Ale-8-One president sees a lot of opportunity to grow the brand

August 24, 2014

140818Ale8One-McGeeney-TE0024Ellen McGeeney, president of Ale-8-One Bottling Co., in Winchester. Photos by Tom Eblen  

 

WINCHESTER — As an 8th generation Kentuckian, Ellen McGeeney knew she was taking on something special when she became president of Ale-8-One Bottling Co. But the Louisville native, whose family is from Henderson and Owensboro, didn’t realize just how special.

Her first week on the job, a 20-something Lexington store clerk tearfully told her about his grandmother’s recent death from dementia, and how, in her last months, the only thing that made her smile was Ale-8-One. Then he hugged McGeeney.

And there was the businessman McGeeney met at a networking event a few weeks later. When she introduced herself, he dropped to one knee and kissed her ring.

“There’s a fervency about the brand in Central Kentucky,” she said of Ale-8-One, the ginger-and-citrus soft drink that has been made in Winchester since 1926. “So many people speak about it as if it’s theirs.”

140821Ale8One-TE0083The Rogers family took a big step a year ago when it hired an outsider for the No. 2 spot in the company now run by Fielding Rogers, 33, the great-great nephew of Ale-8-One inventor G.L. Wainscott.

McGeeney, 52, brought a lot to the company besides Kentucky heritage. A Brown University graduate with an MBA from Yale, she was a business consultant for Booz Allen Hamilton and other firms in New York and Boston, specializing in logistics, branding, marketing and online strategies.

Between the births of their second and third children, she and husband Christian Thalacker moved back to Louisville to be closer to her family. She helped start Grasshoppers Distribution LLC, which sold fresh food from local farmers to customers around Louisville, and did strategy work for Rooibee Red Tea.

It was through the Louisville-based beverage company that she met Rogers, who was looking for someone to help him take Ale-8-One to the next level. McGeeney said the job is a perfect fit because it draws on all her skills.

“Literally, this is my dream job,” she said. “I was ready to have a real career again, and I really wanted it to be in Kentucky.”

McGeeney said another big attraction was the Rogers family’s business values. While the family wants growth, she said, it must be steady growth, without peaks and valleys, because Rogers doesn’t ever want to have to lay off any of his 100 employees. “He’s extremely cognizant of the importance of good jobs in this community,” she said.

140821Ale8One-TE0049Wainscott started in the flavored drink business in 1902. He launched RoxaKola in 1906, naming it after his wife. But when Coca-Cola started suing small cola competitors, he realized he needed a special flavor all his own.

Wainscott went to Europe after World War I and bought ginger beer recipes to experiment with. He launched his new drink at the Clark County Fair in 1926 without a name. After a customer remarked that it was “a late one” in the already crowded carbonated drink market, the name Ale-8-One stuck.

Ale-8-One has more caffeine and less carbonation than many soft drinks. Only four people know the secret recipe: Rogers, his brother, sister and father. Rogers now mixes the concentrate himself using his great-great uncle’s handwritten notes.

Ale-8-One distribution is focused on Central Kentucky, where its own delivery fleet covers 27 counties. It is one of the few bottlers in America that still uses some returnable bottles, a popular tradition the company plans to continue.

“I like to say we’re on the bleeding edge of obsolete technology,” McGeeney said. “And we’re very proud of it. We have invested a lot in making sure that that process is extremely safe and high quality.”

Through contracts with other distributors, nonreturnable bottles and cans also go to most of the eastern three-fourths of Kentucky and parts of Ohio and Indiana. McGeeney hopes to gradually expand distribution, at least to all of Kentucky’s 120 counties.

In addition to the original formula, Ale-8-One comes in caffeine-free and diet versions. While the original formula will “never, ever, ever” change, McGeeney said, she sees opportunities for additional beverages. She wouldn’t disclose specifics, but said she would love to do a seasonal beverage made with Kentucky ingredients.

“If you’re at a big company, you can throw a lot of stuff at the wall and see what sticks,” she said. “We can’t do that. We’re David in an industry of Goliaths. We have to do it differently.”

McGeeney said revenue growth has been up in her first year, to about 5 percent. Her goal is annual growth of 5 percent to 10 percent to keep the company financially resilient as the economy rises and falls. Ale-8-One doesn’t disclose revenues or profits, but McGeeney said the balance sheet is strong and future expansion will be self-financed.

