Category Archives: Business and Economy

Texas Governor Rick Perry advertising for Illinois businesses to move to Texas

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There is a new radio spot running in the Chicago area featuring Texas Governor Rick Perry suggesting Illinois businesses should move to Texas. Listen to the radio spot here and check out the associated web site texaswideopenforbusiness.com. Here is what the website says:

If you’re a business owner in Illinois, I want to express my admiration for your ability to survive in an environment that, intentionally or not, is designed for you to fail.

With rising taxes and government interference on the upswing, your situation is not unlike a burning building on the verge of collapse. If you’re thinking of “just riding it out” you might want to reconsider.

There is an escape route to economic freedom… a route to Texas. The Lone Star State has proven that limited government, low taxes, and a pro-business mindset work wonders when it comes to job creation and a robust economy. If you’re ready for a fresh start in a place that appreciates job creators like you, it’s time to check out Texas.

This echoes the glee in Indiana and Wisconsin when Illinois raised taxes several years ago.

Texas is indeed growing at a rate that a number of states, including Illinois, can only envy. Texas is known for warmer weather (actually, quite hot weather), lower taxes, and is a Republican-dominated state in recent decades. Metropolitan areas like Dallas, Houston, and Austin are booming. And yet, there are still businesses that are willing to locate in and near Chicago. Perhaps it is the world-class city with international connections as well as unique character. Perhaps it is the base of human capital with both high-skill and low-skill workers. Perhaps Chicago’s location in the middle of the country and at the center of transportation networks still matters to some.

I imagine many businesses are already aware of the business climate differences between Illinois and Texas. Is this just an attempt to trumpet the successes of Texas and poke Illinois in the eye?

The new Ace Hardware home is badly proportioned

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Ace Hardware has a new set of television commercials where they argue going to their neighborhood stores is like visiting your neighbor. However, there is one big problem (beyond the fact that many people don’t know their neighbors): the house is badly proportioned. Take a look:

AceHardwareHouse

The bottom portion of the house doesn’t look too bad: a porch, front door, and a two car garage. But, then look above. My best guess is that the Ace sign displaced the actual window which then got squeezed in between the roof line and the garage. Overall, it doesn’t look good. The neighbors would not be happy if the house next door looked like this.

Despite the odd looking house, I like the sales pitch. I was at Home Depot to get five items related to gardening this weekend. Due to the size of the store and my infrequent visits (perhaps once a month or so), I had to ask where three of the five items were because they were very difficult to locate otherwise.

The global culture of the business office

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Photographer Louis Quail has a new book of photos of offices around the world – and they have a similar look:

Since 2006, Quail has photographed offices in Russia, South Africa, Germany, the U.S., the U.K., Cambodia, United Arab Emirates, Santo Domingo and China. Municipal departments, call centers, financial brokers and commodities traders all feature in Quail’s series, Desk Job…

“As we have moved into the technical and information age, there has been a shift towards more office-based work,” says Quail of globalization. “Whatever our job title or geographical location, our tools and environment are becoming similar. It is quite perverse; to travel around the world to photograph inside an office that looks like its in Croydon [U.K.].”…

“The employee is defined by the few cubic meters, which exist around them. They must not just work, but live, eat, pray and occasionally sleep as if ‘chained’ to the desk in perpetuity,” says Quail…

“Companies tend to strive for straight lines and uncluttered office spaces, where as individuals have an urge to colonize and personalize,” says Quail. “In these pictures we see the tension but ultimately workers are intrinsic to the organizations they serve and are best placed to change them if they choose.”

Quail argues this is a side effect of globalization. An office in Dubai looks like an office in Australia which looks like an office in the Chicago suburbs. And he hints at the root of this homogeneity across global offices: an interest in making money within a global business network.

It would be interesting to pair these photos with a history of how the corporate office look spread around the world. Where exactly did it start, who spread it (people or corporations or organizations), and how quickly did it catch on?

