Ed Morrison · Casinos and the role of government…

September 15th, 2011

Interesting commentary from CommonWealth, a public policy magazine in Massachusetts, as the state’s House votes to expand casino gambling.

Richard McGowan, a professor at Boston College’s Carroll School of Management and a leading researcher on gambling, has called compulsive gambling the “Achilles’ heel” of the casino industry. He’s right, of course, so the industry and its allies in government — which now include Beacon Hill’s three top powerbrokers — do their best to keep that painful foot well wrapped and taped, at least long enough for a casino bill to hobble over the goal line and be signed into law.

Problem gamblers, those who lose the mortgage money or the car keys or who leave their family otherwise strapped because they can’t put the brakes on their losses, are always treated by the industry and its army of lobbyists as more of an annoying distraction in the casino debate than the significant part of the gambling landscape they seem to represent. Gaming — the sanitized term favored by the gambling companies and political allies — is an entertainment industry, proponents insist, a place where the dashing men and shapely, party-dress adorned women seen in Foxwoods television ads enjoy an elegant night out, soaking in “the wonder of it all.”

To support that view, proponents invariably point to studies suggesting that just 1 or 2 percent of the adult population suffers from some degree of compulsive gambling. Other research says the figure could be somewhat higher, as much as 4 or 5 percent.

But regardless of the exact number, it’s not actually the figure that should be of concern. Whatever the prevalence of compulsive gamblers in the general population, they obviously account for a much larger share of those who actually visit casinos and a disproportionate share of casino revenues.

Just how much of the revenue casinos bring in is from the losses of those with gambling problems? One of the most thorough studies of this issue was done in 2004 in Ontario, where researchers had a sample of residents maintain diaries logging their gambling expenditures. The study, prepared for the government-supported Ontario Problem Gambling Research Centre, estimated that 35 percent of Ontario casino revenues were derived from moderate to severe problem gamblers. Such gamblers accounted for 30 percent of revenue from casino table games and a whopping 62 percent of revenue from slot machines.

“It’s a huge cost borne by a small proportion of the population,” says Earl Grinols, a Baylor University economics professor who has done extensive research on the casino industry.

The research suggests problem gamblers are an integral part of the industry’s revenue model, not an unfortunate byproduct of the intoxicating hold casinos have on some people. Understandably, that is a tough pill for casino proponents to swallow.
Gov. Deval Patrick, when asked Wednesday morning following a speech to a Boston business convention whether the idea that such a large share of casino revenue comes from problem gamblers gives him pause, said, “Well, it’s given me some pause.

Of course, we have $1.5 billion worth of Massachusetts gamblers today who spend that money just in Connecticut,” he said. “What we get from the casino bill is some dedicated funds, and more of those funds, to try to address the issue of problem gambling,” he said, referring to provisions in the legislation that would direct money from casinos to fund compulsive gambling assistance programs and research.

But Patrick nonetheless seemed to reframe the issue in terms of the overall low prevalence of problem gambling, not the share of casino revenue it accounts for, saying most studies “point to the very small proportion of people for whom this is not just harmless entertainment.”

Speaker Robert DeLeo, who is championing the casino bill that passed the House Wednesday night, scoffed at the idea that problem gamblers account for a sizable chunk of casino revenue when asked about it following a speech last year to the Greater Boston Chamber of Commerce.

State Rep. Kathi-Anne Reinstein, whose Revere district shares with DeLeo’s Winthrop-based district the Suffolk Downs and Wonderland racetracks, has been impassioned in her call for expanded gambling as a job generator for desperate constituents who have been hit hard by the recession. “This is a jobs bill,” she says. “It is something that my district literally is praying for.”

But when asked whether she is concerned about a third of casino revenue potentially coming from the pockets of problem gamblers, Reinstein simply refused to accept the premise. “I don’t agree with that research,” she said. “I don’t think that’s a reality.”
It may be an uncomfortable reality, says Grinols, the Baylor economist, but it is a reliable estimate that’s been well established at this point. Grinols says the casino industry could probably still be profitable without money from problem gamblers. Of course that would throw off all the projections about jobs and revenue to state coffers, figures that are already pretty shaky. He says it would also require imposing limits on casino hours (the pending bill authorizes casinos to operate 24 hours a day), banning ATMs from gambling facilities, and other measures the industry is loath to accept.

Without such aggressive steps, Grinols said in a 2005 CommonWealth story, states are turning the traditional role of government on its head. “This is an industry, like it or not, that is making its money off the sickness of its clients,” he said. “Government is supposed to be the protector and guardian of the community, not the predator.”

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Ed Morrison · A comment on “Can the Middle Class Be Saved?”

September 11th, 2011

Chris Gibbons, in his Google Group on Economic Gardening pointed to a recent article in the Atlantic:  ”Can the Middle Class Be Saved?“ 

His post prompted these thoughts: 

To those of us who have been around a while, articles about the collapsing middle class come as no surprise. 

