Ryan's bank was a mid sized regional bank. They weren’t large enough to play in the mergers and acquisition market so they concentrated on working with regional businesses and growing their loan portfolio. The also had a robust home mortgage business.
Ryan wasn’t interested in mergers and acquisitions. He wanted to work with companies that were trying to grow their business organically by producing products that customers wanted, not trying to make a fee by loading formerly sound companies with debt they had a hard time repaying. His bank was looking to fund machinery, vehicles, buildings, etc. that could be used to improve a company’s ability to earn a profit. This is why he was interested in labor costs. Most of these investments were justified by labor savings that would produce more product for the same labor. This reduces the cost of the product or service and makes the company more competitive. It also frees up labor to work on new products and services.
His long term goal was to become an investment banker. He wanted to help secure funding for new ventures and be on the cutting edge of new ideas. The city where his bank was located had seen better days. At one time it was a major manufacturing center and had a robust working class. The move to the suburbs after World War Two and the movement of industry to the south and then overseas gutted the tax base and left behind the poorest. The city had potential; major highways and railroads crossed it, an airport and port. But too many of the commercial and industrial buildings were obsolete and some even abandoned. The housing stock was also old and much of it in need of replacement.
He saw as a very positive move the city’s program of getting abandoned and non tax paying properties back into productive use and paying taxes. He attended when he could meetings of the local business groups and took courses on economic development and urban planning. At one of the meetings he met Ryan. They discussed each others interests and found they were both interested in economic development. Ryan from project management and engineering side and Ryan from the funding side. They were talking about how the city could develop.
Ryan mentioned that he attended a transportation conference and one of the presentations was about the concept of a manufacturing center served primarily by rail. It was only suitable for cities which had an underutilized rail system, dense population with access to public transit and proximity to a port and the national rail network. As they talked they both realized there were two or three locations within their city that might fit the requirements. They both realized that if they could come up with a business plan they could present it to their respective boards of directors. Ryan’s firm was always interested in large engineering projects and Ryan’s bank wanted to grow. Both Ryan and Tyler were busy, with family, work and keeping up with their profession. They resolved however to meet for lunch on a regular basis to discuss their ideas.
Tyler couldn’t help but think about the engineering challenges and potential to build a state of the art manufacturing center powered by electricity hopefully from renewable sources. He knew rail was easy to electrify and automate and the material handling could be electrified and highly efficient given the current work in automation. He also knew that multistory buildings could be used if served by rail both for material and for concentrating the people needed.
Ryan could see the commercial banking opportunities, equipment loans, work in progress loans, letters of credit, payroll, cash management, etc. One thing they both realized that to get the concept to work, they needed a near real time labor market, that accurately priced and scheduled the labor the manufacturers would need. Ryan had become an Economist Member of SFHAX. Part of SFHAX training was a discussion of the production function and how SFHAX planned in the future to have a production function exchange and a land exchange.
He mentioned this to Ryan at one of their lunches. Ryan being a project manger immediately saw what SFHAX was attempting. When he ran a job he had the design documents (production function). His estimators or the contractors estimators made a material list for the project (land) and a list of all the hours the different qualifications of labor required. They also made a schedule showing when the material and labor would be need to complete the job. This information was priced and then presented to the project owner who made the entrepreneurial decision of how to fund and earn a profit or stay within the budget allocated for the project.
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