Being Local…

Last night I attended a talk by economist Michael Shuman in Traverse City.  His latest book is Local Dollars, Local Sense:  How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity.  (These are my notes and reflections from his presentation 02OCT12 at the Haggerty Center on beautiful Grand Traverse Bay.)

Localization process?

1) Maximize local ownership [Check.  That’s what life in N. Michigan is all about!]

2) Maximize local self-reliance [Check.  Possible WITHIN a community like ours here.]

3) Spread the model of a ‘triple-bottom line success’.  [I’d never heard that before, success financially, success environmentally, success for the contributing labor force.  Check.  That’s something we can all agree on.]

Afterall, you cannot attract local businesses to your area if the whole picture is not complete.  Your beaches have to work:  Here it’s beaches and woods, anyway.

Return on the Dollar?

A common misconception is that when economic develop programs attract biz to the area, it will be GREAT.  huh?  Turns out that if you spend $100 at a BigBoxBookstore (such as the old Border’s)  only about $13.oo of that $100 stays in the local economy.  The rest wings it way far away.  Verses at a small independent shop?  $45 stays put.  Think of that.  Three times the dollar value by “attracting local biz”….an oxymoron to be sure because local biz is ALREADY here!  (This was originally a study of the Austen, TX market.)

Studies show the multiplier nationally is 2.6 more dollars staying put.  Instead of high level professional fees (legal, finance, accounting, marketing, etc) going elsewhere, local professionals get hired.  Local advertisers.  Local suppliers.  Local local local.

More jobs?

Keeping local, means keeping jobs.  Smart growth, entrepreneurship, public health, volunteerism, even voting improves directly proportionally to the vibrant, healthy local business economy.

Trading outside the ven-diagram?

There’s a mainstream economic bias that regards world trade as the prime economic stimulus for growth.  Whereas local growth, focuses first on meeting the market at home, then regionally, then to the world as enhanced trade.

Michael gave two exciting examples of growth “outside the box” of typical economic theory.

Value Added Yields a Horizontal Growth Spread in Vermont?

First, look at Hardwick, Vermont…a small (some would say tiny) community of less than 3,000.  This little farming community set out to become “THE BEST LOCAL FOOD COMMUNITY OF NEW ENGLAND”.  No small feat, although there were really not that many there, especially in cold, snowy, rocky, Vermont.

Organic, yes!  They worked on that.  Value-added product lines?  yes.  The local tofu maker ventured into the soy-cheese business.  They created biz-incubators where start-up companies could get a toe-hold in industrial kitchens.  Also, they loaned money to each other.  $300,000 and counting.  That infusion of local capital along with the spirited enterprise of a community with a mission, created….wait for it… 100 jobs.  THAT’s a lot in a little tiny town.  See the NY times article about them:

Zingerman’s Deli in Ann Arbor goes Vertical to add Dimension to their Business Model-

Faced with the desire to grow your already successful biz what do you do?  Franchise your model across country?  That’s what many business think is the next step.  However, the owners of Zingerman’s Deli in Ann Arbor didn’t want to loose their very real connection to community and chose to grow deeper, instead of wider:  Nine new businesses under the Zingerman’s umbrella.

They needed bread?  Start a bakery.

Cakes for weddings and barmitzvahs?  Mail-order specialty cake biz.

Icecream? Check, have a creamery on site!

All that food making?  Make it a full fledged restaurant.

Coffee Roasting.  Yep.  Got that too.

And, since you are so good at the fine art of customer service?  Teach that as a module that can be marketed nationally.  All without leaving home.  Sigh.

Here is their website:  Go shopping.


Let’s get back to the consensus about full employment, good labor experiences, and great environments… and profitability.

We assume the bigger the biz, the more growth there is going to be.

Turns out, that’s only an assumption.  The truth is that when you compare biz greater than 500 employees and compare that to those with 100-499 and those even smaller with 1 -99 employees combined, not including the home-based businesses which account for 20% of our economy, there’s only been about a 2% growth in productivity in the larger group since 1990.  AND, that’s after all the globalization of the last decade or two.

(See Michael’s book:  The Smallmart Revolution.)

As to profitability, there’s exponentially more profitability in those sole-proprietorships, then joint partnerships over corporations.  Surprised? And, 2/3 of what these smaller ventures purchase is for local goods and local services.

