Economic Life/Grace of Innovating

“Economic life develops by grace of innovating; it expands by grace of import-replacement.”
--from "Cities and the Wealth of Nations: Principles of Economic Life" by Jane Jacobs

In October the E. F. Schumacher Society bought a house for staff and interns. It was not a simple transaction, rather a complex and marvelous adventure weaving our work lives together with the story of a small manufacturing company: the innovation of its founding, the history of its employees, its significance in the regional community, the role of a regional equity fund in financing its growth, and the power of the vision of the fund's founder. It was (though we did not know it at first) a story about ingredients for building strong regional economies and the grace of that process.

We are pleased to share the story in the narrative below.

Photos are at:
http://www.smallisbeautiful.org/PAS/photos.html

Best wishes,
Susan Witt
E. F. Schumacher Society

Economic Life/Grace of Innovating

For the past four years the Schumacher Society has rented a small house for staff and interns that we call Guilder House, located a short walk through the orchard from the Schumacher Library and office building. Because housing prices have been so high in the Berkshire region of Massachusetts, it has been essential to provide free and/or affordable housing in order to enable young staff and interns to work with us. With its four bedrooms and two-and-a-half baths, Guilder House has served that purpose.

In June the owner of the house offered to sell it to us, donating one third of its current appraised value as a gift to the Society. The offer was irresistible; nevertheless, repair work was necessary to responsibly care for the building. How would we get it all done?

A week after signing the contract to purchase Guilder House, we had a call from Dan Levinson, the founder and managing partner of Main Street Resources (www.mainstreetresources.com), a private equity firm in Westport, Connecticut, that provides investment capital and resources to companies with great potential and great people. Main Street had recently invested in Protective Armored Systems (www.pasarmored.com), a small manufacturing firm in the Berkshires making bullet-proof glass for multiple applications. Dan told us that one of the autoclaves used to heat and pressurize the glass had exploded. Miraculously, no one was hurt, but a building was rendered useless, and production would be shut down for over a month. Like other good corporate citizens before it, PAS wanted to keep its workers employed during the rebuilding. The company was reaching out to community groups for appropriate volunteer projects. This was a welcome opportunity for us.

For four weeks we watched as a crew of up to twelve per day worked to transform Guilder House--clearing brush and trees to open the site to more light, sealing cement walls against moisture, staining the exterior to protect the wood, replacing a rotting deck, removing moldy carpeting and sanding the newly exposed floors, insulating walls for heat efficiency, tiling, painting, cleaning. What was merely housing is now a warm, secure, lovely home, thanks to the team from Protective Armored Systems (PAS).

Schumacher staff provided coffee, homemade muffins, home-cooked hot lunches served family style on a row of picnic tables, a refrigerator full of soft drinks, a priority list of projects, and plenty of ahs and heart-felt thanks. The PAS crew provided multiple skills, hard work, good will, and stories about what it takes to run a small manufacturing firm. Main Street Resources provided the inspiration, connection, and funding for building materials. Over lunches and coffee breaks we learned a great deal about the history of industrial development in the region.

The Berkshire region was once home to a diversity of local manufacturing firms. Water from the Housatonic River powered wool, paper, and log mills. We grew much of the food we ate and processed much of the wood used in building our homes. Wood stoves provided a significant quantity of heat from October through April. There was a spirit of self-sufficiency coupled with a rich cultural tradition.

However like many developed regions, the Berkshires have since “outsourced” that manufacturing. Remnants of the infrastructure remain, such as abandoned factories clustered along the river, but we are losing the memory of manufacturing skills and its ethos. The Berkshire economy is changing to a service economy.

PAS is unique in the region, manufacturing its signature product for export and providing jobs for technically skilled employees. What are the characteristics that grew this firm, and how can we encourage additional manufacturing appropriate in scale and nature to the region?

PAS is a small company with only forty employees. Its founder, Phil Martino, has deep roots in the Berkshire community. He basically built the business from scratch, inventing the manufacturing process for the bullet-proof glass, designing the equipment, and gaining the confidence of customers. He worked alongside his employees, training them in cutting the glass to specification, grinding the edges smooth, keeping the work space meticulously clean, and packing in such a way that no damage occurred during shipping.

When asked about the philosophy of work behind his success, Phil Martino modestly claims that it is nothing special--essentially that of the Shakers, who believe that God is met in your work, so you perform each task with the love and care appropriate for that meeting. Further, you treat co-workers as you would be treated by them. That simple but profound work ethic permeates the business.

Several of the PAS workers came from the closing paper mills (some of them third generation in the mills) or were laid off when General Electric closed its nearby Pittsfield, Massachusetts, operations. Ranging in age from nineteen to sixty, they have worked as carpenters, as linemen trimming trees, as equipment installers, as stock clerks, as theater-set builders. Most were raised in the Berkshires. Two are recent immigrants from Eastern Europe. One is African-American with a young family. Another is Phil's grandson, learning the business by working alongside the others. The younger ones might have had some training in the trades in public high school. They wish they had had more.