“One of the real luxuries of being a private company, from my perspective, is the long-term view,” she said.

This spring, Ale-8-One did its first promotional packaging with a horse-racing theme. Football tailgate packaging will hit store shelves this week. Basketball packaging will follow that.

McGeeney hired a consultant to help refine Ale-8-One’s brand strategy. It revolves around the ideas of Kentucky pride, family ownership and independence. The working slogan: “The best of the Blue Grass in green glass.”

“I think there’s a proud story there,” McGeeney said. “We should be as much of a jewel of Kentucky as bourbon is. My fantasy is to get everybody in Kentucky to feel that way.”

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Coal miner’s daughter now one of 25 top U.S. women bankers

March 9, 2014

Jean Hale was a coal miner’s daughter, the youngest of four children. When women in her family chose a career outside the home, they became schoolteachers.

But when Hale was assigned a “career day” report in high school, she chose to interview Robert B. Johnson, the president of Pikeville National Bank. She can’t remember much about what he told her, but it obviously made an impression.

Hale, 67, now has Johnson’s job: chairman, president and chief executive officer. The world has changed, and so has her hometown bank.

JeanHalePikeville National then had about $18 million in assets and 20 employees. The bank Hale has run for 22 years was renamed Community Trust Bankcorp in 1997. It now has $3.6 billion in assets, 1,030 employees and 86 offices in 35 counties in Kentucky, West Virginia and Tennessee.

Community Trust is the largest bank holding company based in Kentucky. American Banker magazine, the industry’s bible, has ranked the coal miner’s daughter No. 24 on its list of the “25 most powerful women in banking.”

Hale will speak about her career March 12 in Lexington at a business and leadership conference sponsored by the group Women Leading Kentucky. The event is sold out, so I called Hale and asked to share her story with a wider audience.

“Neither of my parents had a college education,” Hale told me. “But they were bound and determined their children would, and they did.”

Hale graduated from what is now the University of Pikeville, where she majored in business and minored in math. “I wanted to stay in my hometown and there was limited opportunity, so I needed a backup plan,” she said. “The world always needs math teachers.”

Hale worked for Pikeville National Bank while in college, but quit to finish her senior year because the bank didn’t allow part-time workers. The bank’s chairman, Burlin Coleman, just assumed she would return after graduation.

But when he didn’t specifically offer her a job, Hale signed a contract to teach high school math. Later the same day, Coleman called her home to ask why she hadn’t come back to work.

“I told Burlin that if I don’t have my word I have nothing,” she said. “So I taught for a year, and we had an agreement that I would come back to the bank when that year of teaching finished. That was 45 years ago.”

Hale said the incident taught her important lessons about integrity — and communication. It also confirmed her hunch that she would make a better banker than math teacher.

“A lot of people think banking is somewhat boring; it’s not,” she said. “It’s a constantly changing and evolving industry, and I like that.”

Hale said people often assume it was hard for her to rise to the top because banking and Eastern Kentucky both have male-dominated cultures. But she said her bosses always judged her on her abilities, not her gender.

“A lot of people don’t realize that many times the glass ceiling, so to speak, was not in the workplace. The glass ceiling was in the home,” she said. “You talk about the old cliché that behind every successful man is a successful woman. The reality is that behind every successful woman there at least has to be a tolerant man.”

Hale is a widow now. Her son, Michael, 42, is a successful engineer and corporate executive in Nashville. He also is the father of her two granddaughters.

“I made a conscious decision,” she said. “I wanted to have family and career and I felt like I could do a good job of both with one child.”

What advice would Hale give to women — and men — wishing to emulate her success?

■ Embrace education and continuous learning.

“Formal education is like a tool box,” she said. “Your success is going to be a result of knowing which tools to pull out and use once you get into the job market. And you have to be able to reason and think.”

■ Anticipate and embrace change.

“This is a changing world, and you have to be willing to grasp the changes that occur,” she said.

Eastern Kentucky’s boom-and-bust coal economy taught Community Trust executives the importance of diversification. So as soon as banking laws allowed for regional expansion, the bank did so aggressively. That has been a key to success.

