COVER STORY | IN
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TALK OF THE TABLE | THE HUM | CALENDAR
February 2, 2006
Patrick Cleary, 47, spent 17 years as
an investment banker on Wall Street -- 10 with Chase Manhattan
and seven with the Trust of the West Company -- before moving
to Humboldt County eight years ago. He is the owner and general
manager of Lost Coast Communications, which operates three local
FM radio stations: KHUM, K-SLUG and "The Point." He
serves a chair of the Headwaters Fund Board, a county agency
that oversees the $22 million in economic development funds received
by the county in 1997 as part of the deal between Pacific Lumber
Co. and state and federal government over the Headwaters Forest.
Thomas Bruner, 35, has a masters degree
in international finance from Thunderbird, the Garvin School
of International Management, one of the most prestigious business
schools in the country. After graduation he moved to Seattle,
where he worked as a consultant for a variety of financial companies,
including an investment bank and a venture capital firm. He is
the co-founder of LiveListings.com, a business-to-business firm
specializing in the automotive parts market. Since moving to
Humboldt County, he has been a lecturer in the HSU Department
The Journal sat down with the two over lunch at Curley's
Grill in Ferndale last Friday to talk about the state of play
of the Humboldt County economy, and its future. Bruner ordered
the French dip sandwich and tomato-basil soup. Cleary had the
"Catch of the Day" sandwich and French fries.
Journal: Twenty years from now, what's your
utopia and dystopia scenarios for Humboldt County? How do we
Cleary: I was at a brainstorming session
a couple of years ago where we were talking about the future
of the economy. We asked ourselves: If there's any one thing
we could do to improve the overall economy, what would it be?
And I threw out the idea of a new university.
Because universities, obviously, they import people.
They tend to create very high-paying jobs. They tend to create
a more intellectual community, which tends to lead to more innovation
and therefore more businesses being spawned from that.
A variation of this, which [Humboldt State President]
Rollin Richmond has proposed, is doubling the size of HSU. To
me, that's a really interesting prospect. Because as a general
rule, university towns are very prosperous -- not in a blue-collar
way, though there are obviously support business. But that's
certainly something we could offer, that we have the right settings
for, in terms of natural beauty. And you have an opportunity
for continuous education, which is almost a requirement in order
to compete in the 21st century. It's not going to be just 20-year-olds
going to school anymore.
And there's interesting stories going on that are
not necessarily known. Humboldt Creamery essentially doubled
in size last year...
Bruner: There's a phenomenally well-managed
operation, no doubt about it. A lot of it has to do with management.
Cleary: And there's Cypress Grove Chevre...
Bruner: Smart gal. I worked with her.
Cleary: Yeah. They're at a point, too, where
they're importing goat milk and other milk from other counties.
So you do have some other businesses.
I find one of the interesting things is that somehow
in the 1970s, there was a wave of entrepreneurism that happened
in Humboldt County. That's when you had the Kokatats and the
Yakimas -- all these sort of companies formed. They were pretty
small when they formed, and now they're pretty good-sized companies.
But I haven't seen that wave of entrepreneurism
reoccur. That's one of the challenges we face. Maybe it's there
and I haven't seen it. I'm actually encouraged by [Rob] Arkley's
Economic Fuel business challenge [see this week's calendar
listings] -- I think that's a great idea, to try to create
an entrepreneurial class, if you will, because entrepreneurs
tend to attract each other. But that's one of the challenges
Bruner: Ultimately -- and maybe we agree
to disagree -- I don't see any great growth in Humboldt County.
The other side of it is, nobody in Humboldt County really wants
great growth. I mean, they do in a way -- they want the nice,
high-paying, environmentally friendly jobs, whatever that means.
I'm not sure we ever had those before. But if that comes along,
doesn't that mean more pollution, more congestion, more strip
malls, more of everything people say they don't want? So, it's
very contrary, to me. So basically you're saying you want all
these great, high-paying jobs but you don't want any of the stuff
that comes with it everywhere else.
Humboldt County, on a whole, is very subsidized
by the state of California. Our economy does not pay for everything
we need here, as far as infrastructure and government and law
enforcement. We don't pay our way.
