Why sustainable cities will generate almost unimaginable wealth over the next 3 decades, in two different ways. And how to tell if a city is part of this green rush, or if it's poised on the brink of ruin.
What would you do with a billion dollars?
Would you move somewhere nice? Travel more? I doubt you'd still be flying commercial! Would you dress nicer? Go to more cultural events, have private coaches private trainers, spend more time with friends? Maybe you'd make some new friends. (I'm sure everybody would like to be your friend!) Would you adopt a bunch of Children? Would you give to charity like the Nature Conservancy, or even make your own foundation like the Gates Foundation?
But let's really get down to it. What would it feel like not to have to worry about money anymore? What could you accomplish if you had perfect mobility, perfect health and access to the right people when you needed them?
Today, I'm going to talk about what could be the greatest financial opportunity the world has ever known. It combines the food, housing, transportation and energy industries in a single package that also includes a large dose of social justice by design.
How big a deal is this? Well, I was watching a 2015 YouTube video of a Ted talk by Kimbal Musk. Now this is Elon Musk's brother, and he was talking about the global food market and how it was $4.8 trillion, which at the time was 12x the global software market (mainly the Internet). So I got to thinking about those numbers. I dug around in Value Penguin and CBS News and Statistica and USA Today and the Bureau of Labor Statistics and found that the average household food budget is $500 a month. Transportation budget, with 1.97 cars, comes to $1477 a month. Rent $1231 a month for a total in the United States of $3208 a month, or 77 times the value of the Internet. With an opportunity 77 times bigger than the Internet, do you think there will be a few more billionaires in the world?
But what if I told you you could do even better than that? That by many measures, the average person living in this new way can have a better life than most billionaires do today?
Cities designed like modern Edens, for economic and ecological abundance. I'm Kev Polk, your guide to Edenicity.
Welcome to Episode 8, where I'll discuss the greatest financial opportunity the world has ever known, and how to manage the inequalities this invites for maximum social benefit.
Cities are Gaining Power.
Think of cities as nuclei that inevitably condense population, political and economic power.
Power and wealth are less and less a matter of massive landholdings the way they once were and more a matter of exchange and commerce.
In the year, 1800, 8% of the global population was urban. By 1900 that fraction had doubled to 16.4%. By the year 2000 45.7% of the Earth's population lived in cities.
If you've lived for a while, you've probably seen plantations closed, and cities take over farmlands.
Right now (actually as of 2018), 4.2 billion of the world, 7.6 billion live in cities. Now cities compete for and attract major employers, and they do this mainly by providing social capital and quality of life. This, according to Robert Reich in his famous book The Work of Nations.
But how to cities do this? I think the most succinct statement I've ever seen of the mechanics behind this was by the Australian planning consultant David Engwicht, as quoted in Richard Registers Book, Ecoccities. Engwicht said: "the city is an invention for maximizing, exchange and minimizing travel."
In other words, the whole idea of a city is to make everything and everyone you need more accessible (I'm going to expand on this theme from an ecological perspective in Episode 10).
Edenicity magnifies this trend.
Now Edenicity, if anything, magnifies this trend in cities, competing with each other for economic resources mainly in the knowledge economy. So what Edenicity does is offer unprecedented quality of life at much lower cost as I'll explain in detail in the next episode.
But the thing that may not be so obvious when you look at the reference design is that Edenicity is scalable. You can get that reference design going to edenicity.com and clicking the News link. And once you have it, you'll notice that it's based on a population of 5.4 million people with a commute of four minutes from anywhere in the city to the city center and the longest door to door trip of 25 minutes or less. All of this for a cost of about $58 a month.
Now, if you increase that city in that design to 34 million people, the commute doubles to a shocking 7.6 minutes to city center. And the longest door to door trip becomes not 25 but 32.5 minutes, and your costs skyrocket to $78 a month.