■ Find good mentors.

Hale said her two best mentors were Coleman and Brant Mullins, another former executive at the bank. “They mentored without interfering,” she said. “It was more like planting seeds … and seeing if you could pick up the ball and run with it.”

■ Emphasize communication.

“A leader has to not only have the vision, but be able to communicate the vision and have people buy into it,” she said. “You also have to be able to look someone in the eye when you’re communicating with them and be able to understand the reaction of their personality. You can say the same thing to two different people and you’ll get two different reactions.”

■ Be passionate about your work.

“Passion instills confidence in other people. No one wants to do business with someone who doesn’t show a passion for what they’re doing,” Hale said. “If you don’t like what you’re doing, then I would encourage you to do something else.”

■ Give back to your community.

“If a community is growing, all the businesses in the community will grow as well,” she said. “It’s not just the donations we make, but the actual leadership (employees) provide in their different communities that’s going to make a difference.”

Hale chairs the Kentucky Economic Development Finance Authority, which awards state tax incentives, and is a board member of Commonwealth Seed Capital, the Appalachian Regional Health Foundation and the University of Pikeville. She is a former chair of the Kentucky Chamber of Commerce and the Kentucky Community and Technical College System Foundation.

■ Operate with integrity, and treat others with fairness and respect.

Hale said Mullins gave her some of the best advice she ever received: “Jean, it doesn’t matter how smart you are or how hard you work; in order to succeed you have to have a lot of people willing to work with you.”

“And you need to focus on the success of your co-workers more so than yourself,” she added. “If you do that, your success will come.”


Some Kentucky business stories to watch in 2014

January 6, 2014

Kentucky’s economy begins 2014 with a vigor not seen since the real estate bubble and Wall Street greed crashed the economy more than five years ago. Still, happy days are hardly here again.

Economist Paul Coomes issued a report for the Kentucky Chamber of Commerce last month that showed uneven recovery across Kentucky, based on the growth of wages and salaries. The state as a whole starts the year about 34,000 jobs (2 percent) below 2007, the year before the collapse.

Lexington and Louisville have been slower to rebound than the state as a whole. Owensboro had the strongest job growth, thanks largely to a major hospital construction project and a downtown riverfront redevelopment project financed by a local tax increase and $40 million in federal money.

Federal spending also was responsible for Hardin, Madison and Christian counties being the state’s leaders in terms of wage and salary growth. They benefitted from nearby military bases and the destruction of chemical weapons at the Bluegrass Army Depot.

Eastern Kentucky’s economy is usually the state’s weakest, and that is especially true heading into 2014. The region has lost 6,000 coal jobs recently because of four big factors: cheaper western coal, even cheaper natural gas, dwindling coal reserves in the mountains and stricter regulations to limit the environmental damage and health effects caused by mining and burning coal.

Overall, private business around Kentucky seems to be coming back to life. Although interest rates remain extremely low, community bankers grumble that regulations intended to rein in the excesses of Wall Street and biggest banks have made it difficult for them to lend money.

David Adkisson, president of the Kentucky Chamber of Commerce, said the state’s business community overall is poised to do better in 2014 than in recent years. But there are lingering concerns about the financial impact of health care reform.

“There’s growing optimism, but there’s not enthusiasm yet,” Adkisson said of the state’s business climate, noting that Kentucky’s central location is a plus. “That’s an advantage nobody can take away.”

Business people will be keeping a close watch on the General Assembly session that begins Jan. 7. The state budget will again be the biggest issue, with a lot of attention focused on restoring recent cuts to educational investment. But, as usual, there is likely to be little appetite among lawmakers for comprehensive tax reform to address chronic state funding shortages.

Adkisson said some beneficial tax changes are likely, and Kentucky should reap some savings from recent reforms to prisons and state employee pensions.

Here are some economic stories to watch in 2014:

■ Lexington’s huge medical services industry should see a lot of action as major construction projects progress and the Affordable Care Act expands the availability of health insurance.

University of Kentucky Chandler Medical Center’s $1 billion expansion should see the completion of its 64-bed cardiovascular floor. Baptist Healthcare Lexington, formerly Central Baptist, will be going full tilt on its $230 million renovation and addition, scheduled to be finished in late 2015. Shriners Hospital is moving forward with plans for a new facility near Kentucky Children’s Hospital on the UK campus.

