The myth of ‘focus’: Economic development’s Big Turk opportunity

One of the most oft repeated mantras in economic development is the need to focus.  “We can’t be all things to all people”.  “We have limited resources so we need to focus our efforts”.  I had a conversation with a budding politicians the other day and he told me we must focus on one or two key industries.  That would be the key to success.

I’m not so sure.  As I have mentioned before I changed my mind on this issue a decade or so ago when I was working with Clare, Nova Scotia on an economic development strategy.  During a session with tourism industry folks, I asked them to brainstorm economic opportunities they thought could work in the community.  I heard about the need for more accommodations, tourism operators such as kayaking and experiential fishing.  In all the group identified at least a dozen tourism opportunities that might work in Clare.  If the community could convince entrepreneurs to invest in a handful of these opportunities it would have provided  a small but important boost to the local economy.

So I asked which organization was working to develop these opportunities.

Crickets.

At the time there were at least seven related economic development organizations active in Clare.  NSBI had a body.  ACOA had a body.  The municipality had a body. The local tourism industry had an association.  One of the big universities had an operation in the community that helped budding entrepreneurs with business and marketing plans.  The French-language economic development group RDEE Canada had a body.  There was a regional economic development group that covered Digby to Yarmouth.  In addition, there were several other provincial government departments with some interest in tourism.

None were doing anything to proactively try and attract tourism investment to Clare.

It was my light bulb moment.  It was then and there I realized that economic development efforts should be focused more on opportunities than on functions.  Identifying opportunities would help focus efforts.  Big opportunities might require more effort but smaller, relatively limited effort opportunities were just as important.  It was all a matter of the relative cost and effort to develop them.

It would have taken very limited effort to package up those dozen tourism investment ideas into separate business cases, book a room at a hotel in Toronto and invite interested entrepreneurs to come and take a look.

But no one did it because for most economic development is not about proactively developing and pitching ideas, it is about waiting for the phone to ring (or the email to arrive).  Once a potential entrepreneur is interested, then there is an army of support.  ACOA has funding. NSBI has funding. BDC has funding. The university will help with a business plan.  The regional agency will help.  The tourism industry association will help.  The municipal economic development officer will help – an army of support – after the entrepreneur walks through the door.

You might call this the Big Turk approach to economic development. The Big Turk is a Canadian chocolate bar.  It ranks in the top 20 in Canada but isn’t exactly Smarties.  I can’t find annual volume for the bar but I would be surprised if it generated more than a couple million in sales per year across the country.

Why would Nestlé, a company with more than $90 billion worth of annual sales and over 300,000 employees, ‘focus’ on the Big Turk? Why the Big Turk and its 0.0033% of global sales?

Following the wisdom of the economic development gurus they should put all their effort into Kit Kat.

In reality, Nestlé  offers thousands of smaller regionally focused products because they see opportunity.  The issue is not the volume of sales.  It’s the profitability of the opportunity. And there are other benefits such as shared overhead, distribution, R&D, packaging and other costs.

There is a lesson here for economic developers.

Developing the maple syrup sector in Albert County is not a billion dollar opportunity but it could be a $30 million opportunity.  Attracting 50 immigrant farmers is not a billion opportunity but could help strengthen an important industry in the province.  Identifying tourism investment opportunities in and around the Fundy Trail is not going to save the New Brunswick economy but it might yield important economic benefits.  Promoting the development of tourism-related housing along the Bay of Fundy and convincing the Yanks to buy (or fractionally own) these houses creates a permanent base of tourists that visit here multiple times per year.

Determining if there are firms doing warehousing out of Montreal that would have a better economic case to do it out of Moncton isn’t going to solve the province’s long term demographic crisis but it would be taking advantage of a core economic asset of the hub city.

I used to joke that there must be economic opportunities along the Plaster Rock-Renous highway.  There must.  But who is looking at it?  No one.  If a budding entrepreneur just happens along then the whole system kicks in with support but no one is seriously poking around the swamps of central New Brunswick looking for opportunity.

Again, I’m not suggesting that governments own businesses or provide significant subsidies to industries they like or anything so heavy handed.  I’m saying there is information asymmetry between the potential opportunities and the potential entrepreneurs/investors and economic developers would be better off playing in this intermediary space.

Obviously there needs to be a rigorous focus on ROI.  If it costs $1 million to develop a $50,000 opportunity, don’t do it.  But what would be the cost to develop a program to attract 50 immigrant farmers to the Salisbury area?  What would be the cost to flesh out new tourism investment opportunities in Greater Saint John?

