The Urban Exodus and How Greatness Goes Bankrupt

September 30, 2020

The best-case scenario is those who love their "great city" will accept the daunting reality that even greatness can go bankrupt.

Two recent essays pin each end of the "urban exodus" spectrum. James Altucher's sensationalized NYC Is Dead Forever, Here's Why focuses on the technological improvements in bandwidth that enable digital-economy types to work from anywhere, and the destabilizing threat of rising crime. In his telling, both will drive an accelerating urban exodus over the long-term,.
Jerry Seinfeld's sharp rebuttal, So You Think New York Is 'Dead' , focuses on the inherent greatness of NYC and other global metropolises based on their unique concentration of wealth, arts, creativity, entertainment, business, diversity, culture, signature neighborhoods, etc.
The core issue neither writer addresses is the financial viability of high-cost, high-tax urban centers.
It's telling that Seinfeld's residency in Manhattan began in the summer of 1976, shortly after the federal government provided loans to save the city from defaulting on its debts and declaring bankruptcy.
In other words, Seinfeld arrived at the very start of New York's fiscal rebuilding, though its social decline would continue for another few years (the 1977 blackout and looting, etc.). Fiscal conservative Ed Koch was elected mayor in 1977 and by 1978, the city had paid off its short-term debt.
This return to solvency laid the foundation for the eventual revival that attracted capital, talent and hundreds of thousands of new residents, replacing the 1 million+ residents who had moved to the suburbs in the tumultuous 1960s and 70s.
This urban exodus had led to urban decay which had generated a self-reinforcing feedback: the greater the decline in livability, the more people who moved out, which then reduced commerce and taxes, further exacerbating urban decay, and so on.
As I explained in How Extremes Become More Extreme , these feedback loops are one way that Extremes Become More Extreme until a tipping point / phase change is reached and livability and solvency both collapse.
The other dynamic I discuss is the Pareto Distribution, the 80/20 rule which can be distilled to 64/4 (80% of 80% is 64%, 20% of 20% is 4%). Once the vital 4% act, they exert outsized influence on the 64%, far out of proportion to their numbers.
Thus the expanding criminality of the 4% criminal class can dramatically change perceptions of safety and security of the 64%.
Telling people who no longer feel safe in the city that crime only went up 10% will not change their minds.
If 20% of the businesses in a district close for good, the district might retain enough of a concentration of commerce to draw customers.
But once the number of businesses plummets below a critical threshold, the survival of the remaining enterprises becomes doubtful as the customer base drops below the level needed to sustain the remaining businesses.
As I have repeatedly stressed, the surviving businesses are burdened by high fixed costs, none of which have declined even as commerce collapsed.
Again, you cannot persuade people who no longer feel that shopping is safe and fun to get out there and spend, spend, spend like they did a year ago.
Neither Altucher nor Seinfeld mention the macro-issues of demographics and the broader economy.
Despite soaring inflation and a roller-coaster stock market, jobs were plentiful in the 1970s, partly because the Baby Boomers were entering the market for goods and services and partly due to low costs for employers.
As late as the mid-1980s, it only cost me $50/month (one day's pay for a moderate-wage worker) to provide good healthcare insurance for a single, young worker. Try buying a month of good healthcare insurance today for one day's moderate-wage pay.
Not only were rents much cheaper (measured by the number of hours of work needed to pay rent), there were "squats" where the rent was zero, and a variety of cheap "slum" dwelling options. These options have mostly disappeared from the housing inventory, so it now takes enormous sacrifices to live in a "great city".
Compare these positive demographics and cost structure then to the present. Not only are jobs no longer plentiful, many of the Millennials who flocked to a "great city" for jobs and the amenities can no longer afford to live there.
Many found jobs in the dining-out and retail sectors that have been devastated, and they only survived financially by sharing flats with multiple roommates.
Costs such as healthcare insurance and housing are "sticky:" insurers, landlords, etc. are reluctant to cut prices for fear that cost reductions may become permanent, hurting their profitability.
These high costs are also endangering all the cultural institutions and commercial life that attracted people to the "great cities." I doubt that every symphony, opera company, museum, music venue, etc. will survive the downturn, due to their incredibly high fixed costs of operation.
As I've noted before, the patrons who are financially able to support these costly institutions are older and wealthier, and have the most to lose if they feel their basic security is no longer assured. They're the first to join the exodus to safer, less risky homes elsewhere. Yes, they'll miss all the amenities, but not enough to make them stay.
I've also stressed the absolute necessity for any entity to be financially viable. If the entity isn't viable in terms of income covering all expenses, it dissolves regardless of its greatness.
Seinfeld is on solid ground arguing that great cities will never go away, as their benefits are simply too compelling. On the other hand, goats were grazing in Rome's Forum, a few decades after the Western Empire collapsed.
What collapsed wasn't just Imperial authority; the city could no longer afford all the free bread and circuses which fed and amused much of its vast populace, not could it defend / maintain the long trade routes that fueled commerce or the political structure that secured the wealth of its nobility.
Cities are not cheap to operate, and they must continually attract workers and capital / wealth which can both be taxed at a high rate. They also need a high volume of commerce that can be taxed.
Most employers are facing a profound reset that will very likely require permanent cost-cutting to maintain profits, and remote work is very cost-effective, as commuting and office space are both unnecessary expenses that can be eliminated.
In terms of financial viability, much of the activity that generated taxes for "great cities" is gone for good: downtown concentrations of tens of thousands of workers that supported hundreds of small businesses, commercial landlords paying high property taxes, and so on.
The question nobody seems to be asking is: are cities no longer financially viable , given the enormous cost of living, the high taxes needed to run the city, and the strong economic and demographic headwinds?
What kind of city is possible if half the small businesses close and tax revenues fall by 50%? What effect will those massive changes have on the livability of the city and its most compelling attractions? How will the city provide services on half the revenues?
The worst-case scenario is only those who can't afford to leave will be left. Unless great sacrifices are made by those remaining, that's not a recipe for financial viability, it's a recipe for goats grazing in the Forum.
The best-case scenario is those who love their "great city" will accept the daunting reality that even greatness can go bankrupt, and that the city will have to adapt in new and wrenching ways to remain financially viable as tax revenues decline and some percentage of the wealthiest taxpaying residents have left or will leave.
It's not just the urban exodus that's the challenge-- it's who's in each successive wave of the exodus. If the wealthy, the entrepreneurs and the displaced small business owners leave in the first wave, the adaptation will have to be rapid and profound, as the modest, incremental reforms that typify the past 75 years will not be enough to be consequential.

