Politics Before People

June 13th, 2010

The Honorable Geert Visser, consul general for the Netherlands in Houston, gave an interview to the Houston Chronicle in which he revealed that his government extended an official offer of assistance to the U.S. three days after the oil well explosion in the Gulf Coast. The administration wrote back to decline the offer. Now, after nearly two months of an oil gush that is savaging the wildlife and economy of the Gulf Coast states, our government is reconsidering the Dutch offer. No doubt the Dutch are horrified by what they are seeing on the news, as this paralysis and political blame would not be tolerated in the Netherlands, where the government gives an oil company twelve hours to contain a spill. If the oil company’s response is insufficient, the government steps in, assumes control of the cleanup and bills the oil company to ensure that taxpayers are reimbursed.

The Netherlands is certainly experienced with building dikes and managing water, as most of its terrain lies below sea level. The Netherlands had proposed a plan for building sand barriers affording some protection to the vulnerable marshlands. The Dutch were also willing to provide equipment to implement the plan, including ships equipped with oil-skimming booms. But our government got in the way. Dutch ships were prevented from approaching the U.S. coast by an anachronism of maritime law, the Jones Act, which limits access to the U.S. coast to U.S. ships. This week, the federal government allowed for U.S. ships to be equipped with four pairs of the skimming booms delivered from the Netherlands, which should be put in use in the Gulf Coast very soon. Each pair can process 5 million gallons of water daily, removing 20,000 tons of oil and sludge each day that they are in use.

The plan for the sand barriers was enthusiastically endorsed by Louisiana Governor Bobby Jindal and tentatively endorsed by the Coast Guard. A Dutch marine contractor has worked out a plan for building 60-mile long sand dikes within three weeks, which plan is opposed by American dredging companies that want to do the work themselves. But they lack the dike-building experience of the Dutch. This, of course, is a sad replay of what occurred in the aftermath of Hurricane Katrina, when the U.S. government declined offers of assistance from the German government. The Germans had emergency relief equipment and evacuation plans ready to be deployed, but Washington insisted that it had everything under control. The people of Louisiana are paying a very high price for this silliness.

Small Business is Too Big to Fail

June 12th, 2010
Not So Welcoming in Washington

Not So Welcoming in Washington

The National Small Business Association published “Squandered Opportunities and Misplaced Priorities: Why Small Business is Too Big to Fail”, a report chronicling certain of the largest opportunities Congress and the administration missed in addressing the biggest challenges facing U.S. small businesses.

“There are more than 70 million people in the U.S. who work for, or run a small business – one-third of the voting population in the U.S.,” stated NSBA President Todd McCracken. “Despite that number, and the increased public profile of small business, not enough has been done to actually help small businesses survive the economic downturn.”

NSBA’s campaign, “Small Business: 70 Million Strong…And Voting” educates lawmakers, candidates and the public on the importance of small business to the U.S. economy. In the two years since the campaign was launched, the U.S. economy has plunged into recession, resulting in a new (at least in word, if not deed) recognition of the importance of small businesses to job creation. But speeches have not led to constructive policy.

“Squandered Opportunities and Misplaced Priorities” highlights Washington’s most disappointing failures, including the failure to enact long-term reauthorization of the Small Business Innovation and Research Program, the exclusion of small business credit card accounts from the protections afforded by the CARD legislation; failure to correct the distorted incentives of the estate tax and the failure to ensure fair labor law processes. The report compares the cost of addressing these key small business priorities to the cost of other initiatives of the administration, such as the Troubled Asset Relief Program (TARP) and health-care reform legislation. The cost differential is staggering: $2.9 trillion spent on major initiatives vs. $358 billion, the estimated cost of small business programs called for in pending legislation.

“Despite our very-well earned frustration at these many missteps, NSBA’s small-business members still believe there is a way forward,” stated NSBA Chair Keith Ashmus and co-founding partner at Frantz Ward, LLP in Cleveland, Ohio. “However, more can and must be done—small business will no longer accept rhetoric in the place of action.”

