. They typically will know their own communities far better than any outside consultant ever will. But they also have sense enough to know what they can say and what they cannot say.

If the word comes from them, the local economic developer, it may be viewed with suspicion and even derision. But if the word comes from me, the “enlightened one” with a briefcase from a far away land, ah, then somehow it is gospel. I don’t mean to be sacrilegious, truly I don’t. But Jesus spoke of the impossible task of being viewed as a prophet from your own village. There is so much truth to that.

I am certainly no prophet. But I do have a nice leather briefcase, which my wife gave me for Christmas. I took it with me to Tallahassee, where I hope that I made a difference.

I’ll see you down the road.

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

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

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

Breaking Some Rules Along the Way

When I left the newspaper business back in 1998, I don’t believe the word “blog” had yet been invented. Maybe it had, but I don’t think so. What I did then follows me today. With this Barberbiz thing of mine, I am essentially writing a business column, which was one of my many duties as the business editor of The Birmingham News.

In my newspaper columns, I took a somewhat irreverent tone, pointing out pomposity and the absurd in both government and corporate America. I was able to jab, poke and prod at the big boys with an eye toward keeping it real and funny for readers who wanted someone to just shoot straight with them.

I have certain ulterior motives in writing what I will now call a blog. It should be no great secret that as a contractor I hope to win contracts, both on the corporate side for site selection, and with economic development organizations. My observations might convince a prospective client that I am worthy.

My writings are having some impact. In the newly published second edition of “Economic Development Marketing” by Anatalio Ubalde and Eric Simundza, one of my blogs is included. “Local Investment as Marketing and the Myth of Branding” was my attempt to inject a little reality into the equation. Now if you love your country and your children, you will go out and buy this book.

Two Rules I Will Break

In my role as a consultant, I habitually violate what some would say are two cardinal rules of business: A) I will use humor to sometimes illustrate certain points and B) I don’t claim to know it all, which is almost blasphemy in some consultant circles.

Now there are those serious people in suits who will tell you that if you use humor, you risk coming off as being viewed as some sort of buffoon, certainly no one capable of providing serious solutions to serious problems. Therefore, humor should always be avoided. For best results, portray yourself as a Lutheran.

To that, I would say that life is too short and too weird not to find the humor in it all.

Look, if you have any walking-around sense whatsoever, you will soon recognize some of the absurdities of life that are thrown your way almost on a daily basis. Congress is a perfect example. If you cannot laugh at these things, and especially at yourself, well, then you need to go on a C-span marathon. Or better yet, go out and buy or rent DVDs of the Three Stooges.

If you do this, I submit that the meaning of life will dawn on you and you will either be laughing or crying as a result. Mind you, there is absolutely a time to be serious in business as people’s money and livelihoods are at stake. The Great Recession with $16 trillion of wealth vaporized and nobody going to jail for it? That was not especially funny. But I’m past that now. I’m just looking ahead for the next big joke.

Question: How can you look at Kim Jong Un, the 28-year-old leader of North Korea, and not think goober? Yes, he might prove to be a very dangerous goober by threatening nuclear war, but right now he’s the goober who met with Dennis Rodman. You cannot make this stuff up.

The Glue That Connects

I believe that we need humor to keep us sane. It certainly keeps us connected to each other and often a penetrating wisdom results. That sense of humor is often a glue of sorts at workplaces across America big and small. 

If you listen to combat veterans, they will tell you that humor was used as a survival tool when they found themselves in the presence of death and destruction. Sometimes it was a dark humor only understood and appreciated by them, but the joking served a purpose that they were in this together.

And to that sense, that is the very purpose of humor – we are in this thing together and we might as well make the best of it.  As a business tool, if nothing else, it serves as an assurance of good faith.

“Hey, I’m not here to rob you or take advantage of you. I just want to get the job done, like you, and then go home and eat Cheetos in my underwear and veg out in front of a zombie movie, OK?”

Not with a Straight Face

The second cardinal rule that I violate with some regularity is that I do not hold myself as an all-knowing guru/problem solver with encyclopedic knowledge at my finger tips. I simply couldn’t pull it off with a straight face. Lately, I have had several readers of this column ask me questions that would have taken me hours if not days of research to answer with any sort of certainty.

The questions were posed by economic developers who probably hoped that I would give them short and sweet (and free) answers, to which I simply could not because I did not have the answers. Now I have met some business people, consultants in particular, who have answers for everything under the sun. They are the be-all and end-all source, which means you should grab your wallet.