An overview of IKEA’s new 26-acre redevelopment in London’s East End

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Here is a quick look at IKEA’s large redevelopment project in London’s East End:

The new project is only the first step of Ikea’s journey into urbanism. Inter Ikea’s LandProp division has acquired a second parcel north of London and has initiated talks for a $1.45 billion project in Birmingham twice the size of the one in London; it has reportedly shopped for sites in Hamburg, Germany, too. LandProp also intends to build a hundred budget hotels across Europe and is considering a push into student housing, all covered by the stores’ bottomless cash flow. “Once we decide to do something, we go like a tank,” said LandProp’s chief, Harald Muller, at Strand East’s unveiling in 2011. (Citing overwhelming media interest, LandProp refused repeated requests for an interview.)…

The new town within a town pursues this dual goal by putting the Swedish vision of the folkhemmet (the “people’s home”) to the test. It’s a utopian dream that dovetails nicely with the aim of London officials to use the Olympic legacy to address historic inequalities in the city’s East End. Plans for Strand East depict car-free streets lined with low-slung multifamily town houses, while smaller homes face the back alleys in an echo of London’s beloved mews. Of the 1,200 homes and apartments, LandProp promises that 40% will be large enough for families; another 15% will be set aside for affordable housing, for which London has considerable pent-up demand. The remainder of the site will consist of public squares and parks, with mid-rise commercial districts along the edges.

So far, urbanists are impressed with what they’ve seen of the project. “Compared to the towering cities popping up around the world, Strand East is a quaint, pleasant surprise, mixing old and new in a way that gives the area an uncommon sense of history and place,” says Paul Kroese, strategic adviser for the International New Town Institute. The plans are of a piece with Ikea’s other ventures, too. “Ikea wants to build a world that leverages its knowledge of how people live,” says Steen Kanter, a former top Ikea executive in the United States who today runs his own consultancy, Kanter International. “And it’s a good way to gain expertise installing kitchens and wardrobes and other large environments.”

Indeed, some retail analysts suggest that Strand East is both a branding exercise for Ikea and a living laboratory for a renewed drive into housing. The company has been trying to crack the U.K. market since 1997, when it intro duced a flat-pack home. The BoKlok comes in three configurations (none larger than 800 square feet), with prices starting at about $112,500. (The houses are assembled by Ikea’s construction partner, Skanska.) More than 4,900 BoKloks have been built to date in Scandinavia, but it hasn’t caught on in the United Kingdom despite recently renewed interest in prefab housing.

Curbed sums up some of the more interesting aspects of the project:

1. Included in Ikea’s masterplan: shops, schools, theaters, a hotel, and, you know, apartments for 6,000 people.

2. Strangely absent? An actual Ikea store.

3. Starting prices for the town’s flat-pack houses, called BoKlock, are less than half the price of an average U.K. house—$112,500 vs. $260,850...

5. Of the 1,200 houses to be built, 40 percent will be large enough for families, and 15 percent of them will be earmarked as affordable housing...

7. The whole shebang will supposedly cost around $500M.

We’ll see what happens. Even if this wasn’t built with IKEA, there could be some questions about the design, how successful it will be as a mixed-income neighborhood, and how it will fit in with the surrounding area. While people seem interested in how might affect IKEA’s global image, I would be more interested to know how the community itself will relate to IKEA as developer and major corporation. The experiences of a place like Celebration, Florida and Disney suggest this can be a convoluted process that both attracts a certain kind of resident but can lead to governance and identity issues.

Joel Kotkin links population increases in Sunbelt, Great Plains, and Mountain West with positive business climates

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Joel Kotkin argues the recent population growth and population loss in certain regions of the U.S. is related to business climate:

These trends point to a U.S. economic future dominated by four growth corridors that are generally less dense, more affordable, and markedly more conservative and pro-business: the Great Plains, the Intermountain West, the Third Coast (spanning the Gulf states from Texas to Florida), and the Southeastern industrial belt.

Overall, these corridors account for 45% of the nation’s land mass and 30% of its population. Between 2001 and 2011, job growth in the Great Plains, the Intermountain West and the Third Coast was between 7% and 8%—nearly 10 times the job growth rate for the rest of the country. Only the Southeastern industrial belt tracked close to the national average…

Energy, manufacturing and agriculture are playing a major role in the corridor states’ revival. The resurgence of fossil fuel–based energy, notably shale oil and natural gas, is especially important. Over the past decade, Texas alone has added 180,000 mostly high-paying energy-related jobs, Oklahoma another 40,000, and the Intermountain West well over 30,000. Energy-rich California, despite the nation’s third-highest unemployment rate, has created a mere 20,000 such jobs. In New York, meanwhile, Gov. Andrew Cuomo is still delaying a decision on hydraulic fracturing…

Since 2000, the Intermountain West’s population has grown by 20%, the Third Coast’s by 14%, the long-depopulating Great Plains by over 14%, and the Southeast by 13%. Population in the rest of the U.S. has grown barely 7%. Last year, the largest net recipients of domestic migrants were Texas and Florida, which between them gained 150,000. The biggest losers? New York, New Jersey, Illinois and California.