I chuckle at economists who, like the author of the Atlantic article, come up with facile policy prescriptions. The framing question of the article is silly. Worse, it points to a paternalism, an elitism, that makes our Washingotn-centric policy community (whether left or right ) largely useless in confronting the practical realities of regional innovation. 

Meeting the challenges of strengthening our economy will require innovation,but innovation of a different sort than companies pursue. We will need innovations that take place outside the four walls of any one organization. Innovations in our civic economy, the economy that supports wealth creation in our market economy. Innovations like economic gardening.  

In 1983, while I was working on the Senate Democratic Policy Committee on issues of US Competitiveness, an intriguing report with an alarming title came across my desk: A Nation At Risk. Among other memorable lines, the report included a warning: “The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a Nation and a people.”

The report’s warnings lined up closely what I had learned before working for the Senate Democrats. 

Prior to that time, I worked as a corporate strategy consultant with large multinational companies: GE, Ford, Volvo and a few others. Most of my work focused on moving manufacturing operations out of the US and into lower-cost countries. 

By the early 1980s, improvements in logistics and communications, coupled with more liberal trade policies starting in the Tokyo Round in the early 1970s, opened the door to globalization. (Actually, I date the beginning of globalization to the mid-1950s when SeaLand started the containerization of freight with the shipment from New Jersey to Houston. For an excellent history, read The Box.)

Remarkably, I encountered unionized plants with 2,000 workers and over 200 job classifications. The rigid industrial structure of our corporations––reinforced by union collective bargaining––made many of these industrial operations in the US hopelessly uncompetitive in the emerging world of global competition. 

My insights grew enormously when I had the opportunity to join a consulting team in 1982 that compared production costs between a Ford Escort and a comparable Mazda GLC. Wage differentials between Japan and the US played some role in the cost difference, but not as much as you might think. In the end, the Japanese were making automobiles with a different business model, one that focused on flexibility, speed and lean production practices. To make these models work, they requested a lot from everyone throughout the production system.

Contrast the scene I experienced when I walked through a Ford engine plant in Dearborn. I saw one assembly worker simply putting a very small rubber bushing on an engine block, about one every minute or so. When I asked the plant engineer how they could justify paying assembly-line worker to do so little, he explained the inflexibility of union contracts. Under the then prevailing agreement, job descriptions were frozen within 90 days of the new model introduction. That meant that the contract effectively cut off any learning on the production line after 90 days.

It would be a mistake to jump to the conclusion that the non-competitiveness of the US auto industry was grounded only in union contracts. To illustrate, I will share another story. Looking at the design between the US and Japanese models, we found that the Japanese product design was far simpler and involved far fewer parts. Active collaboration between the Japanese automaker and its suppliers led to countless innovations that were reflected in ingenious designs for everything from interior trim to the transaxle. Meanwhile, the US auto executives focused on squeezing supplier for the lowest cost and playing one supplier off against another: a short term game that strangled innovation.

US industrial business models did not require much from front-line workers. All this began to change with advances in computers that reached the factory floor beginning in the mid 1980s. By the early 1990s, employers were recognizing the need for different set of skills with their workers. During the first Bush administration the Secretary of Labor convened an important group that began to focus on specifying the skills needed. Their report set in motion a push by employers focus on a new set of competencies. In shorthand, they have become known as 21st Century Skills. (ACT made a nice little business out of these competencies by commercializing them in their WorkKeys system.)

While the demands of employers have been increasing relentlessly in response to advances in technology and communications, our public schools have been mired in a slow-motion effort at reform. As the National Commission on Adult Literacy pointed out in its 2005 report, “The US is the only country among 30 OECD free-market countries where the current generation is less well educated than the previous one.” 

As well educated Baby Boomers are leaving the workforce, they are being replaced  by a workforce that is both smaller and less educated. 

We can see the consequences. Despite the deep recession, employers are facing difficulty finding people with adequate skills. Many of these shortages are within the band of “middle skill” jobs: they require some post-secondary training but less than 4 years of college. 

The reason for this imbalance goes back to the sorry state of our public education system, which, for at least thirty years, has been underperforming. It was less that ten years ago that policymakers in Washington began to measure in realistic terms the Nation’s drop-out problem. Across the country, about 30% of ninth graders fail to graduate from high school. These young people face a lifetime economic disability.  (You can check out some statistics here.)

The National Commission on Adult Literacy calculated that out of a labor force of 150 million, 88 million adults face at least one education barrier to higher income employment: No high school diploma; speak English “less than very well”; or a high school diploma with no post secondary training. 

To improve our performance significantly, we will need to innovate in complex civic systems. 