I have said, somewhat facetiously, in the past that we should go through all 900+ NAICS industry codes.  Do we have a business case for NAICS 712120 – Historic and heritage sites?  Is there some historical or geographic attribute we can exploit?  Where are NAICS  624310 – Vocational rehabilitation services happening?  Who is getting the economic benefit?

Are we losing out of NAICS 623110 – Nursing care facilities opportunities?  My wife suggested there should be a mini-assisted living facility in Upper Blackville so that elderly people don’t have to leave the community.  Maybe?

Do we have enough NAICS 541215 – Bookkeeping, payroll and related services providers or are we losing business to other jurisdictions?  Is there opportunity for NAICS 487110 – Scenic and sightseeing transportation?   Do we need more NAICS 311811 – Retail bakeries or are we satisfied bringing in fresh bread and doughnuts from Montreal?

Is there any potential for NAICS 112410 – Sheep farming? Okay, this one might be a stretch.

I can tell you right now that a lot of old timers in the economic development biz are rolling their eyes as they read this.

But I truly believe the competition for investment, entrepreneurs and people attraction is more heightened then at any time in the past.  We can try and go after video game development firms or film production or aerospace manufacturing just like everyone else or we can focus on the opportunities that make the most sense in our community – large or small.

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The best places to live in Canada, hmm

I know this is going to sound like sour grapes, but so be it.

MacLean’s magazine is out with its list of the 2019 best communities to live in Canada.   Almost all the best places to live are in southern Ontario and British Columbia.  Atlantic Canadian communities hardly register with Halifax ranking 131st (the highest among all Atlantic Canada communities) and Moncton a lowly 312th.  Rothesay came in at a robust 141st.  Fredericton, aghast, 244th.

They claim Atlantic Canadian cities rank so low because of high unemployment and low incomes, among other factors.

If this was a study done by academics, one would probably think there might be something wrong with the methodology.  If you have results that maybe don’t make a lot of sense, maybe you have the wrong variables or maybe the wrong weighting on the variables, or whatever.  Imagine if you did a study that ranked the best hockey players and put Connor McDavid at 131st.  Instead of gleefully announcing your great results, you might want to take a second look – maybe McDavid was injured when you crunched your data or maybe something else was going on that the 131st ranking should have raised an eyebrow or two.

But when a study conforms to preconceived ideas – southern Ontario idyllic location to live, Atlantic Canada crappy place to live, it’s probably wise to take a closer look.

I’m not saying there are not lessons to be learned here.  I would suggest Atlantic Canadian cities look at the ranking and see if there can be improvements but if we want to know truly where are the best places to live there are a few other questions that might be thrown in the mix such as:

Unemployment situation adjusted for the impact of EI, most of the Atlantic Canadian communities in this list are at or near full employment if you factor out EI and structural issues.

Cost of living adjusted income – Atlantic Canada is still lower but would come out much better.  Look at the following chart.  In Fredericton only a little over 10% of households spend 30% or more of annual income on shelter costs – almost 40% less than the #1 city to live in Canada.  Doesn’t that count for something?

Access of after hour health clinics as opposed to just the doctor metric.

Average commute time to work.  Over 40% of people living in the #1 city to live in Canada, Burlington, have at least a 30 minute one way commute to work.  In Moncton it is 10%.  Over 14% of Burlingtonians have an hour one way commute to work.  In Moncton, 2%.  What should the ‘best place to live’ weighting be for the loss of hundreds of hours per year in traffic?

According to Statistics Canada , more people moved to Moncton in 2016/2017 from Ontario than vice versa.  Of the 45 urban centres in Ontario, Halifax had a positive migration rate with 26 and a negative rate with only 14.  Why would anyone want to move from paradise to the 131st best city to live in Canada?  More people moved to Halifax from Oshawa, Hamilton, London, Barrie, Brantford, Waterloo and 20 other Ontario urban centres – than vice versa.

How about adding that to the mix?

My real concern here is that these superficial comparisons are likely going to take on more significance as more immigrants look at places like Halifax or Moncton or Saint John.  They will go online and read that Russel, Ontario ranks 123 spots higher than Halifax.

The truth is I do a lot of work these days in Ontario and there are many great places to live.

But maybe a little more thinking is needed.

 

 

 

 

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Are efforts to attract international students facing the “why would anyone want to….  …. in New Brunswick?” challenge?

