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Archive for the “Texas” Category

2011-topics-politics-rick-perryYippie Ki-yay!  I had the great good fortune to be part of a small luncheon hosted for NY business owners by Governor Rick Perry of Texas last Wednesday.  Gov. Perry was in Manhattan to recruit businesses to relocate to Texas.  His arguments were powerful and hard to gainsay.

Perry articulated a blunt mantra based on what he perceives as fiscal  insanity in the policies of NY, CA, IL, NJ, and others toward business and especially toward the entrepreneur.  He spoke in terms that are profoundly practical for most of us small businessmen in these states.  I would suggest these states, including my own, perk up their ears and listen.  They ignore his message at their peril.

Like all states, New York needs successful entrepreneurs to simply survive in a rapidly evolving national business climate. Many industries will surely be rendered obsolete in the next decade.  These dinosaurs must be replaced by leaner, more innovative companies.  Any city or state government that structurally impedes and straight-jackets the nimbleness and verve of the entrepreneurial community will surely pay a heavy price.

2593-Niall Ferguson (internet)Perry understands this in spades.  His pitch for Texas is couched in the idiom of freedom more than financial venality.  While he points to the many financial benefits for doing business in a consciously business friendly state like Texas, his greater argument is philosophical. You cannot consciously and spiritually disincentivize the passionate entrepreneur with the benighted thralldom of a wasteful, rigid, intrusive bureaucracy.  Perry’s key insight is that this kills the elan and the unique frisson of business risk- takers.  Businesses under this oligarchic yoke should and will leave their present venues.  And when they do, it will result in at least a partial “Detroitization” of the states they leave.  Even California and New York.  Good bye tax base.  Hello heavier tax burden on the companies remaining in such inefficient bureaucratic states.

Harvard professor Niall Ferguson, coincidental with Gov. Perry’s appearance in New York on June 19, wrote a compelling op-ed in the WSJ castigating what he calls “Planet Government.”  It is a neat companion piece to Perry’s plain talk. Ferguson quotes Clyde Wayne Crews of the Competitive Enterprise Institute who notes the particularly invidious effects of over-regulation on small businesses whose costs are over 36% higher per employee than they are for bigger firms.  The Federal Register—the official directory of regulation–today is 78,961 pages.  In 1986 it was 44,812 pages and in 1936 it was 2,620.

To survive, entrepreneurial businesses will increasingly  move to states like Texas that allow and encourage them to function freely and healthily.

tocquevilleFerguson concludes his WSJ piece with this quote from Alexis de Tocqueville‘s prescient book of 1833, Democracy in America.  De Tocqueville warned against a US government covering society’s surface “with a network of small, complicated, painstaking, uniform rules through which the most original minds and the most vigorous souls cannot clear a way….[The regulatory state] prevents things from being born: it does not tyrannize, it hinders, compromises, enervates, extinguishes, dazes, and finally reduces the nation to being nothing more than a herd of timid and industrious animals of which their government is the shepherd.”

States like my New York cannot afford the smug and sanguine assumption that folks like us won’t shake the dust of governmental insanity from our entrepreneurial sandals.  Governor Perry certainly knows we will.  He is doing us all a favor by publicly offering his salubrious Texas ambiance as a compelling alternative.

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Here’s an only half facetious comparison of a business friendly state with one that is not so much.  A Texas client of Corporate Rain shared it with me.  It is why I think long and hard about what states I have exposure to these days.

California

The Governor of California is jogging with his dog along a nature trail.

A coyote jumps out and attacks the Governor’s dog, then bites the Governor.

1. The Governor starts to intervene, but reflects upon the movie “Bambi” and then realizes he should stop because the coyote is only doing what is natural.

2. He calls  animal control. Animal Control captures the coyote and bills the State $200 testing it for diseases and $500 for relocating it.

3. He calls a veterinarian. The vet collects the dead dog and bills the State $200 testing it for diseases.

4. The Governor goes to hospital and spends $3,500 getting checked for diseases from the coyote and on getting his bite wound bandaged.

5. The running trail gets shut down for 6 months while Fish & Game conducts a $100,000 survey to make sure the area is now free of dangerous animals.

6. The Governor spends $50,000 in state funds implementing a “coyote awareness program” for residents of the area.

7. The State Legislature spends $2 million to study how to better treat rabies and how to permanently eradicate the disease throughout the world.

8. The Governor’s security agent is put on leave, with full pay and benefits,  for not stopping the attack. The State spends $150,000 to hire and train a new agent with additional special training for the nature of coyotes.

9. PETA protests the coyote’s relocation and files a $5 million suit against the State.

Texas

The Governor of Texas is jogging with his dog along a nature trail. A coyote jumps out and attacks his dog.

1. The Governor shoots the coyote with his State-issued pistol and keeps jogging. The Governor has spent $0.50 on a .45 ACP hollow point cartridge.

2. The Buzzards eat the dead coyote.

And that, my friends, is why California is broke and Texas is not.

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According to the Wall Street Journal (December 15, 2010) Americans now spend more on tort litigation than they do on new cars.

What a waste. What a waste of energy and creativity that must be siphoned into unproductive litigation or insurance and administrative protection. What a profound nonsensical silliness is our system that so richly rewards a parasitic institution which so effectively and legally preys on small and large business alike.

