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BBA Economic Digest: A CEO Creates a Stir

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A CEO Creates a Stir

It was one man's opinion, but his comments went viral after initally appearing in the Wall Street Journal under the headline, "I’m Leaving Seattle for Texas So My Employees Can Be Free."

Peter Rex, founder and CEO of Rex Teams, wrote said he tried San Francisco and Seattle and found them to be "hostile to the principles and policies that enable people to live abundantly in the broadest sense."

"By the end of the year, I hope to move dozens of employees to the Lone Star State and to be ready to hire hundreds more," Rex wrote.

While Mr. Rex's views may regarded as extreme (or not) by some they are not uncommon. Others have contended that the West Coast’s high cost of living and doing business is measured not only in dollars but in what some would contend is stifling conformity.

Mr. Rex's comments certainly got a rise from a consultant that I know and respect. Rajeev Thakur, head of Growth and Client Strategy at BeyondHQ, wrote on LinkedIn that he moved from the Washington, D.C. area to Seattle to be more free.

"I wanted to be free from a toxic political environment that seeped into every aspect of life. I wanted to be free from the pretentiousness. I wanted to be free from the 'what’s in it for me' culture," wrote Thakur on LinkedIn. He added, "If you’re moving for lower cost then just say that."

One thing is certain is that economic developers in Texas do propulgate the notiod of more freedom (even with higher property taxes) and, of course, lower costs in comparision to West Coast cities. As a economic development consultant, I would tell my economic development friends on the West Coast that there comes a point when perception becomes reality. And that should concern them.

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Yes, Costs Matter

Coronavirus-related work-from-home policies at the country’s biggest technology companies appear to have caused an exodus from Silicon Valley, which has sent rent prices in San Francisco plummeting. Rents for a one-bedroom apartment in the major metro area were down 9.2 percent in June when compared with the same period last year, according to data from rental site Zumper. That is the largest decline since at least 2015 and brings the price point ($3,360) down to where it was three years ago. In the U.S. overall, one-bedroom rents fell by just 0.2 percent. No other major metro city’s data came close to the decrease in San Francisco. Anthemos Georgiades, the CEO of Zumper, called the price decline “unprecedented” in a Twitter post, saying it supports the theory that people are starting to leave the city as options for remote work in the technology sector become more widely available. “Turns out a lot of the online hype about Silicon Valley's move to remote is … now borne out by the data,” Georgiades wrote in a Twitter post.

There is mounting evidence that office work will never go back to where it was before the pandemic. PwC has a new survey out this week with some eye-opening factoids: • The vast majority of office workers -- 83 percent -- want to work from home at least one day a week, after the pandemic has passed. • A majority of employers -- 55 percent -- expect they will give workers that option.

Photo by Caleb Long on Wikimedia Commons

Take Me Back to Tulsa

In last week's Digest, I wrote about how Tesla appeared to be focusing on Austin for a $1 billion "gigafactory" to build it's Cybertruck electric pickup and Model Y SUV.

Company officials were involved in two public/virtual meetings in which they argued for property tax abatements concerning a 2,100-acre site east of the city.

I made the argument that while Austin, the 11th largest metro in the country soon to be 10th, may make sense from a labor/tech talent standpoint, it's highway transportation network was far inferior to that of Tulsa, Oklahoma.

And low and behold, Tesla CEO Elon Musk visited Tulsa late Friday afternoon to get a look for himself.

“The site is very important to Elon. He likes to get a feel for it. He really goes based upon his kind of personal feeling,” Secretary of Commerce Sean Kouplen told the Tulsa World. “So that was a big part of it, just letting him experience the drive from downtown to the site.”

“We showed him the site plan, what it would look like on the site. We obviously talked about things like utility access, and water and natural gas access ... all the kind of the basics around the site and really just kind of tried to visualize what a Tesla plant would look like on that particular piece of land.”

