Working Together for Shared Prosperity
By Rhonda I. Zygocki
Former Executive Vice President, Policy and Planning
Remarks to the California Chamber of Commerce
Sacramento, Calif., December 1, 2011
Our CEO, John Watson, spoke to a lot of you in June. You've definitely seen a lot of Shariq [Yosufzai, Chevron Corporation vice president and 2011 CalChamber chairman] this year – and now me. I hope Chevron isn't wearing out our welcome. You see a lot of us because we're big fans of the CalChamber and the indispensible role it plays in creating opportunities in our state.
What I want to talk briefly about is a solution to California's economic challenges – the solution, in fact. It's the single most effective source of innovation. It's the most effective driver of higher living standards. It's the primary engine of economic growth the world over.
It's you. It's business – small, medium and large – private sector entrepreneurs. The private sector is California's great hope.
That said, the economy is struggling, which affects businesses everywhere. A long period of recovery no doubt lies ahead. For the private sector to spark any long-term economic revival requires something fundamental – a healthy environment in which all businesses can reach their potential.
The only way we're going to meet the challenges we face is not by legislating our way out or by taxing our way out, but by growing our way out.
But efforts in this state must begin with an understanding of what's behind California's particular economic ecosystem. By that I mean the tremendous power of the private sector isn't just about small business – as essential as small business is to any thriving economy. It's about all business.
The private sector as a whole must be encouraged to grow.
Today, the private sector faces some headwinds – which isn't new.
The Chamber of Commerce was created in 1912 because, even a hundred years ago, business needed a vocal advocate. It may have been no coincidence that, in the very same year, Teddy Roosevelt observed, "It ought to be evident to everyone that business has to prosper before anybody can benefit from it." And yet, if he had to say it, it wasn't so evident.
Now here we are, almost 100 years later, and business, in general, seems to have lost even more of its luster. Profits are resented and begrudged – as if businesses don't have payrolls to meet, infrastructure to repair, inventory to replace or taxes to pay. Today, large businesses are often reduced to stereotypes or caricatures, becoming very convenient targets – especially when times are tough.
Churchill recognized this tendency. He once lamented the tradition in political circles of seeing business as, "a cow to be milked or a dangerous tiger to be shot." Churchill knew full well that business generates the wealth on which growth, revenue and just about everything else depends. Or, as Churchill put it, business is "the strong horse that pulls the whole cart."
Let's consider for a moment how that cart gets pulled in California – from a big business point of view.
First, I want to say that, as a big business, Chevron needs small business. In fact, we started as one, 130 years ago. Two men saw a need – in this case, for oil. They saw opportunity – in the mountains near Los Angeles. They accepted the risk – of their time and capital. They even defied rattlesnakes and wasps. And, eventually, they struck oil.
When their risk paid off, they did what lots of other small businesses do – they looked to grow. They improvised by buying old railroad cars and welding axles together for a drill shaft. They hired employees and incorporated as Pacific Coast Oil Company. And the rest, as they say, is history.
Today Chevron is California's largest company in terms of sales and one of the largest companies in the world. But the two entrepreneurs who started us off discovered something that's just as true today – we don't succeed alone.
For example, we employ some 60,000 full-time employees around the world. But, on any given day, over 200,000 people work for us – which means that about 70 percent of our workforce is comprised of contractors who work, first, for someone else.
Here in California alone, we employ 10,000 people full-time. But, for every job Chevron creates, nearly six more jobs are created – either as providers directly related to the energy business or as providers of other services. All told, Chevron supports 1-in-200 nonfarm jobs in the state.
And over the last four years, Chevron has spent about $2.5 billion with California's small businesses. These partnerships – between large and small businesses – create the backbone of a prosperous and growing economy. Not only here in California, but across America.
In fact, according to a 2010 report by the Business Roundtable, a typical U.S. multinational buys goods and services from 6,000 American small businesses totaling more than $3 billion – or 24 percent of its total purchases. The report concluded that our supply chain is undeniably interdependent – deeply embedded in the economy – having extensive connections to each other in product markets, capital markets and labor markets.
Let me put a face on this dynamic right here in our home state.
One of our business partners is S&S Supplies and Solutions, located not far from here, in Martinez. S&S provides us with personal protective equipment, welding supplies and thousands of other items that support operations in our Richmond Refinery every day. The company started in 1983 with one pickup truck and a $30,000 loan. Today, S&S does $70 million in business every year – and provides jobs to 135 people.
The company's owners, Tracy and Steve Tomkovicz, credit the relationship with Chevron as driving the company's growth – and preserving it through tough economic times. As Steve put it, "if Chevron is successful, we are successful."
Steve points to a link – and a benefit – that, unfortunately, is sometimes misunderstood or overlooked, but not by small business owners.
When the issue of a severance tax comes up in the state capital, it's been small business owners who, I think, make the most compelling cases for that vital link. They explain, better than anyone can: When large companies become a target, small businesses like theirs suffer collateral damage.
That was the message delivered by Ron Jacobs, another one of our business partners. Ron's company, Pro Tools, provides general services in our San Joaquin oil fields and employs 57 workers. During last January's hearing on the severance tax, he came to Sacramento. He testified that the proposed measure would put many of those jobs, if not his entire company, at risk. "If our oil field customers cut back production," he said, "it's only logical they'll cut back on services we provide."
Like a lot of business owners, Ron speaks frankly and directly. He understands the nature of partnership and the interdependence of business – in strong partnerships, both parties benefit.