Cleary: It's slightly more complex than
you frame it.
Bruner: Fair enough. What I'm trying to
get at, though, is that we are linked to the state of California
and the nation. And I have to ask the question "Where are
we?" before I get to the question of where we're going.
Ultimately, this story tells me, I don't see a
lot more money coming out of the government to help us with all
of our problems. Which is what I hear a lot of. "Mmmm, the
government will buy us a railroad. The government will buy us
something else. The government will clean up this area, the government
will build us new infrastructure." Nice ideas, and we had
a lot more money 10 or 20 years ago to do these things. I think
in the future we're going to see a lot more belt-tightening.
You're going to find that this area is going to be harder-pressed
to get government moneys.
Cleary: And actually, on that score, I saw
some statistics this morning that the amount of government money
available to help with water systems and sewer systems has been
dramatically cut back.
Bruner: We're going to have to pay more
and more of our own way.
Journal: And you sound very pessimistic.
You're saying we're not going to be paying our own way.
Bruner: I said we're going to have to.
Journal: But how are we going to do that?
Bruner: Well, one of the
ways -- Dan Ihara did a fantastic study showing that HSU contributes
an enormous amount to the local economy. About $200 million,
total. That's huge. When you look at the numbers, HSU is exceptionally
Right now, HSU is going through an enrollment crisis.
It amazes me, because you read things in the paper -- people
are angry at HSU, people are angry at Rollin, who I think is
a fantastic man who took on a much worse situation that he ever
imagined he was getting himself into. The last administration
left a real mess for him, and I think he's done a phenomenal
job, to be honest. He's very patient, and he's one of the most
open-minded people I've ever met. Very hard-working.
If HSU doesn't figure out how to recruit more people,
more students from out of the area, it will begin to lose more
and more funding. The school will shrink, not grow. And as that
school shrinks, you'll see the Arcata economy shrinking and the
Humboldt County economy shrinking with it. Humboldt State is
vastly more important than the majority of people understand.
HSU is a huge issue. Timber will decline. I think
it will always be sustainable...
Cleary: Trees keep growing. Part of the
battle there has been getting people to think in time horizons.
I know that some of the timber companies now have started looking
50 years out. For a redwood tree, that's not a very long time
horizon, but for a timber company or a human being to say, "Here's
my 50-year plan..."
Journal: It goes against nature.
Bruner: Ultimately, then, what else do we
have to work with? It's a beautiful place. Why am I here, why
is Patrick here, why are you here, probably? Why are so many
other professional, smart people who could do other things with
their lives and probably make significantly more money in other
places, why are they here? Well, the natural beauty, the grandeur
and all these sorts of things. So we have all decided, whether
consciously or subconsciously, that we will forgo $50,000, $60,000,
$100,000 extra a year to go somewhere else. To us, the value
is intrinsic to here, that we will give that up. And I think
that will continue to be.
But that will never attract Intel, it will never
attract Microsoft. Once again, we don't have the infrastructure,
we don't have the brain pool. These things are not going to happen.
Cleary: Why don't we have the brain pool?
Bruner: Because, I think, the younger populace
is always going to be more interested in being in a city environment,
wanting to meet other people, wanting to go to the clubs and
the dances. This Humboldt County environment is attractive to
a smaller proportion of the younger set of people who get out
of college and want to move up in the world.
Cleary: You and I both have the luxury of
the fact that we could live anywhere we wanted, and both of us
chose here. One of my criteria was that I didn't want to move
to some backwater place, where there wasn't thought, where there
wasn't stimulation. I mean, we actually have a reasonably well-educated,
intelligent, thoughtful populace here. I don't always agree with
their thoughts, but, you know...
Why do we have more media outlets per capita here
than any place in the country? Well, obviously we must consume
a lot of media. Who consumes a lot of media? People who are interested,
people who are engaged. I think we're attracting some of those
Bruner: I think we attract a lot of those
people, absolutely. But I'm just talking about the realities
of the situation -- what you have to work with. Most of the people,
though, you have to admit, start a business here because they
want to be here. They don't come to Humboldt and go, "Humboldt's
a great place to start this business."