■ The Federation Equestre Internationale will announce this year whether the 2018 World Equestrian Games will be held at the Kentucky Horse Park. That was the site of the 2010 Games, which were successful thanks in large part to the active sponsorship of Alltech, the Nicholasville-based nutrition supplement company. Alltech also is the main sponsor of the 2014 Games, Aug. 23-Sept. 7, in Normandy, France.

With so many excellent competition facilities already in place, Lexington would seem to be in a good position to again host the Games, providing another big boost to Kentucky’s economy.

■ After five years of delays, construction is supposed to begin soon on the huge CentrePointe hotel, apartment, office and retail development in downtown Lexington. Developer Dudley Webb demolished a block of historic buildings for the project in 2008 but couldn’t get financing to build.

The first step in construction will be excavating a huge underground parking garage without breaching the century-old culvert containing Town Branch Creek. Because CentrePointe is getting some tax breaks, the city required Webb to show proof of construction financing and put up $4.4 million to restore the site in case he runs out of money. The goal is to keep CentrePasture from ending up as CentrePit or CentrePond.

■ This year will see more details about proposals for redeveloping Rupp Arena, Lexington Center and the huge surface parking lots surrounding them. And then there is the visionary plan to create Town Branch Commons, a connected greenway along the path of long-buried Town Branch Creek. They are ambitious proposals that will require even more ambitious financing plans.

■ The state Transportation Cabinet is likely to decide by late this year whether to recommend construction of the I-75 connector highway between Nicholasville and Interstate 75 in Madison County. Boosters say the $400-plus million project would be good for business. But opponents call it a special-interest boondoggle, a waste of public money that would cause substantial environmental damage to a section of the scenic Kentucky River Palisades south of Lexington.

■ A lot of excitement was generated Dec. 9 when more than 1,500 people gathered in Pikeville for a public forum launching a bipartisan effort to create new economic development strategies for Eastern Kentucky. Gov. Steve Beshear, a Democrat, and U.S. Rep. Hal Rogers, a Republican, are leading the project, called Shaping Our Appalachian Region, or SOAR.

The coming year will show whether the effort called SOAR, or Shaping our Appalachian Region, amounts to a breakthrough or just more empty talk.

■ Another ambitious economic-development effort is the Bluegrass Economic Advancement Movement, or BEAM. Mayors Jim Gray of Lexington and Greg Fischer of Louisville launched it with the goal of attracting more advanced manufacturing jobs to the 22-county region around and between the two cities, which already includes Toyota Motor Manufacturing Co. and many of its suppliers.

In late November, Gray and Fischer unveiled a BEAM strategic plan around the ideas of embracing innovation, increasing Kentucky exports and improving education and workforce development. It’s a sensible vision, but whether Kentucky leaders will find the political will to invest in making it happen remains to be seen.

Staff writers Janet Patton and Cheryl Truman contributed to this report. 


New program to nurture Kentucky’s young entrepreneurs

January 28, 2013

Thirty years ago, Kentucky created the Governor’s Scholars Program. Twenty-six years ago, the Governor’s School for the Arts. Now, the Governor’s School for Entrepreneurs.

The idea for this new summer program is the same as with the other two: identify high-potential high school students and bring them together to boost both their development and Kentucky’s future.

The Governor’s School for Entrepreneurs is now taking applications for the first class of 50 students who will attend a free program June 9-29 at Georgetown College. The deadline to apply is Feb. 15. For more information, go to: Gse.kstc.com.

Kentucky’s economy needs more entrepreneurial thinking, said Kris Kimel, president of the Kentucky Science and Technology Corp., which is creating the program.

“Increasingly, people are going to have to create their own jobs, figure out how to create their own value,” he said. “Entrepreneurship is a way of thinking. It’s a different mindset.”

More young Kentuckians need the skills and mindset to start their own businesses, rather than assuming they will always work for somebody else, Kimel said.

This three-week program will include tours of innovative companies and talks by Kentucky entrepreneurs. Students also will hear from lawyers and other professionals who help entrepreneurs make their companies successful.