Popeye the Sailor said: “I am what I am and that’s all that I am.” Similarly, I will suggest that I know what I know, but I keep on trying to learn more. And that is especially true if you are paying me in a consulting capacity.

Educating a Client

When I am talking to a prospective corporate client about my services as a site selection consultant, I think it is important that I tell them about my philosophy in assembling information that they can ultimately use for their benefit. The way I see it, this company will know its own business. That will be their primary expertise, their bread and butter. Conversely, I know how the site selection process works or should work, and that is probably something they will not know much about. So I have to do a little educating along the way.

I will explain my plans and will seek their buy in. If they are spending their money on me, they deserve as much.  So in this exercise in transparency, I will tell them that I’m going to bring in some specialists with expert knowledge in certain fields that I have some cursory knowledge about but that I do not consider myself the expert in. I will bring in these experts to ensure that site selection search process works better than if I tried to wing it alone. 

So I will find my GIS person. I will hire my logistics-transportation guru, and I will contract out with my expert tax accountant. In short, I will serve as the general contractor and hire qualified subcontractors to get the job done and get it done right. For me to attempt to do it all myself, well, I don’t think I would be serving my client to the best of my ability.

As the outlaw Josey Wales said, “A man’s got to know his own limitations.”

And therein lies the beauty. I do not have to know it all. I just have to know who knows what. If I get that part right, which means assembling an All Star team on any given project, and then manage the overall site selection process competently, then we will bring true value to that company and determine the best place for them expand or consolidate operations.

Yes, I might be breaking some rules along the way, but there is a method to my madness. First, if I recognize that humor is called for to calm some frayed nerves, then I just might whip up a batch. “Look, the worst that can happen is that we all get fired and find ourselves living under a bridge.” Ok, maybe that is not such a good example.

Second, I hope that I am offering a realistic approach by acknowledging that I am not an expert in all fields but will actually depend on the expertise of others to get things done.

Bigger Means Better?

Also, I have no desire to blow smoke at you. I read a 50-page report this past week about a piece of property and how it should be used. I truly believe I could have done that same report in two, maybe three pages. But maybe that’s not what that economic development organization wanted. Maybe they wanted that 50-page heft to it. I mean, if there are more pages to it, there has to be more thoughtful analysis, more truth, right?

Also this past week, I got my rewritten, re-designed economic development brochure back from the printer. I think I like it, because it spells in rather succinct, no-nonsense terms the things that I can do for an economic development organization. If you want a pdf version, just let me know and I will email it to you. I think of it as being short and sweet.

After I get back from Florida working a mock project as a teaching aide to business stakeholders this coming week, I will resume my work on a redesigned corporate site selection brochure, which I think will prove to be very useful and instrumental to companies who could use my services in finding best locations for future operations.

Like me, companies need to know what they don’t know, which is exactly why they should hire me. They may be an industry leader in manufacturing widgets, but they don’t know how the intricacies of a site selection process works any more than I know how to play the xylophone.  

For the record, I do not anticipate the need to ever subcontract with a xylophone player. But I have learned that you never say never. That would be very funny.

I’ll see you down the road.

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

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

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

Waiting for a Renaissance (and My Smiling Robot)

Do you see the world as it is or how you want it to be?

Talk about a loaded question. If it makes you feel any better, we all see the world through very personal and sometimes even fractured lens. At any given time, each of us can be an optimist, a pessimist and occasionally, very occasionally, a realist.

Now I will admit that I get rankled with what I perceive as cheerleading talk about a wave of re-shoring that will spark a “manufacturing renaissance” in this country. As most of us are prone to do, the proponents of this notion cherry pick information (anecdotal evidence) to buttress their argument that this mega-trend is actually taking place.

This confirmation bias, also known as “my side bias,” is a tendency of people to favor information that confirms their beliefs. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. They also tend to interpret ambiguous evidence to support their existing position.

Now we are all guilty of this because we are human, but there are times when you really have to guard against it. For example, I would not be serving a corporate client very well on a site selection project if I allowed my personal biases to skew or interfere with my interpretation of data.

Strive to be Fair

Sure, there will be subjective decisions made during the process, but I should strive to be fair and balanced in my approach to essentially eliminate building/sites/communities from contention. After all, site selection has to be a winnowing process.