A few months ago I had the opportunity to interview the general managers of multiple national and multinational firms with operations in New Brunswick.  Many of them told me they would be very happy to hire immigrants to grow their New Brunswick operations.  But they also said they hire a lot of immigrants elsewhere in Canada – but they hire them right of the street (in Toronto, Montreal, Vancouver, etc.), so why should they have to recruit internationally for their Moncton or Saint John operations when they don’t have to in the biggest urban centres?  If this is the case, I was told by several, they might as well just expand elsewhere in Canada.

Consider the following chart.  In 1976 there were 146,930 people aged 13 to 22 living in New Brunswick.  This is a good proxy for the number of people who would be joining the workforce over the next decade.  That same year there were 32,100 active in the provincial workforce over the age of 55.  These folks represent those that are likely going to retire in the next 10 years or so.  In other words, there were 458 young people who would mostly be entering the workforce for every 100 that would most likely leave it.

Now there are 106,600 heading towards retirement in the next decade or so and only 82,000 young people potentially entering the workforce.

In other words we don’t even have enough young people to replace those leaving the workforce let alone provide the talent for industries to grow.

So what do we do?  We are bringing in more immigrants and that is great – but we have the problem discussed above and the fact that the process is onerous for smaller businesses.

If we don’t have enough young people in school to replace those leaving the workforce and to provide enough workers to expand industries – light bulb moment – why not increase in the number of young people in school?  Almost all firms would hire immigrants already here and if they are getting Canadian education experience, bolstering their language skills and getting used to our winter, so much the better.

According to IRCC, in August 2018 there were 21,075 education study permit holders – folks who have the paperwork to study in Canada – with Manitoba as their intended destination of study.  There were nearly 18,000 with Nova Scotia as their intended destination of study.

New Brunswick? 6,680.

Now the number has been increasing in recent years, mostly at the college level, but we still have among the fewest international students in our schools, adjusted for population size, among the 10 provinces.

Just to get back to a one-to-one ratio of young people to those leaving the workforce in the near future (as defined above), we would need to boost the population 13-22 by around 25,000.  Why not bring them in as international students?  Why not encourage them to study courses that provide skills that are in demand and will be in demand in the very near future?

The old education paradigm was pretty simple.  Government heavily subsidizes post-secondary education and we clunkily try to graduate just enough to meet the demand of the workforce – although this is more true at the college level.

In the new education paradigm, we attract substantially more international students, train them in areas where there is demand and not be as worried about the supply-demand balance.  In the worst case, some of the students leave after graduation but we benefited from the spending while they were here.  In the best case, entrepreneurs are able to leverage this new talent pool and expand and grow in New Brunswick.

Because international students pay higher rates of tuition and because of the difference between fixed and marginal costs, international students are not subsidized by the taxpayer.

So what’s the problem?

I fear this issue is another edition of something I have identified many times before.

We used to poke fun at the provincial slogan “Be…. in this place” but at least it was aspirational.

Now, our real slogan seems to be “why would anyone want to….  …. in New Brunswick?”

We have a collective self-esteem problem in New Brunswick. I have heard from the public and leaders around the province on many occasions:

Why would anyone want to expand their business in New Brunswick? We will have to give them a big subsidy and they will leave once the money runs out.

Why would anyone want to move to New Brunswick?  We can’t even keep our own young people.  They will come here and then just leave.

Why would anyone want to visit New Brunswick? To see a couple of old lighthouses and oversized symbols of our inferiority complex (i.e. world’s largest axe or lobster)?

Now I am hearing “Why would anyone want to move here to study in New Brunswick?”

It’s time to have a little bit more self-confidence.  Lots of national and international firms have moved here and love it.  Thousands and thousands of people move here every year and most of them love it.  We attract hundreds of thousands of tourists and, I assume, most of them enjoy it because they keep coming back.

Why come to New Brunswick to study?

  • Because we are an order of magnitude cheaper than many other provinces.
  • Because we have great schools.
  • Because we have a growing demand for college and university graduates.
  • Because we offer safe communities with a relatively low cost of living.

Finally, I will point to our neighbours in PEI.  Charlottetown has the fourth highest number of international students per capita in the country among urban centres (Kamloops, surprisingly, has the most).

If PEI can do it, so can New Brunswick.  Let’s dramatically increase international PSE enrollment – double or even triple the amount (PEI has 2.5 times as many as New Brunswick adjusted for population size).

Let’s enroll them in programs that are aligned with labour market need – even if we need to develop new programs (e.g. college level finance and insurance diploma).  Let’s send a clear signal to the economy that New Brunswick is serious about ensuring the talent will be here for the future.

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The most important, overlooked role for an economic development agency

I have been studying economic development agencies and their effectiveness for well over a decade and I can tell you there is one very important role that is mostly ignored or at least glossed over.