Surely the rest of the world must laugh at this institutionalized suck on our corporate efficiency. The courts are full of such frivolous items as the $54 million dollar pair of pants that a Washington D.C. cleaner supposedly ruined in 2007. Yet such nutty nuisance lawsuits can hit any one of us at any time.

The simple answer to all this is loser pays, a system like England and most of the rest of the sane world has. The problem is the power of the tort lobby, of course, which makes the second largest political contributions in the U.S. to keep our system less profitable and less productive. The tort bar is a true national villain: It is a profoundly anti-business, anti-efficiency, anti-employment and purely self-enriching force.

However, there is hope and (as most creative governmental ideas these days) this hope is coming from the states. For example, Texas is proposing a British-style, loser pays rule which would require the plaintiff to pick up the legal costs of their targets if they lose their suits.

Texas has had its gimlet eye on the tort bar already, with reforms in 2003 and 2005. Again, the Wall Street Journal states in an editorial of December 15, “Before the reform, Texas was a kind of holy place on the tort bar pilgrimage. Now it is a Mecca [particularly] for doctors…” but increasingly for small business in general. So yee-haw. God bless Texas, an increasingly bright and seminal beacon of business enlightenment and legal sanity.

So as not to end the year with another grumpy screed, I am happy to note that business does appear to be improving. Most economic indicators are pointing up for the next year, almost across the board. I’m certainly seeing a spike up at Corporate Rain International. So God bless us each and every one as we embark on 2011.

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Horace Greeley, the nineteenth century editor of the New York Tribune, famously said, “Go west, young man!” I wish to update that maxim to, “Go to Texas, young man!

Why? I’ll tell you why. Texas likes entrepreneurs, goddamn it. It welcomes them. It smoothes their way. It wants them. It loves them. You may say, “Doesn’t every state want our wonderful, productive, job-creating, creative business class?” No. Every state apparently does not.

I was in Dallas last month on business for my company, Corporate Rain. And I was pleasantly surprised by the palpable warmth extended to me in many ways as a non-resident small businessman looking to expand into this peculiar and unique state. I came home to New York feeling that Texas offers a paradigm and guidepost of what can surely make all our struggling states more internationally competitive.

Case in point, The Dallas Morning News (Sunday, March 14, 2010) printed a revealing, succinct article by staff writer Cheryl Hall about this phenomenon. Ms. Hall cites Michael Cox former chief economist for the Federal Reserve of Dallas (presently head of The O’Neil Center for Global  Markets at SMU). Mr. Cox apparently has a slogan for companies seeking to recruit elite workers from New York and California: MOVE TO TEXAS AND GET A FREE BMW. Ms. Hall confirms that this is no exaggeration; that professionals living in the Northeast and California “pay the equivalent of a year’s worth of expensive car payments in annual personal income tax”, which Texas doesn’t have. Professor Cox states, “Every six years Dallas adds a million people.” Since taking over as Director of the SMU O’Neil Center, Cox has created compelling statistics that point to Dallas/Ft. Worth as the new “it” economy for common sense American businessmen.

I live in Westchester County, New York. I personally love living here. I love the opera, the theatre, the art, the Yankees, the Mets, and the Jets, the wooded beauty, the distinctive seasons, the intellectual ferment, the buzzing frisson of sweaty go-go New York energy. But Westchester County bears the heaviest tax burden of any county in the United States. The State of New York is effectively bankrupt and controlled by featherbedding unions, selfishly interested only in maintaining staggeringly excessive benefits at any cost–mostly on the back of energetic productive small business. Why would any entrepreneur in his right mind come here?

Furthermore, even with New York’s incomparable cultural footprint, Dallas, particularly, is quietly growing its competitive cultural presence including a startling new world class opera house, the architecturally notable AT&T Performing Arts Center and the Morton H. Meyerson Symphony Hall (home to the Dallas Symphony, led by charismatic young conductor, Jaap van Zweden), and strong civic support of museums, theatres, parks, wildlife, environment, and education. Dallas is not New York, but it is stealthily becoming a quality of life, as well as an entrepreneurial, oasis. They’ve even elected a lesbian sheriff. Really.

On February 18, 2010, Forbes Magazine released its list of America’s most miserable cities. It’s not just Detroit and Newark on this list anymore. It’s also New York City, Chicago, and Cleveland. I assure you, my friends, we entrepreneurs will leave the New Yorks, the Californias, the Massachusetts, the Michigans, the Illinois, the New Jerseys, in droves. Eventually, entrepreneurs will shake the dust of these mad states from our sandals.

I won’t leave New York. I am willing to continue to pay the uncompetitive price of living in New York because I love it and it’s worth it to me. But for a young entrepreneur in New York or California it makes no sense to stay in these states when Texas and other sensible states beckon with lower taxes, reasonable government cost and efficiency, and rational labor costs.

The actor Fess Parker died while I was in Texas. Fess Parker was famous for portraying Davey Crockett in a Walt Disney TV series during the mid-fifties. (I still remember my Davey Crockett coonskin cap, which I wore religiously for a while.) Crockett, in a speech he made when he resigned his Tennessee legislative seat, memorably concluded his parting Jeremiad with the immortal words, “You may all go to Hell, and I will go to Texas.

Well put, Davey. Good advice. Thank you.

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