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Chicago and the ‘O’ Factor

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Chicago used to have a reputation for lawlessness and corruption. But, as Austrade’s Chief Economist Tim Harcourt reveals, it’s now a top-tier global business town and a place where Australian companies are shining.

I was in Chicago recently and came across ‘the big ‘O’s.

First of all, there’s Obama. While he was born in Hawaii, President Barack Obama cut his political teeth in Chicago and won his way through to the Illinois State House and on to the White House.

If you can make it in Chicago politics, you can make it nationally. The city has been run by the legendary Daly family for decades, and the local political machine is a tough school.

So for a young, Harvard-trained African American community organiser to rise up through the ranks says something about Obama’s ability and tenacity. Naturally, Chicagoans are very proud of being the home city of America’s first African-American president – they are running tours to his home neighbourhood and the like, along with other expressions of Obama-mania that we are still seeing in the US some time after his historic inauguration.

Secondly, there’s Oprah. The undisputed talk show Queen of America and leading African-American entrepreneur bases her famous show out of Chicago and uses her amazing profile to plug products, books, charities and even political candidates.

Oprah, of course, endorsed Barack Obama early in his nomination race against Hillary Clinton, and she was in the front row in Grant Park Chicago with Reverend Jesse Jackson and other notables when Obama claimed victory on that famous night in November.

Oprah has done her bit for Australian exporters, too, with Jamie Durie appearing regularly as her resident landscape gardener, along with our leading entertainers like Hugh Jackman and Nicole Kidman. In short, the Oprah endorsement has great power in the American market and adds global profile as well (hmm… I must get The Airport Economist into Oprah’s book club, somehow!).

Thirdly, there’s the Olympics. Chicago is in the running to host the 2016 Summer Olympics (after London), which will be announced in Copenhagen in October. Chicago is up against a strong field, including Madrid, Tokyo and Rio de Janeiro (South America has never hosted an Olympic Games).

While in Chicago, I met with the bid organisers, including Rick Ludwig, who was a major player in winning the 1996 Olympics for Atlanta and worked on the Sydney 2000 Games.

“Sydney was a benchmark for all of us in the Olympic movement and has greatly influenced the approaches of all bidding cities,” says Ludwig. “I think if we win, you’ll see a huge demand for Australia companies with logistics and event management expertise here in Chicago. You Aussies are just so good in running things, and you have such a great darn time doing it!”

The business and environmental impact of hosting the Olympics is on the top of Chicago’s agenda, and the Chicago 2016 team have been looking closely at what Australia has done in Sydney 2000, Beijing 2008 and Vancouver 2010 in terms of leveraging business opportunities – particularly in the environmental technology area – around the Games.

The Fourth ‘O’

So there’s the three ‘Os’ – Obama, Oprah and the Olympics. But, “You could add a fourth ‘O’ – Opportunity,” says Ian Smith, Australia’s Trade Commissioner to Chicago and the US Mid-West. “Everyone goes through Chicago, from planes, trains and automobiles, it is America’s transport, trade and business hub,” he says.

Smith is right. Chicago is at the centre of it all in terms of trade and commerce. With a population of over 9.5 million, Chicago’s metropolitan region has the third largest Gross Product in the United States and the 20th largest in the world. Chicago is the headquarters of 30 of the Fortune 500 companies and is home to big names such as McDonalds, Boeing, Kraft, Motorola, Hyatt, AON and even Playboy. (Don’t laugh, Australian designers fit out the Playboy concept stores in London and in the USA!)

As David Hale, leading economist and confidant of Presidents and Federal Reserve Board Chairmen Paul Volker, Alan Greenspan and Ben Bernanke puts it: “Chicago is truly a global city, smack bang in the middle of the largest market in the world. You have to understand Chicago’s historical links at the heart of American capitalism. Chicago has been home to a number of prominent market exchanges, including the Chicago Mercantile Exchange, the Chicago Board Options Exchange, the Chicago Board of Trade and even now the Chicago Climate Exchange.”

According to Hale, this continues today, as Chicago is one of the largest financial centres in the United States and is home to nearly one quarter of global futures, options and derivatives trading activity. “Chicago-based investment companies manage over four percent of the nation’s institutional assets. The financial and insurance sectors account for one in ten of the jobs in Chicago. Professional and business services make up more than 15 percent of the metro economy and generate more than US$74 billion in Gross Regional Product,” he explains.

It’s clear that Chicago is a market town. After all, it’s no accident that even the sports teams are called the Bulls and the Bears (in basketball and football respectively)! And it’s symbolic that as Chicago established the grains and future exchanges in the past, that the climate exchange is now in Chicago.