My take: If you look at a map, it is apparent that Tesla would be much better suited to shipping finished product via truck from Tulsa rather than in Austin. Interstate 44 runs through Tulsa (east to St. Louis) and it's a short haul to Interstate 40 (east to Memphis). Austin's nearest east-west corridor is I-10, 50 miles to the south heading east to Houston until it terminates in Jacksonville, Fla.

The closest east-west interstate corridor to the Austin site is Interstate 10, about 50 miles to the south. Heading east on I-10, truck traffic could come to a crawl in Houston, with the remainder of the interstate hugging the Gulf Coast. The alternative east-west corridors are approximately four hours to the north in Dallas via Interstates 20 and 30.

(Of course, I could make a similar argument against the location of the Toyota assembly plant south of San Antonio, which has undergone multiple expansions over the years.)

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Customer Value Comes First

What does the customer value? You know, that may be the most important question. And yet it is often the one least asked. We often try answer it for ourselves, convinced that we are doing the right things (when often we aren't). Rather than correctly asking, “Does it deliver value to our customer?” too often we wrongly ask, “Does it fit within our rules?" Such an approach inhibits vision and dedication. It's not going to be our approach at BBA. No cookie-cutter approach from us.

Last week I reviewed an econoomic development organization's new website at the request of staffers. It is a service that we provide at no charge. But I always add a disclaimer at the start: You get what you pay for.

The new website was attractive, but missed the mark by trying to please everyone, hence pleasing no one. It goes back to identifying who your customers are and what they value. An EDO must think about the needs that it fills among its customers that they do not receive from another source. That entails understanding the long-term aspirations of its customers, which I think should be reflected in a website. It means going the extra mile. You do that by meeting, listening and asking questions of your incumbent businesses. That's business retention and expansion in a nutshell, and yet so many EDOs don't do it or place BRE in a subordinate role behind business recruitment. Big mistake. While EDOs should cater to the "tire kickers" -- companies outside the community considering an investment in the community -- they are secondary customers until or unless they become become corporate citizens of the community. Then they become primary customers whose needs are valued most.

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Be Bold and Prosper

During times of crisis, it's the bold that win. Always has, always will be.

“Economic calamities—even tragic, once-a-century global pandemics—require business leaders to find opportunity in the chaos. It’s there to be found. Leaders who can seize it will mitigate the pain for employees, consumers, vendors, communities, and investors. The big lesson from past downturns is that the competitive order within industries will change far more now than it ever will in prosperous times,” writes Geoff Colvin for Fortune. So how do economic developers gain a better understanding of a changing competitive order? Go out in your community and ask, listen, an learn. That was parting advice to a virtual class recently at the University of Oklahoma Economic Development Institute on business retention and expansion.

Communities that act courageously to save their small business sector, which employs roughly half the workforce, will win. Communities that identify positions that are in-demand from employers and re-train people accordingly will win. Communities that put a premimum on digital skills will win.

Economic development is a about leaning forward and betting on the future. It's not about the status quo, but being bold so that people will prosper.

Photo by Pascal Habermann on Unsplash

It's Not What We Know That Matters

Too often, consultants are intent to prove how much knowledge and experience they have. (How often have you heard a consultant say, "I don't know" when asked a question?)

And yet arguably the best consultant of all time, Peter Drucker, known as "the father of modern management" and who provided counsel to the head of nations and Fortune 500 CEOs, took a quite opposite approach.

"I do not use my knowledge and experience at all. I bring my ignorance to the situation. Ignorance is the most important component for helping others to solve any problem in any industry.”

Drucker held that ignorance is "not such a bad thing if one knows how to use it."

"You must frequently approach problems with your ignorance; not what you think you know from past experience, because not infrequently, what you think you know is wrong.”

The key to successful consulting, said Drucker, is "to ask the right questions."

So we are unapologetically ripping a page from Drucker's book in creating a new service called Virtual Solutions.

It is not so much what we know at BBA that matters, but rather what we will find out for a client. As a former investigative reporter, I believe that is where we can bring true value.