BBA Economic Digest

September 8, 2019

Out of the Wilderness

 

My friend, we'll call him "Bob," was down and I was frankly concerned. Having lost his job as the head of an economic development organization, he struggled to find work in the field he loved.

 

Out of more than 75 applications to ED groups, Bob got six or seven interviews, a far cry from a few years earlier when four ED groups were clamoring for him. Now, he found himself in the wilderness.

 

During his nearly two years out of economic development, Bob's self-esteem took a beating. After seeing the jobs that he applied for all go to candidates 20 and 25 years his junior, he stopped looking and eked out a living for a non-profit, making a fraction of what he needed.

 

But then a friend of Bob's left a head ED position for a consulting job and urged Bob to apply for the vacant position. And the rest is history. There is an old spiritual, probably a slave song, "Ain't I Glad I Got Out of the Wilderness," which speaks to emerging from a dark place.

 

Bob was there for awhile, but now he's back doing economic development, and I'm so happy for him.

 

Most of us will find ourselves in the wilderness at some point, but we can get out if we only keep at it. Friends and networking really do matter. Never give up.

 

With Loss Comes Opportunity

 

Maybe a hard pill to swallow, but I tell economic developers to publicize not only their "wins" -- new investment announcements by companies -- but also their "losses," when a plant shutdown means a good building will become available.

 

I very much appreciate an email received today from Subash Alias, CEO of the Missouri Partnership, who speaks to "an immediate location opportunity" with the closing of the Parker Hannifin Corp. plant in Kennett due to consolidation.

 

In his email, Subash states the workforce of nearly 100 is "Trade Act Certified, with dislocated worker and training funds available, and we expect the workforce to be available for hiring and re-training in the Fall."

 

"We anticipate the Parker building becoming available next year. This building is approximately 150,000 square feet on 20 acres. Other nearby options include a 100,000 square foot building on 23 acres and a 35 acre industrial park. All locations have all infrastructure in place, are within a Federal Opportunity Zone and are eligible for New Market Tax Credits."

 

This is smart marketing by the Missouri Partnership. Economic developers need not be afraid to publicize "losses" when the result is that a good building will become available.

 

 

The Dinosaur Club

 

Assuming that most site selection consultants are competent and know their stuff, the question is not so much what they know and convey to their clients, but what they may not reveal.

 

That's where business ethics comes to the forefront. Unfortunately, it is largely a subjective matter. What is ethical behavior to one consultant may not be to another.

 

In the past several days, I've talked to four consultants who cited what they believed to be unethical behavior by other site consultants, including pay-to-play schemes. Now was this mere professional jealousy or is there a real problem here?

 

As I have previously said, I believe site consultants have a fiduciary duty to serve their clients first and foremost and put their own business interests as secondary. Basing fees on incentives granted and/or accessed, a common practice, allows for an unethical consultant to steer a project to a place where he or she would benefit more than the client.

 

The truth is incentives should be of secondary if not marginal interest to a client seeking a best location. Quantitative and qualitative business factors should be the Holy Grail. But do consultants tell their clients that? Or is it, "You won't believe what I can get for you," which appeals to greed and allows for incentives to drive a site selection project.

 

Most consultants who base their fees in whole or in part on incentives awarded/accessed would deny that incentives are an overriding driving factor in site selection. Even if this is true, who, other than the consultants themselves, would know this for certain. Who knows what lurks in their hearts and minds?

 

When it comes to conflict of interest and fiduciary responsibility, it is my belief that a flat professional fee, or a variation of, is the only viable solution to this ethical bugaboo. Admittedly, I'm probably dinosaur in taking this position.  

 

But I'm reassured that I'm not alone. Others, too, are joining the ranks of the Dinosaur Club, among them, Chris Steele with Conway Inc. and Mark Simmons with Parker Poe Consulting. (I only wish others would come forward.) Wrote Simmons on LinkedIn:

 

"In our practice, we have never based our fees on a "% of incentives received/granted" basis, and would never do so just for the very reasons you have outlined. All of our engagements (100%) are either billed on an hourly basis or fixed fee. I have had more than a few clients request a "% of incentives granted" based payment schedule when initial discussions turned to pricing.

 

"However, after honestly explaining the pitfalls of that arrangement (not to mention that its legality is questionable in many states), nearly all of those clients have embraced either an hourly or fixed fee engagement relationship. With that said, I have been truly shocked by some of the stories I have heard related to this percentage form of compensation.

 

"Like you, I truly believe that this practice is just plain unethical. I feel very comfortable joining the ranks of dinosaurs with you!"

 

The Status Quo is Unacceptable

 

Walmart said it will stop selling ammunition for handguns and short-barrel rifles, while prohibiting customers who are not law enforcement officials from openly carrying guns in the store.

 

The world' largest retailer has locations in virtually every corner of the country and has long served more conservative regions where gun rights are cherished. In announcing the move, Walmart’s chief executive Doug McMillon acknowledged the difficulty of the decision.

 

“In a complex situation lacking a simple solution, we are trying to take constructive steps to reduce the risk that events like these will happen again,” he said in a memo to employees on Tuesday. “The status quo is unacceptable.”

 

Walmart, which sells guns in about half of its 4,750 U.S. stores, will continue selling long-barrel deer rifles and shotguns, as well as other firearms and ammunition for hunting and sports shooting.

