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Sunday, December 18, 2011

Going Galt In California

What follows is about business in California, but it is also happening to the nation as a whole.  If there is a more profitable physical location somewhere else, business will go there.  The sole obligation a company has is to its shareholders.  Not to its employees, its city, its state or its country.  A smart company will develop relationships with all of these entities to enhance its ability to make money for its shareholders.  When all else fails, you change the cast of characters with whom you build relationships.

Liberals:  Please challenge this statement so I'll have fodder for another post.

Businesses and individuals are leaving California in droves.  Their tax dollars are going with them.

One of the latest is a company headquartered in the Sacramento region, called Waste Connections.  Its headquarters, in the city of Folsom, is moving to Texas (well there's a shock... not).  They're moving for a number of reasons, but the primary cause of the relocation is that it's too expensive to do business in California.

The city will be losing 120 high-paying jobs, and the $80-$100 million the company spends in the area each year.  Rental cars, hotel rooms, accountants, restaurants.  Buh bye.

Click here [link] to listen to 4 minutes of an interview with the CEO after their announcement.  It's awesome and to the point.

The money quote is right at the end, and really tells the story of what's happening in this state.
"[California State Senator Darrell Steinberg] basically told me that business is a fungible commodity - it comes and it goes.  So, in this case, it's going"

--Waste Connections CEO Ron Mittlestaedt, locking the door and turning out the lights
This maggot Sen. Steinberg had a great comeback to the CEO [/sarcasm].  He noted that Waste Connections should be happy with the profitability they made here in California -
Senate Pro-Tem Darrell Steinberg pointed to Waste Connections’ profitability in California, with revenues up 38 percent in three years, according to the company’s annual report.
Steinberg is of the opinion that companies should be grateful for what California so graciously gives them.  Apparently, Waste Connections figures it could make more money for its shareholders in Texas, and not have to deal with the obscene regulatory climate we saddle on business.

Uprooting its entire corporate structure was deemed less painful and more profitable than staying in California.

'Going Galt' - the idea of productive individuals abandoning the status quo and setting up shop elsewhere - has manifest itself on the national stage when large companies move their manufacturing facilities to other countries.  Lower costs, lower regulation, higher profits.  No brainer.

Unions, politicians and Occupiers cry for, "living wages" for employees - many times making it the law.  Business respond by cutting jobs and/or moving to more fertile grounds.  This has been repeated over and over, but the politicians and unions don't get it.

The plot of Atlas Shrugged keeps replaying itself.  More "fairness" laws - we call it 'economic justice' - as we villainize the producers and encourage them to leave.  When you over-tax and over-regulate something - businesses and the jobs they create - you'll get less of it.

In that sense, the politicians, unions and Occupiers have been wildly successful.  Well done.

Accept The Challenge

California politicians like Steinberg will harp on companies like Waste Connections as wanting to harm the state.  Just a bunch of Tea Bagging, greedy, racist sons-of-bitches.  Companies bad, Caretaker government good.

Steinberg has this vision that California is this beautiful, pristine state.  In reality, it is a body riddled with cancer.  When you have cancer, you've got to cut out the tumor or you die.  It's really that simple.

The externally pristine body must be cut deeply to save it.  Band-aids and positive thinking have had their chance, and didn't work.  Time to don the scrubs and sharpen the scalpels.  The blood supply is running low, so you better get going quickly.

Either that, or as the businesses are doing, you leave, and the result is starvation.  You just have to hope you kill the tumor before you kill the body.

My guess is that California politicians will take the second option.  They'll keep up the happy talk, and find a few extra pints of blood - probably from DC.  It will keep us alive for a while, but the cancer will eventually eat us alive.

Copyright 2011 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.


Sean McKee said...

I am about 3/4 the way through reading Atlas Shrugged for the 1st time. The simmilarities of the book and what is happening in this nation and the world are frightening.

Chief Instructor said...

Sean, it really is amazing. She wrote the book in the late 1950's, and it's like she saw what's happening today clear as day.

Anonymous said...

"Atlas Shrugged" is not a forecast... it's a retelling of what happened in the US in the 1930's and in Russia in the 1920's.

In some ways that makes it worse than a forecast, because it's happening again.

But where can we "Go Galt" if Colorado is already full of Liberals?

Chief Instructor said...

I think the best options are in the American Redoubt - Idaho, Montana, Wyoming and eastern Washington and Oregon.

I personally like Texas a lot, as well.