As a result, the corridors are home to most of America’s fastest-growing big cities, including Charlotte, Raleigh, Atlanta, Houston, Dallas, Salt Lake City, Oklahoma City and Denver. Critically for the economic and political future, the growth corridor seems particularly appealing to young families with children.

This is part of a larger demographic trend that has taken place in the last 50 years in the United States: larger population growth in the Sunbelt and West. This has been accompanied by the growth of major cities, particularly places like Dallas, Houston, Atlanta, and Phoenix, and the movement of jobs to these areas.

It would be interesting to view these struggles as part of a larger power struggle between regions. It is obvious to pick up on the political implications but we could also look at economic, social, cultural, and religious implications. These growing Sunbelt cities don’t quite have the global status several of the northern cities do. Is this a function of time or can they catch up? Where does Washington D.C. fit into this – still a compromise city between North and South? How different are everyday lives in these different parts of the country? How much do businesses who relocate to these areas like the regions beyond the bottom-line considerations?

h/t Instapundit

Chicago group hopes for 70 million tourists in the city by 2050

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Phil Rosenthal writes about a new plan from Choose Chicago to significantly boost tourism in the city:

Bruce Rauner, Choose Chicago’s chairman, told the Chicago Tribune’s Kathy Bergen the goal is to increase the number of annual visitors, which was close to 44 million in 2011, to 70 million a year. Not even Mayor Rahm Emanuel, who has said he would like to see 50 million visitors by 2020, is that ambitious.

On top of ongoing efforts to attract marquee sporting events and cultural attractions, conventions and other attention-getting visitor magnets, privately funded proposals are reportedly being discussed, such as glass-encased gondolas strung high above the Chicago River, light shows that play out across the city’s skyscrapers and bridges, a ritzy downtown casino (if gambling in Chicago is legalized), a jazz and blues hall of fame, and more.

Some of it undoubtedly is best left on the drawing board. We’re Chicago, after all, the heart and crossroads of America. We want to be in a class with Paris, France, not the Paris Las Vegas Hotel and Casino. There’s already plenty to see and do here to fill Ferris Bueller’s three-day weekend, and there is a danger in trying too hard.

Just as dangerous, however, is in not trying enough. There is a lot of competition for tourism money at home and abroad and, depending which way the economy turns, not necessarily a growing pot of disposable cash for destinations to divvy up. Nothing wrong with trying things, so long as those things don’t erode the image and good will that already exist. This challenge is going to require more than some ads and a halfhearted slogan, like: Chicago — A Better Destination Than Wherever Your O’Hare Connection Would Take You.

Rosenthal hints at the real reason behind this push. It is isn’t just about raising the profile of Chicago or making sure Chicago is considered to be a world-class city. It is about money from tourists visiting attractions, staying in hotels, eating meals, and shopping. It is about tourists going to conventions and taking vacations that include spending money.

Even further behind this story is the idea that tourism is sometimes presented as close to a zero-sum game. Particularly in this economy, an average tourist who goes to Chicago might not be going to St. Louis or Nashville or somewhere else. With limited dollars to go around, Chicago has to successfully compete. However, the whole secret might be to attract new tourists. This might be younger people who are starting out, want to see exciting places, and might consider Chicago. (Does Navy Pier cut it with this crowd?) This might be international tourists, particularly from countries with growing middle-classes such as the BRIC nations.

In the end, tourism is big business and is an essential part of a global city’s economy.  Chicago has to either grow its market share or find new customers. Preferably both.

Argument: if you want a Walmart, you have to accept the McMansions and other things that come with it

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Henry Briggs argues that the phenomena of Walmart is related to other phenomena like McMansions:

In any event, the idea of paying less and less and buying more and more is a real driver of our economy. As most economists will tell you: unless the US consumer is spending, the US economy tanks.