Unless the economy is booming, when I talk with politicians and local stakeholders I always here the same thing.  How come we are investing in this economic development agency and the economy isn’t booming?

The usual retort from the economic development agency is some version of this:  we can’t be responsible for the growth of the economy.  It’s too much to ask of an agency receiving government funding of, say, 0.02% of GDP to be expected to directly move the needle on overall economic growth.  They will then focus on the narrow stuff they are doing and try to correlate that with some form of hard or soft ROI.

For example, yes overall economic growth might be weak but we worked with 22 firms on their expansion plans.  Or we helped 15 new entrepreneurs start up companies.  Or we embarked on a marketing campaign that promoted our city or province far and wide.  We worked really, really hard and why don’t you appreciate us?  What more do you want from us?

Because the economy is in the doldrums, that’s why.

Let me use an example.  Let’s say the shareholders of a private corporation were questioning why the company wasn’t profitable.  The CEO of the company can blame a lot of things that are mostly out of her control: the general health of the economy, government, competition, consumer attitudes and other issues.  She will tell the shareholder that the employees are doing their best.  They are working really, really hard.  But the shareholder still wants a return on invested capital.

The most important and overlooked role for an economic development agency is to be clear with the shareholder (s) what it would really take to address their goal.  If a city wants 2% growth in the tax base, the economic development agency should be the organization best positioned to clearly articulate how that might happen.  If a provincial or federal government wants 3% GDP growth, the economic development folks should be the best positioned to tell them how that might happen.

Consider the private sector example again.  The shareholders want the leadership to double revenue (profitably) and grow to be within the top five firms in the sector.  The leadership of the company would then go back and do the analysis and report back to the shareholders with the following finding:  If you want that level of growth we can’t do it organically without dramatically cutting into profits.  You will need to grow by acquiring smaller firms in the sector.  Then the shareholders have a decision to make.

This is exactly what I would like to see with economic development agencies.  They should be the most knowledgeable of the local economy, the structure of the economy, the competition, the labour market, etc. and what it would take – at least in theory – to achieve the strategic goals set out by the city council or the Cabinet.

In the CEO mandate letter:  Please tell us what it would take to get our economy back to 2% growth per year on an average basis.

CEO response:  After careful analysis, we believe it would take the following steps to bring the economy back to 2% growth: 1) we need to focus heavily on sectors A and B; 2) we need to cut tax X or Y to be competitive with the fast growing jurisdictions; 3) in our analysis of other similar jurisdictions they achieved growth of 2% by doing X or Y and we should too; 4) you are investing 0.02% of GDP in economic development and the best practice is 0.04% of GDP.

Or whatever.  I think you get the point.

But economic development agencies don’t want to set themselves up for failure so they focus on narrow functions (business attraction, startups, etc.) and then cross their fingers and hope it moves the needle.

In my opinion, being the most credible advisor to government and community leaders on what it would take to move the economy forward in a sustainable way is the most important function of economic development.  More than business attraction.  More than startups.  More than workforce development.  More than marketing the community.

Because, if not you, then who?  Find me another organization better positioned to play this role.

If economic development agencies truly played this role, it could lead to exciting new thinking.  It turns out, surprise, surprise, that a single economic development agency can’t move the needle by itself so maybe one conclusion is that we need to better align the myriad of government agencies and departments that impact economic development.  Or maybe we need to do a better job of natural resources development.  Etc.

You may say, rightly, what if the conclusion is that 2% growth is not realistic?  That there are too many obstacles, cultural and otherwise to get back to a sustained level of growth?

I would respond with two points:

  1. Who, if not the economic development agency charged with fostering growth, is better positioned to draw this conclusion?
  2. Then you take it to the public. You be very clear with the public, the voters, the ultimate shareholders, that if we want to get the economy back to a sustained level of growth, we have some big obstacles to overcome.

Ultimately, this would alter the focus of economic development agencies. They would need more policy minds, more thinkers and analysts (and, shockingly, maybe even an economist or two).  Most economic development CEOs would rather invest that money in business development folks or marketing or whatever.

But my many years of experience tells me that we will never fill the gap between disgruntled politicians and exasperated economic development agencies unless we make this simple change to our approach.

 

 

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When it comes to economic and demographic data, speak clearly

Economic and demographic data is hard enough for most of us to understand.  When we add in hard to understand or misleading comparisons it can completely lead people to misunderstand the point that is being made.