Take the idea from the Atlantic article that we should be pushing career academies.  For those of us who have been working in the trenches, this proposition is nothing new. Career academies can work to provide more flexible choices to high school students. The challenge is accelerating their implementation. Here, we run into resistance, as reformers like Michelle Rhee, former head of the Washington DC schools, and Joel Klein, former head of New York CIty’s schools have explained. Steve Brill’s new book also explores this issue. 

The Atlantic author suggests, as well, “a continued push…for clearer paths into careers for people who don’t immediately go to college”.

Let’s examine that idea more closely. First, we should recognize that we have no effective career guidance system in our high schools. A typical high school career guidance counsellor handles between 200 and 300 kids. Most of this guidance goes to helping the tip 30% get into college. Yet, once they are there, alarming numbers are inadequately prepared for college level work. 

Providing effective career guidance creates a daunting challenge, but figuring out career pathways is even tougher. We clearly need new ways of communicating the skills needed by employers to the educators responsible for teaching. This is not only a problem of educators. Most business people, as University of Akron President Luis Proenza points out, can tell you more detailed specifications of the products they buy than the people they hire. 

Career academies can help. So can early college programs, career and technical education programs, new entrepreneurship programs in high schools, more team teaching and project-based learning (like New Tech High) and stronger STEM education in successful innovations like Project Lead the Way. 

We also need to focus our innovations on “youth support networks” like Communities in Schools and the Strive initiative in CIncinnati. 

This last point brings me to perhaps the best place we have for major investments to change the trajectory of poor education: Investments in early child care. Advances in brain science in the 1990’s point to the critical importance of 0-3 in brain development. A handful of economists — like Nobel laureate James Heckman — have underscored the value of early childhood education. 

Getting to a more open, innovative, agile approach to developing brainpower will be critical to our future competitiveness. 

The basic fact is clear: in a world in which technology can leap boundaries, low cost labor costs pennies an hour, and capital can fly around the globe with the click of a mouse, the only competitive advantage any region has comes from its brainpower and its ability to convert this brainpower into wealth through innovation and entrepreneurship networks. 

In sum, we will meet our competitive challenges with both civic and market innovation, and each region of the country will likely be developing their own solutions. We will eventually move on from education reform to education transformation. We will find ways to tie these education investments more tightly to the emerging business models of how wealth is being created. No one is quite sure what these new systems will look like. But one fact is certain: the more we try to fix old systems instead of creating new ones, the worse our situation will become. 

The longer we wait, the more we fiddle, the more dire our situation. Raghuram Rajan, former chief economist at the IMF, has made this point clearly in his book Fault Lines. 

The challenges we face involve figuring out how to manage and guide open, loosely joined networks strategically. This challenge is not easy, but this is where the exciting work of economic development is now taking place. 

That’s why at Purdue Center for Regional Development, we are focused on expanding civic innovation. Teaching communities how to build complex networks to support civic innovators who are transforming old, tired systems of education, workforce development and economic development. The good news: we have found some approaches that work: they are simple, scalable, low cost, measurable and sustainable. 

More soon. 
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Ed Morrison · Innovating in Career and Technical Education

September 2nd, 2011

One of the most daunting challenges we face involves redesigning our career and technical education system (CTE). 

We have a gaping hole in our talent development system when it comes to training people for “middle skill” jobs: positions that require post-secondary training but less than a four year college degree.  (For more, check out the National Skills Coalition.) 

My colleague at Strategy-Nets, Laz Kozmon, has been discussion the challenges of innovating with the leadership of the CTE system in Alaska. Today, we are having a conference call, and Laz prepared the enclosed discussion document. 

Getting people to embrace open innovation in the “civic space” is both difficult and simple. Many bureaucratic organizations operate with a cardinal rule, “Cover thyself”. Don’t make mistakes. Don’t take chances. 

Of course, this tendency runs to the exact opposite direction of where we need to head. To innovate and adapt to new economic realities, we need more experiments. A good book on this subject is Adapt: Why Success Always Starts with Failure. 

Moving people with entrenched habits is difficult. 

But innovation starts in the small space between our ears. Seeing the world in a new way is, actually, quite simple. We’ve all had the experience. 

One of the ways to get people to see new possibilities involves drawing maps. Here, Laz uses a few visual tools to describe how to see Alaska’s CTE system and the challenge of innovation in a new light. 

Laz, who has a background in bio-medical engineering and corporate strategy consulting, is doing some interesting work developing and extending the Strategic Doing model. 

CTE Slide.pdf Download this file

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Ed Morrison · Steve Litt to Cleveland: Here comes Pottersville

August 20th, 2011

Steve Litt explains how Cleveland’s design review of the new casino is, well, not much of anything at all…

Cleveland review bodies are winging it on the traffic impact of Rock Gaming’s downtown casino

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Ed Morrison · Colleges and universities: Changing the game in regional economic development

August 18th, 2011

Colleges and universities sit on the front lines of “What’s next” in economic development. 

