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Steel mills, Facebook and graduates - Dunwoody Crier: Our Columnists

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Investment Coach Steel mills, Facebook and graduates

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Posted: Tuesday, June 5, 2012 10:02 am

Graduates have tossed their hats in the air and the job search begins! Politicians debate the creation of jobs—who does and who doesn’t—the creation of wealth, the taxation of wealth.

Midst all of this, Facebook goes public, creating fabulous wealth for some and a cadre of new “one percenters.” Those who bought Facebook shares on day one at prices as high as $45 were looking at losses up to 37 percent about 10 days later. Egg on your Facebook?

The IPO price equaled more than 105 times earnings and 25 times revenue. Heavy insider selling was a clue that the hype factor was a bit much!

Lost in the focus on the social media frenzy was a Wall Street Journal story about a steel mill in northern Indiana. Considered dead a decade ago, the dying mill was taken over by Luxembourg-based ArcelorMittal. Installing new technology and retraining workers while battling unions, the owners turned a corner. The mill is profitable in a tough industry, operating with fewer workers. The little town of Burns Harbor, Indiana, is thankful for the jobs and the profits vis-à-vis the alternative, what almost was a shuttered, rusting hulk of an eyesore on the shores of Lake Michigan.

The Journal points to a trend that merits attention: “American manufacturing—from chemicals to washing machines—is growing again. Spurred by stable labor costs, weaker unions and low natural gas prices, today’s manufacturers have emerged from the recession far different from what they were even a decade ago. They employ more highly skilled workers, are far more automated and have far fewer workers.”

Facebook and wunderkinds of the digital age make a few people rich and attract big money, but they do not employ vast numbers of people. Those they do employ by and large have digital and creative skills, the products of advanced education. Facebook is not a General Motors of the past, with sprawling factories and thousands of employees, many of which did not need college educations.

Lakshmi Mittal is an Indian billionaire who buys rundown mills, cuts costs, lays off workers, increases productivity via technology and training, in pursuit of profit. He operates 112 steelmaking facilities in 20 countries. Mills must compete with each other in terms of productivity and profit or they risk closure.

Some would say that is cruel or heartless, but in a global economy, competition is a reality. The Indiana plant competes with a facility in Belgium. Competition works in athletics. Apparently it also works in steelmaking.

Students in high school and college must understand that in a globalized world they are competing with students in India, China, South America, and elsewhere for an eventual piece of the pie. It isn’t enough to be a “good person”—you must have marketable skills. Friend the guidance counselor. Understand where the jobs of the future are, and where they are not. Brains are in; muscle is out. With brains, it is right-brained creativity as well as left-brained analytical skills.

Parents, understand funding tools to provide tax-favored education dollars—Coverdell Education Savings Plans and 529 College Savings Plans. Good education is expensive.

As early as middle school or high school, seek consultants who offer testing techniques to help direct children and young adults along paths suited to their cognitive, affective, and conative skills and instinctive modalities. Financial advisors, teachers, and guidance counselors can assist in finding community and professional resources that can direct a young person along solid paths.

The Burns Harbor steel mill is not a sexy story like Facebook, but it is a more instructive tale. Business owners complain that they cannot find enough skilled people. New era manufacturing is coming back, and training and retraining facilities are a growth industry. Lifelong learning is in. Take note, Class of 2012 and on out to Class of 2022!

Lewis Walker, CFP® is a financial planner and investment consultant with offices in the Forum on Peachtree Parkway in Peachtree Corners; 770/441-2603, lewisw@theinvestmentcoach.com.

© 2015 Dunwoody Crier. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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