The Economist Reports on Louisiana Oysters

June 11th, 2010
Still Yummy

Still Yummy

On June 6, I wrote a blog posting about the importance of perception with respect to the safety of seafood harvested in the Gulf Coast. Today, The Economist asks “No mo’po’?” meaning “no more poor boys?” reflecting concerns about the fate of Gulf Coast oysters after the Deepwater Horizon spill. The po’boy, or poor boy, is a sandwich for which Louisiana is famous. My favorite is served at Brennan’s in New Orleans. Fresh oysters harvested from the Gulf Coast, which have a uniquely sweet flavor, are served in a sandwich made with French baguette breads. The taste is exquisite. The five Gulf Coast states (Texas, Louisiana, Mississippi, Alabama and Florida) harvest more than 20 million pounds of oysters annually, which sell on the market for about $60 million. Two-thirds of the oysters consumed in the U.S. come from the Gulf and while oysters are a less valuable harvest than shrimp, they are more difficult to replace. But the immediate concern, reports one fisheries owner quoted in the article, is the perception that the oysters are not safe to eat. Media reports of the oil spill have led consumers to shun Gulf Coast seafood, further compounding the economic losses. This is when small businesses in the Gulf Coast need us most; the seafood that has been harvested to date has been collected in areas unaffected by the spill and has been tested by authorities. And the Gulf shore is still a great place to take a vacation. I look forward to my next trip there.

Sign of the Times: Investing for the Future

June 10th, 2010
High Hopes

High Hopes

FedEx Office released the findings of its third annual Sign of the Times national small business survey. The study, conducted in April, finds that small business owners are more optimistic now relative to their views last year at this time. They look forward to leading the U.S. out of its protracted recession, as 72% expect to be the driving force of the economic recovery in 2010. Half of those surveyed stated that their businesses have recovered or will fully recover by year-end. Perhaps these findings should be taken with a pinch of salt, as the survey was conducted before the Gulf Coast oil spill changed the outlook for our energy markets. Nevertheless, other findings of the survey continue to resonate. About 42% of small business owners are considering increasing spending on marketing and advertising initiatives this year and 30% may increase spending on sales programs. It is encouraging to read that small businesses see the opportunity for growth in the recession; perhaps opportunities that were previously out of reach have now become affordable. That is certainly my experience. To read the full FedEx Sign of the Times survey and learn of the sentiment of your peers in the small business community, click here.

Complacency and Maybe Disaster Fatigue?

June 9th, 2010
It's That Time of Year

It's That Time of Year

As disasters recede into memory, complacency creeps in and we become less vigilant in preparing for the storm season. Even worse, mega-disasters competing for our attention may distract us from more imminent threats. With the round-the-clock media attention on the largest oil spill in U.S. history, residents of the Gulf Coast may be desensitized to the beginning of the 2010 hurricane season. This would be risky at any time, but particularly when the forecast calls for an unusually severe Atlantic storm season. This indifference alarms the Florida Division of Emergency Management, which retained Florida State University geography professor Jay Baker to conduct a study of disaster preparedness. Professor Baker found that nearly two-thirds of residents of hurricane evacuation zones dismissed the threat levels of wind and water damage. Half of the residents of the hurricane risk zone do not have an evacuation plan, an increase from prior years. It was just a few short years ago, in the 2004 – 2005 period, that Florida endured a destructive hurricane season in which it was slammed by storm after storm; in particular, Hurricanes Katrina and Wilma. But it isn’t just Floridians who dismiss the threat of the 2010 storm season. A Maxon-Dixon multi-state poll of residents in the southeastern coastal states found that most residents are unaware of their vulnerability. I am particularly concerned about a potentially severe storm season during a period of record unemployment. Imagine that you live in one of the vulnerable states. You would reasonably have to budget at least $1,000 for an evacuation fund, inclusive of transportation, meal and hotel costs, perhaps slightly less if you have out-of-area friends and relatives with whom you could stay. How many people who are collecting or have exhausted their unemployment benefits are equipped to evacuate? If you live in the hurricane zone, look after your employees and their families by briefing them on appropriate safety precautions during the storm season, including an evacuation plan.

