A Tale of Many Cities

When working with young entrepreneurs over the past two years, my advice has been to study and thoroughly understand the societal shifts that will follow on from the recent pandemic hysteria for several decades to come. Yes, the virus was a lab creation, and the opportunity that its emergence into the world population offered to opportunistic companies and politicians for profit and control was just too good to pass up.

Lockdowns, a control mechanism that had previously been found to be totally ineffective, soon followed, simply because this was the core mechanism for gaining control of the population by an outright taking of basic human rights. The media became complicit simply by receiving huge sums of cash from “Emergency” funding to force them to sing the government narrative. As we recently learned, the FBI forced social media companies to ramp up the fear, promote the “vaccines,” and censor all dissenting voices. Before you knew it, everyone was scared of their nearby human contacts. Clever politicians study Machiavelli and Goebbels to understand the old catchphrase: “A fearful population wants to be led to safety, so lead them.”

A fledgling entrepreneur must study how this horror show we are emerging from will play out sociologically. The young capitalist will find more opportunities where people have developed what I would call herd anxiety about not only Covid but also, now that the media is hyping the danger, most of the invisible invaders we've been coexisting with forever ("It's the flu - run for the hills!") We are watching tectonic societal changes that will create massive new market opportunities in the form of an addressable market (to use a VC term) that will be psychologically damaged for decades to come. They will have unique needs and desires. I wrote an article last year that previewed one of several concept solutions for these millions and millions of middle-aged self-isolating population groups in and around major cities (Link).

One major tectonic-style shift that seems obvious is the tens of millions of people now working (in their jammies) from home. Three years ago, a walk through any major American downtown area gave you a snapshot of what a city needed to be economically and culturally successful. A positive feedback loop fed by close proximity meant new ideas could become new companies, which fed other ideas that became other companies. At an accelerating rate, this became the standard urban growth prototype over the past 60 years.

Then came a massive overreaction to a virus whose fatality statistics are no worse than the common flu that we learn to live with from a young age – the result of which means that downtowns have emptied out. That self-feeding symbiotic relationship that led to dynamic growth was rightly viewed by our next generation of entrepreneurs, artists, bodegas, and restauranteurs as a stable future. Now, it has come undone. The only exception that I see to this new model of erosion at the core of urban centers is university centers like midtown Atlanta, where no less than nine major office and apartment towers are being built so as to cluster around talent centers like Georgia Tech. This leads me to conclude that the pedestrian core of the cities will constrict further into these tight knots for years to come.

Watching the tension around returning to the office play out publicly at companies like Twitter and Facebook is interesting. At those companies, where the average age is often less than 30, many employees simply refuse to return to the workplace. They would rather quit and take their chances in the gig economy - which is already overpopulated by millions of other 20-somethings.

I walk past the headquarters of NCR occasionally when I'm in the city. It is shocking to see the beautiful new office tower of one of the world's pre-eminent facilitators of commercial transactions literally empty. There is a bit of traffic from Tuesday to Thursday as major employers try to adapt to a new paradigm: the three-day workweek. Where did these 1,200 highly paid tech workers go? Home, of course. They sit in front of their home computers all day in virtual meetings, wearing sweatpants and house slippers from the waist down. In my view, the greatest peril for once-dynamic cities is that downtown business districts, which were at the core of the economy and tax base, revolve around technology industries that are uniquely equipped and even enthusiastic about letting workers stay home indefinitely.

This will not end well for major cities, but there is opportunity in that. A clever entrepreneur can ride this wave for many years to come. Office rents will plunge, and the sub-let marketplace will be frantic, with cap ratios swinging wildly. Yes – deflation will return with a vengeance. On the offer side of the trade will be deep-pocket equity control decision-makers with wide latitude to make deals happen. The opportunity here is to facilitate the buy-side trade through disintermediation plays.

Final observation: this massive societal shift is quite location specific, both here in the U.S. and in the rest of the world. Getting right to the point here at home: there is far less opportunity for the young entrepreneur in red states simply because they ignored most of the fear porn emanating from Washington and the CDC. A young capitalist will find more opportunities in places where the populous is so traumatized that many still wear masks while driving alone in their cars.

In closing, lest you think that this brief analysis of population-scale market changes is too opportunistic, I would say this: capitalism is the most effective means of human progress over long periods of time, and the clever entrepreneur sees tidal changes in human desires early on - and acts on them. The best aspect of capitalism is that it creates jobs and wealth by providing solutions. Yes, many of these new opportunities are created by fear and anxiety. A few major companies have capitalized on them from the outset, with Pfizer and Moderna being the most obvious, though I would argue that they were too quick to act with unproven products - which will result in the mother of all product liability litigation fiascos. Better now for young venture entrepreneurs to create low-risk products that facilitate societal progress in the new paradigm.

As a postscript, the terms "red state/blue state" are not meant to convey political orientation. These terms are now widely used by econometricians and market analysts because they describe new and evolving societal boundaries better than others.