When I was a newspaper reporter, the creed within the profession of journalism was that I should be “objective” and not let any personal views creep into my reporting. As I am a bit of a traditionalist, I still believe in that approach, although it is impossible to be completely objective.

But by virtue of the fact that I would return to the newsroom with a notepad full of notes after covering, let’s say a trial, I had to pick and choose on what facts to report. I couldn’t just regurgitate all my notes.  Rather, I had to make subjective decisions on what to report and how to organize my story.

Later, as an editor, I would stress to my staff that they should strive to be accurate, fair and balanced and, of course, tough.  If we did those things, I figured, we would be doing our jobs.

As the business editor, I was frequently approached by business owners and corporate flacks to do “puff pieces,” that is favorable, cheerleading stories about their businesses. In essence, they were seeking free advertising in the guise of journalism. When we asked why we should do the story, more often than not the answer was that they were nice and had a swell business.

Beyond the Cheerleading

That in itself didn’t cut it. There had to be more. There had to be a compelling reason or news peg to do the story. We were always willing to listen and be convinced, but the cheerleading by itself was not enough.  Our credibility would surely have suffered had we cranked out puff pieces essentially promoting businesses.

To me, cheerleaders are pretty much just that, cheerleaders. They are proponents of something, often a feel-good notion that would make us feel better if it were only true. But too often reality sets in. Them durn facts get in the way.

If there is a re-shoring tidal wave to come with huge inroads in manufacturing job growth, please know that I am all for it but am just waiting for it to happen. I am willing to be convinced.

Since the 2007-09 recession ended, the economy has struggled to grow above a 2 percent annual pace. In the fourth quarter, output barely expanded.  The economy is forecast to yet again grow a modest 2 percent this year. Growth will likely be held back by uncertainty about the federal budget, higher Social Security taxes and across-the-board government spending cuts that kicked in March 1.

And unemployment remains high nearly four years after the end of the Great Recession. Roughly 12 million people remain out of work.

But I recognize progress when I see it. The breaking news on Friday that the unemployment rate had dropped to 7.7 percent, the lowest in four years, is certainly welcomed. But put it in context.

We Are Trudging Along

Of the 236,000 jobs created in February, 14,000 were in manufacturing, following the 12,000 factory jobs created in January. If we create 200,000 manufacturing jobs in 2013, I will be pleasantly surprised.

Industrial production is expected to rise by just 2.3 percent in 2013, even slower than 2012’s 3.8 percent growth rate, according to John Lonski, chief economist at Moody’s Capital Markets. The truth is we are trudging along.

A new Michigan State study said 40 percent of manufacturing firms surveyed believe there is increased movement of production back to the U.S. Conversely, that would mean 60 percent do not foresee that happening.

About 220 to 250 companies have brought some manufacturing operations back to the U.S., with the heaviest migration from China, according to Harry Moser, president of the Kildeer, Ill.,-based Reshoring Initiative. This represents about 50,000 jobs or 10 percent of job growth in manufacturing since January 2010.

And while that is all very good, it’s a gnat on a log when you consider the 5.5 million manufacturing jobs lost in the first decade of the new century.

So there you have it, I am trying my best to be a realist. I see positive signs but I am still waiting for a renaissance in terms of a job explosion in the order of a half  million manufacturing jobs. Let’s just say that I remain skeptical.

What Will the History Books Say?

Lord knows we live in a strange time. This past week, stocks surpassed the nominal record set in 2007, while the last recorded real median US household income was 8 percent lower than its 2007 peak. Is it just me or is something wrong with that picture? I only wish I could read the history books 100 years from now.

The last time the Dow hit a record, unemployment was 4.7 percent, George W. Bush was president, and Apple had just sold its first iPhone. From its peak in October 2007 to its bottom in March 2009, the Dow fell 54 percent.

That was far less than the nearly 90 percent drop in the Great Depression but still resulted in some $16 trillion in American household wealth being vaporized. There had been 11 previous bear markets since World War II and none had reached 50 percent.

Ascending stocks usually bode well for consumer spending, as there is the well-documented “wealth effect” that helps people feel better about spending. But the stock market, while a boon to Wall Street, cannot repair all the damage done to Main Street.

And while the US economy appears to be healing, workers’ pay has been a progressively shrinking piece of total GDP. Labor’s share of the economy is now at a 50-year low.  This is not just a U.S. phenomenon. The share of income going to workers is crashing worldwide.

Are the Machines Plotting Against Us?