One of my biggest gripes in this area is the terms “as a share of” and “relative to”.  For the sake of ease, economists will talk about everything “as a share of” something else to indicate relative size.  For example, public debt “as a share of GDP” or public spending as a share of GDP.  What they really should be using is “relative to”.  Public debt is not a sub-set of GDP and when we say “as a share of” we are making that implication.  When someone says Government of New Brunswick spending is 29% of provincial GDP they are trying to put the size of spending in context.  It’s not that GNB spending is 29% of GDP (a sub-set of GDP).  So, in reality it would be better to say that GNB spending is 29% relative to the size of GDP.

This is an important concept because we do want to ensure people understand scale.  If we can’t help the reader understand relative scale than a specific datapoint doesn’t mean much.  If I say there are “eight bicycles in the neighbourhood” and leave it at that there isn’t much value.  If I say there are “eight bicycles per 100 people” and the average is 37 per 100 people, then we get to value.

As a different example, economists might say that household debt as a share of annual household income is 210%.  What they should say is household debt is 2.1 times the size of annual household income.

A simple graphic illustrates the point.  As a share of should be taken literally to mean a part of something and “relative to” should describe relative size/scale.  Household spending on coffee as a share of total household spending is 0.2%.   Public debt is 89% relative to GDP – gives us the relative size of the debt without implying it is a sub-set of GDP.

So ends your lesson on economic reporting.

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You love getting your government cheques, come on, admit it

Some one asked me one time to give them some Canadiana.  What is interesting about this place?  I rattled off Tim Horton’s, moose, lobster, canola, the Rockies, etc.  but I also said getting cheques from government.  I had just read somewhere that the government cuts something like six cheques per capita per year to individuals across Canada.   This was a while ago. It was puzzling to me on a practical basis – what an administration process – but the politics of it are juicy.   It’s nice to get that little shot of dopamine every time the government sends you a few hundred dollars.  Even with direct deposit now, we look forward to it, plan what to do with it.

I have been helping my young adult children with their taxes and they get the little jolt of cash from government multiple times per year. HST rebates, my daughter even got a cheque from the Ontario government for something.  The cheques keep coming. Someone was handing out application forms recently in my parents’ church that would give them a little cash uplift.  They filled it out and sure enough a few weeks later, $300 came in the mail.  Families get cash for their kids.  In fact, that money is rolling in these days.  Our PM is practically ecstatic about it:

Maybe I am just jealous as  I have long since stopped getting government cheques.  In fact, I have to send the government multiple payments every quarter as a small business – payroll deductions, HST payments, prepaid corporate income tax payments, and usually a bunch of penalties because I filed late or wrong.

The government could easily structure these programs as tax deductions.   You would get the same money.  The only difference is that in most cases you wouldn’t get periodic cheques from your friendly neighbourhood politician reminding you of their munificence.  I know, I know, for the amateur tax policy analysts among you some of these cash transfers go to families that pay no income tax at all.  But lots of countries, including the U.S. have ‘negative’ income tax rates – in other words you would get a cheque once after filling out your taxes each year.

In New Brunswick nearly 461,000 people reported getting direct cash payments from government in 2017.  This was substantially more than the number earning employment income (415,000).   And, of course, many New Brunswickers get multiple cheques from government: EI, HST, Child tax credit, etc.

In recent years the number of people getting direct cash from government has risen significantly both because of more retirees (OAS) and more receiving family and child benefits. In New Brunswick the number collecting workers compensation is up 10% even as the number with employment income is down 1% over the decade (2008-2017).

In terms of absolute dollars in 2008 New Brunswickers in total received $0.24 in cash transfers from government for every dollar earned in employment income. By 2017 it was nearly $0.28.  For those of you arguing this is mostly Canada Pension Plan income which is paid into by Canadians, nah.  The CPP represented 29% of total government transfers in 2008 and just over 29% in 2017.

Total employment income has risen by 21% while total government transfer income has risen by 50%.  Federal child benefits are up 80%, workers compensation up 43%, provincial child and family credits up 600%.  Even total EI (employment insurance) income is rising faster than employment income, up 28%.

Overall, New Brunswickers received $4.7 billion in direct government transfers in 2017 or nearly $20,000 on average per household across the province.  Even without CPP the amount was $3.3 billion.

This doesn’t include the employment income of the 80,000 or so local, provincial and federal government employees – which at even a modest $50,000/year on average would mean a payroll of $4 billion.  These people, of course, also get cheques from government, but this is different as they are workin’ for a livin’. Still it does add to the stock of government cash flowing directly into households – close to $9 billion per year in New Brunswick.