Of course, we can compare that to today's status quo, where millions of people spend three or more hours a day and $400 plus per month commuting. So just on transportation alone, Edenicity wins big.
Now the rise of cities like Singapore in New York City and Luxembourg show that cities are becoming the new centers of political and economic power in the world. Cities have huge incentives to modernize (strike that; I mean edenize). But most people won't realize this until much too late.
I was looking at an article called The Housing Crisis in THE WEEK, March 13th 2020. It ended with an example of how the wealthy town of Lafayette, California, near San Francisco, fought off an apartment development. The joke will be on them. Their posh, isolated mansions are destined to depreciate down to their wholesale salvage value. In time, as cities grow in power and in edenicity, places like Lafayette, California, will be left behind to try to maintain legacy road infrastructure on their own. They'll eventually suffer a tax catastrophe and have to abandon their homes.
I say this with great confidence, knowing as I do the fundamentals of the forces driving the decisions that people are making, and I've seen these forces at work in the past. During the 2008 housing crisis, I drove through a west Ohio town where block after block of McMansions, which were once thought to be posh, were boarded up, abandoned. It's happened before, and it happens fast. Cities that don't keep up with the times fall hard. I lived in the heart of Detroit in 1970. Since then, it's lost more than half of its population,
But cities can grow fast, too.
In India, Malappuram grew 44% over the past five years, according to Quartz India. This is Detroit in reverse and nearly 10 times as fast. The city of Kinshasa, in the Democratic Republic of the Congo, in 2010 had a population of nine million people Well, that's not bad. I mean, New York City has a population of 8.5 million people. But by 2050 Kinshasa is forecast to grow to 35 million people, according to visualcapitalist.com. That's a nearly 300% growth in 30 years.
Hundreds of new cities are being planned or built worldwide. A few successful ones will grow. Most will fail. I'll tell you what to look for in a moment, but let's look at the opportunity.
According to the United Nations, in 2018 there were 7.5 billion people, 4.2 billion of whom lived in cities. The same report projected that by 2050 we're going to have 9.7 billion people on the planet, 6.6 billion of whom are urban. In other words, in 30 years there's going to be 2.4 million more people living in cities than live in cities today. Now, if you divide that 2.4 billion by 32 years, that is 2018 to 2050. You get this number: we're going to need new urban homes for about 200,000 people a day, every day, for the next 30 years.
But wait, there's more!
Nearly all the world's existing housing inventory will be replaced in this century because it's not environmentally sustainable, it's energy inefficient, it's attached. It's too spread out. The locations are not good. Most existing housing is not in mega cities, and as we saw, it's the big cities that are growing. That's where the action is. The bigger cities with very high edenicity (that is to say, economic + ecological abundance) are best for the environment too.
Now, the reference design has the cities, on average about 290 kilometers apart. But if you make the city six times bigger on average, then the distance between them grows to 700 kilometers. And so it's that much easier for large scale habitats to repair.
Let's say that half the world's urban housing gets replaced in that time frame. That's another 200,000 people a day (in round numbers). So the total demand that we have for edenic housing is 400,000 new homes per day every day for the next 30 years.
Now, I've run some numbers and I figure that it's possible to build these with housing, agriculture, energy and transportation for about $43,000 per person. And so that works out for her family of four to about $172,000. And with a 30% margin, you'd sell these at about $245,000 to house a family of four. Now, if they get a mortgage at a 4.5% annual percentage rate for 30 years, that works out to $1246 a month. That's a very reasonable mortgage for a family of four. And remember, too, that it also includes many city services that are not typically rolled into a mortgage. If we capture just three hours and 20 minutes of that urban surge at a 30% margin, that's enough to make a billion dollars.
Today, if you Google it, there are 2153 billionaires in the world. Now. What I'm saying is there's enough opportunity in this urban population surge to create 83,000 new billionaires, which is 38 times as many as exists today.
