Meeting Tom Wolfe

A highly accomplished author recently died.  His name is Tom Wolfe.  Be advised, this is not an obituary in the usual sense.  

First, I read Bonfire of the Vanities. It was an outstanding book.  The characters were so real.  Mr. Wolfe also wrote non-fiction.  You know his most famous books so I will skip that. 

No, this one is different. I met Mr. Wolfe in 1999.  I just started at the SC Department of Commerce (DOC) and a Forbes event was scheduled for Charleston.  Two DOC staff were able to attend and I was one. I almost did not get to go.  Mr. Wolfe served as the dinner speaker and the two day meeting was filled with CEO oriented sessions. The venue was Charleston Place. I was looking forward to hearing Mr. Wolfe speak. 

I decided to hit the gym before the evening event. I open the door and I see Mr. Wolfe on a treadmill.  No one else is in the gym.  So I take treadmill next to him, introduce myself, and say I am looking forward to his speech tonight.  

Now this was before iPods and smart phones. The only distraction was music from a console.  

He was very receptive.  At this point is it Tom, not Mr. Wolfe.  We talk for about 20 minutes.  He loved Charleston for its charm (he was born in Richmond, VA).  He talked about his writing and we discussed politics.  Since he lived in New York City i asked him about Ms. Clinton's prospective candidacy for a NY senate seat. He did not think she could win. 

His engagement and kindness stand out to me. He could have left, he could have said he wanted to concentrate on an issue, but he did not.  From my perspective, I had a wonderful conversation with an accomplished author of fiction and non-fiction works. He was a true gentleman.  

Technology and Innovation Driving Economic Growth

The article this post is about appeared in Fortune magazine.  The title is "Lone Star Rising." It is about the re surging oil industry in my home region of Midland, Texas and the Permian Basin.  This comeback is due in large part to new technology that allows the extraction of oil in a cost effective way.  The impact starts at the local level and continues through to an international level.

I am reminded of a parallel I recently read.  Back in the 70s I recall reading that the world would run out of food to accommodate future population growth.  If you looked at  the current food production back then and imposed a graph of world population growth on top of it, you might come to the same conclusion. What was not included in any analysis and likely could not be factored in was technology improvements and innovation in food production and preservation.  But that is what we saw,  substantial increases in food production using technology and innovation in grains, equipment, fertilizer, etc. resulting in a higher yield per acre.  Yes, it has positive and negative impacts.  Examples are the cost of equipment increased, the optimal size of a farm in terms of acreage went up too. This was a factor in the purchasing of family farms by corporations and partnerships.

Another example is rubber. In World War II one product highly valued was rubber.  It was an important natural resource.  Before World War II, rubber was largely controlled by the Axis powers.  During the first part of World War II rubber drives in the U.S. were very popular and very necessary. However, in 1940 a scientist with B.F. Goodrich invented a synthetic rubber.  This helped the U.S. manufacture rubber for all the products needed to fight a war. Think jeep and other vehicle tires for one.  After the war, the U.S. catapulted in the production of rubber and impacted the world rubber trade and sourcing of the raw material.  Consider the cities built on rubber and tire production and jobs created in this industry. An example of a city is Akron.  And an industry that experienced phenomenal churn and growth based in part on these and future innovations include these U.S. based companies - B.F. Goodrich, Goodyear, General Tire, and Uniroyal.

In almost every industry you can name, straight line graphs of production and population growth can indeed imply severe shortages in the future. However, we cannot easily predict the impact of technology and innovation in increasing the volume of products.  I realize this is somewhat simplistic, but one I think rings true in a broad sense.  We seem to consistently underestimate corporate R&D to solve so many of the challenges we face. 

A bit of history of the oil industry in West Texas.  When I lived in Midland, we read that the world is running out of oil that we can feasibly drill.  And we were importing well over 50 percent of the oil consumed in the U.S. on a daily basis. That was a couple of decades ago. In addition, when I was growing up in Midland I learned about the oil industry and the factors that positively and negatively impact the business.  Perhaps among the most important, the price of a barrel of oil in large part determines where and how you extract oil from the earth.  To put it another way, the cost of getting one barrel of oil out the earth is directly related to the price of a barrel of oil on the market.  Oil that can be pulled from the earth in a cost effective means is called recoverable.

Today. The U.S., led by the Permian Basin, produces more oil than anyone thought possible. The U.S. exports oil.  Very few people ever thought that was possible.  According to the article, over 30 billion (yes billion) barrels of oil have been drilled from the Permian Basin since 1923.  How much left in the ground is recoverable (it can be extracted in a cost efficient means)?  Estimates are between 60 to 90 billion (yes, again billion) barrels.

The Permian Basin has substantial oil reserves, but until recently it was not cost effective to extract the oil. Two innovations changed that.  The first one was horizontal drilling. The second one is fracking. As a result, production in the U.S. climbed and in the Permian Basin surged.  The article does on excellent job showing the growth of drilling. 

The article points out the positive and negative impacts of these innovations.  As you  experience growth, sometimes demands in construction outstrips infrastructure development.  By infrastructure I mean roads, schools, housing, etc. West Texas, parts of North Dakota and other states witnessed this.  Costs increase (wait till you read about hotel rooms).  You may see an increase in new business formation with may not directly related to the oil business and see far more disposal income from residents. 

