Author Archives: Brad Ferguson

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About Brad Ferguson

Private citizen focused on building the economic competitiveness of Canada.

Cash Cows in FunkyTown

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“Talk about it, talk about it, talk about it, talk about it, talk about it … FunkyTown.”

It was 1980.  Disco was mainstream.  John Travolta was had just released Saturday Night Fever, and a band called Lipps released this catchy tune that hit #1 on the Billboard Top 100.  Alberta was a boomtown.  People were flocking to the province, as the price of oil had risen to $37 from $3 a decade earlier.  Life was grand, and nothing could stop us.

FunkyTown was a wild success.  Fans couldn’t get enough of it, and Lipps raked in the money from royalty sales that was then spent on concert after concert where people came to hear that one song … FunkyTown.  Unfortunately, the cash and the glamour was all consuming, and Lipps never really made it back in the recording studio to make another hit.  They tried … kind of … but they had to keep feeding the FunkyTown cash cow, and eventually after five years they packed it in … and now will forever be known as a one-hit wonder.  Sad.

Cash cows are both wonderful and dangerous things.  Microsoft is a great example.  At first they generate extraordinary profits and everyone is feeling funky and can do no wrong.  Profits are used to fund experiments in other areas – but those experiments are unfortunately just that … experiments … that are started then stopped, funded then under-funded, prioritized and then deprioritized.  You see, cash cows often produce wasted efforts across organizations, as they fund experimental opportunities for diversification but as soon as the cash cow hiccups, everything is shut down and all the resources come running back to protect the beloved bovine.  Diversification never happens, and cash cows often end up being one-hit wonders.

In Alberta, we suffer from our own cash cow system, our own one-hit wonder, our own FunkyTown.  We use our cash cow to create one of the finest universities in the world.  We seek out the best and the brightest talent and encourage them to come here to create opportunities for diversification – in areas like medical devices, heart transplants, nanotechnology, engineering, cardiovascular diseases, metabolomics, virology and islet cell transplants.  And just as they are hitting their stride … just as they are moving toward commercialization … what do we do?  We see our cash cow hiccup, we shorten our breath and immediately cut budgets to the very things that could bring us our second hit song, leaving the best and the brightest in our recording studios feeling like they are nothing more than an experiment.  Sad … once again.

The winning formula for attracting investment and people to Alberta is to create a stable environment for greatness to occur.  We need to understand that our cash cow is a blessing if we are smart, and a curse if we are complacent or inconsistent.  We have a winning formula for producing second, third and fourth hit songs … but it requires commitment and dedication to the investment; a stable environment for musicians to generate hits.

So let’s stop “talking about, talking about, talking about, talking about, talking about” disrupting the winning formula we are creating … and let’s commit ourselves to establishing a stable environment that generates multiple-hit wonders.

Commercialization Redefined

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It’s convocation season … that spring season when the University of Alberta commercializes 9300 new products into the Edmonton market … all of which walk across the stage on two legs.  Our new medical students can save more lives.  Our new engineering students can build better bridges.  And our business students can start new companies.

Everyone is excited about the possibilities … except … there is a quiet hush and whisper that surrounds the liberal arts graduates.  Engineers become engineers.  Teachers become teachers.  Nurses become nurses.  But arts grads … what do they become?  This is the question that stumps many of our elected officials, who are quickly swinging the education pendulum away from “intellectual exploration” and rapidly towards “technical training” such that our youth can immediately become … as we say in economics … factors of production.

So for the public policy pundits, whose vision for Alberta is to be the industrial engine of Canada and the Banana Republic of North America, I offer the following perspective for consideration:

  • Not all liberal arts graduates work as baristas at Starbucks.  This fact disappoints many who love to point to the liberal arts graduate as the poster child for unemployment … but it is far from the truth.  You see, only some liberal arts graduates work at Starbucks, and thank God they do … because someone has to be responsible for weaving human psychology, anthropology, addiction and economics into a $50 billion empire built on $5.00 non-fat lattes.
  • Not all graduates with history degrees are unemployed.  Some are.  Some probably should be.  But some make a lot of money understanding that societal unrest in Chile affects the price of copper, and thus the price of electricity and the price of houses … and they tend to make terrific long term investors.  History grads also tend to understand that markets are driven by world events, and world events are driven by markets … making events like the Arab Spring – Egypt, Tunisia, Bahrain – highly predictable.
  • Not all political science programs are the same, contrary to what some people might think.  But what all programs teach in common is that empires always overreach and they always overspend … and that politicians will always come up with ways to create more money while finding creative ways to avoid discipline.  Political history shows that debt ceilings and quantitative easings are often a band-aid solution to a slightly larger problem called fiscal hemorrhaging.
  • Not all fine arts students are street performers.  Some work at Apple Computer … because a guy named Steve Jobs believed that technology needs to be married with the humanities, and human beings need to interact with technology in ways that bring both joy and productivity.  Not sure if Apple will remain as the most valuable company in the world, but I have a feeling it has forever changed the way the world sees industrial design.

