The recent passage of Brexit by voters in the United Kingdom raised many questions and had far-reaching consequences. And despite our small footprint, Marin County potentially will feel the repercussions.
Some good; some not so good.
Nonetheless, whatever the local outcomes, they should make us realize that this is an interdependent financial world that we live in.
And all the more reason that such organizations as the Marin Economic Forum continue to be an important informational, networking and idea exchange.
Because we (and the North Bay region) have several companies that compete on a global basis, there are three immediate issues to contemplate: housing and financial market performance, shifts in tourism flows, and trade links to the UK as either a marketplace or a gateway to mainland Europe.
The Brexit decision assures that we are likely to remember 2016 as one of the most politically intense years of the century.
While our presidential election is slowly building to a crescendo in November, the UK vote to leave the European Union has already changed the scenario that whomever we elect will have to face.
Because the UK’s currency is the pound sterling and not the Euro used in EU countries, the unwind will be more about how currencies are trading for each other and less about compliance.
But the disconnect from trade and financial infrastructure based on EU membership will be a large enough headache.
Marin County, housing may be positively affected for two reasons.
First, the outflow of capital toward the United States from the UK will further reduce pressure on interest rates; the Federal Reserve knows this and may now further delay interest rate increases to prevent the U.S. from becoming a magnet for UK wealth seeking the slightest of interest rate gains.
Mortgage rates should remain stable and low, and housing demand will remain supported.
Those residents with global investments may find losses from emerging markets that have ties to the UK (e.g., Indonesia and Malaysia); countries like Japan may be financial beneficiaries although auto sales to the UK (and wine sales there for the North Bay region) may suffer.
For Marin County businesses, trade and labor connections to the UK may be delayed or hampered.
U.S. trade relations otherwise should be little affected.
Businesses such as Autodesk and BioMarin may need to consider the size and scope of offices and business branches in the UK if they are utilized to service Europe more completely.
This may slow progress in life sciences generally, especially if global uncertainty is exacerbated by this situation.
For tourism, we may see a flip of British tourism for Americans.
Marin County residents may now plan trips to London that they have delayed if the pound’s value falls significantly. For UK travelers, the opposite might be the case, reducing their visits to Marin County, wine country and the greater Bay Area.
Businesses in Marin County, such as hotels and B&Bs and restaurants, may hear fewer UK accents.
Under the assumption that global uncertainty ebbs a bit after the tidal wave of opinions and concerns is done crashing over news channels, Marin County should be economically good after this is all said and done.
The UK has multiple reasons to sort the aftermath out quickly, and allow us to prepare for November and more political zaniness.
Robert Eyler is dean of the School of Extended and International Education at Sonoma State University as well as the chief economist for the Marin Economic Forum.
North Bay iHub celebrates the second annual North Bay Innovation Week highlighting innovation in the North Bay the week of Sept 12 – 16, 2016. In collaboration with iHub, Marin Economic Forum is hosting our 4th annual Marinnovation event on September 13.
iHub is a collaborative of partners dedicated to building a robust entrepreneurial ecosystem in Sonoma, Marin and Napa counties thru the promotion of innovation as a community building and job creation tool by providing entrepreneurs with resources to enable them to build successful businesses.
The information economy has impacted the way we currently work and will continue to impact the way we work. This economy values knowledge workers and our future depends on the workforce development strategies towards a sustainable economy. There are many ways to discover your value in our economy. One question to ask is, “Could the vast majority of your work responsibilities be automated by a “kludged together” Excel script?”
America is the wealthiest country on earth because for most of our history we have followed the basic principles of economic freedom. Said differently, our wealth is not preordained; it is not coincidence and is it not guaranteed to endure. Instead, our wealth is the direct result of deliberate action to abide by certain economic principles, laws, and freedoms, many of which are now slipping away.
Some portion of the persistent unemployment in our economy is structural in nature: There is a gap between the skills of the unemployed and the capabilities that are being sought by employers with unfilled job openings. Much of the structural unemployment we see is being caused by rapid technological innovation and the evolution of our economy, which increasingly demands workers with technical skills and experience. Conventional thinking might look at this problem and say that this phenomenon happens constantly; as economies grow, skilled workers are in increasing demand. We now face a situation in which technological innovation is altering the economy so rapidly that many workers are unable to make the adjustment and gain the retraining necessary to evolve with it.
A simple thought experiment: Let’s pretend you won $10 million in the lottery and you could only do one of the following two things with your windfall:
Option #1: Invest in a conservative portfolio of stocks and bonds and live comfortably on $300,000 – $400,000 per year in income.
Option #2: Start-up a new business that is creative and innovative and hires new employees to try and become successful.
Which option would you choose? There is no right or wrong answer here. Both options might benefit you, but only the second option is capable of being beneficial to the broader economy and society at large. New business formation and the creation, innovation, and job opportunities that come with it are the foundation of economic growth and prosperity.