Of related interest:
Dear Jerry and James: You’re Both Wrong About New York (9/11/20)

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts end September 30 (Kindle $7, print $17)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction .
Recent Podcasts:

AxisOfEasy Salon #23: Lords of the Algos (1 hr)

My COVID-19 Pandemic Posts
My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook coming soon) Read the first section for free (PDF) .

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF) .

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook ): Read the first section for free (PDF) .

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).
If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com .



Thousands of people are applying for grueling jobs in Amazon warehouses, low-paid serfdom with only one purpose: increasing the profits of billionaires. Wouldn't it be beneficial if those people had an alternative source of paid work that actually benefited themselves and their community rather than the Financial Aristocracy?

The world has entered an era of profound uncertainty. The Old Normal is gone for good, and the deck is shifting ominously beneath our feet. Now is the moment to ask: what would a fairer, more sustainable system look like? How would it be better for me, humanity and the planet?

Even before the global upheavals, our system was failing. Now that it's unraveling, it's time for a new arrangement that's actually sustainable on our resource-depleted planet that doesn't favor wealthy insiders. But those gorging on inequality will never accept reforms that strip away their unearned privileges, and so the only practical way forward is a Hacker's Teleology .

What's a Hacker's Teleology ? A hack is a workaround in a kludgy, broken system-- a new way of connecting the dots . Teleology means the destination we end up reaching because that's where the dots lead .

In this book I connect the dots of my own life experiences to show how a sustainably fair way of organizing human activity would work. In telling my story , I'm also telling our story , because we all share our limited-resources world and the same aspirations for fairness, belonging, getting ahead and a say in our future.

So let's get started on an arrangement that actually works for all of us--and our world. Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction .

