America remains the most productive, innovative, and wealthy country on Earth. We’re home to world leading industries, with global talent and capital. What’s our secret? One simple factor that distinguishes the United States from many of our industrialized peers: America is business-friendly, and making business easy is a key ingredient for generating long term wealth.
While America is broadly business-friendly, different states and municipalities vary in their approaches to encouraging industry. Alliance invests all over America, so it pays to keep an eye on conditions across the country. When a deal is on the margin between looking solidly profitable or too risky, these ease-of-business factors can tip me one way or the other.
Regulation, in all its forms, is the top way that governments influence the ease of doing business. Rules around land use and renovations have a big impact on a building’s usefulness as a productive asset. Rules about noise, waste disposal, occupancy, and a thousand other things can all make business harder. Other kinds of rules-making determine how easy is it to setup and maintain a corporation, or for lawyers and brokers to facilitate deals. The local approach to these elements can make deals smooth and easy, or difficult and expensive.
Low costs are usually a good thing for business climate. Low taxes, calculated in a fair and transparent way, always encourage more business. Low energy prices and wages also bode well. But it’s not a simple one-way street. Great local infrastructure matters too. So does having a quality education system that produces a useful workforce and a well-paid customer base. These are often associated with higher taxes, but that’s OK. Business-friendliness is not a race to the bottom for the lowest costs and regulations. It’s about communities making choices that favor productive enterprise.
Add a bunch of those community choices together, and a state (or municipality) gets a reputation. Some are known for electing (or appointing) leaders and administrators who are openly pro-business and looking to promote economic activity. Others are famous for being more suspicious of business and hostile to their desires. I’m particularly interested in avoiding rent-seeking officials, who can sap the profit out of any investment, whether the climate is “pro” or “anti” business.
When it comes to closing deals, these business-friendliness factors have an indirect effect. Unfriendly conditions help us negotiate better prices. In fact, some of our best investments have come in relatively unfriendly states. Not many competitors have the in-house expertise that lets Alliance confidently navigate the landmines. We do, and our experience is a great differentiator.