Tornadoes Strike Ohio and Michigan

June 8th, 2010

Powerful and DeadlyTornadoes and thunderstorms struck the Midwestern states this weekend. In Ohio, the tornadoes killed at least seven people and destroyed homes and commercial buildings along a seven-mile trajectory path. The storm also knocked out emergency 911 dispatchers for a brief period. Thankfully, the storm missed the more heavily populated communities around Toledo. In Michigan, the storms caused cosmetic damage to a nuclear reactor, causing a safety protocol to initiate an automatic shutdown. More than 30,000 people were left without power, possibly due to the nuclear plant’s shutdown or to damaged power lines in the area.

One of the key takeaways of this weekend storm is that every natural disaster comes with a threat of power outages. It is uncertain how soon power will be restored to the affected area in Michigan, but consider solutions for your business that address this threat. Do you sell products on your website? Perhaps a hosted e-commerce solution can ensure that your online store stays up and running even when your office is down. Are there contingent service providers you can retain to perform certain of your functions remotely when your office power is knocked out? Assess the sensitivity of your revenues to these risks and plan accordingly.

Measuring Performance Is Not Straightforward

June 7th, 2010
Measuring Management Performance

Measuring Management Performance

This weekend, I read an excellent article, “The Expectations Treadmill”, in the current issue of the McKinsey Quarterly. This publication is obviously not geared towards small business owners, which is why I appreciate its insights – I like to learn about best practices from leading corporations that I can apply to my own business. And occasionally, it lifts my spirits to be reminded that whatever challenges we face in the small business community – such as the inability to diversify risk and the lack of access to capital – the alternative of large corporate employment remains unattractive for a number of reasons. McKinsey’s article sheds light on one of them: the difficulties of measuring management performance. I appreciated the counter-intuitive insight that the share price measure complicates fair compensation for managers of public companies. We tend to think it is harder to value privately-held concerns, that the public companies have an indisputable report card in the form of share price at the close of each business day. Many believe that total return to shareholders, meaning share price appreciation plus dividends, is the cleanest measure of performance. McKinsey’s analysis highlights one of the deficiencies of this measure: share price embeds market expectations about future performance. As a consequence, measuring performance by total shareholder return distorts incentives, leads to bad decisions and alienates capable managers. One aspect of private company ownership/entrepreneurship that I truly appreciate is that I am not hostage to the expectations of the stock market or a focus on short-term returns.  At a time when we are all gloomy about access to capital and other hardships we face as small business owners, it is good to be reminded of our advantages.

Spread the Word to Help Louisiana

June 6th, 2010
Safe and Delicious

Safe and Delicious

Food safety officials are taking a two-pronged approach to ensure that tainted seafood doesn’t reach consumers. First, one-third of the fishing areas of the Gulf of Mexico are closed because of the oil spill, ensuring that the fish are harvested in unaffected waters. Second, fish samples are tested for evidence of contamination, to add a second layer of protection to ensure food safety. Unfortunately, perception matters and these measures have not reassured consumers. The Director of the Louisiana Seafood Promotion and Marketing Board reports that buyers are canceling orders and more restaurants are posting notices that they are not selling seafood caught in the Gulf. Sadly, history may be repeating itself as buyers shunned Gulf seafood for two years after Hurricane Katrina, even though fishing waters were cleared as safe a month after the hurricane. The impact is significant as Louisiana’s seafood brand accounts for one-third of all U.S. production. For the commercial fishing businesses it is a triple impact: reduced harvests (Worldwide Shrimp reports that it would normally pack 250,000 pounds of Gulf Coast shrimp daily at this time of year versus 15,000 pounds now as a consequence of the oil spill); lower sales volumes owing to consumer fears and this occurring when shrimp prices are 50% higher than they were at this time last year. Perhaps one thing we could all do to help Louisiana is to purchase their seafood and spread the word about the adequacy of food safety measures.