As the price of oil increases, that becomes even more true since the trade-agreements tend to focus on non-durable goods (those for the consumer that last three years or less; wearing out.)  These goods are heavy and take a lot to ship.  Here’s the opportunity for the local economy to step up and compete.

Steps to take?

Planning:  Plug the holes.  What outside goods and services are missing from your local economy?

People:  Support the entrepreneaur.  Hear that.

Policy:  Be at least, policy neutral toward local business.  Remove roadblocks to success.

Traverse City Factoids

Employed:       44,648

Self-employed:  8.757  (Typical proportions)

Unemployed:     3,532  (Think it’s more than that. Count me too.)

Potential Jobs:    1,970 (Thru a self reliant economy)

Potential wages?  83 M.

Techniques – the how and why?

Provide systems that, get this, pay their own way.

Local foodie incubators are not a new idea (there are perhaps 1000 in the USA).  But have the successful new ventures create stock  and reward a 10% share to the incubator.  Now THAT’s new.


Check out Tuscon Originals, a buying club for foodies.  A built in reward system for those who eat locally (and who doesn’t do that?) building community, and purchasing power among restaurenteers.

Similar opportunities exist large and small to offer loyalty points.  Think of your barista’s coffee card system, only bigger.

Bernal Bucks. a very very local debit card system in the SF Bay area rewards local shoppers and brings capital back to the community.

Local Procurement

While awarding contracts only to local businesses may be in conflict with the constitution and international trade agreements (are you scared now?)… what if you evaluate the ‘real cost’ of bidding when you include the cost of taking wages, saleries, services and goods outside the service area?

The Purse

Getting access to capital is all we hear about, yada, yada.  Where is all the money?

Turns out, its YOURS.  And, it’s locked up in your pension funds way far away from here in the big fortune 500 stockfunds and bonds building biz-bridges across country, not locally.  30 Trillion.  That’s a capital T.  Long term money tied up tightly.

Local banks don’t have pension funds you can invest in, right?  As Michael says:  “YOU GOT A PROBLEM!”

If there’s a way to shift even 1/2 of that from wall street to mainstreet, that would amount to $50,000 in capital available per every man, woman and child.  More children would have businesses if that money was available.  For sure.

Even when you look at stock market returns over the many, many years that typically we quote as having an 8% return, in actuality, the return is more like 2.6% including dividents and not counting the loss to inflation.  And, that’s generous.

Investor Clubs, Angel Investors

Thanks to government regulation, which aims to please by reducing risk for those unpracticed with large scale gambling, to be an “accredited investor” you have to have 200-300 K in income, 1M in wealth and sign numerous lines in an investor agreement that states:  “This is a risk, you could loose it all”.

Not so different from gambling, really.

Now when your granmother, or Michaels’ anywat,  goes to the casino with a wad of cash there are no similar protections.  She doesn’t sign anything warning of the dangers of throwing money away.  Why not let her invest in her local restaurant or start-up craft business? Such ‘gambling’ may actually come back to her with real rewards.

The securities and exchange laws protect the lawyers who earn their millions producing the boilerplate warnings which everybody signs but nobody reads (in their right minds anyway).

Specialized Certificate of Deposits

Some banks and credit unions have gone ahead and created a specialized CD that has a societal purpose (other than making the bank money).

Some $34,000,000 of investor’s capital has been put to use through the ‘Equal Exchange CD’ of Eastern Bank in Boston.  See their website:  “In return for that risk, your money can be used for tremendous good. For example $2000 can buy, at Fair Trade prices, the complete coffee harvest of a typical family farm. That 5-acre farm, perhaps high in a remote Peruvian valley, might support 6-8 people. So with a $2000 CD you can help keep a family on their land, providing hope that they can improve life for their children. You earn a competitive interest rate, too.”

Co-op Investment

Weaver Street Market Co-op in Carboro, NC (where my daughter lives by the way) as a coop needed to expand and they successfully borrowed from their own members who earned 5-8% return on their investment.


See Port Townsend, WA who with James Frazier (a former options and hedge fund manager gone good)

By creating ‘pre-existing relationships’ between the investors and the investees, small funds can be gathered to capitalize new ventures and entrepreneurs.  There’s risk involved (remember you are not sitting at a black jack table) and the fine print can be interesting.