Given the ‘greening’ of the US economy under the ambitious environmental plans of the Obama Administration, Chicago is geared to play a pivotal role in green industries. According to Ian Smith, “Chicago lays claim to being the “greenest” city in the US and is home to over 200 green roofs, covering 2.5 million square feet and the Chicago Climate Exchange (CCX) offers North America’s only cap and trade system for greenhouse gases.”

Smith points out that the Exchange now has a joint-venture with Macquarie Capital to develop products for the energy and environmental markets. In addition, there’s the FutureGen Alliance with the Department of Energy that will be an important initiative in combating climate change and is using Australian expertise. FutureGen is a public-private partnership to design, build and operate the world’s first coal-fuelled, near-zero emissions power plant. BHP Billiton and Rio Tinto are partners in this clean energy initiative.

So how are Australian companies doing in Chicago?

Chicago has attracted around 1,500 foreign firms and there are around 50 Australian companies headquartered in the windy city. Australia has a very lively business community in the Chicago area, including an active Chamber of Commerce, and I met with a large number of these companies.

For instance, that well-known Aussie travel icon, Flight Centre, is now based in Chicago. Viewers of the ABC show, Australian Story, will know how Graham Turner, or ‘Skroo’, took the hippie backpacker travel business Top Deck Travel, and made it into the global business it is today.

According to Cameron McLeod, one of Turner’s rising young executives, he moved to Chicago to conquer the American market after the company’s great success in Europe, Asia and Canada. “For Flight Centre, or FCm Travel Management as we are formally known, the States is Mount Everest for us!” he explains.

So why did FCm choose Chicago? “It’s simple. It’s a matter of proximity, being so centrally located, and it has a swag of customers in both our college student and corporate business traveller markets. And the cost of business in Chicago is cheaper than New York or LA, which matters for companies cutting back travel during tough economic times.” If McLeod gets his way, Flight Centre will become an even better known Australian ‘brand’ like Rip Curl and Billabong. He says it’s remarkable given Graham Turner’s laid back persona. “If Skroo were an extrovert, he’d be Richard Branson!” he quips about his boss (and obviously a good friend).

Another Australian company in Chicago is Standfast, which designs, develops and manufactures award-winning height safety products. I spoke with the CEO, Cameron Baker, a former military man from Queensland, along with his business partner Michael Bolton, who recently relocated his company and his family to Chicago.

“We were growing so fast both here and around the world that I had to be centrally located for both the US and Europe, and Chicago fitted the bill. We’re now in 70 countries and we’re signing joint ventures to get a firm footing in the US market. After the free trade agreement (FTA) was signed, Australia’s profile improved even more in the US, and we’ve had terrific assistance from Austrade and the Queensland Government in getting established.”

In fact, Standfast has received a boost from the Obama Administration in terms of the fiscal stimulus package (boosting construction and infrastructure) and the government’s approach to overall occupational health and safety issues.

“Obama is our best friend,” says Baker. “He takes occupational health and safety seriously. Obama’s reforms to the OSHA – the US federal occupational health and safety act – has really helped our product. And through our unique product design, we’ve reduced workers compensation payouts and the number of workplace accidents. So I feel we are doing something for America, something for Australia socially too, whilst running a successful business. Both Federal and Queensland Governments backed us big time. Beattie was terrific, Austrade has been terrific,” says Baker.

The New Chicago

But surely it can’t all be good. How about Chicago’s image of gangland violence and Al Capone? As Tom Bartoski of World Business Chicago points out (actually, I am typing this in front of their billboard at O’Hare Airport), Chicago is not as dangerous as it used to be.

“We have a large number of Colleges in the metro area, and a large number of white collar professionals given the number of corporate headquarters downtown. The financial and insurance sectors account for one in ten of the jobs in Chicago, professional and business services make up more than 15 percent of the metro economy and the local industry concentration in services is over 25 percent higher than the US overall. As a result, there are lower crime rates and people are moving back to the city.”

So Chicago has cleaned up its act. In fact, as Ian Smith says: “You’ve got more chance of being knocked over by a soccer mum jostling to get a cafe latte than being mugged in downtown Chicago.”

Perhaps that soccer mum is in a hurry to catch a speech by President Obama, watch Oprah or (maybe depending on how the cards fall) get ready for the Olympics. But all in all, there’s plenty of opportunity to work and play in Chicago, a city that truly flies under the radar as a global powerhouse.

*Tim Harcourt is Chief Economist with the Australian Trade Commission and the author of The Airport Economist (see www.theairporteconomist.com).

Photo: papalars

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