Journal: Investment from the outside, in
Bruner: They come in here saying, "OK,
well, I'm willing to work maybe a little harder, to have slightly
less revenue, higher expenses, but I like Humboldt so I'm going
to work here." But this idea that people will come here
because it's the spot for my business -- I think that's not going
Journal: This gets to what the official
county strategy is.
Bruner: (Sardonically) I don't know.
What is the official county strategy?
Journal: The official county strategy is
-- We're a local government, we're a local agency. We don't have
a lot of control. We're sailing with the wind. There's the global
economic situation, the national economic situation, the state.
Patrick can correct me, but to me the county's
strategy is "OK, what we can do is fund and encourage and
network our entrepreneurs. We can encourage that spirit here,
and we can create those new companies again -- another wave of
Kokatats. And that's what's going to carry us.
Bruner: I think education is phenomenal.
The SBDC [Small Business Development Center]? Phenomenal. RREDC
[Redwood Region Economic Development Commission]? Phenomenal.
The fact that Greg [Foster, of RRDEC] can get the kind of return
he does on the small business loans he makes, that he gets them
to perform the way he does, speaks very well for Greg and that
program. That's not Prosperity. Don't confuse the two.
Cleary: So what was your wince about?
Bruner: Well, Prosperity. Prosperity is
a group of other individuals, and I don't know... They produce
this fluffy document. What's in the document? It was 70 pages,
and I still got nothing of what this thing was and what they
were going to do. I've gone back to them a couple of times, to
look at what they're doing, and I'm still grasping at finding
the value in Prosperity. SBDC, it's very clear. What is Prosperity
doing besides creating jobs for Prosperity people?
Cleary: The premise behind Prosperity is
that industries tend to grow when they have a critical mass.
Bruner: So you need a government agency
to pull these industries together?
Cleary: No, that's not necessarily the conclusion.
The thought was, if you can provide strategic assistance to some
of these industries, you can help to build that cluster and build
that critical development, that then will have a multiplicative
Bruner: So Prosperity somehow has some greater
insight into the strategy of these businesses than the businesses
Cleary: What Prosperity is doing, though
-- they're not doing this in a vacuum. They're meeting with these
Bruner: So they're getting the information
and regurgitating it back to them and saying, "This must
be the strategy. Look, I've proved my value as Prosperity."
Cleary: One of the interesting discussions
going on right now is about Humboldt-grown beef. Can you create
a business out of that? You happen to have cows, here. They happen
to be grass-fed. Can you create something that actually is a
business, that has a brand, that has identity?
So there's a Headwaters grant looking at this,
there are industry cluster meetings. Because none of the individual
farmers have the resources to pull this off. But just like Humboldt
Creamery is a co-op -- are there mechanisms by which you can
seed things like this to make it happen? I think that's the premise
Bruner: OK. Sounds good. Let's see it happen.
We've had, what, five years since Prosperity has been around?
Bruner: And they've done ...? I remember
looking at a list that they produced saying, "Here's what
we've achieved," and 90 percent of that list was from the
Small Business Development Center.
When I first moved here five years ago, I had much
greater hope for the idea of subsidized small-business development.
I got very involved. I made phone calls. I spent a lot of my
own money taking everyone out to lunch. I got lists from everyone,
people with businesses, people involved in economic development.
I met them all. And they got to know me -- at least over lunch.
Because I really wanted to learn. I wanted to know.
Can this be done? Because I thought, here I was, coming in with
my degrees and my experience, I'm going to come to Humboldt and
I'm going to help them, to teach them about capital marketing
and business plans and maybe help them raise financing, venture
capital, all that fun stuff. Didn't I?
Bruner: Oh, boy. So I put a lot of work
and effort into that, and I always had good intentions about
it. But I always kept hitting that same brick wall. And all the
people that wanted to help would show up and go to the meetings,
and they'd do this and that, and people would talk, but nothing
would ever really happen. And ultimately, if you started talking
about something that was outside the group-think -- the theory
of Prosperity or whatever -- if you didn't match up with where
they wanted this thing to go, you would begin to feel yourself
pushed to the margins. And you'd also see that nothing happened,
and that people would stop going to the meetings.
