Doug Lawrence: Reviving American Eco-nomy
Doug Lawrence is the Managing Principal of NY’s 5 Stone Capital, a new equity investor in green real estate and green business. He speaks to us about the recent Jobs Report that has garnered some serious press. And offers more comprehensive solutions – that don’t just target the environment but also healthy living, veterans affairs, and unemployment.
The Jobs Report that came out last Friday unveiled a rather dismal economy. What was your take on the report? If you had to point out one aspect of the report to policymakers (make them pay attention to it), what aspect of the report would you point to – the unemployment numbers? Low consumer confidence? Manufacturing on the decline?
What miserable report? May 2011 seasonally adjusted unemployment was 9%. May 2012 seasonally adjusted unemployment was 8.2%. Are we better off now than just a year ago…YES!
But the non-seasonal number is even better. Without the statistical smoothing of seasonal adjustments, the unemployment rate was BELOW 8% at 7.9%. Wow!
The jobs report is completely misunderstood by the press. In fact, there are 6 different jobs reports. The press only looks at one.
Think about it this way. We think about unemployment as a percent of the labor force. That’s on the chart and is line U-3. May was amazing for this measurement.
First, the labor force increased .2 percent in May. Whoa….311, 000 more people were in the labor force in May over April. That is a shock to the system because not all of them could be absorbed in 30 days. People were feeling more optimistic and they returned to look for work.
Healthcare, Transportation, wholesale/trade, manufacturing added 97,000 jobs in May. Those sectors are growing.
Where were jobs lost? Construction lost 28,000 jobs in May. May-August is traditionally the busiest part of the year for construction, yet we lost jobs.
What is the solution… President Obama yet again should ask Congress to provide and an infrastructure bill. In other words, we should put taxpayer money to work to move people, products and ideas faster. Making our infrastructure world class, will promote our growth because those assets will last more than 100 years and therefore magnify the right things about the economy.
The multiplier effect would be enormous. In fact, Moody’s Analytics indicates that for every $1.00 spent on infrastructure, GDP would increase S1.59.
An answer to strengthening the employment rate is to get the construction and reconstruction going.
In general, what do you think we’re doing wrong when it comes to addressing unemployment? What would you tell policymakers or even the private sector – what changes do they need to make to fix this trend?
I’d plead with them to put the country first. We know that austerity does not provide growth. It cuts growth. Austerity cuts employment and elongates recessions. We’ve seen in the last 20 years two clear phenomena worldwide.
We know supply side tax cutting economics does not work. We’ve tried it twice in the 80’s and again in the 00’s. We were left with the economy in wreckage. The 80’s saw interests rise to 21%. The national debt tripled from just $1 Trillion in 2000 to $3 Trillion by the time Reagan left office. From 1789 to 2000 the entire accumulated national debt of the United States was just $ Trillion. But under Reagan, the debt rose to $4 Trillion.
Under Reagan and both Bushes we had 20 years of national debt increases. And deficits increased faster than GDP.
An increase in national debt crowds out the ability for business to borrow and grow. If business can’t borrow it can’t grow. Large national debts reduce employment therefore.
So the answer is to increase growth by stimulating the parts of the economy which have the greatest multiplier effect AND pass tax hikes but dedicate those tax hikes to pay down the national debt.
Briefly, what is your organization doing to help the unemployment problem in America?
We are working to create temporary and permanent jobs by developing high performance buildings. We like using technology to make real estate operations more efficient, particularly in its use of energy and water. We also like re-tasking real estate to do new things, such as urban farming. That way we solve a need, and create jobs, and create a new revenue stream from fallow real estate.
When crafting your company, what was the driving force – were there three or four points in your head that you kept at the forefront? Goals that you wanted to achieve with this for-profit solution?
Yes, our goals are pretty straight forward. They are:
- Use green technology and sustainable best practices to deliver integrated energy, housing, food and employment security
- Make all projects have world wide application, and be rapidly deployable, replicable and scalable with high quality.
- Minimize the amount of equity investment at risk to complete projects
- Maximize distributable cash flow
Why is this all encompassing, comprehensive approach so important? And do you feel that it has the capacity to scale?
In 1950, the US had 150 million people, today we have 310 million, and by 2050 we will have 450 million citizens. The world’s population has exploded as well. In 1960, world population was 3 billion. Today it is 7 billion, and by 2050 the estimate is that the world will have 9 billion people. There is a resource supply and demand imbalance clearly coming.
The US is less than 5% of the world’s population and consumes 30% of its resources and produces 30% of its waste. As competitive nations’ populations grow, and drive to become middle-class, competition for resources will increase, which will cause prices to go up. It’s inevitable.
We think the commercial real estate opportunity is to do much more with much less. Technology will be the way the U.S. maintains its strength. Green technology, when employed as a way to reduce operating expenses and future capital expenditures has the ability to make real estate operationally more efficient thereby increasing its current net income.
Our model is to build housing and urban farming projects which we think will create higher quality housing with a lower cost to operate, and also grow fresh produce from the urban farm which in turn creates local jobs, and takes often underutilized real estate, revives it and re-tasks it, and makes a vital national production sector , food production, more secure.
The model is scalable globally because it meets 3 basic human needs; people need a safe home, healthy food to eat, and employment security.
What role has the government played in your work, if any? Have they been supportive, helpful, and encouraging of this enterprise?
We have found government to be very, very supportive. But, we don’t see government as an enemy. In fact we see government generally as a positive contributor to our efforts. There 13 or 14 federal agencies with green initiatives and there are 142 cities with sustainability initiatives, 54 of which we think are truly real estate investment magnets.
Photo: Courtesy Doug Lawrence