Birmingham is still recovering from economic mistakes of the past. We can’t repeat them.
When the clock struck midnight the other night, I heard the refrain, “Time to party like it’s 1999.” I guess a little Prince, coupled with a year mnemonically similar to an event 20 years in the past, makes the comparison inevitable and perhaps fortuitous. As I look forward to the coming years in the Birmingham ecosystem, I remember and reflect on that time period. What was Birmingham doing in the economic development realm in 1999? Apparently, partying, and not much else – at least from my perspective.
The era between 1995 and 2005 is a time of lost opportunity and missed chances. The region was on a high, having just landed the Mercedes Benz plant in Vance: an economic plume in the cap like no other and a business that still provides much-needed employment in both the facility and the many suppliers around it. Birmingham had several Fortune 500 companies, and we (the Birmingham business community) generally felt good. Which, of course, is when you make mistakes.
First, we failed to diversify our economy. We stuck with the financial, construction and automotive industries. It seemed diverse enough, so we were generally unconcerned. Based on some early biotech successes, we tried to build a biotech cluster, but failed (I would love someone with more perspective on this — specifically, why we could not or did not capitalize on Biocyst).
Second, we failed to invest in infrastructure projects. We did not approve MAPS; we did not approve Amendment One. The failure of MAPS meant that we did not have a complex to draw people into the region. This also continued our mindset that no one wants to visit or move to our fair city (a mindset which still exists today, albeit that is beginning to fade). The failure of Amendment One did not provide the necessary tax reform to move Alabama forward (a problem that still plagues the state today).
Finally, and perhaps most importantly, we did not value entrepreneurs. The risk-takers who would lead our economy forward were often unfunded, discouraged, left for ruin or otherwise dis-incented. As a consequence, few companies grew into mid-sized businesses. We did not participate in the .com boom, which was in full upward swing in 1999. Few companies (and arguably zero, depending on how and when you are counting) went public. IPOs were deemed a false indicator of success in the merger world, but while the number of IPOs is not a completely accurate picture, a total lack indicates a failed entrepreneurial ecosystem. The dire consequence of this failure is today’s lack of human capital.
We felt pretty smug when that world came crashing down in the .com bust. We stuck with the traditional economic development incentive packages in a zero-sum game of luring established industries and continued investing in traditional companies.
But that changed in the recession. Our “diversification” proved completely inaccurate. The state government could provide no support to bolster the economy in the recession. No infrastructure was available to create a vibrant community that attracted young professionals, and, most importantly, little to no human capital was available with any “been there, done that” experience.
The amount of high-growth start-up CEOs who had a successful exit between 1995-2005 can be counted on one hand (actually, I can only think of two, but I’m pretty sure I am missing a couple). As a consequence, we are playing catch up. The Great Recession spared no one, but the pain was greater and longer for Birmingham, and I think our approach to economic development between 1995-2005 was a major factor in our ability to mitigate the damage.
The biggest issue we have in our entrepreneurial ecosystem is the lack of mentors and advisors with true entrepreneurial experience. Many out there are working hard, but we have a huge talent gap. This issue is directly related to our lack of entrepreneurial development in the 1995-2005 time period and presents our current ecosystem’s biggest challenge. We are working on it, but this will not happen overnight.
There are parallels between 1999 and 2019; let’s hope for different outcomes. Irrational Y2K, hyped-up .com start-ups and endless reporting of sex scandals would find a welcome home in 2019. However, we now have a greater understanding of the ever-evolving economy, and more people now understand the pace of change than in 1999.
We must continue the course of evolving our economy by bolstering our entrepreneurial ecosystem. We have to continue to invest in growing companies and give them the support that they need. We do not need to do this unwisely or without forethought to the economics, but we must keep moving forward – even as things get tough.
~ Mike Goodrich