Wednesday, May 20, 2015

Dubuque Rebuke

In 2009, IBM – tax-incentives happily placed in their grasping, outstretched palm – established tech centers in Dubuque, Iowa and Columbia, Missouri.

That was then, and this is now: half of IBM’s Dubuque workforce has been laid off, and Missouri’s headcount – thanks to lay-offs there – has dropped below the 500 employee threshold for their tax credits. Between them, the cities forked over $84M that resulted in a few years employment (albeit well-paid employment) for a couple of thousand folks.

Back when the deals were struck, both cities were no doubt envisioning a restart for their economies would build off of the IBM and become tech centers.

Hey, if it happened to Research Triangle, why not us?

Rick Dickinson, a Dubuque official who helps lure new employers, said he’d expected IBM to put the city on the map and help Iowa transcend Midwestern stereotypes he describes as: “red barn, silo, Holstein cow, hog and a bale of hay.” No company before IBM has moved into town or ramped up so quickly - - only to scale back, he said. (Source: Bloomberg)

Alas, that just ain’t the way the world works, and it looks like it’s back to red barn silo, Holstein and hog for Dubuque. Which kind of fits, given that two of the major employers in town are Hormel (think hog-to-Spam) and John Deere (think field-to-silo-to-hog).

This is, of course, terrible for the towns and for the employees who no longer have work, and are in an area where there’s not a lot of other tech options for them.

Which is one big difference between losing your job in a place where there are many like opportunities out there – tech centers like Research Triangle, Silicon Valley, Boston, NYC… – and losing your job in an isolated area where the firm you worked at was a one-off.

Part of this is just how the economy works these days: an acceleration of what happened in the latter part of the 20th century when the Northeast and Rustbelt factories first moved South chasing cheaper labor, and then out of the country entirely. The fortunate places, like Boston, were able to replace manufacturing with medical, education, tech/bio-tech. The less fortunate places, like Detroit, found themselves hollowed-out.

Now it just happens faster, especially in technology, where yesterday’s know-how is tomorrow’s so what.

Yet there remains the lure of having a big name like Big Blue smile benevolently on you, even if you paid for that smile. Caveat, Dubuques:

“Going after big names makes you vulnerable to the vagaries of the company’s fortune,” said Howard Cure, director of municipal research at Evercore Wealth Management LLC in New York.

This reminds me of my stint in a company that claimed its sweet-spot was mid-market organizations, and in fact put it in its mission statement. The CEO was fond of saying how well-suited we were to serve mid-sized companies, because we ourselves were mid-sized.

My mantra to sales was ‘if you’ve heard of the company, they’re probably not right for us.’

Despite all our pronouncements, our sales guys were always on the elephant hunt, dragging in big name accounts – like IBM, in fact – that were never, ever, ever going to work with us – at least not on reasonable terms. I was once accused of being defeatist when I told a rep that it wasn’t worth responding to an RFP from Bank of America, since we clearly didn’t meet several criteria explicitly presented as deal-breakers. (I threw in on the RFP because I didn’t want to be blamed for the loss. But predictably, we didn’t get the deal.)

And when we did get a deal with one of the elephants – like IBM, in fact – we had to jump through so many hoops and promise them so many things: customizations, free support, deep discounts – that we always lost money on them. All for the glory of having their name – fleetingly –on our customer list. Anything for a bad deal!

If elephant-bagging incentives don’t work on the micro-level like this, they don’t seem to work all that well for cities and states, either.

Yet the promise of rebirth, the lure of bringing in good jobs. It’s just irresistible.

And for the IBM’s of the world, if it makes at least temporary economic sense, why not?

If it doesn’t work, on to the next…

Governments seem to do an even worse job when they actually invest in a new enterprise. Talk about a place that the market should be taking care of…I can see government getting involved in training, but investing in start-ups? How about leaving that to VC’s who can afford to lose on nine out of ten deals.

And don’t get me going on tax incentives for Hollywood.

If someone wants to make a film that takes place in New England strike a note of authenticity by actually being filmed in New England, they’re most welcome. I love seeing places I recognize, and enjoy movies being made on my door-step. Why, just last summer I narrowly missed seeing Johnny Depp and Benedict Cumberbatch on my block making a movie about Whitey Bulger.

But if we need to bribe them to do so on the sketchy promise of job-creation and boost to the local economy (c.f., box lunches), well…

Let those who must be bribed to film here take their camera crews elsewhere – and suffer the scorn of the cognoscenti when those of us in the know spot the fakery.

A few years ago, there was a TV series – something dystopic starring Noah Wylie – that was supposed to take place in and around Boston. I watched an episode, and one scene took place on the town green. I was just telling myself that this didn’t really look local when they panned on a war monument, which gave the dates of World War II as 1939-1945. Oh, Canada!

Conviction, an otherwise pretty good movie set in New England, was shot on location in Michigan. Which looks vaguely like New England if you’re from the Southwest, but nothing like New England if you actually live here.

Back to Dubuque and Columbia. I feel badly for those who’ve lost their jobs with IBM, and don’t have a lot of other local options.

But this is the way the world works, and it’s only going to get worse as globalization and automation keep chugging along.

Today it’s a rebuke to Dubuque. Tomorrow it’s your job.

I don’t know what the solution to what seems an intractable problem for those interested in stability in their professional and personal lives, who want to live and work in wherever their own private Dubuque is. But I’m pretty sure that government tax breaks aren’t it.


Frederick Wright said...

Places like Boston attract/create successful companies in SPITE of any incentives, not because of them. It is our infrastructure, our progressive, educated, and tolerant culture, that breeds a thriving diversified economy. Meanwhile, these other states seem content to slash spending on education, pass absurd 'religious freedom' bills to demonize minorities, and are surprised when nascent tech booms collapse.

Maureen Rogers said...

Frederick - Good point. Maybe towns in Iowa and Missouri that want to go techie should focus on tech related to their core, as in agri-tech. But you also raise the issue that many states also through up barriers to major tech investment by passing laws that would make it impossible for companies to move there...(Hard to imagine a bio-tech company relocating to a state that mandated teaching creationism...)

Frederick Wright said...

Exactly - it is hard enough to hire real talent in this country anyway. No way would any literate, opposable thumb type scientist consent to living among the neo-Taliban of the flyover states unless no other options were available.