That is what’s behind the “You deserve it! ” lines in ads, why having a “McMansion” is part of the “American Dream,” and why the American Dream is no longer a dream: “It’s my right, by God!”

That’s why household debt shot up from $734 billion in 1974 to $13.6 trillion in 2009, from 45 percent of GDP in 1974 to 96 percent of GDP in 2009.

We complain about Walmart wrecking communities, even as we go there for the deals, and then we must go there for the deals because Walmart is all we can afford.

If you walk into a house built in the ’50s or ’60s, you’ll find smaller closets, smaller kitchens and smaller garages. This in a time when people were happier, the country was thriving, and the future glowed with promise.

You want things cheaper? There’s a price.

This is a familiar argument about McMansions: they are linked to larger patterns of consumption. But, if the economy really does depend on such spending, can’t buying McMansions, smartphones, and other items and shopping at Walmart be seen as helping American society? Of course, one can choose to buy “better” items than others – instead of a McMansion, perhaps a passive house or a tiny house. Instead of a regular car that contributes to sprawl, perhaps a membership to Zipcar. While some complain about particular kinds of houses, Briggs and others suggest that consumption comes in bundled packages. If this is the case, then McMansions are just the symptoms of a society that consumes and spends too much and likes sprawl.

 

In response to emergencies, companies seek out more distribution centers

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A number of companies are now pursuing a new distribution center strategy in order to be better prepared for disasters and other disruptions:

Major storms like Hurricane Sandy and other unexpected events have prompted some companies to modify the popular just-in-time style of doing business, in which only small amounts of inventory are kept on hand, to fashion what is known as just-in-case management.v

The shift has led retailers and logistics companies to alter supply chains by adding distribution hubs, according to the CoStar Group, a real estate research firm in Washington. In turn, the hubs are creating real estate opportunities in markets on and off established distribution paths, including growth in markets outside the traditional seaport hubs on the East and West Coasts…

Just-in-case is a response to the vulnerability of just-in-time supply chains, said Rene Circ, CoStar’s director of industrial research. Since the 1990s, just-in-time has made sense for many companies looking to reduce the cost of keeping large inventories on hand. Technology enabled retailers and manufacturers to closely track and ship items to replace merchandise sold or components consumed in production…

The tendency toward numerous distribution facilities runs contrary to a strategy that was common just after the recession, when some companies sought efficiency by consolidating warehouse operations, according to Bob Martie, executive vice president for the New Jersey region at Colliers International, a real estate service provider.

Consumers may not pay much attention to this distribution chains. In fact, they may only really notice them when major events disrupt them. However, the distribution system is incredibly important for the American consumer economy. The reason products are on the shelves when consumers want them is due to this. Companies argue more efficient systems help them keep costs down. Better planning can reduce truck traffic on local roads.

This article adds another twist to the distribution center story: there is money to be made in distribution center real estate. Perhaps quite a bit of money.

Zappos CEO says office space should be designed like cities

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Zappos CEO Tony Hsieh argues office space would work better if it were organized like cities:

Tony Hsieh talks about his Internet juggernaut Zappos in the same way that urban planners talk about cities. In fact, the language is uncanny. He believes the best ideas – and the best form of productivity – come from “collisions,” from employees caroming ideas off one another in the serendipity of constant casual contact.

This is only achievable through density, with desks pushed close together in the office, or – in the case of Hsieh’s ambitious plans to leverage the new Zappos headquarters to remake downtown Las Vegas – with company employees and community members colliding into each other on the street. For the kind of “collisionable” density he’s looking for in downtown Vegas around his company, he figures the neglected area (not to be confused with the Vegas Strip) needs at least 100 residents per acre…

The typical office has about 200 or 300 square feet of space per employee. When Zappos moves into its new headquarters in the former Las Vegas City Hall in about six months, Hsieh is aiming for something closer to 100 square feet per employee. He’s also planning to decommission a skywalk into the building to force people to enter through (and collide with) the street.

In the context of offices, this kind of density bucks conventional wisdom. Most companies think employees will perform best, or at least be happiest, if as many of them as possible can have their own spacious corner office (with closable door!). This thinking has even influenced the architecture of office towers.