Don’t expect this to change under any government.  Those periodic cheques from the Prime Minister are a little reminder of the importance of the government to just about every Canadian.  Simplifying things in a way that would see you get the same benefit but without the ongoing stream of payments would make you forget about the important role of government in your life.

Tax reform and lower income support models that don’t require multiple cheques during the year are not on the cards.

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It’s all about the product: Putting the ‘development’ back in economic development

I was in a meeting this week where we were having a good conversation about how to revive a local economy.   We need more people.  Check.  We need to better promote ourselves.  Check.  We need to support startup companies.  Check.

My only contribution to the discussion was to remind the room that we actually need a ‘product’ to sell, too.  In fact, product development should be the core of our economic development strategy – unless, as I have said before, you already have an amazing product or products to sell.  In that case (rare) get out there and sell.  For the rest of you, put more thought into what you are selling.

As another reminder, I don’t believe that product development has to be the 1970s style champion development approach.  In that world you protected industries with high tariffs and large subsidies.  That is a ‘product’ but it has turned out to be not a particularly successful model in the long run.

Although, as an aside, this is what Andrew Carnegie argued about the steel industry in its infancy in the United States.  He said the British steel companies could always dump cheap steel on the U.S. market but shouldn’t we build a local steel industry in the U.S.?  This argument was made by many of the Robber Barons and they, indeed, did build local champions in transportation, steel, etc.  protected by government policy.  Would the U.S. have been better off if those industries were not protected in the early years?  You can think about that.

So what is product development circa 2019?  It still involves communities figuring out what they are good at.

Post-secondary education is a ‘product’.  If you attract a thousand more students, you boost provincial GDP by $25 million/year and support 300 jobs across the economy.  Plus you boost your talent pipeline for the future.  Win-win, right?   Well, have a look at the enrollment numbers at our universities.

Product development is blueberries, maple syrup and other natural resources.  Do we have a resource?  Can it be developed profitably?  What government policies could support this effort (assuming there is a strong ROI on the effort)?

If you have a little cluster of insurance firms (e.g. Greater Moncton), product development is asking those firms what kinds of initiatives would help that cluster grow?  Does it need more workers?  Would university-based research help strengthen the cluster? Are there gaps in the supply chain that could be developed here?  Are there government policies that hinder growth?

If you have a university-based research centre that is really good at something, that can be part of product development.

On and on.  People always ask me should we have one or two big sectors that we focus on.  My answer is no.  If you have some big opportunity that could be transformational (think Alberta oil sands circa the mid to late 1990s), sure go after it.  But you can cross home plate with small ball the same as with the big, booming home run. A bunt single, stolen base, passed ball and sac fly still gets you a run.

The key is ROI.  If you can spend a buck and make $10, why not?  Why only focus on the opportunities that cost $1,000 with the potential to make $10,000?  If it takes little effort to bring 100 immigrant farmers to New Brunswick why not do it?  If there are huge challenges to make that happen, then focus elsewhere.

I know for some of you even this kind of soft economic development makes you uncomfortable.  You want to ‘leave it to the market’.  The role of government is to keep taxes low, ease the regulatory burden and then let the market do its job.

I’m a huge fan of capitalism.  I have written many love letters to the the concept of free and open markets as the arbiter of what kind of ketchup wins the war.

But communities can’t just sit back and wait.  They need to define what they want and then work collaboratively – government, industry, education, and other stakeholders – to shape the future.

No large structural subsidies.  No protectionism.  Just efforts to make sure we leverage what we are good at and make sure entrepreneurs and business leaders get to see our story.

Easy-peasy.

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Start with good data: You are not as average (or median) as you think you are

One of the most misunderstood statistics out there is the average or median income stats.  People will look at that data and scratch their heads.  How can the median income only be $31,000 and the average income only $39,141 in New Brunswick (Census)?   That makes no sense.  The problem is in the definition.  That statistic includes everyone that earned any kind of income in 2015.  If you look at average employment income for full time, full year workers the median is actually $46,349 and the average is $54,011.

The same holds for household or family income.  The median total income of all Census families in 2015 was $72,354.  A lot of folks look at that and say, hey, my household income is higher than that so I am doing better than most.  But, again, consider the data.  A Census family includes every family – from 19 year olds living on their own to 80+ year old widowers.  If you look at couples with children, the median income in 2015 was $98,521.  By now likely over $100,000/year.  Again, for those families with kids trying to pay for hockey, music lessons, trips, the minivan and, maybe, trying to put a little aside, $100,000 may not be a lot but it is much higher than $72,354.