The employees all have friends who are looking for jobs, and they are grateful for the manufacturing job at PAS. It provides a relatively good salary, enough to provide security for a family. They are proud of their role in the business and report that PAS is different from other worksites. Because of the relatively small scale of the firm, they know all the stages of making the glass, not just their one task. That gives them greater ownership and pride in the finished product. They have read letters from American soldiers in Iraq thanking PAS for the bullet-proof glass in their vehicles that protects lives under fire. They have seen the copy of the U. S. Constitution kept safely behind their glass and know that it is a document of enormous significance to the history of this country.

These men trained by Phil work alongside him in the production line, fish with him, see and respect the discipline it took to build the company, and so they do not hesitate to labor hard for him. If GE or the paper mills had been shut down by equipment failure, their employees would be on the dole, not working on a community project supported by PAS.

I asked Phil Martino what he sees as the limitations to creating more manufacturing firms of the scale and quality of PAS.

* Distribution of tax incentives
Regional economic development programs provide tax incentives to lure big corporations to the region but fail to offer similar incentives for smaller home-grown businesses.

* Infrastructure
Building and site selection, while a concern, is not an insurmountable problem. Remnants of a once thriving industrial base along the rivers mean that suitable buildings remain vacant and affordable. It is important, however, to cultivate a citizenry that welcomes appropriately scaled manufacturing in their neighborhoods.

* Transportation
A lack of sufficient freight-train service to the region puts reliance on trucking, thus narrowing choices of locations to easy access from the few highways.

* Skilled workers
There is a base of good workers in the region, but they are not trained, so businesses must take the time for and bear the cost of training on the job. Though more technical education in the public schools would be helpful, better yet would be funds for apprenticeships so that job-skill development can be specific to the manufacturing process.

* Financing
Phil named lack of financing for small and medium sized businesses like his as the biggest hindrance to business start-ups and expansion. Large enterprises have national sources of funding, but not so the regional firms on the scale of PAS. Phil is quick to credit Main Street Resources with providing an answer to the problem of financing.

Dan Levinson earned an MBA from Stanford Graduate School of Business and holds a joint degree (with honors) in applied mathematics and economics from Brown University. But his real skill lies in recognizing the talent of individuals and encouraging those talents. His equity fund, Main Street Resources, is shaped in a particular way to best apply his skills and inclinations. Investing primarily in businesses within a hundred mile drive from his home in Westport, Connecticut, he knows the companies and their management teams personally. He is available on short notice for consulting and trouble-shooting. He is well-informed about his portfolio businesses, without micro-managing them.

Phil Martino personally funded the startup of PAS, putting his home and family at risk. When PAS was ready to grow in an organic way, it needed a financial partner. Main Street understood the scale of the business, made the personal contact, and provided the right amount of financing while still keeping the successful management team in place--a team that knows the product as well as the ins and outs of the manufacturing process, the suppliers, the markets, and the local community.

Main Street's engaged, personal, proven approach to financing has turned clients into new investors. Under Main Street's leadership a group of former owners of small businesses has coalesced into an informal mentoring team to help a new set of entrepreneurs, ensuring the success Main Street’s partner enterprises.

It was Main Street that provided the capital to open a new facility at PAS to house a new autoclave. When the explosion occurred, the leased building next door was already under renovation and the autoclave was on order. Main Street's investment meant that production would resume in one month, not one year. What would the employees do during that time? For PAS, with its deep local roots and in partnership with an equity fund with strong social values and a commitment to the region, the answer was simple: seek a community service opportunity, supporting the workers and the community group at the same time.

By good grace, that group was the E. F. Schumacher Society.

For four weeks staff of the E. F. Schumacher Society and the Protective Armored Systems team ate lunch together on picnic tables stretched out across the lawn of Guilder House. Our co-worker, Kristen, spent the morning cooking, using fresh produce from local farms and my kitchen garden. The red, white, and yellow checkered table cloths and napkins were washed fresh each day. We all experienced a note of subdued festivity.

I spent two hours every day interviewing each member of the team, learning what brought them to their work and asking what they thought was needed to create more manufacturing jobs in the region. Their stories lingered with me over the weekends, when they were not with us, and I began to realize that our stories, told over many lunches, lingered with them.

One Monday morning I went over to Guilder House and found the crew already hard at work. Oronde, meaning the Appointed, whom everyone called "O," was scraping old paint from the side of the house in preparation for a fresh coat. "O," says I, after a pause while watching him work, "You are all pouring so much love into this house." "Susan," says O, "that's because you are all pouring so much love into us."

Grace.