I am wondering if the machines are not to blame. If there is a renaissance, a flourishing of knowledge, it would seem the case in the area of robotics and automation. Certainly, our machines make us more efficient and more productive at our jobs.

But it is also appears that there might be a sinister side to all this technological advancement at the workplace. How should I say this delicately? It would appear that the machines are making many of us, gulp, obsolete.

Recent technological advances have resulted in robots performing some higher cognitive tasks, which is both cool and scary. While it might initially be attractive to have a cyborg write this blog, I would soon tire of lying on a Mexican beach sipping from a glass with one of those little umbrellas.

Actually, the demise of mass labor is a sobering concept to say the least. I think it will be something the world will struggle with for decades to come and will only increase the inequities of wealth within societies. And I say that as true believer in capitalism.

Economists are increasingly pondering this trend “capital-biased technological change” — of machines essentially killing the need for people.  If the economists are offering solutions, I not sure I am hearing them. Maybe we should all be trained on how to program our own personal robots. 

If I could program mine with certain cognitive skills, certain human traits and attitudes, I think I would want it to be happy and optimistic. My smiling robot. I would want it to be my personal cheerleader, saying such things as, “Go Dean Go,” or “You can do it, Dean,” or “You the man, Dean.” Then again, I might hit the off switch after awhile.

I’ll see you down the road.

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

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

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

Blessed Are the Peacemakers

I have decided not to subject you to any more blather on our latest manufactured crisis from Washington called sequester. If you are like me, you’ve had your fill, so I am going to spare you.

Leave it to say, the business community is not pleased with the current political climate, which certainly inhibits future investment. The private sector yearns for at least a modicum of stability for purposes of planning, but the politicians are too caught up in a blame game on why they cannot or will not govern. I am so tired of them.

It appears that the ability to get things done now resides on the state level, where partisan politics will often take more of a back seat. That’s not always true. There have been some bruising political fights in Wisconsin, Indiana, and Michigan, where governors there have taken on organized labor and largely won.

As a site selection consultant, I have had corporate clients who have insisted that the search area for new operations be limited to right-to-work states. Typically, those are states in the Southeast, the Southwest and parts of the West.  States in the industrial Midwest and the Northeast, where a legacy of organized labor exists, have rejected the right-to-work mantle. At least until recently.

The Big Difference

Unions can form and do exist in right-to-work states. The same federal laws pertain as to the legality of forming a union, with a process overseen by the National Labor Relations Board. The big difference is that in a right-to-work state, workers are not required to join a union (and pay dues) even if their workplace becomes unionized.

And while right-to-work status may weaken the union movement, it doesn’t put it  out of business. I can tell you from firsthand experience that the United Mine Workers of America and the United Steelworkers of America had political if not actual muscle in Alabama, a right to work state, during the 1980s when I was a business reporter for The Birmingham News.

When I would cover meetings at USW Local 1013 union hall in Fairfield, Ala., a short distance from a U.S. Steel mill, I made sure to park my Toyota blocks away, as I have always preferred to drive with a windshield and inflated tires. The steel workers didn’t play around. Nor did the Mineworkers, who I found to be even more prone to, let’s just say, excitement. Anybody who works underground and then gets upset above ground, well, I will give them wide berth.

But I did get some valuable insight covering those industrial unions.  And I understood the union/lunchbucket mentality to some degree, as I had previously worked in several grey-iron foundries before I decided that I needed to become a college boy.

Witnessing Courageous Leadership

While they may have donned this masculine “don’t mess with us” attitude, I realized over time that there were certain enlightened union leaders who sensed that the world beneath their feet was shifting and that they (and their membership) had to essentially adapt or die.

I actually came to respect certain union leaders as I watched them move their membership to accept things that would have been unacceptable just a short time prior. In essence, they showed courage and leadership. And I can also tell you from firsthand knowledge that senior management with some companies respected them for it.

Jobs were saved as a result, as the howling hotheads were kept in check. There is no doubt in my mind that some of these union leaders who I watched work to save their membership from themselves would have made excellent CEOs.

The U.S. Bureau of Labor Statistics reported last month that union membership fell in 2012 to its lowest level since 1916. And last year Michigan, yes Michigan of all places, became the 24th right-to-work state in the country. It did so by following Indiana, another bastion of Midwest manufacturing, earlier in the year.