As I read the article I took great pride in my hometown and the region.  These are good people, hearty people.  Midland is a wonderful city to raise a family.  It offers so much.  The entrepreneurial spirit is alive and well.  Advances in drilling technology breathed new life into the area.

In economic development we constantly read about cities and regions struggling with declining employment, loss of jobs, and aging population. Or cities that are highly dependent on one industry.  Midland and the Permian Basin is an excellent example of how this can be changed. However, I do note that it is driven by technology and innovation applied to a natural resource.  Frankly, I think this is not easily replicated.  Other struggling locations may not be as fortunate to have a natural resource vital to U.S. interests.   Even with this, a good goal for every economic developer should be to diversify the economy.

I tried to offer a few of the high points of the article. It is long, but definitely worth the read. The graphics and pics are outstanding.  I can remember when Midland experienced decline in jobs and negative population growth.  Major oil companies cut back on local employees or simply shut down all operations in the city.  Now, it is coming back.  Unlike previous surges, this one maybe more long term.  Note the commitment of Exxon Mobil and Royal Dutch Shell.  I hope it is. 

Link to the article:  http://fortune.com/longform/permian-basin-oil-fortune-500/

Follow the Leader

This article is the ideal way to start a morning.  It is about three mainstay retail monoliths forced to follow the lead of a disrupt-er.  

The three retail giants are Walmart, Target, and Kroger. The disrupt-er is (you guessed it) Amazon. 

The disrupt-er is forcing monumental change in all three companies. The three are buying other companies to catch up with the disrupt-er and they are forced to alter the compensation structure.  Finally, all three are trying to find avenues to be the leader as opposed to the follower.  

Customer focus is the foundation of disruptive technology.  What I find fascinating is Amazon's consistent effort to be the disrupt-er. Even though the company celebrates its 24th anniversary this year and is among the largest firms in the US, it continues with its entrepreneurial attitude and intense customer focus.

I am reminded of the Andy Grove book, Only the Paranoid Survive.  In it he says, “Businesses fail either because they leave their customers or because their customer leave them !” 

This will be a fascinating story over the next few years and certainly worthy of a a book. For now, this is the article.

https://www.msn.com/en-us/news/finance-companies/walmart-and-target-are-spending-like-crazy-to-challenge-amazon/ar-AAxN9pI

I’ve Been Everywhere - by Johnny Cash

This is not about Mr. Cash, but it is a great theme song for this post.  I ran across an article in Bloomberg BusinessWeek on people who move to a place instead of a job.  The title of the article is "Moving to a Place Instead of a Job."  

Back in my college day, I had friends from all over the U. S. who attended various universities and did not want to move from the university town. That is what I thought when I first read title.  I was wrong.  

The article focuses on people (mainly renters) who chose to live in a city first, then start applying for jobs.  This concept is somewhat foreign to me. I cannot conceive of living in a place before I had a job.  

However, it appeals to many individuals.  Frankly, I cannot do the article justice. And I was surprised at the cities of choice, until I read the article. And that is what I encourage you to do. 

Link to the article:  https://www.bloomberg.com/view/articles/2018-05-18/cities-need-workers-to-move-for-the-location-not-the-job

Link to Mr. Cash's song:  https://youtu.be/ov4epAJRPMw

Family Owned Businesses

MSN recently did a story on the largest family businesses in the world.  It is an impressive list.  I must say, I was disappointed when I started clicking through the slide show and saw how few are US based.  Spoiler alert: you will see several toward the end.

Family owned businesses generate considerable nostalgia.  We take pride in shopping at family owned businesses. In economic development, it never fails to point out the leading family owned businesses in the area. 

Why is this?  Because it is the classic American success story.  A family sees a void or has a passion and starts a business as the result.  It may grow, establish new locations and/or products. The kids are involved and will likely take over some day. Sometimes internal family battles get played out in the media and that can be riveting reading.  It may even be the subject of a mini-series or feature film.   It certainly has an almost romantic feeling to it.

Enough about that. 

The family owned businesses in this story run across the world.  They may be in the first, second, or third generation of family ownership.  Consider some of the challenges.  For example, any non-family member will likely never take the helm.  So to hire the best, you may also lose them to a firm who can offer the top seat.  Your children know what is expected and will likely be indoctrinated accordingly and likely at a young age.  Transitioning leadership to the next generation maybe tumultuous.  Current leadership maybe arrogant and refuse to listen to outside advisors (after all I built it, how can I be wrong).

When I read about these companies and the accompanying write-up, I was mightily impressed. After all, we can pick our friends, but not our family.  From my perspective, these companies instilled a company sense of values throughout the entire organization and that carried through to future generations.  The leaders of these firms navigated extremely challenging times and events.  They adjusted their business and business model when necessary and I suspect never sat on their laurels.  Rather, they spent considerable time thinking about how to maintain leadership in their respective fields and listened to outside counsel.

All of the above applies to any business. But I think family owned businesses have inherent advantages and unique challenges. The companies in this piece have successfully navigated these challenges, so far.

https://www.msn.com/en-us/news/finance-companies/the-worlds-biggest-companies-that-are-still-family-owned/ss-AAw3Wn3