There will be a lot of teamwork time devoted to students’ ideas for products or services that could be turned into companies. That will include learning about business plans, iteration, investment capital, production, sales, marketing and long-range strategy.

“The program will be all about creative thinking, critical thinking, innovative thinking,” said Kimel, who in 2000 started the Idea Festival, an international creativity festival now held each September in Louisville.

The program is open to 9th, 10th and 11th graders in Kentucky’s public or private schools. Students may apply as individuals or in teams by filling out an online application and submitting adult references.

They also must create a two-minute video explaining their idea for an innovative product or service, or why they would be suited to become part of a team that comes up with one.

One criteria that will not be considered for admission is a student’s grades. After all, some of America’s most brilliant innovators — from Thomas Edison to Steve Jobs and Bill Gates — didn’t do well in school.

“Just because you’re a ‘C’ student doesn’t mean you’re not incredibly smart,” said Laurie Daugherty, the program’s director. “Sometimes the personality types and thinkers who make the best entrepreneurs are the kids sitting in the back of the class not really engaged in the stereotypical classroom style of learning.”

Daugherty has been traveling around Kentucky, speaking at high schools to attract applicants and raising money for the program among business people.

“There has been a lot of excitement about it,” she said. “The first application was from a student in Louisville who already has a company and wants to learn more about how he can grow it.”

KSTC has a $50,000 seed grant from the state Economic Development Cabinet. The rest of the estimated $200,000 needed for the program is being raised from businesses. There will be no cost to students.

Gov. Steve Beshear kicked off the fundraising effort recently by bringing 40 entrepreneurs and corporate leaders to Frankfort for a presentation.

“Business people get it,” Kimel said. “I think they realize this is an important part of our future, our ability to create these kinds of people and companies and jobs.”

Randall Stevens, who has started several companies in Lexington to develop innovative technology, is one of the entrepreneurs who will be teaching at the program.

“I’m a big believer in the educational process of how to become an entrepreneur,” he said.

Part of that process is learning to be comfortable taking the calculated risks needed to succeed.

Part of the program’s value will be creating a network of young Kentucky entrepreneurs going forward, Stevens said. He is trying to organize that kind of network among his fellow 24,000 graduates of the Governor’s Scholars Program.

“I want them to leave with a good education,” Kimel said of the first class of students in the Governor’s School for Entrepreneurs, “but also with a sense of empowerment that I can do this, or I can think differently.”


Finding human, financial capital for Kentucky

January 31, 2010

Improving Kentucky’s economy will require more capital. Finding that capital, both human and financial, is likely to involve more small steps than big leaps.

Two groups are taking steps worth noting. They are the Young Professionals of Eastern Kentucky and the Lexington Venture Club.

The Young Professionals of Eastern Kentucky is a new organization that hopes to help talented young people stay in — or return to — Eastern Kentucky’s mountains. It is having its kickoff event Monday night in Hazard.

“We really want to combat the brain drain,” said Bradley Parke, 24, of Knott County, the group’s vice president. “There are a lot of people who leave and want to come back, but there’s just not the opportunities for them.”

The free event, which begins with a 6:30 p.m. reception at First Federal Center on the campus of Hazard Community and Technical College, will include speeches by U.S. Rep. Hal Rogers and former Gov. Paul Patton.

Kevin Smith, 26, a Laurel County native who lives in Inez, was inspired to start Young Professionals of Kentucky after reading Visioning Kentucky’s Future, a 2008 report by the Kentucky Long-Term Policy Research Center.

“There was a need for young professionals to come together,” he said, not only to create new economic opportunities for themselves and their communities, but to be more aware of opportunities already in the region.

“Many of us have a passion for this region,” he said. “We want to live and work here.”

Smith, Parke and others formed a steering committee and then a board of young professionals from across Kentucky’s 32 Appalachian counties. They applied for non-profit status and organized small get-togethers in London, Hazard, Prestonsburg, Somerset, Whitesburg and Pikeville.

“We’re pretty spread out, so we’re trying to reach every part of the region so everyone feels like they’re included,” said Parke, adding that online networking tools will be key. The organization has created a Web site (www.ypek.org) and a Facebook group with nearly 1,200 members.