When 1+1=5: the Oil Slick During Hurricane Season

June 4th, 2010

New Orleans Mayor Mitch Landrieu expressed concern about how the Deepwater oil spill could be lifted by hurricane force winds and storm surges to become a tidal surge of slime over inland areas. “The oil that’s in the water is either going to be on the marshland or the land that it touches, the challenges are great,” he said. Ron Kendall, an environmental professor at Texas Tech University, told National Geographic that a major hurricane could deliver oil to downtown New Orleans. My friends in Louisiana told me that they see oil slicks the size of Manhattan moving through the Gulf Coast, creating dead zones where fish and the birds that feed on them cannot survive. Should the residue from the spill be pushed deep into coastal marshes, which slow and sometimes block storm surges, low-lying areas such as New Orleans will be even more vulnerable to major storms for the foreseeable future.

Heartache and Activism in Louisiana

June 3rd, 2010
Endangered Oysters

Endangered Oysters

June 1 would have begun the shrimp catching season in the Gulf Coast. While the season lasts only 90 days, during that period Gulf Coast fishing enterprises earn their entire year’s income, often working 18 – 20 hour days in a grueling business. But the Deepwater oil spill ended the shrimp season before it began, forcing many businesses, such as Camardelle’s Seafood, a bait shop and convenience store operating in Louisiana, to close. The proprietor put a sign on her door stating that BP closed her business. She reported to the news media that her utilities are being shut off and she can’t pay her rent. The oil spill has destroyed more in the Gulf Coast than hurricanes of past years did. Small businesses in Louisiana’s fishing industry report that BP’s compensation for their losses doesn’t even come close to making them whole.

One community isn’t accepting the losses without a fight. A group of Vietnamese-American fishermen have filed a class action suit against BP seeking compensation for their losses. The case is to be heard by U.S. District Judge Lynn Hughes who, according to the Miami Herald, has ties to the oil industry. Specifically, the Herald reports that the judge was compensated for traveling around the world to present ethics lectures to the American Association of Petroleum Geologists, a professional association that works with oil companies, including BP. The company has requested that Judge Hughes hear all of the cases filed against it, presumably because the judge has positive relations with the oil industry. This action suggests a long march to justice.

But the Vietnamese-American community has fought such battles before. Case in point: in the aftermath of Hurricane Katrina, residents of Versailles, a community on the edge of New Orleans, used the disaster as a catalyst for change. Versailles is the home of the densest community of ethnic Vietnamese outside of Viet Nam. Hurricane Katrina destroyed what they had spent years building since arriving in New Orleans as refugees. Because of their extraordinary work ethic, they rebuilt what nature had destroyed – only to face another threat in the form of a toxic landfill the government planned to build in their neighborhood. The documentary film “A Village Called Versailles” chronicles the experiences of the Vietnamese-American community in New Orleans. It airs on public broadcasting stations this month. I watched it twice and, in light of the oil spill disaster, the timing of the broadcast makes the subject particularly poignant.

The image I have chosen to accompany this blog posting is that of a piece of jewelry from the Gulf Coast collection by Mignon Faget. Mignon Faget is one of my favorite jewelry lines and I always make it a point to visit her shop when I am in New Orleans. She also has a website and catalog for online sales. She writes, “it is a heartbreaking statement to make with jewelry originally designed to celebrate the abundant gifts of our coast. The reality: we need to make people aware of this disaster and the long-term effects it will have on this region. We all need to do what we can.” Mignon Faget is donating 10% of all sales of this jewelry line to the Coalition to Restore Coastal Louisiana.