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts end September 30 (Kindle $7, print $17)



Recent entries:

The Urban Exodus and How Greatness Goes Bankrupt September 30, 2020

Helicopter Money and the End of Taxes September 29, 2020

Goodbye To All That: Are Our Rituals of "Prosperity" Increasingly Meaningless? September 28, 2020

The Road to Nowhere: Whatever Can't Be Politicized Ceases to Exist September 25, 2020

The Silent Exodus Nobody Sees: Leaving Work Forever September 23, 2020

Inflation and "Socialism-Lite" Are Just What the Billionaires Want September 22, 2020

The Bill for America's $50 Trillion Gluttony of Inequality Is Overdue September 21, 2020

"Inflation" and America's Accelerating Class War September 18, 2020

This Is Why Inflation Will Rip Everyone's Face Off September 17, 2020

Sacrifice for Thee But None For Me September 16, 2020

Isn't It Obvious We Need a New System? September 15, 2020

The Four D's That Define the Future September 14, 2020

Dear Jerry and James: You’re Both Wrong About New York September 11, 2020

This Is How It Ends: All That Is Solid Melts Into Air September 10, 2020

Inflation Is Stealth Austerity September 9, 2020

Intolerance and Authoritarianism Acclerate Disunity and Collapse September 8, 2020

In the Footsteps of Rome: Maybe It No Longer Matters Who's Emperor September 7, 2020

5-Part Series by Zeus Y.: When the World Market Itself Is Fake, Economic "Value" Loses Any Real Meaning.

Plugging into "Small Everything": Wake Up and Smell the 3 Cs--Community, Cash, and Coin (Coffee optional) September 4, 2020

Fighting and Winning against "Big Everything" September 2, 2020

Extorting the "Little Guy": The Special "Screw You" of Junk Bond Bailouts September 1, 2020
January 2020 entries February 2020 entries March 2020 entries April 2020 entries May 2020 entries June 2020 entries July 2020 entries August 2020 entries September 2020 entries

Archives 2005-2019







Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency. All contributors are listed below in acknowledgement of my gratitude.

Thank you, Tristan ($5/month), for your splendidly generous pledge to this site -- I am greatly honored by your support and readership.

Thank you, Michael W. ($5/month), for your superbly generous pledge to this site -- I am greatly honored by your support and readership.



go to Kindle edition






Of Two Minds Site Links

home musings my books archives books/films policies/disclosures social media/search Aphorisms How to Contribute, Subscribe/Unsubscribe sites/blogs of interest original music/songs Get a Job (book) contributors my definition of success why readers donate/subscribe to Of Two Minds mobile site (Blogspot) mobile site (m.oftwominds.com)


HUGE GIANT BIG FAT DISCLAIMER: Nothing on this site should be construed as investment advice or guidance. It is not intended as investment advice or guidance, nor is it offered as such.... (read more)

WHY EMAIL TO THIS SITE IS READ BUT MAY NOT BE ACKNOWLEDGED: Regrettably, I am so sorely pressed for time and energy that I am unable to respond to the vast majority of emails. Please know I read all emails, but I can only devote a very limited number of hours to this blog and all correspondence....



Contributions

Contributors and subscribers enable Of Two Minds to post free content. Without your financial support, the free content would disappear for the simple reason that I cannot keep body and soul together on my meager book sales alone.

Become a patron of my work via patreon.com

How to Contribute, Subscribe/Unsubscribe to Of Two Minds

one-time subscriptions

SPECIAL APPEAL TO READERS OF OFTWOMINDS from longtime correspondent Cheryl A.:

I don't recall exactly how I discovered Of Two Minds in late 2005, but it is hard to express how grateful I am that I did. As a result of the insight I have gained from the information Charles has shared over these past 9 years, I have been able to navigate this turbulent period much more successfully than most of my acquaintances. I'm sure that those of you who visit OTM with any regularity have similarly benefitted in numerous ways.

The addition of the weekly musings has been an extra bonus for supporters that has provided further insight into the markets, as well as the world around us (often providing a much needed smile).

I have no doubt that those who generously contribute to this site recognize the value that it offers. I hope that those of you who visit, but have not yet contributed, will consider doing so. Your support is essential in helping to maintain such an important resource.

Thank you, Cheryl, for this vote of confidence. I can only promise that I will continue to do my best.

"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.

"You shine a bright and piercing light out into an ever-darkening world."
Jeremy Beck




Or send coins, stamps or quatloos via mail-- P.O. Box address


Contributions in any amount are greatly appreciated.



Subscriptions to the Weekly Musings Reports

Subscribers ($5/mo) and those who have contributed $50 or more annually (or made multiple contributions totalling $50 or more) receive weekly exclusive Musings Reports via email ($50/year is about 96 cents a week).

Each weekly Musings Report offers five features:
1. Exclusive essay on a diverse range of topics
2. Summary of the blog this week
3. Best thing that happened to me this week
4. Economic commentary
5. From Left Field (a limited selection of interesting links)

At readers' request, there is also a $10/month subscription option. (Everyone at the $10/month rate has the opportunity to add another person to the Musings email list for free.)