In addition to networking, Smith and Parke said the group plans to form working groups to study and undertake projects around six themes: economic development; energy and environment; education; health care; technology; and civic engagement. That work will get started at the group’s next regional meeting, tentatively scheduled for early April.

They said the organization’s board includes Republicans and Democrats, and they’re being careful to avoid political associations that could limit their effectiveness in the region.

“We’re trying to say, no matter what your background or ideology is, we’re here to make a difference,” Smith said.

Meanwhile, the Lexington Venture Club gathered last week to discuss the state of venture capital funding in Kentucky.

The club reported that entrepreneurial companies in Central Kentucky attracted $47.5 million in venture funding last year for a two-year total of $116 million — not a bad showing considering the overall economic climate.

The 88 companies surveyed by the club said they hired 386 people last year, up from 230 in 2008 and 162 in 2007. The average salary for full-time jobs at those companies was $69,800, up from $61,000 two years ago.

Venture funding comes from a variety of non-traditional sources outside bank lending, such as venture capital funds, private investors and entrepreneurs and their friends and families.

It is a vital source of capital for young companies in fields such as technology and bio-sciences. Innovation is often a risky investment, but it can pay off big, both for investors in those companies and for their communities.

The gathering at Lansdowne’s Signature Club attracted nearly 200 people, prompting UK President Lee Todd to remark that Lexington’s venture capital and entrepreneur community “could not have filled a closet 10 or 15 years ago.”

The keynote speaker was David Jones Jr., chairman and managing director of Chrysalis Ventures in Louisville, the region’s oldest and largest venture capital firm with about $400 million under management. He also is non-executive chairman of Humana Inc., which his father helped found.

Jones said Kentucky is behind many neighboring states in creating the kind of innovative companies that can attract venture funding. A key to improvement, he said, will be for Kentucky to emphasize and invest more in education at all levels.


Shakertown Roundtable full of food for thought

October 26, 2009

I wrote Sunday about last week’s Shakertown Roundtable, which featured former Federal Reserve Chairman Paul Volcker and included more than 50 of Kentucky’s most influential leaders in business, government, academia and philanthropy.

Given the complexity of the topic — economic crisis and recovery — and the caliber of the panel and participants, there was a lot to discuss and think about.

Here are a few additional notes from last Thursday afternoon’s conference in one of Kentucky’s most scenic settings, Shaker Village at Pleasant Hill:

■ One executive I found insightful was Paul Varga, president and CEO of the Louisville-based liquor giant Brown-Forman Corp. In stressful times like these, he joked, “You’ll all understand why I’m happy to be in the business I’m in.”

Varga said he understood some executives’ worries about a backlash of too much taxation and regulation after a period many people think had too little. Liquor has always been an easy mark for higher taxes, he said, adding that “our industry once had the ultimate government intervention: Prohibition.”

He noted that much of the economic crisis was caused by what people did with other people’s money and an abandonment of traditionally sound business practices. Varga said future prosperity will require companies to not just achieve revenue growth, but create value.

Brown Forman — and the entire bourbon industry — has remained relatively healthy by not taking on too much debt and by searching out new markets overseas and developing spinoffs such as the Bourbon Trail initiative around distillery tourism.

■ In response to a question, Volcker said ideology and economics don’t mix well. That’s because unpredictable human behavior can have a big effect on the economy.

“It’s not a rational activity,” he said of economics, adding that this crisis showed that free markets with little regulation can lead to greed, manipulation and disaster.

■ Louisville Mayor Jerry Abramson, who is running for lieutenant governor on Gov. Steve Beshear’s re-election ticket, reminded executives who criticized government spending on the social safety net that many average Americans are hurting.

“We have real families and real children who are going through some real difficulties,” Abramson said. The nation needs to take care of them, he said, not only because it’s the right thing to do but because they are the workers who will be needed to build the future.

■ Centre College President John Roush said most aging baby boomers won’t be able to enjoy the leisurely retirement they expected because our old economy and lifestyle expectations weren’t sustainable.

“We’re not going to get to go fishing every day,” said Roush, 59, who said he likes to fish.

But Roush said he is encouraged that today’s college students have different expectations. “They have a sense of possibility and optimism,” he said.

■ University of Kentucky President Lee Todd said America needs to renew its focus on research and development, advanced manufacturing and high-quality education. Kentucky students need more math and science — and more confidence in their abilities.