Now, of course, it takes massive investment to make that kind of money, so the advantage definitely goes to the incumbents who already have money. So rather than creating 83,000 new billionaires, it's a least as likely that Edenicity could allow 83 of the existing billionaires to become trillionaires.
Now, building for ecological fair share, without cars, it's really hard to build a lot of inequality into it Edenicity, At least as far as daily living is concerned. The very rich might have better materials in their homes. They might live in slightly better locations. They might have more loop stations in their village or town. But even those things make a very small difference. I'm talking about maybe $100 a month for most of these differences. They might be able to arrange private loop charters. They might have a degree of exclusivity. They might have servants, and services that the rest of the population doesn't. But the big things -- like air quality, water quality, food quality, health safety, speedy travel, access to friends -- are already much better than you can get anywhere today.
No matter how rich you are, nobody today has the money to cross a five million person city in eight minutes, or 25 minutes door to door, at a moment's notice. But with good design, every single one of those five million people can have that.
The Perils of Wealth
Still, unchecked inequality, even in Edenicity, comes with problems for society that multiply exponentially over time. If you have big money to invest, you have more opportunities to invest. If you invest in productive assets such as factory automation, you could keep investing some of the profits in more and more of it. At first, automation merely displaces workers into lower wage service industries, but ultimately it reduces the overall demand for work.
The brilliant mathematician Norbert Wiener commented in his 1948 book, Cybernetics, that automation is slave labor (I mean, machines basically do exactly what you tell them all the time), but this creates an inevitable pressure of all labor that competes with it towards slavery.
Even the tight-fisted Henry Ford realized that he needed to pay his workers more than the market rate for labor at the time, so there would be enough buyers for his cars.
In 2012, Dan Price, CEO of Gravity Payments, gave his employees and minimum wage of $70,000 a year. There was a huge uproar. Rush Limbaugh called him a communist! But his company has thrived. Morale and performance went up. Recruiting got easy. Revenue went way up, and people started doing things they had previously deferred in their lives, like having babies.
The problem is, it's so easy to lose track of the value of sharing.
In a world of wealthy foundations such as the Ford Foundation and the Gates Foundation, some libertarians have said that simple charity is all the redistribution we need.
But that's fantasy. Here's what we're really like: the next time you cross the street, should you worry about an oncoming car? Well, of course! But it also depends on the make. If it's a BMW, the answer is yes! Video studies have shown that luxury car drivers are four times less likely to stop for a pedestrian than the average driver.
This is just one of many surprising results in a research program on income disparity by Paul Piff, a social psychologist at the University of California, Berkeley, in 2014. In 30 coast to coast studies, he also found that the wealthiest people are at least twice as likely as the poorest to cheat at dice, lie in negotiations and even take candy from babies.
It didn’t matter whether they were conservative or liberal, nor even how or when they got rich. In one experiment, Piff rigged games of Monopoly® between pairs of students so that early on it became clear that one player couldn’t lose. Not only did people made to feel rich by this experiment report afterwards that they deserved to win, but they also took more of the snacks and were verbally much ruder during the game.
This empathy gap, as Dr Piff calls it, also appears in charitable giving. According to an April 2013 article in The Atlantic, the bottom 20% of wage earners give 3.2% of their earnings away to charity. Will the top 20% only give away 1.3%? This is all the more remarkable when you realize that the low income group didn't even earn enough to itemize charitable giving on their taxes. Worse wealthy donations skewed toward elite schools and arts charities rather than helping the poor.
The high end of inequality is a powerful motivator to think hard, work hard and innovate. Leaders are driven by wanting to change the world. For example, Steve Jobs wanted to democratize computer power. But to build an effective team, as Andrew Carnegie once remarked, the profit motive must prevail. High skilled people are excited by the vision, sure, but also by the dream of all the things they could have, do or become when they cash in some equity.
I'm too familiar with the downsides of co ops and communes to throw that out.