This matters because a lot of government policies revolve around this type of income statistic.  Take the previous government’s free college and university tuition program.  It only kicks in if you have a gross family income of $60,000 or less. I was told the idea was the half the households in New Brunswick would be eligible.

When I pointed out the above statistic, I was met with consternation.  Apparently no one told the politicians that the average household/family income among those with children – at least the couple families – the actual targets for such a program – was closer to $100,000 per year.

Now, I’m not questioning the cut-off (at least not in this post).  But I am questioning the vision that half of your households will be eligible for the free tuition because this is only true if you roll in grampy and grammy, the intransigent bachelors and the spinsters.

Among those couple families with children, only 20% earn less than $60,000 per year (median income).

Let’s try and make sure when we are shaping important public policy that we are using the right data.

For example, we are fixated now on making sure we retain immigrants (which we should be, to a point).  We are tracking medicare numbers and trying to figure out how best to determine who is leaving when we have a pretty good data point sitting out that that has been used for decades.  It’s called net interprovincial migration.  Sure it doesn’t separate out immigrants but if we are losing folks – immigrants or locals – what’s the real difference?  In the past two years New Brunswick’s net interprovincial migration (combined) has been positive.  That’s right, more moving in that out on a net basis.

At least for the past couple of years there isn’t the mass exodus predicted by some.

If you want good policy, start with good data.

 

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Super Mario’s world: From entrepreneurial risk to reward

In his soul, Mario Thériault is an artist. He started out as a poet but that doesn’t pay the bills.  In another time he might have been a revolutionary but instead he turned his creativity to the marketing and communications sector.  He made a good living as a mad man but found his way into the political realm when his brother, Camille, took a run at the leadership of the Liberal party and became Premier.   After a short stint as a political guy, Mario started ShiftCentral in 2000.  Fast forward 19 years and ShiftCentral was just sold to an outfit in Los Angeles.

Politics runs deep in the Thériault family.  Mario’s father, Norbert, was a top provincial government cabinet minister and lieutenant of LJR in the 1960s and ultimately was appointed to the Canadian Senate. I heard great stories of Norbert staring down business tycoons in an era of big and important changes in this province. In his 80s, he told me the key to his longevity was eating fish.  In his youth they would eat it for breakfast, lunch and dinner.

Entrepreneurship runs deep in the Thériault family, too.  As I recall, several of the clan owned their own businesses.

There are basically two kinds of entrepreneurs.  For some, it is all about the big idea.  They are working for another firm or hacking in their basement and they come up with a big idea.  They take the idea and turn it into a business.  The second kind is the pure entrepreneur.  It doesn’t matter what the idea is, they have the soul of an entrepreneur – they don’t like working for someone else. They enjoy taking on risk.  They are tenacious and determined.  Mario is the second kind of entrepreneur.  It really didn’t matter the business – I always said he could be manufacturing furniture or chocolates – for him it was about building something of value.

I got to know Mario when he recruited me in the late 1990s to come and work for him.  I only found out later he had no way to guarantee my salary.  In its first year the firm had burned up virtually all of the seed money he and his partners had put in and they were now running on fumes.  I spent nearly six good years helping Mario build the business into a profitable shop with an expanding client base in Canada and the United States.

The original idea – to provide high value professional services to small businesses – died quickly when Mario realized small businesses had no money.  He quickly pivoted to a new vision.

It was, and is, a neat idea.  At the time ShiftCentral was founded there were a lot of new Web-based tools emerging help with searching content.  In fact, the late 1990s, early 2000s was the era when that came of age.  We would attend conferences with seminars covering topics such as semantic searching and how to best search the vast amount of unindexed content.  But Mario’s insight was that busy organizations didn’t want their staff spending hours scrolling through content for the nuggets of relevancy.   ShiftCentral would have a human do that for them. Instead of a bank or law firm having hundreds of staff spending 10 hours a week surfing the Web, they would get relevant content served up to them on a daily basis.  Kind of like a smarter version of media monitoring.

At the time many people thought this was a stupid idea.  But, stupid or not, Mario built a business around it – growing to more than 30 staff with clients across North America and beyond.

There were several times early on when ShiftCentral nearly went under.  Mario pleaded with the bank to extend credit.  He cashed his RRSPs. He made late night calls to hustle emergency angel funding.  I have no idea how many weeks he went without paying himself.  A lot of people like to complain about entrepreneurs – but Mario is the example – the entrepreneur gets paid last – after employees and suppliers, if there is anything left over – that is what goes to the owner.

He was tough but also a very good boss.  I learned a lot in those years.

I’m not sure what’s next for Mario.  Likely a new big idea.  He has been involved on a variety of community boards and initiatives so I expect he will be in that realm as well.