Cleary: I think there is a natural tension
between business and government. Business people have a very
low tolerance for meetings. One of the things about democracy
-- you know the famous Winston Churchill quote, about democracy
being the worst form of government except all the others? There's
a lot of truth to it. There's a lot of inherent inefficiency
in our process, because we are inclusive. It's difficult to circumvent,
and 95 percent of the time the people who are most vocal tend
to a minority, rather than a majority.
The great contribution that Prosperity made was:
Stop hoping that Hewlett-Packard is going to open a plant here.
It's not going to happen. Let's nurture what we've got.
Journal: Don't look for the silver bullet.
Cleary: Don't look for the silver bullet.
And I think that's really the message we need to follow.
Cleary: The interesting thing about capitalism
is that, yes, capitalism is certainly efficient and, yes, it
allows the cream to come to the top. The issue, which is almost
a non-economic issue, is: What do you do with people who can't
Bruner: Right. Absolutely.
Cleary: If you have this system where the
best are going to thrive and survive, what do you do with a displaced
worker? Who -- you know what? -- he's not going to learn how
to use Excel. He's 56 years old and his livelihood has just disappeared,
and his world has disappeared. What do you do with those people?
Journal: The people who are pulling green
chain are the people who are not going to be learning Excel.
Cleary: What we are seeing here is a dislocation.
We're seeing the traditional livelihoods go away, and we are
having people who don't fit in to the new economy. This is happening
around the world, and it's an issue. And I think we're reaching
a kind of world economy now where continuous education is going
to be mandatory. You're not going to be able to go to school,
come out of school and know everything you need to know for the
rest of your life. The world is changing too fast.
Journal: So you say that we have to evolve
into a society where everyone's in a continuous state of learning,
to adapt and change with the times. Well, there's quite a few
people here -- most of our elected officials, as I wrote recently
-- who say, look, we can provide high-paying blue-collar jobs.
We've got the bay, we've got a railroad that could theoretically
be amped up...
Bruner: Most everyone knows that it's just
Cleary: I know people who would say that
it's a 19th century solution to a 21st century problem. I'm not
sure I'd put my name on that quote, but the question is: Let's
say we open up the railroad and we open up the harbor. And I
think the harbor is certainly an underutilized asset. But what
are we going to do -- cut more trees? We're cutting as many trees
as we've got. Are we going to import cars and ship them on the
rail down there? I don't think that's what we're going to do.
The Harbor District just got a grant from the Headwaters
fund to do a business plan. What do we do with the harbor? But
that's a really big issue. The railroad? I don't know anybody
that really knows the answer to the railroad. I do know that
in a state where you're crying out for resources -- and California
is stretched -- the railroad just never seems to be the priority.
The bond issue that Schwarzenegger just announced has a sort
of unspecified thing for "other railroad projects,"
but our railroad's just not in there.
Bruner: Who has interest in a railroad?
Who is producing things that they can move right now on rail
that they wouldn't move on truck? See, if you have a product
that is going to many places, if you put it on rail it's just
going to one place. If you put it on truck, it's much easier
to diversify. Some will go to Redding, some will go to the Bay
A lot of people will say even if there was a railroad,
I'm still using trucks, because it serves my interests better
as a business.
Journal: Who are we talking about?
Bruner: I don't want to say any names. Local
I was always curious about this idea of the railroad,
too. But to use Patrick's phrase -- what was it you said? "God's
not quite done with that country yet"? Maybe the engineers
are going to tell us that they can build it so it will never
slide again. But think about this, now. Once you've built it,
you've spent $150 million. That $150 million -- we could have
put up, what? Four or five hospitals? Some schools? Rebuilt our
Resources. $150 million. Would you rather take
that $150 million put that into health care, education, infrastructure
and a variety of other projects we could think of around here,
or would you rather try to build the railroad and hope that maybe
something could be done with it? Would we ever make that money
back? Or if you have $150 million and gave it to residents here
-- $150 million, there's 130,000 people here, so everybody in
Humboldt County gets $1,000 dollars. I'm betting that creates
more economic development in a matter of five years than a railroad
Extreme example, but you see what I'm saying. I'd
rather use those funds elsewhere. I think the railroad's a pipe
dream. What are you shipping?