When I visited The Farm intentional community in Tennessee, I met old timers who longed for the days when The Farm ran its economy communally. But in a book I bought on that visit called Voices From the Farm, I learned that workers skilled in the trades became discouraged and left because they had to run their wages through the community bursar and justify every purchase down to a stick of gum or a can of soda pop. So redistribution can go much too far.
That said, the trappings of wealth often come at the expense of the environment and the common good. Multiple houses, bigger houses, rooms full of art you might enjoy just once a year, if ever. Expensive clothes you might only wear once. Traveling by private jets that pump many times more. CO2 into the atmosphere than economy travel.
This is how you live if you're wealthy these days.
Why we need to balance inequality
Bottom line: unless a society has some mechanism to allow broader sharing of the benefits of equity, many people will be left behind and become a permanent underclass, and the lifestyles of the wealthiest among us will undermine the ecological and social advantages of Edenicity.
I believe the solution will consist in a broadened property tax that targets all wealth from real estate to capital assets to savings. My models are not yet very complex or sophisticated, but it looks to me like a 1% monthly savings and assets tax, coupled with a guaranteed minimum income, would retain the motivational benefits of inequality without letting it run amok.
If you had a sudden windfall, for example, it would take six years to lose half of its value, unless you invested it in something that produced an ongoing value in trade. This is similar to the high corporate income taxes of the Nixon era that provided incentives for private innovation and investment and helped to fund massive public investment. But a guaranteed minimum income (another proposal from the Nixon era) would add to that a safety net that minimizes bureaucracy.
The advantages that cities have over nations is that they can run a wider variety of redistributive experiments over shorter amounts of time and at less cost to find the formula that works best.
Earlier, I promised to explain…
How to spot a good city
Hundreds of cities are being planned. Which ones are good investments? My answer: NONE OF THEM. At least, not in the long term. They're all grossly under-designed. Google any of them. If you see highways and cars, the whole thing is a MISTAKE. It will be buried soon by the dust of history.
Remember, design does not compromise. That's the third principle from Episode five in this series.
So let's just take one example. How many people does your car move every day? According to the U. S Bureau of Transportation statistics, the average American makes 1500 trips per year. Divide that by 365 days. You'll find that each car moves about four people per day. Well, what about taxis and rideshare vehicles? Well, there's about 3.9 million drivers, 14 million rides per day. So you end up with just under four trips per day. Say,half of those are shared rides and they're still moving something like six people a day, plus the driver. Even with self-driving cars, it's not likely to get better than this on surface streets.
Let's compare this to the efficiency, speed and environmental performance of Loop Transit. Episode 12 of this series will go into detail, but what I mean by Loop transit is an underground transit system that is 5 to 15 times faster than anything we have today because of higher speeds in an on-demand, point to point architecture with no stops.
A loop car will typically carry 1000 people per day (hat's 250 times better than your car) and make 90 trips for the energy cost of one car trip per person today.
Would you rather have an hour commute or four minutes? Would you rather have noise, pollution and scary traffic, or greener and quiet? Would you rather have time for family, friends and neighbors or time fighting traffic? As people answer these questions, they will decide where to live.
High edenicity cities will win absolutely. And all other cities with their cars, roads and detached houses will lose, meaning they will empty out and literally fall into ruin. It's very Darwinian, and it will happen very fast. Remember, edenicity is ecological + economic abundance. Living in a city that has more of it gives you more freedom, more connection, more health and less stress than any billionaire can possibly enjoy today.
Edenicity is the parameter that will make or break every city's success and ultimately reshape our future so it is long and abundant.
If you enjoyed Episode 8, please be sure to subscribe so you don't miss a show, and please join me next time when I'll apply the design process of factoring to a neighborhood. Perhaps the strangest thing about this exercise is how, despite vast improvements to quality of life and the environment, the end result doesn't look weird at all.
I'm Kev Polk, and this has been edenicity.