Dr. John Plodinec on the business of bars and business continuity

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One of the reasons I’m so proud of the work we’re doing at CARRI is that we are firmly rooted in the real world. Focusing on the “Whole Community” will do that to you! We have come to recognize that a community’s web of interdependencies can be a source of great strength but also introduces new vulnerabilities.

This weekend I was sharing a bottle of wine (or so) with my neighbor Dooley, who owns a small pub. We hadn’t seen each other for a while, and he asked what I was doing now. When I told him a little about CARRI, and especially when I mentioned interdependencies, he looked at me as if I was some kind of freak and said, “That’s all well and good, but it’s way too [expletive deleted] Ivory Tower for the real world.” So, with the courage born of three or so glasses of wine, I tried to prove the practical importance of resilience to him.

“You’re a small businessman, right?” “Yeah.”

“We live in South Carolina, right?” “Well, duh [Sometimes Dooley is not the most sparkling of conversationalists – he can be a real Bubba.].”

“Of all the things in this community, what’s probably the most important to your business?” He looked at me as if I was an idiot and said, “My customers, of course.”

“Okay, but what is the most important thing besides your customers?” “I don’t know, electricity?” “Bingo. Electricity – keeps your beer cold, your customers cool, and your business hot.”

“So?”

“What happened to your business when we lost power during the ice storm?” “I couldn’t open. In fact, since my rent’s so high, I had trouble making ends meet for a few weeks afterward. Fortunately, Glen and Shirley [Dooley’s bartender and waitress] were willing to let me be a little late in paying them. The landlord – that [expletive deleted] – wouldn’t cut me any slack.”

“And how are you doing now?” Well, I’m back on my feet; in fact, I’m actually doing better than before the storm – Bill’s Brews and Bratz didn’t make it so I’ve got some new customers.”

“And what happened to Bill’s bartender?” “I think he left town. I’d have liked to hire him – he came by looking for work – but the new business wasn’t that good.”

“See, that’s why interdependencies are so important. You depend on the electricity being on – if it isn’t, you can’t open. The folks who work for you rely on you being open for their livelihood; but that means that they also depend on the electric company because you do. If you bought a generator, you might not depend directly on the power company, but you would depend on a fuel distributor to deliver fuel, which would probably mean that you’d now depend on the power company to power the fuel pumps. And the electric company depends on its customers to pay their bills, otherwise the company couldn’t pay its employees and suppliers.”

Dooley – always gracious in defeat and articulate to fault – grumbled something like “Humph, rhubarb ratz a fratz.”

I’ve portrayed what I was telling Dooley in the figures below. In the first, I’ve shown a sort of general picture of a community’s electric utility that experiences a disaster. There’s an initial loss of capacity, followed by a gradual return of service to its customers. I’ve also shown a red region, indicating that without power small businesses will begin to fail. The figure is meant to indicate that some smaller businesses actually fail. As the outage goes longer, more and more businesses will fail. You may notice as well that eventually the capacity of the electrical system goes back to what it was before – no more nor less. That’s because a utility almost never adds new generation in response to a disaster.First Image

In the second, I’ve plotted gross sales for the community’s small businesses. Sales fall during the service outage, because many of the businesses aren’t open. And, as indicated in the first figure, some never reopen. Thus, gross sales plummet. Sales probably won’t fall in proportion to the number of businesses that haven’t reopened, because some of the competitors of these businesses in the community will reopen (or stay open if they have a generator) and capture their customers, just as my friend Dooley did. I’ve plotted small business activity in terms of gross sales because that’s what businesses use to pay their staff. You may notice that the figure suggests that the workforce is even more vulnerable than small businesses. These, at least, can lay off one or more of their employees.

second image

In the third figure, I’ve plotted the workforce, expressed as employment. As you can see, it’s taking a much longer time for this part of the community to recover. I’ve used the different colors to suggest another step in the cascade: the community may be able to build up a reserve fund when employment is high (green) through taxes on payroll and other economic activity; may just break even at somewhat lower levels (yellow) of employment; but high unemployment will likely bring with it a higher demand for community services and lower taxes, meaning the community will be running in the red.

third image

As Dooley and I discussed later, each part of the community can do something to reduce the impacts. Small businesses could buy generators if they need them or buy business interruption insurance for lost revenue. That shrinks the red region in the first figure. The utility could bury its lines, pulling the black line away from the red region. Businesses are just as vulnerable, but the likelihood of a loss of electric service is reduced. Workers could save so they can live without a paycheck if necessary, or gain a diverse enough skill set to be more broadly employable.

An ice storm is not a hurricane, or an earthquake, or a terrorist attack. In fact, ice storms are pretty common in many places across the country. Resilience is not just about recovering from disasters. Resilience is really about recognizing that change is inevitable, and being prepared to make the most of the changes that will affect our communities – like Dooley, capturing a failed competitor’s customers; unlike Dooley, being ready to stay in business until power is restored. Thus, community resilience is all about recognizing the possible, and having the reins in hand for it to take us to a better future.

 

[With apologies to the memory of Finley Peter Dunne]

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