 

Research firm CivicScience's survey of 1,986 U.S. adult Walmart shoppers found that under the change to its open carry policy, 29 percent are more likely to shop in Walmart stores, 22 percent are “much more likely” to shop there, 19 percent said they are less likely, including 14 percent who said they are “much less likely” to do so.

 

A second survey question asked to 1,471 Walmart shoppers about the ban on ammunition sales found nearly identical responses.

 

A Rural Homecoming

 

People living in small town America are rightly concerned about "brain drain," young people who typically leave to get an education and then take jobs in metro areas.

 

It comes down to economic opportunities, which means that smaller communities will be at a disadvantage simply because of sheer numbers.

 

Rather than fight gravity, I believe a more realistic approach is to lure native sons and daughters back after they have gained work experience and their talent quotient has grown.

 

Not only would they have more to offer in terms of business acumen, but they may want to return to a familiar place to start families and possibly new businesses. We've all heard stories of CEOs investing in their former hometowns because they want to give back.

 

It's an emotional response to be sure, but keep in mind that we're people, not machines. Tugging to the heart strings can work if a community has real business resources to offer.

 

Rural communities will celebrate the inaugural Rural Homecoming Oct. 18-20 to reconnect people to their hometowns. The program was developed by the Rural Community Assistance Partnership in partnership with the LOR Foundation. It's free, and I think worth checking out.

 

So Where is the Midwest?

 

So what or where is the Midwest? CityLab pins down America's romanticized “Heartland,” through a survey that lets people define “Midwest” however they want. So far, more than 12,000 have responded.

 

Is the the Midwest a geographic entity that can be defined by state lines, rivers, and mountains? Or is it shared cultural attributes that are only loosely associated with the land itself?

 

Some find the term Midwest to be too broad, and prefer narrower ones, like the Great Plains, the Rust Belt, or the Great Lakes region. Colin Woodard, the author of American Nations: A History of the Eleven Rival Regional Cultures of North America, argues that “there isn’t, culturally speaking, a single Midwest.”

 

“There is this kind of cultural understanding that the origins of the Midwest was heavily agricultural and small-town, but by the late 19th century, Midwestern identity was definitely adapting itself to include urban areas,” said Jon Lauck, the founding president of the Midwestern History Association. “Everyone knows that Chicago, Milwaukee, Minneapolis, Omaha -- these are Midwestern cities.”

 

Our Diversity Explosion

 

Recently released U.S. Census Bureau estimates for 2018 make plain that racial minority populations continue to expand, leaving fewer parts of the country untouched by diversity. We are, in fact, experiencing a "diversity explosion," according to Brookings. 

 

Hispanics and Asian Americans are the fastest-growing racial minority groups nationally, increasing by 18.6 percent and 27.4 percent, respectively, from 2010 to 2018. There is also a growing dispersion of both groups to new destinations, which tend to lie further afield than the familiar large metro areas.

 

Hispanic residents are highly represented from California to Texas and parts of the Mountain West, the Southeast, urbanized parts of the North and many smaller places in the nation’s interior. Asian residents are highly represented in California, Washington, Texas, portions of the Southeast, large metropolitan areas, and small towns in all parts of the country.

 

The highest concentration of black Americans remains in the South, which houses 58 percent of the nation’s black population. These concentrations also appear in many northern urban areas. The most notable shift for black Americans in recent decades has been a reversal from the historical Great Migration to traditional northern and West Coast destination areas, to a return to the South.

 

The nation’s white population has grown by a tepid 0.1 percent since 2010, and is projected to decline over the next decade. And areas with declining white populations are not likely to grow them by way of white immigration from abroad or white natural increase (the excess of births over deaths).

 

While there are large swaths of “white counties," many are sparsely populated areas where the white population is stagnating. In fact, these counties, spanning large sections of the middle of the country, are home to just 30 percent of the nation’s residents.

 

In contrast, 35 percent of U.S. residents live in counties where two or more minorities are highly represented. Since 2010, 96 percent of all U.S. counties registered declines in their white population shares.

 

What We're Reading

 

A Nobel-Winning Economist Goes to Burning Man  New York Times

 

The Future of Food  Quartz

 

The Unbuilt Streets of California's Ghost Metropolis  WIRED

 

This is What a Transportation Looks Like  CityLab

 

After the KKK Makes a Late Night Visit, a Tiny North Carolina Town Takes a Stand  Washington Post

 

Workers Are Fleeing Big Cities for Small Ones—and Taking Their Jobs With Them  Wall Street Journal

 

Parting Thoughts

 

We leave you with remarks by Grammy-winning folk singer Rhiannon Giddens, one of a number of artists featured in Ken Burn's upcoming documentary on country music, to air on PBS on Sept. 15. Ms. Giddens is quoted here by Rolling Stone magazine.

 

‘It’s really important people know country music is a hybrid, a creolization that comes out of African and European cultures mixing. Also, most importantly, it comes from working-class people mixing. That’s the thing that’s often forgotten, that where people made these interactions musically was in the fields, on the riverboats, or wherever — and that this music is our music, all of us together.

 

"It’s very dangerous to subscribe to it as ‘white music,’ or as this monolithic thing, because it’s not. And that’s the beauty of America, I think — all the positive stuff comes out of that aspect of the mix.”

 

 

 

 

 

 

 

 

     

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