In the light of what C.J. Buck calls "California's antibusiness legislation," Idaho and its "probusiness climate" strike him as the Promised Land, as he explained recently to BusinessWeek Online's Edward Popper. Edited excerpts of their conversation follow:
Q: How long has your company been in California?
A: My great-grandfather, Hoyt Buck, moved here to San Diego with his oldest son, Al, in 1943. Over the next few years, he taught my grandfather how to make knives. Then, in 1947, they were H.H. Buck & Son Lifetime Knives. And their gimmick was they used the best materials, they did the workmanship, and they guaranteed the kinves for life. That's where the "Lifetime" came from.
A: Did the recent advertisements by neighboring states about the lower cost of doing business outside of California inspire you to consider relocation?
A: No. We had people approaching us for years. We never encouraged it, but they approached us. I'd been throwing away packages from other states for 15 years, and my dad had gotten them before me. It just wasn't worth the effort to relocate.
Q: So what made you change your mind?
A: We started thinking about it seriously about two years ago, when we moved to a lean manufacturing system, and one of the key points is trying to manufacture as close to one-at-a-time as you can. It works somewhat like a firemen's bucket brigade. An operator will do an operation, set the knife down on a little table next to him. The operator to his right will pick up the knife, do the next operation.... To do this, you put people elbow-to-elbow, so it doesn't take up much space. We vacated 40% of our assembly space, so we needed a smaller facility.
At first, we were just going to move to a smaller place in San Diego County, but if we're going to spend all that money and [face] all that disruption, it's not that much more expensive to move out of state. We thought we should look at it, and we were amazed at what we found.
Q: And what did you find?
A: What really prompted the urgency were the rapid and seemingly random changes in California's workers' comp and electricity. It has been getting into the realm of the uncontrollable. Through no fault of what you've done or what you're doing, your workers'-comp premium is going to go from $250,000 a year to $400,000 to $650,000 over a three-year period. That's huge, and it's completely out of your control. You aren't guilty of bad practices, but the cost just goes up and up. Now that's a scary thing.
From a utility standpoint, we had been paying 7 cents or 8 cents a kilowatt hour for years. Then it started going up. One month in the middle of the [2001's] brown-outs, we paid 31 cents a kilowatt hour. That's the highest we paid, and it was only for one month, but it was scary. For that one month, it was about a $70,000 impact. This year, we've paid 13? cents a kilowatt hour. Up in Idaho, it's running about 5 cents a kilowatt hour, and it's going to stay there for the next three years to four years. They don't anticipate any changes.
We don't really know what's going to happen in California regarding power. It seems like it's much more in control, but it seemed like it was right up until it got out of control last time. From a business standpoint, it's like surviving an earthquake and not being able to trust the ground under your feet.
Q: What made Idaho more attractive than other states?
A: We looked at the Pacific Northwest as a matter of lifestyle. Being a family-held business, the quality of life was important. The family and all the executives were going to relocate with the business. I was not going to have satellite facilities because I do not have a high trust factor for them. I like people running into each other in the hall. I like being able to call opportunity meetings, which means we need to know that everybody is within reach. I like having everybody in the same buildings. So location was important.
We looked at Washington, Oregon and Idaho.... In the end, [it was] the legislative climate in Idaho, [which] is incredibly business-friendly. There is an understanding that making life easier on local business benefits the state...so the legislature in Idaho is not passing onerous business legislation.
Q: Governor Schwarzenegger has promised to reform California's workers'-compensation regulations. Could this, or any other action, persuade you to stay in the state?
A: I can't imagine what could change our minds. When I was voting for the recall of Gray Davis, I was voting for two things. One of the things I was voting for was for the wave of antibusiness legislation to stop, and I think Arnold will do that. He may even get some things repealed or rolled back.
I have a total love for this state and this city [San Diego]. Nobody [in government] is trying to destroy business, it's just people trying to be nice. It's unions trying to provide extra benefits to their membership. The leadership of the top executive of the state is where you are supposed to sift out what sounds good from what just can't happen. I think that sort of leadership just wasn't taking place. Things were getting passed from a political standpoint, and...it was hurting the state, and I think it continues to hurt the state.