“That’s analogous to people wanting to live in the suburbs and live in a big house,” Hsieh says. “And what they don’t realize is that they end up trading two hours of commute time for more time with friends or relaxing or whatever.”

Interesting comparisons: corner offices are like suburbs. While Hsieh cites research, how come other companies haven’t figured this out yet? I also wonder if this is more about corporate cultures established in more traditional firms versus newer startups or high-tech firms. This reminds of a video I show in my Introduction to Sociology class to illustrate the differences between more bureaucratic structures and more flat, disc-shaped structures. In the clip from Nightline, the design firm IDEO is shown working through designing a new shopping cart. The atmosphere is both less hierarchical in terms of authority and space; people seem to be closer together and common collaborative space is important.

This conversation also lines up with talk on college campuses about interdisciplinary research and collaborative activity. Just how much can redesigned offices and common spaces contribute to this? Are we missing something major by building office buildings more like suburbs than cities?

Barnes & Noble as “the last bookstore chain standing”

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Here is a look at the dwindling fortunes of Barnes & Noble:

In an interview with the Wall Street Journal, Mitchell Klipper, chief executive of Barnes & Noble’s retail group, said that, over the next decade, the chain will reduce its outlets by about twenty a year to reach a figure of about 450-to-500 consumer stores, down from a peak of 726 in 2008. A separate chain of 674 college bookstores (which thrive on tchotchkes and their exclusive franchises) is not part of that calculation. Even with so many fewer consumer stores, Klipper said, “It’s a good business model. You have to adjust your overhead and get smart with smart systems. Is it what it used to be when you were opening 80 stores a year and dropping stores everywhere? Probably not. It’s different. But every business evolves.” Klipper disputes the notion that bookstores will be unable to hold their own in the digital era, despite the chain’s need to downsize where rents or locations are hurting the prospect of acceptable profitability. Only a handful of the stores–fewer than twenty–are actually losing money, he told the Wall Street Journal’s Jeffrey Trachtenberg. But the company’s revenues have been significantly impacted by its commitment to build the Nook franchise.

While holding on to ownership of nearly 80 percent of its Nook division, a $300 million investment in Nook from Microsoft last fall, followed by an $89.5 million commitment from Pearson, which sees value in the growing electronic textbook market, are signs that Barnes & Noble can forge a way to secure enough of the digital business to offset the problems it faces in traditional bookselling.

But the overall impression of Barnes & Noble’s situation in the book industry is not nearly as positive as its owners and investors would like to portray. Publisher’s Weekly reported last week that Barnes & Noble is in the midst of contentious negotiations over terms with Simon & Schuster. “Although the exact nature of the disagreement is not yet clear,” Publisher’s Weekly reported, “Barnes &Noble has significantly reduced its orders from S&S. The main reason for the cutback seems to be, according to sources, Barnes & Noble’s lack of support from S&S.” (One way or another, this means a dispute over the size of discounts and advertising.) Another factor for concern is the impending merger of Random House and Penguin, which is expected to give this corporate behemoth the ability to deal with Google’s Android ecosystem, and Apple’s consumer cachet as well as Amazon’s dominant position in online retailing. There was an initial belief that Borders’ bankruptcy would bring a substantial portion of its in-store business to Barnes & Noble, but that has not turned out to be the case.

“Barnes & Noble is the last bookstore chain standing,” Wharton management professor Steve Kobrin, who is also the publisher of Wharton Digital Press, told the Knowledge@Wharton newsletter. “There’s still a niche there, but it may go to small independent bookstores.”

As I’ve watched these stories over the last few years, here are a few thoughts:

1. There still is a lot of irony in people lamenting the loss of Barnes & Noble today when not too long ago they were lamenting the rise of big box bookstores in general.

2. We could have a larger conversation about reading in society in general. Is this just about Amazon and online retailers taking away business or are less Americans reading in general? (Book sales were down 2.5% in 2011.) This extends to libraries as well: do people go there for books or DVDs?

3. There is room for interesting conversations about the goals bookstores meet in society or the function they play. Are they supposed to be more like “third places,” commercial learning centers where the average citizen can encounter a world of knowledge (commercial versions of a library), or retailers looking to make money? If bookstores are lost, what is really lost? If people aren’t going to bookstores, what are they doing instead?