Watching Michigan

I have been thinking a lot about Michigan lately. A group of Michigan economic developers recently visited with me in Dallas. This is not an uncommon occurrence. I frequently meet with gaggles of economic developers from different parts of the country. They come to Dallas to call on gaggles of site selection consultants.

The message is always similar, no matter from where they come. It goes something like this:  “Hey, things are looking up here in (insert state, city or region). We got this, this and this. Please consider us if and when the time is right for a project.”

I have yet to hear this: “You know, there are probably better places than ours for capital investment.” Then again, I haven’t met many economic developers from California. I’m sorry, that was a low blow. Really uncalled for. Well, kinda. (Gov. Perry, let’s do lunch.)

I actually find these meetings with economic developers quite useful, as it gives me not only a face or faces of people whom I may work with in the future, but it also gives me a sense of what is important to them and what assets they may have on the ground. I focus on the real and tangible – what do you actually have existing that might make a difference – rather than on some ethereal notion of your brand.

“Accordion music capital of North America? No kidding. Well, that’s nice. Now tell me about that new robotics program that was started last year at your community college. And what’s the status of that interstate bypass on the north side of town? ”

Now I know what you are thinking and you are right — I get too caught up in provincial matters, when I should be thinking polka, polka, polka.

One Tough Nerd

But like I said, I’ve been thinking a lot about Michigan lately, where the Cedar Polka Fest will be held July 4-7 for all those so inclined. More importantly, I have been thinking about Gov. Rick Snyder, who I just might lump into that courageous leadership category. (It matters not to me if you are liberal or conservative to win my respect. I take notice of those who act and make a positive difference.)

Gov. Snyder currently does not enjoy particularly high approval ratings in his state.  About half of those polled in a recent survey said his push to make Michigan a right-to-work state was a bad move. Kurt Weiss, a spokesman for the governor, said Snyder is focused on fixing Michigan, not poll results. “He campaigned as ‘one tough nerd,'” Weiss said. “It wasn’t political. He wanted to put Michigan’s house in order and create an environment for job growth.”

Even if Snyder’s actions result in him becoming a one-term governor, I think he will leave a lasting legacy. Not only has he transformed this once union bastion into a right-to-work state, but he has also eliminated the widely despised and wildly complex Michigan Business Tax. It  was replaced with a simpler 6 percent corporate income tax that exempts most small businesses. As a result, the Tax Foundation now ranks Michigan 7^th lowest or best on corporate income taxes, compared to the previous ranking of 49^th.

Detroit Can’t Wait

On Friday, Snyder took on the proverbial weak link in the chain, that something in the punch bowl – Detroit. Standing beneath a banner at Wayne State University that read “Detroit Can’t Wait,” Snyder announced the state would be taking control of the city’s finances. My visiting economic developer friends from Michigan said this would likely happen. And it did.

Now I could write an entire blog on the good things that are happening in Detroit and there are good things happening there. The automotive industry is rebounding and showing growth. A young, creative class is moving in. Conversely, I could probably write several blogs on why Detroit can be viewed as a miserable, broken and dangerous place.

If you are secretly drawn to watching races to see the wrecks, then you might be a candidate for “ruin porn.” Believe it or not, there are tourists who actually come to Detroit to gape at and photograph once magnificent buildings and structures that are now essentially fallen timbers. Little do they know that 16 percent of all homicide victims are visitors.

Detroit, facing $14 billion in long-term debt, has struggled to maintain its tax base and services as its population has plunged. Since 1970, the Motor City’s population has been halved, from 1.5 million to less than 700,000 in 2012, and more than one-in-five lots in the 139-square-mile city is vacant. Michigan was the only state to lose population between 2000 and 2010, when the nation gained population by 10 percent.

Solve These Problems

“A lot of the things we’re talking about today could’ve been done in the last decade or even two or three decades in some cases,” Snyder told The Daily Beast. “Now, it’s to the point where an emergency manager is really what’s needed. We do need to solve these problems.”

No doubt the governor’s latest actions will not endear himself to a majority of voters in Detroit, as a racial gulf exists between the city, with more than 80 percent of  its residents black, and what could be viewed as a heavy white (Republican) hand emanating from Lansing. I understand those concerns.

The most important thing that the governor can do now is to choose the right person for the job as the emergency manager. Whoever he chooses, that person must be a tough, effective and yet a reasonable diplomat, willing to listen and build bridges. Blessed are the peacemakers.

I’ll see you down the road.

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