We need more Marios.  The pure entrepreneur looking to build something of value. Not just a lifestyle business owner looking to generate a comfortable income.  People who want to leave their mark.

I’ve been thinking a lot lately about self-discipline.  What motivates people to get off the couch and leave the NetFlix and Cheetos behind?  For most people these days it’s easy to live a life of leisure.  But some people want more.

And it’s those people that move our society ahead.  They are the ones that pursue the entrepreneurial dream.  They are the ones that tackle the big challenges.  They are the ones that make the world a better place.

Congrats to Mario and his team.  I hope the new tie up with the LA-based firm leads to more growth here.   New Brunswick’s future economic growth will depend on its entrepreneurs developing export markets and then integrating into global supply chains.

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Do you have the most livable city? You will thrive.

I know, king of statistics and all that jazz.  But this one matters.  A lot.

We need to attract more people to New Brunswick but the best data source on who is coming and staying, the Census, doesn’t paint a good picture.  It is important to point out that the Census was taken in 2016 and we have had a fairly strong increase in the inward flow of immigrants since.

The Census is the best source on attraction and retention because it shows the number of people who were living in New Brunswick at the time of the Census who lived in another province five years previous.  There is no estimation.  No trying to track immigrants through medicare cards.  It shows the number in 2016 that did not live in the province in 2011.  The truest measure of attracting people (it’s not the best measure of the net change in population via interprovincial migration as it doesn’t consider those moving out).

The figure below shows the number (population aged 5+) living in New Brunswick in 2016 who lived outside the province in 2011.  It also shows the same figure for 2011 and for 2006.  In a nutshell we are hardly attracting any more now than we were a decade ago.  We have more immigrants but that is offset by a decline in interprovincial migrants.

This is not tenable.  We will need to grow the population of younger people in this province and it will require a big boost in the number moving in.  If we are seeing a decline in the number moving in from other parts of Canada, almost down 7,000 from 2011 to 2016, we will need an even larger boost from those moving in from around the world.  There are lots of folks looking to come to Canada.  We need our share.

But we also need to focus more on how to keep them here.  BTW, this is not inconsistent with my view that we shouldn’t be obsessed with retention.  Some immigrants will leave – for many different reasons – they have less holding them here than those born here, with family and roots here.

But to better retain immigrants we need to:

Do a better job attracting those with the skills and interests to work the jobs on offer (or take on available entrepreneurial opportunities).

Do a better job of building and supporting ethnocultural communities.

Do a better job of ensuring we have the right mix of housing.  Developers are building as if the demographics aren’t changing right in front of them.

Do a better job of encouraging immigrants to engage with social organizations, churches and other entities to help them put down roots.

Do a better job of being an excellent place to live.

The last point is a catchall but and important one.  Those moving here – from elsewhere in Canada or from around the world – have moved at least once.  They can do it again.  City and town halls need to make livability even more of a focus – yes the plumbing of the city needs to work – garbage removal, snow removal, public safety, green spaces – but these are just table stakes.

We need to think about what would be compelling reasons for people to stay?  What would they brag about when talking about their city to friends and family back home?  That the garbage was picked up?

I went to the antique car event in downtown Moncton last night.  There had to be 25,000 or more people squeezed into the downtown.  There were two live concerts, one at each end of of the event.  Food trucks.  Kiosks.  The place was just throbbing with noise and energy.  And as I walked around I saw a lot of immigrants in the crowd.

We need to foster spaces for interaction – the new and the old, the old and the young.  From neighbourhood meet and greet picnics to massive festivals.  I would recommend communities large and small host many of these gatherings – one every couple of weeks or so.  They don’t have to be expensive – just find some innovative such as Saint John’s Moonlight Bazaar.  Such a simple idea but something people will remember and look forward to.  Bring people together.  They will laugh.  They will talk.  Collisions will happen.  Good things will happen.

And figure out winter.  We can’t ignore the fact we are not southern California.  And we can’t ignore the fact that most people coming here from abroad have never even seen snow.   Assuming they will hunker down and survive – is not a particularly inspiring vision.

The Brazilian community in Moncton wants to organize group events in the fall to teach people how to ice skate.  Giddy up.  I would recommend finding very specific ways to nudge newcomers to get out in the snow – skate, slide, ski, snowshoe, ice fish.  Bundle up!  Many will end up liking it.  And they will talk about it with friends and family back home.

As shown in the chart, we will continue to attract lots of folks from elsewhere in Canada.  We should focus on them too.  Many of the same rules apply.

 

 

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