Living in Cities is No Longer Worth It

Where are you?

“Hi matey!  Long time, no see,” I had said to my Irish friend on our long awaited Zoom call.  “What a lovely room that is,” I remarked, noting the black and white checkered floor and fine wood furnishings.  It looked like something out of a Hans Holbein painting.

Suddenly, I was confused.  I had visited my friend’s flat in London many years ago, but I didn’t recall it ever looking like that.

“Wait a minute – where are you?”

“Toulouse!”

Well, that explained why I didn’t recognize the place.

“What are you doing there?”

“I moved here in October.”

My friend is the co-founder of an exponentially growing start-up that deals with credit card fraud.  The company had just completed its Series B funding round, and he was flush with cash.  So he decided to get out of Dodge, or in this case, London.

“I just couldn’t take the incompetence anymore,” he explained.

I don’t blame him one bit.

City Mayors Don’t Know What They’re Doing

When my friend was talking about “incompetence,” he was talking about the abject failure of leadership on the part of major city majors.

Whether it’s Saddiq Khan in London, Bill DeBlasio in New York City, Ted Wheeler of Portland, Jenny Durkin of Seattle (but not CHAZ!), LA’s Eric Gracetti, or Chicago’s Lori Lightfoot, mayoral leadership is an utter embarrassment.  Let me count the ways.

Even most enthusiastic libertarians understand the need for some sort of policing.  After all, if you’re going to defund the police, shouldn’t that result in a major tax refund?  Where does that money go?

Municipal level debt is already out of control.  There’s no way for these cities to repay their debts without state and federal intervention.  Though they’ll use this as an excuse to raise already egregious taxes.  Check out the 10 cities with the worst debt burden per taxpayer, thanks to Truth in Accounting:

All democrat-run cities with leftist spending policies and an out-of-control welfare state.  Cutting police funds will reduce expenditure in the short run, but it’s plain silly in the long run.

There’s No Network Effect If You Can’t Go Outside

Metcalfe’s law states the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2).  It has since been applied to social networks.

That’s the point of living in a city.  Your network is, for all intents and purposes, unlimited.  And before the advent of the internet, it was critical to getting anything done.

Just listen to the oldtimers talk about how they got their “first shot.”  It’s almost always because they knew someone or were lucky to meet the right person at the right time.

Cities moved the odds in their favor.

Now that the Internet is one of the first places we network, cities’ power over the networking scene waned, little though it seemed.  Whether you’re in London, New York, San Francisco, Hong Kong, or Singapore, there’s always a club to join.

Since most of those activities are forbidden under the draconian measures city mayors fearfully imposed, what good are cities?

Just for sitting in you 30 foot by 20 foot box and staring at the ceiling all day?  Two weeks of that is bad enough.  But over a year?  It was unthinkable… until it happened.

So that’s another mark against cities.

City Taxes are Insane

If you look at the income, property, and general sales tax collection per capita in these cities, you’ll see double digit percentages added to their inhabitants’ tax bill.  That is, these are the taxes paid on top of the federal income tax paid every year:

city taxes

Is the Manhattan nightlife really worth it now?  Maybe for some, but probably not many.

Are Cities Safe?

When I first moved to London, I got into a barroom brawl that left me with a titanium plate in my head.  It’s still in my head, though regettably it doesn’t set off any airport alarm bells.

I didn’t leave the country immediately and run back to America crying.  Quite the opposite, I took it as my badge of initiation.  I belonged.

This was in 2000, by the way, when Rudy Guiliani practically Disneyfied New York City.  So London felt far more dangerous, but I liked it.  London had an edge to it.

Back then, it was only me.  No wife, no kid.  Just my mates, the pubs, and me.

Would I move my family back there now?  No.

Forbes contributor Laura Begley Bloom published a piece on the most unsafe neighborhoods in America.  I prefer this to entire cities, as I think it’s more accurate.

For instance, nothing’s going to happen to you in Greenwich Village, unless of course, you steal Alec Baldwin’s parking space.  But Brownsville?  Another story altogether.  In London, Hampstead is positively pastoral.  Newham is another kettle of fish.

Here’s where the Forbes The 10 Most Unsafe Neighborhoods in America are:

        1. Los Angeles
        2. Los Angeles
        3. Los Angeles
        4. San Francisco
        5. Kansas City
        6. Los Angeles
        7. San Francisco
        8. San Francisco
        9. Portland
        10. Kansas City

Are you really getting value for money in the two major cities of California?  It doesn’t look like it.

Broadband Internet Changed The Game

To write for Agora, back in the day, you had to move to Baltimore and work in the office.  (That’s what buying a mansion for $1 gets you!)  Once the lockdown happened, the business had to change the way it operated.

I live in Cebu, Philippines.  It’s the only place between Singapore and California.  “Beyond this point, there be dragons” stuff.

For all its faults, the Philippines has good Internet.  Because of that internet, I can work from here for anyone anywhere else.

Same thing for the banking graduates I teach.  Goldman Sachs, Morgan Stanley, Standard Chartered, DBS, ADIA, and Bank of America all moved their grad programs online.  I could teach the classes I’ve taught for 14 years, without the jet lag.  Didn’t need to fly to Singapore, Hong Kong, New York City, London, or anywhere else.  Couldn’t fly, really.

Many, many other businesses adjusted in the exact same way.

The pandemic actually increased my chances of employment.  I know that’s not the case for everyone.  But the highly mobile, location independent part of the workforce got a major boost.

Sure, it sucks if you’re a new employee, trying to make friends.  The office environments, bars right under the office… even the commute is cool, when you first start your career.

But for more established folk, working from home has been a godsend.

I can write or teach for a few hours, and then roughhouse with my son for 15 minutes during a break.

Now companies are calling for a return to the office.  Good luck with that.  A lot of workers – and their now spoiled spouses – don’t want them to go back.

Altucher was Right, Seinfeld was Wrong

James Altucher penned a piece called “New York City is Dead Forever” on his LinkedIn profile that was republished in the New York Post on August 17, 2020.  For all the reasons I’ve stated here and more, Altucher said this time is different.

Jerry Seinfeld published this piece in the New York Times, where he resorted to sarcasm, ad hominems, and straw men in an attempt to humiliate Altucher.

Altucher’s retort was positively sublime:

putz from LinkedIn

The bottomline is this: cities aren’t worth the premium they’re charging.  With municipal debt out of control, police getting defunded, and businesses still not completely open, the situation is far from resolved.

So what’s the trade?  I’d keep a close eye on commercial real estate, which thanks to all the money printing, hasn’t collapsed yet.  And moving companies look like they may be a great bet.

I’ll leave you with this, from Redfin.  It’s not a surprise when it comes to whose cities’ residences are fleeing.

city flight

Until tomorrow, my friend.

Have a great one.

All the best,

Sean

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