They produce the brainpower that powers high growth businesses. 

Their research ignites innovation. 

Their incubators, accelerators and entrepreneurship networks convert brainpower into wealth. 

Their campuses create hot spots that regenerate economies. 

Higher education is the key to the next transformation in the U.S. regional economies. As the National Intelligence Council wrote in its recent report Global Trends 2025: A Transformed World, higher education is reshaping the global economy: 

As global business grows increasingly borderless and labor markets more seamless, education has become a key determinant of countries’ economic performance and potential. Adequate primary education is essential, but the quality and accessibility of secondary and higher education will be even more important for determining whether societies successfully graduate up the value-added production ladder.  

The University Economic Development Summit is the place to catch the wave on these new developments. In addition to presentations, you will see the finalists of the Awards of Excellence: 15 innovative ideas for connecting campuses to regional economies. 

Here the agenda for the event, which, this year, will be held in Indianapolis on October 9-11. 

If you want to know how high education is changing the game, all you need to do is register.  It’s the best investment in economic development education that you’ll make all year. 

(Disclosure: I sit on the board, and I invest my time to get the inside track on how colleges and universities are reshaping our regional economies.)

UEDA Annual Meeting Brochure 08-18-11 v2.pdf Download this file

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Ed Morrison · Cleveland’s missed opportunity with GE Lighting

August 17th, 2011

Incompetence has its consequences.

Lexington, KY is the winner when it comes to the expansion of GE’s high efficiency lighting products.

GE Lighting to Expand Manufacturing In Lexington

The jobs in Lexington: $25 per hour plus benefits.

I could never quite figure out why the corporates in Cleveland could never see the opportunity with GE Lighting.

Instead, they backed the bonehead strategy of Cleveland to recruit a no-name Chinese LED manufacturer in a bogus sole source project. GE saw through the scam. More here.

Years ago, when I directed the Center for Regional Economic Issues at Case Western Reserve University, I went out to Nela Park — our country’s first industrial park — to explore stronger relationships with GE Lighting. (For more on the rich history of Nela Park, go here.)

I found GE executives there willing to partner, but curious why leaders in Cleveland did not pay any attention to the opportunity. No one had visited them in years.

When housing REI at Weatherhead became an issue, I even proposed to then President Hundert that we move the Center to Nela Park. The business school’s response: Shut down the Center.

(Odd, to say the least, given all the emphasis these days on regional innovation strategies.)

GE Lighting provided Cleveland with a strong anchor to attract GE business partners in the fast growing markets for high efficiency lighting. (Companies like Cree.)

Despite the opportunity to partner with GE Lighting and work on a high potential new cluster, the corporates have blown it.

Don’t be surprised to see the Nela Park facility moving soon. Kentucky smells an opportunity. Kentucky’s political and business leaders — from the governor on down — lined up behind GE to get this investment. Read more.

You cannot be serious if you think Kentucky will ignore the opportunity to come after the headquarters of GE Lighting. They’ll see it as an anchor to their emerging cluster. (Disclosure: Both the Kentucky Cabinet for Economic Development and Commerce Lexington are former clients of mine.)

Meanwhile, NorTech, Team NEO and the Greater Cleveland Partnership have been….where?

My guess: GE will be gone from Cleveland within 3 years.

Go figure.

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Ed Morrison · From Jim Cossler in Youngstown

August 16th, 2011


News from the Youngstown Business Incubator…

Normally we just don’t get all that excited when someone approaches us to help launch an iPhone app. They most often do not create the big new jobs number we are looking to achieve.

But, sitting through a PowerPoint presentation recently for a new iPhone and iPod Touch app called Toaster Pop, imagined and designed by Connor Zamary, well…we were left completely speechless.

Particularly when the last slide appeared:

“If you want more information, my Dad said you have to sign an NDA.”

You see, Connor is all of seven years old. And he is simply amazing.

If you want to see what kids are capable of these days, visit www.toasterpop.com, now selling in the Apple App Store.

Man, I really need to get myself back in school. I suddenly can’t compete with a seven year old.

This kid’s already had downloads from Kuwait, Indonesia and Malaysia!

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Ed Morrison · O-H-I-O

August 15th, 2011

Source: elevenwarriors.com

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Ed Morrison · How Mobile Apps Are Helping Urban Explorers Discover Their Cities

August 13th, 2011


How Mobile Apps Are Helping Urban Explorers Discover Their Cities

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Ed Morrison · Akron ranked third nationally in manufacturing job growth

August 12th, 2011

Akron ranked third in one year manufacturing job growth.

Columbus ranked 80th in one year job growth, Cleveland ranked 54th, Toledo ranked 21st in one year job growth, Youngstown ranked 14th and Cincinnati ranked 12th.

Akron ranked third nationally in manufacturing job growth

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