What subscribers are saying about the Musings (Musings samples here) :

"What makes you a channel worth paying for? It's actually pretty simple - you possess a clarity of thought that most of us can only dream of, and a perspective that allows you to focus on the truth with laser-like precision." Jim S.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

How to Contribute, Subscribe/Unsubscribe to Of Two Minds


PayPal members can also subscribe to the weekly Musings Reports with a one-time $50 payment.

Become a $5/month patron of my work via patreon.com



Extra-Special Bonus Aphorisms:
"There is no security on this earth; there is only opportunity."
(Douglas MacArthur)

"We are what we repeatedly do." (Aristotle)

"Do the thing and you shall have the power." (Ralph Waldo Emerson)

"Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction." (E.F. Schumacher, via Tom R.)

"He who will not risk cannot win." (John Paul Jones)

"When we drink coffee, ideas march in like the army." (Honore de Balzac)

"Progress is not possible without deviation." (Frank Zappa, via Richard Metzger)

"Victory favors those who take pains." (amat victoria curam)

"The man who has a garden and a library has everything." (Cicero, via Lee Bentley)

"A healthy homecooked family meal and a home garden are revolutionary acts." (CHS)

"Do you know what amazes me more than anything else? The impotence of force to organize anything." (Napoleon Bonaparte)

"The way of the Tao is reversal" Or "Reversal is the movement of Tao." (Lao Tzu)

"Chance favours the prepared mind." (Louis Pasteur)

"Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill)

"Where there is ruin, there is hope for treasures." (Rumi)

"The realm of gratitude is boundless." (CHS, 11/25/15)

"History doesn't have a reverse gear." (CHS, 12/22/15)

Smith's Law of Conservation of Risk : Every sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some consequences will be intended, some will not. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences. (July 8, 2014)(thanks to Lew G. for retitling the idea.)

Smith's Neofeudalism Principle #1: If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.

The Smith Corollary to Metcalfe's Law (The Network Effect): the value of the network is created not just by the number of connected devices/users but by the value of the information and knowledge shared by users in sub-networks and in the entire network. (CHS, 4/6/16)

My Credo of Liberation: I no longer care if the power centers of our society--the distant, fortified castles of our financial feudal system--are changed by my actions, for I am liberated by the act of resistance. I am no longer complicit in perpetuating fraudulent feudalism and the pathology of concentrated power. I no longer covet signifiers of membership in the Upper Caste that serves the plutocracy. I am liberated from self-destructive consumerist-State financialization and the delusion that debt servitude and obedience to sociopathological Elites serve my self-interests. (Thank you, Klaus-Peter L., for reminding me)

"We've become a culture of excuses rather than solutions: solutions always require sustained effort and discipline." (CHS 4/9/16)

"Fraud as a way of life caters an extravagant banquet of consequences." (CHS 4/14/16)

"Creativity = problem solving = value creation." (CHS 6/4/16)

"Truth is powerful because it is the core dynamic of solving problems." (CHS 7/21/17)

"We live in a system of human emotions that masquerades as a science (economics)." (CHS 1/1/18)

"Always remember, your focus determines your reality." (George Lucas)

"Diversity is for poor people. Sameness is for the successful." (GFB)

"When power dissipates suddenly, it dissipates completely." (CHS 7/14/19)

"Disobedience is the true foundation of liberty. The obedient must be slaves." (Henry David Thoreau)

"Markets cannot price in the value of non-monetized natural assets such as diverse ecosystems." (CHS 7/14/19)

click here for more Extra-Special Bonus Aphorisms .





Terms of Service:
All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.

Our Privacy Policy:
Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.

PRIVACY NOTICE FOR EEA INDIVIDUALS
This section covers disclosures on the General Data Protection Regulation (GDPR) for users residing within EEA only. GDPR replaces the existing Directive 95/46/ec, and aims at harmonizing data protection laws in the EU that are fit for purpose in the digital age. The primary objective of the GDPR is to give citizens back control of their personal data. Please follow the link below to access InvestingChannel’s General Data Protection Notice.
http://stg.media.investingchannel.com/gdpr-notice/

Notice of Compliance with The California Consumer Protection Act
This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising. If you do not want any personal information that may be collected by third-party advertising to be sold, please follow the instructions on this page: Do Not Sell My Personal Information .

Regarding Cookies:
This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly.

Our Commission Policy:
As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted on my site.


Full Website