Leaving a zero-sum economy behind

Two weeks ago, I suggested in an UpFront column (Business Needs To Lead, Offer New Ideas) that a reason for New Mexico’s chronic economic underperformance is a chronic lack of leadership by our business community.

More than one businessperson responded by saying New Mexico isn’t very kind to leaders. By putting themselves out front, they said, the leaders are exposed to hostility, envy, criticism. Let someone get a little too successful, and the rest of New Mexico will drag him down.

One hears this enough that even if it isn’t true, many businesspeople believe it to be true and, consequently, keep their heads down.

If this syndrome is baked into our culture, it is likely a manifestation of a zero-sum economy.

A transaction is zero-sum if the only possible outcome is someone wins and someone loses. An entire population could be suspicious of someone’s success if people believe it could only come at the expense of others – a zero-sum economy. For centuries, that is exactly the sort of economy New Mexico had.

Ours is a land of scarcity. If you over-irrigate, I can’t water my field. If Chevron bids more for an oil lease than my company can bid, I have to find oil somewhere else. If you get grazing rights on what little decent pasture the national forests offer, my cattle starve.

This zero-sum problem is a feature of New Mexico’s reliance on government spending, too. Kirtland Air Force Base receives new missions; Fort Monroe in Virginia closes. Los Alamos National Laboratory hires; Lawrence Livermore fires. Government funding is just as constrained as water.

Many of our economic development efforts are zero-sum. Very generous incentives meant lots of movie productions in New Mexico. Less generous incentives mean fewer productions.

Other choices and transactions may or may not be zero-sum.

Opponents of business tax changes argue the state can only reduce corporate incomes taxes by reducing support for education and children’s health. That’s a zero-sum outcome. Supporters say lower taxation will increase business activity, spur job growth and generate more tax revenue from newly employed workers; everybody wins. The truth is neither side knows for sure what will happen.

Opponents of a higher minimum wage say the local sandwich shop can’t afford a larger payroll and will fire workers or shut down. Supporters say employees earning more money are likely to buy more sandwiches, so business should improve; everybody wins. Again, no one can say for certain which way this will go.

The antidote to a zero-sum economy based on scarcity is an economy based on abundance. Nothing on this planet is more abundant than human ingenuity and energy. Tap that and the economy takes care of itself.

That is the story of Silicon Valley. William Shockley, an inventor of the transistor, founded a company on the south end of San Francisco Bay because he had family there. The nation’s brightest engineers wanted to work with him, so they moved there.

When they got tired of Shockley, some of them, led by Robert Noyce, founded Fairchild Semiconductor. Fairchild’s employees founded so many of their own companies they became known as Fairchildren. Ultimately, Noyce, Gordon Moore and Andy Grove left Fairchild to create Intel.

New Mexico has dozens of small companies living on little more than ingenuity and energy. Unless they read technology stories written by my colleague, Kevin Robinson-Avila, most people have never heard of them. They are working on toxic waste remediation, network security, aerospace controls, nanoparticles. These companies don’t belong to big business organizations. They spend no time lobbying in Santa Fe. They don’t think much about taxation. They hire the brightest people they can find who have off-the-charts training from universities and technical schools in New Mexico and everywhere else.

Their problems are access to capital and markets, lack of experienced business management, and occasionally they confront a specific technical challenge they don’t know how to solve themselves. State and local economic development efforts focused on finding the big manufacturer willing to locate a plant in New Mexico do these companies no good at all.

For a fraction of what we forgive in taxes for a big fish, we could buy our innovative companies’ booths at their trade shows. We could pay larger companies, like PNM and Northrop Grumman, to lend consultants to companies needing technical or management help. We could bankroll their patent applications. We could subsidize their marketing expenses. We could abate the personal income taxes of some of the technical and management talent they require.

There is no need to abandon conventional corporate recruitment efforts, but there is every reason to supplement them with programs designed to harness the ingenuity and energy that is already here. Unlike so many other areas of our economy, everybody really will win when these companies succeed.

UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or wquigley@abqjournal.com. Go to www.abqjournal.com/letters/new to submit a letter to the editor.
— This article appeared on page A1 of the Albuquerque Journal