MEF Chief Economist Update
by Dr. Robert Eyler
Entrepreneurship and Sustainability
Entrepreneurship and sustainability have a similar history in terms of how economists look at their definitions. Initially, we looked at entrepreneurship as “ideas”; economists think about four factors of production or inputs including labor, land, physical capital, and entrepreneurship. These ideas are paid profits, profits earned by the idea owner or ultimately the owner of a business that springs from intellectual capital (the idea). The entrepreneur’s role in our economy became more important as the economy began to monetize ideas more rapidly, and with large sums of money. There is a magazine with the title of “Entrepreneur” like “People” or “Time”; like sustainability, entrepreneurship has become a generalized term and no longer associated directly with its original meaning. Generally, we think of a smart person who started a business that was successful as an entrepreneur now. Economists still consider entrepreneurship an input to any and all businesses.
Successful businesses are the heart of every economy and all businesses began technically with an entrepreneur. We teach this subject throughout business school curricula; Dominican University of California has its MBA programs wrapped around the entrepreneur; Babson College has a satellite campus in San Francisco on the Embarcadero and Folsom Street, a college made famous for its focus on entrepreneurship as a core idea taught in its classes. The concept is everywhere, and everyone has some ideas about new products or innovations. Not all these ideas are commercial; television programs like Shark Tank provide a quick lens into the decision making that links financial markets to new ideas.
Marin County is a place where famous entrepreneurs have flourished. Lucasfilm, Fair Issac, BioMarin, EO Products, and many others started and grew here. Many lessons can be learned from these businesses growing from a couple ideas or concepts or products; many other businesses fail to make it here in Marin County, as in other places as starting a business is tough. Marin Economic Forum’s work is to stimulate entrepreneurs in Marin County and beyond to see Marin County as a place to do business. The history is here, but is the community support?
Marin County has been resistant to business growth generally, under the supposition that growth means change which has many “bads” that come with it. Ironically, climate change will likely be solved or mitigated by entrepreneurship: science made commercial to help people and the earth. Everything in your home, the restaurant meals you enjoy, the phone you may be reading this on right now is a by-product of supported entrepreneurship. Our community is supported by businesses and new ideas; without them, there is no change and nothing new, fewer jobs and societal devolution.
MEF Board Director, Laurie O’ Hara, Working Solutions
Congratulations to Working Solutions. On Friday, July 8, they funded their 400th microloan! The loan was made to Firebrand Artisan Breads, a local bakery in Oakland that is taking the Bay Area by storm with its signature breads and delicious pastries.
Working Solutions began in 1999 as a workforce development program under the auspices of TMC Financing. By 2005, the organization had commenced its own microlending program. Since then, they have provided over $9.8 million in lending capital to Bay Area businesses and perfected their holistic approach to community economic development by blending their lending services with business coaching and mentoring programs. In 2009, Working Solutions was officially designated a United States Community Development Financial Institution (CDFI).
MEF Board Director, Michael Leifer, Digital Candy
Congratulations to Michael Leifer and the launch of Digital Candy. Digital Candy offers advanced artificial intelligence searches on the web to identify counterfeit products and misused logos, domains, images and video.
Events
September
Marinnovation — Tuesday, Sept. 13, 2016 4:30pm – 7:30pm, Marin Commons, San Rafael visit marineconomicforum.org to register
North Bay Innovation Week September 12-16, 2016 Throughout Sonoma and Marin counties visit: northbayihub.com
100MARIN — Wednesday, September 28, 2016 block party outside of Il Davide, San Rafael 6:00pm – 8:00pm visit: www.100MARIN.org to register
On August 24, 2014, Napa County experienced a natural disaster that no part of California wants to ever experience: an earthquake that affects the downtown area. The City of Napa was hit particularly hard, and the visual damage provided some reminders of a similar outcome 108 years earlier from San Francisco northward. Among the many differences between the 1906 earthquake and the 2014 earthquake in this region was that Napa was ready for this and the community rallied with its support and with its recognition that Napa’s visual aesthetic is very important to its main industry: tourism.
Marin County can learn from the speed and agility with which Napa County rallied. By November 2014, Napa had turned many corners in terms of the financial issues of recovery from the earthquake; to walk around in Napa and not know what happened there otherwise had the feel of major construction work and not reacting to a natural disaster. Because tourism is a major economic driver for Napa County and the City of Napa in specific, clearing the streets and confirming the safety of each business was critical in the economic effects of the quake not lingering beyond the necessary items.
There are three types of “residents” in Marin County. Those that own a home or rent here in Marin County we directly call residents. The second are in-bound commuting workers, those that spend a large amount of their lives working for an employer in Marin County but live in another place. Finally, those that visit Marin County, for business, shopping or pleasure, “live” in Marin County while here, especially if they stay overnight.
These three categories define the universe of possibilities for everyone in Marin County, from those that you see in local restaurants, local retail stores, parking their car, to walking on the street. Commuting workers are both a lament and luxury for Marin County. The lament is that traffic is heavy one-way in the morning and in the opposite way at night and creates additional traffic on Marin County roadways during the work day. The luxury is that a relatively low-cost workforce comes from elsewhere seven days a week to and from Marin County and provides many services, which residents, tourists, and other workers in Marin County utilize every day. Visitors create another set of people to demand local resources alongside of local workers and residents.