The case for liberal arts education needs to be reframed.  Not only is there economic return as shown through these cheeky examples, but there is massive societal return given that the root causes of our global challenges are often grounded in human behaviour … and the understanding of how people live, think, co-exist, network and interact … and frankly I’m not imagining a world where adding more engineers will help us answer the most important questions that seem to all start with the word … why?

The public policy pendulum across the country is swinging, and I am gravely concerned with the narrow direction we are taking around technical training at the expense of intellectual exploration.  It is not one or the other.  We need both.  We need the technically trained, but not at the expense of our need for interdisciplinary, liberal arts graduates to help us shift from an industrial powerhouse to an intellectually curious city that embraces creativity, entrepreneurism, thought-leadership and democratic freedom.

Great cities, provinces and countries have great universities … and our University of Alberta must continue to commercialize liberal arts students as part of the portfolio of youth that will help make us remarkable.

EEDC’s Position on Arena

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At the risk of being too outspoken on this topic, it is my intention to provide Edmontonians with EEDC’s absolute position on the new downtown arena.  The rhetoric on this issue will escalate in the weeks ahead, so please consider this to be my statement of record.

Over the past six months, we have have had the opportunity to review the assumptions, business models and pro-formas of all parties involved.  We have worked to find common ground between parties when needed, and we have struggled to watch the negotiations between parties unfold as they have.  However, our support for this project has been unwavering, as the economic benefits are game-changing and the financial outcomes remain sound.

Specifically, EEDC’s support for the new downtown arena is based on the following fundamentals, in real dollars:

  • Involved in $400-$500 million of new construction projects in the immediate vicinity that are targeting to proceed within 18 months of the arena’s approval;
  • Aware of an additional $500-$600 million of new capital expenditures planned to proceed approximately 18 months in advance of the arena opening;
  • Pro-formas conclude an average annual tax contribution of $19.5 million per year, which supports the 30-year financing of the missing $55 million; and
  • Positive economic impact of $17-$19 million per year in hospitality (food, beverage, entertainment) expenditures associated with the physical move of the Edmonton Oilers Hockey Club to the downtown core.

Although the above fundamentals provide substantial justification for the investment, EEDC believes the following qualitative factors should also drive decision making.  This investment:

  • Unshackles our civic brand from a history of inaction and indecision on major projects, and provides confidence to the business and entrepreneurial communities that #YEG is a place where big ideas can be brought to reality;
  • Solidifies Edmonton as the regional sports, entertainment, retail and hospitality centre for the rubber tire tourism market in Northern Alberta; it allows us to create new tourism products that appeal to those within a 400km radius;
  • Stimulates a doubling of the residential density required to create a critical mass of after-hours vibrancy and safety in the downtown core;
  • Adds necessary hotel capacity to support 8-10 new conferences and major events per year, reducing the ~25,000 room nights currently lost due to lack of supply; and
  • Concludes the 25-year debate and threat of moving the Edmonton Oilers to another market, thus affirming our position as a leading professional sports city in North America.

New arenas built in isolation rarely result in positive outcomes – see examples in Ottawa and Phoenix.  However, new arenas developed in association with a comprehensive downtown development plan have produced extraordinary benefits.  Having recently assessed the impact of major projects in Brooklyn, Pittsburgh, Columbus and Minnesota, we can confidently state that the work completed by City Administration is peer-reviewed as “leading practice” and Edmonton will soon become a reference site for other major municipalities that follow.

Like many of you, I find it most disappointing that the Government of Alberta is lacking the long-term thinking needed to invest in such a critical piece of economic infrastructure.  When we consider the $55 million request in the context of their $5 billion annual capital budget, the short-sightedness and political motivation is beyond comprehension.

Recognizing the province’s absence, it is more important than ever that Edmontonians and our City Council step up and show unified leadership.  We can comfortably finance the missing $55 million at $2.5 million per year within an annual $800 million municipal capital budget, and we can confidently approve both the CLR and the arena financing needed to move forward.

We have encouraged members of City Council to take a unified position on this matter and push our great city forward.  The business community is firmly behind the project and a timely decision, and we all look forward to realizing the positive economic gains over the decade ahead.

Each reader of this blog is encouraged to do the same, as this is YOUR arena and YOUR city.  Thank you for being interested and engaged.

– Brad.