Chevron's California small business partnerships are very diverse and extend beyond our traditional operations.
Take BrightSource Energy. It's a solar technology company located in Oakland. We've invested in the company, and we're using their technology to produce steam in the San Joaquin Valley where the oil we produce is "heavy" oil. Because it's thick, heavy oil doesn't flow easily. So we inject steam into the ground to coax the oil out of the ground.
When we were introduced to BrightSource, the company had developed advanced solar technology that would provide steam for power generation. That was the business model – solar to steam to power.
One very smart guy on our venture capital team asked: What if you stopped at steam? Well, through a lot of hard work with BrightSource, they did just that. And now we're operating a solar-to-steam demonstration project at our Coalinga heavy oil field. There, some 3,800 mirror systems capture sunlight to produce the steam to increase oil recovery – without increasing our carbon footprint.
And now others can better envision the possibilities of this technology.
Over the past decade, other California startups have received some $78 million in investments from our venture capital team, in the IT, oil and gas, and clean technology sectors – precisely the kind of technology California is known for.
We also have a long-standing relationship with the Lawrence Berkeley Lab to understand how we can develop and commercialize innovative energy technologies. And we recently formed a new partnership with Cal Poly to explore ways NASA technology can be applied to energy production.
Technology will continue to play a big role in the California economy, and Chevron will continue to invest in it.
What does all this do? It creates jobs.
Small business gets lots of credit for being a big job creator – rightly so. Small businesses employ about half of America's workers, and they create more than half of the nonfarm private GDP. The U.S. government calculates that, over roughly the past two decades, small businesses – which are defined as any business employing fewer than 500 people – generated 65 percent of net new jobs.
That's impressive. But here's something else that's impressive.
According to the Small Business Administration, 99.6 percent of all U.S. companies meet the SBA's definition of a small business. If you do the math, you find that, over about the same period of time, the remaining 0.4 percent of American companies – medium and big business – created 35 percent of all new jobs in this country.
So, big business is also a big force in the economy and can play an equally big role in our long-term recovery. In our industry alone, over 1 million jobs can be created by 2020 if U.S. energy policy would allow access to and transport of the incredible energy resources contained within this continent.
Now, there is one area in which big business is less nimble than small business – it's far less likely for a Chevron to be recruited to pick up and move to another community as easily as a startup could do. So for big companies, it makes the most sense to encourage conditions that allow for continued organic growth – so we can grow the numbers of our jobs, so we can continue to support small businesses who support us, and so we can continue to provide capital to small firms who have great ideas that can serve us both.
That's why we will continue to do our part to advocate for all business – big, medium and small, alike. Because we know that economic growth that benefits us, relies on our mutual success.
Here, I want to point to Lt. Governor Newsom's economic growth and competitiveness agenda as a good start – as is Governor Brown's appointment of a jobs czar and his signing of legislation to start the process of curtailing cumbersome regulations – that includes selected improvements in CEQA, California's Environmental Quality Act.
All of these measures help set the framework for all of us to have the right conversation. They're steps in the right direction. We need a more pro-business environment in California. We need rational regulations and rational taxes that don't disadvantage California manufacturing and other business.
Like the Chamber reminds us every day, these are things we can address. And because we can address these things, Chevron believes, like the Chamber, in the future of California.
Whether you are a large or small business, that future also needs human capital – a highly educated and skilled pipeline of workers to help businesses grow and prosper. It's why we actively support education wherever we operate. And of the 95 universities Chevron partners with around the world, California institutions top our list for corporate support.
In the past five years, Chevron hired about 500 full-time employees and another 500 interns from California universities. Eighty percent of those hires were in the fields of science, technology, engineering and math – the STEM subjects. Why? The people who design and run the engineering marvels that bring us the energy we need share one thing in common – they're strong in STEM. For us, supporting STEM is a business imperative.
But I'd argue it's the same for just about everybody else. The U.S. Bureau of Labor Statistics projects that 15 of the 20 fastest-growing occupations in 2014 will require science or math knowledge to successfully compete for those jobs. In California, it's more so – 75 percent of the 50 fastest-growing occupations require STEM skills.
So as we contemplate our state's economic revival, effective education must rank among its highest priorities.
Our support for California's prosperity extends to our local communities as well. Among our many community programs, the focus on economic development, job creation and getting people back to work ranks high.
Recognizing the value of the smallest of small business, Chevron contributed $1 million to launch the first West Coast branch of Grameen America. It's a Bangladeshi bank that specializes in supporting microenterprise, which it will do in Bay Area neighborhoods very soon.
Our collective actions to provide jobs, to support our schools and communities, and to grow our businesses make a difference. And California needs every bit of what's right about business right now.
2012 will be a tough year. Facing the headwinds aimed in our direction and reviving California's economy and optimism for the state is no work for the faint of heart. Which means, it's a job for business – and for the Chamber.
I want to acknowledge my friend Shariq again for all the great work he's done for the cause of business. And we congratulate the Chamber's new chairman, Tim Dubois. We know he'll carry on with the same strong leadership that's needed now.
And to all of you, let's continue the great partnership all businesses have. We have to tell everyone and tell them again about the total contribution business makes. We have to remind them that success for the entire private sector and success for California is one in the same. When business succeeds, we all succeed.
Let's keep working to make California the greatest state in the Union – on the broad shoulders of one business community.
Published: December 2011