Bruner: There is the big elephant that we
haven't touched, gentlemen -- I don't know if you want to get
Bruner: Well, it's the underground economy.
Journal: Ah! You know, I've tried to get
answers from people about this. No one seems to know.
Bruner: It's far more important than people
realize, or want to realize.
Cleary: Didn't one of your colleagues publish
a number of, like, $200 million a year?
Bruner: We kicked it around. I remember
the sheriff was talking about, in one article, how he thought
that one out of three, or one out of four people -- it was really
high -- had some sort of play within the underground economy.
Mostly marijuana cultivation, of course.
That was one way to look at it. But then you can
back in on the numbers. I'm told -- I can't confirm this -- that
we have more restaurants per capita than San Francisco in Humboldt
County, which is a very strange thing.
Cleary: Another stat, there ...
Bruner: What's that?
Cleary: Banks. In a time when the number
of banks is shrinking rapidly around the country, we're getting
new banks. You might want to put a call in, but I understand
our bank deposits per capita are significantly higher than the
rest of the country.
Bruner: That's fascinating. The numbers
that we look at, the numbers we see -- they're constantly skewed
because of this massive economy that goes on in Humboldt that
you can't track. When you get all this influx of money in and
you don't know where it's coming from, it sort of skews everything.
What did we say? $200 million? I think it's fair
to say that it's as big if not bigger than the timber industry.
Whether it's $150 million or $200 million, it's pretty damn big.
I don't think there's anyone who's looked at it who says it's
less than $150 million.
Journal: But it's fragile, possibly. Any
little tweaks in the regulatory system, in prohibition...
Bruner: That's very good. That's why I always
laugh, when people say, "Oh, we want to legalize marijuana."
That's fine, if you want to do that, but I wonder if you understand
that it's going to cost us about $200 million. And then the people
go, "Oh, no, the Humboldt bud will always be the best."
I promise you that Marlboro and everyone already have plans.
Cleary: On that score, this ties into another
point I was going to make. One of the issues that HSU has, and
I think that we have, from an economic development point of view,
is that when you think of Humboldt County, what do you think
of? The brand, if you will, of Humboldt, is not necessarily conducive
to recruiting academics, to recruiting business.
Bruner: How many times do you go outside
the county and say, "I'm from Humboldt," and it's the
snicker, or the "Ohhhh..."
Cleary: I got the snicker in Iceland! But
I do think that Humboldt County and Humboldt State need to create
an identity for themselves outside that.
Bruner: Can you do that? Can you create
an identity, or does the identity happen, based upon the actions
Cleary: You can influence it.
Bruner: Well, how in the world can you shake
Cleary: You need to come up with something
Bruner: If we can't sell the redwoods and
the ocean, I'm not sure that we have anything much more interesting
That's pretty interesting stuff.
Cleary: OK, here's a radical idea. How about
if Humboldt State changed its name?
Cleary: I don't know. Redwood State.
Bruner: So you're saying, drop all the value
created in the hundred years of branding of Humboldt State. Drop
that value because of the stigma that's attached to the name
"Humboldt," and start with a re-branding.
Journal: Didn't they just do a study that
showed that something like fewer than half of the people in the
Bay Area have even heard of Humboldt State?
Cleary: And maybe it's a negative. Because
Mom says, "I know what goes on in Humboldt. You're not going
to Humboldt!" But if it was Spituli State -- "Oh, where's
that?" "In Arcata." "Oh, OK."
Bruner: Did you just come up with that?
Cleary: What? Spituli?
Bruner: No, the idea of renaming the thing.
Cleary: Yeah, no, I just came up with that.
Bruner: That's not bad.
Cleary: Is that my good idea of the day?
Bruner: It's not bad. Because what are you
going to do, spend hundreds of thousands of dollars on a marketing
campaign? "Humboldt: It's Not Just Dope."
Cleary: That's my rule in life -- to have
one good idea a day.
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