With the right education and training, Kentucky students can compete with anyone, said Todd, himself the product of a small town in Hopkins County. As an example, he mentioned UK students’ strong showing last week in the international solar house design competition in Washington, D.C.

Kentucky students need to start their own businesses, not just expect to work for someone else. And the state needs to emphasize entrepreneurship and business development, not just attracting employers from elsewhere.

“Kentucky people who start companies will stay in Kentucky,” Todd said. “We’ve got to create our own jobs.”

Kentucky Educational Television videotaped the Shakertown Roundtable and will show an edited version on Nov. 23 at 8 p.m. and at other times.


We won’t fix economy unless we can change

October 25, 2009

Paul Volcker, who was chairman of the Federal Reserve under presidents Jimmy Carter and Ronald Reagan and is a top adviser to President Barack Obama, has earned a reputation as one of the rarest of creatures: a straight-talking economist.

Volcker was true to form Thursday, when he came to Kentucky to speak at the Shakertown Roundtable, a gathering of about 60 of the state’s most influential leaders in business, government, education and philanthropy.

The 82-year-old economist was blunt in his assessment of what caused this economic crisis and what’s needed to fix it. And he brought things back into focus when some executives tried to point fingers, shift blame and complain about recovery strategies.

“We spent, as a nation, more than we were producing,” Volcker said. Mix that with a real-estate bubble, reckless financial manipulation and too little government oversight, and it was a recipe for disaster.

“We were leveraging the economy … and then it all unraveled,” he said, adding that the recovery will be a “considerable slog” that could take years.

Volcker has advised Obama to restore legal restrictions, enacted after the Great Depression but repealed in the 1990s, that separated investment and commercial banking and prevented banks from becoming “too big to fail.”

The Obama administration has balked at Volcker’s suggestions amid industry opposition. But Volcker warned that without such reforms the nation could face a repeat of its current crisis in a few years.

After Volcker’s remarks, the 11 other panelists gave their views on the economy and the proper relationship between business and government. They included Gov. Steve Beshear, Louisville Mayor Jerry Abramson, the presidents of the universities of Kentucky and Louisville and several business leaders.

David Grissom, president of Mayfair Capital in Louisville, said he was depressed at the quality of national leadership. He complained about the huge amounts of money government is using to try to rescue the economy.

Julie Janson, president of Duke Energy in Kentucky and Ohio, lamented new government regulations on energy and utilities.

Churchill Downs Chief Executive Robert Evans warned this was a bad time to raise taxes and increase government regulation of business.

U of L President Jim Ramsey cited sobering statistics about Kentucky’s economic “blood bath,” such as the decline in manufacturing jobs in the past decade from 310,000 to 200,000 and the fact that Kentucky spends $9,000 a year on each public school student, $6,000 on each college student — and $19,000 on each prison inmate.

As each panelist took his or her turn, things turned gloomier. Then the last panelist, the governor, spoke.

Beshear said he thinks Kentucky is in better shape economically than many states and, with smart strategy and investment, the state could position itself to take advantage of future economic opportunities, such as advanced manufacturing.

“Until I heard from the governor, I was in a state of desperation,” Volcker deadpanned, adding that he agrees with Beshear’s optimism.

But, Volcker said, Kentucky and the nation must see the economic crisis as a “wake-up call” and make some fundamental changes.

Volcker also agreed with comments by UK President Lee Todd, who emphasized the need for more rigorous math and science education and more technology research that can be commercialized to create jobs.

Todd criticized the recent emphasis on the service economy: “We can’t create wealth by serving hamburgers to each other.”

In the best line of the day, Volcker said Americans need to shift away from “financial engineering” and focus once again on civil, mechanical and electrical engineering.

We need to regain our leadership in technology development and manufacturing, he said, rather than churning out so many business school graduates who are focused on making big, quick and easy profits by manipulating money.

If there’s one thing this year’s Shakertown Roundtable made clear, it is this: Economic recovery will require us to figure out how to prosper in a new and different global economy, rather than simply trying to get back what we have lost.

Centre College President John Roush, commenting from the audience, perhaps said it best: “I think we are going back to a place of well-being. But it’s a different place.”