One of the most difficult steps in starting and growing a business is how that business will finance itself. One of the cornerstone ideas that built modern finance is that there is not a material difference among potential mixes of debt, equity and cash to finance a business. The Modigliani-Miller Theorem has this implication; the Capital Asset Pricing Model (#CAPM) was born from this idea (and many others). However, finance theory evolved in the 1980’s and 1990’s to consider data that suggested it did matter a bit, and that there is an optimal mix for every business that is specific to that business.
I was humbled to moderate a panel at the “Access to Capital” gathering on April 29 at the San Rafael Community Center. MEF was a major sponsor; San Geronimo Golf Course provided food and we provided staff to help with the event’s coordination. This event was hosted by the Small Business Development Center (#SBDC) here in Marin County, as well as Renaissance Center (where SBDC in Marin is located at 1115 Third Street). Marin County’s only business accelerator, Venture Greenhouse (also housed at Renaissance in San Rafael), was also very involved and had many alumni of its program in attendance.
Governor Brown held a press conference on April 2 to announce an order he was making to all cities and towns (implied all areas of California, including unincorporated areas) to reduce water use by 25 percent. This order was made as a reaction to low snowpack that remains in the Sierra Nevada Mountains as of April 1, and also to the general drought conditions in California. Last year, Marin Economic Forum and Dominican University of California’s Barowsky School of Business hosted an event where the economics of a drought were discussed. Conservation was part of that discussion, as was residential behavior in our landscape choices. The conclusion is there is no surefire way to get people to conserve on water. In short, Governor Brown ordered replacement of millions of square feet of lawns for more resistant landscapes. He also discussed rebate programs to use water-efficient appliances and fixtures in homes and commercial spaces. Water use will be reduced at UC and CSU campuses; new homes and developments will have to use recycled water.
The unemployment rate is one of the most deceptive and oft-used economic data points in the world. Conceptually, the unemployment rate measures the percentage of residents in a certain area’s labor force that are looking for a job but have not found one yet. The labor force definition is the sum of an area’s employed and unemployed residents. Two immediate issues jump out for economists. First, we know there are people who are “marginally attached” or discouraged workers, or those who are unemployed but unlikely to remain in their job search for much longer or are done looking (discouraged workers); second are those that are working under their economic potential (underemployed), another difficult thing to measure in terms of filling a productivity gap, which could create more jobs if filled. The recent recession and recovery put a large focus on labor market measures, and are at the heart of two macroeconomic issues: slow inflation rates and why the Federal Reserve has not changed interest rates directly since January 2009.
Something near and dear to me is education. I have been a professor at Sonoma State University since 1995, so I am about to complete my 20th year on campus. In my time as the CEO at Marin Economic Forum, the teacher has become the learner; I have learned a lot about local politics, economics, and communities using Marin County as a living laboratory for almost every angle on these topics. In many ways, my experience at Marin Economic Forum has acted like an “externship”, where a faculty person goes into actual business, gets out of the academic bubble, and sees more about the real world.
Internships can do a lot of the same and more for students as they get closer to graduation from high school or undergraduate work at a university or college. One of the key ways in which Marin County businesses can reduce the lack of talent or the shortage of younger workers in professional positions. This is a lament I have heard since 2009 when I started at Marin Economic Forum, and this is not a new issue that local businesses face. However, it is something that internships can help as a bridge between a newly minted worker and possible job opportunities.
As 2015 begins, we are seeing some continued, downward movement in gas prices at the pump. Gasoline prices are determined, in large part, by the price of crude oil on global markets. Future markets for oil also play a major role. Many people understand this, as gasoline is derived from crude oil. The gas price going down is a reflection of a global glut of oil. As in any markets when there is an excess supply of a commodity (supply greater than demand currently), prices begin to fall. Demand for gasoline is falling in the United States seasonally; the winter usually shifts demand from gasoline to heating oil and natural gas in part as people stop driving as much and need to stay warm.
Since the middle of 2013, Marin Economic Forum has been considering a change to Marin County’s targeted industries that were established in 2004. Such industries are groups of businesses that set Marin County apart in terms of economic opportunity, providing relief to social inequities and also reducing harm to the environment. MEF’s reconsideration of these industries will be finalized in a document called a Comprehensive Economic Development Strategy or CEDS document. Formally, this document is used by the federal government when local applications for infrastructure grants and other assistance come to Washington D.C. The CEDS describes the local economy in the recent past, now, and in the future such that a federal grant reviewer can understand the context in which new infrastructure dollars would support the local economy. Specific areas of concerns, need and stress are identified through both data analyses and focus groups.
The recent passage of Brexit by voters in the United Kingdom raised many questions and had far-reaching consequences. And despite our small footprint, Marin County potentially will feel the repercussions.
Entrepreneurship and Sustainability
Congratulations to Working Solutions. On Friday, July 8, they funded their 400th microloan! The loan was made to Firebrand Artisan Breads, a local bakery in Oakland that is taking the Bay Area by storm with its signature breads and delicious pastries.
Congratulations to Michael Leifer and the launch of Digital Candy. Digital Candy offers advanced artificial intelligence searches on the web to identify counterfeit products and misused logos, domains, images and video.