Still, for all of its potential, LION operates in a sort of gray area, as far as securities laws are concerned. Unlike most private and angel investors, LION’s members are not necessarily accredited investors, who have the SEC’s blessing to wade into small, private deals that the agency considers risky. “We’re more going on the concept of the securities law exemption for nonpublic offerings,” explains Frazier, who is a registered investment advisor.

By that, he means the “private offering exemption” under Section 4(1) of the Securities Act. But what exactly constitutes a nonpublic offering is open to debate. Frazier points to a 1962 SEC ruling that attempts to clarify when such exemptions from registration are allowed. Traditionally, the private offering exemption has been available for “bank loans, private placements of securities with institutions and the promotion of a business venture to a few closely related persons,” the ruling explains. So, as long as the potential investors have a preexisting relationship and familiarity with the offerer of the securities, it can be considered a nonpublic offering. “In a community like ours,” says Frazier, “that’s usually if not always the case.”

Note:  There’s a group in Traverse City that meets the second Thurday of every month having great potlucks – and, oh, some investments get made between friends with close personal relationships.

Kicking Money

Kickstarter funding is pretty well known.  Your investment goes in as a gift really, except you may get a t-shirt, or a book or CD out of it.  Great for small ventures and easy to set up.

KIVA lending

Kiva lets you invest in needy projects.  You get your principal back after they’ve used it to change the world.  No interest tho.  Sorry, but you get bonus points for being an angel.

Slow Money – Slow Munis

Slow tax-exempt municiple funds to collatorlize loans from local lenders.  See the book by Woody Tash Slow Money.  Typically used to save soil, support local farms.  From Wiki:

Slow Money’s long-term objective is for one million investors to commit 1% of their assets to local food systems. Slow Money is incubating new intermediaries. One strategy is the I. Fund, with “I.” standing for “integral,” in which a new foundation charter mandates investment of assets that are consistent with charitable purposes. Another strategy is Slow Munis or tax-exempt bonds dedicated to local food systems. New funds dedicated to organic farmland are being organized. Food funds and “clubs” are being developed locally in many regions.[10]


I really like this one.  Sort of a lay-a-way investment strategy.

Awaken Coffee in Oakland, CA (where my son, Andrew, lives by the way) needed to expand and move shop.  They presold coffee subscriptions for $1000 each which were worth $1200 after the move.  They raised $100,000!  That’s a lot of coffee.  I hope croissants were included too.

That almost looks like Andrew in some ways -same rosy cheeks.  awaken cafe

Local Stock

Each state can have a local stock if purchased and traded at a local stock exchange.  No need to go to Chicago or New York.  How about an exchange here in town?  If there are enough business with stocks out there to exchange this begins to make sense.  Lots of SEC and State law to go through tho… they don’t make it easy.

Time out.

Take a breath.  the two of you who are reading this.  Michael?  My son, Andrew, the UC Grad Student in Policy and Economics.  breathe in, now out…..

Michael Shuman got to go to the Rose Garden to watch President Obama sign a law which he and many others worked hard to get through Congress.  It enables small investments of $2,000 or less, to be made by individuals.  Basically legalizing ‘Crowd Funding’.   It took more than 2-1/2 year to get this passed (DESPITE THE ECONOMIC HOLE WE NOW SIT IN) and it will take more time for the burearcrats to obscure the intent in their legaleze regualtions.  But, wheeeh…. a breeze is ablowin’.

Self-Directed IRA’s

I’m running out of steam, except to note that the same laws that make it possible to have gold in your IRA, also make it possible to invest in your neighbor’s house.  That’s as simple as can be right?  See the “Dummies” book about it….LOTS OF POTENTIAL IN THIS ONE!

These comments are again, basically my notes from Tuesday night’s lecture.  Michael Shuman is a great speaker with lots of ideas that we should all be aware of…let the dialogue begin.  I think Traverse City is far the RICHER for his appearance here.

See his website: and his email:

Published by Alexis Wittman

Artist, Designer, Writer, Facilitator living in Northern Michigan Architectural Engineer/Designer owner of Architectural Research + Design.

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