I live in New York City, and have been thinking about how I think large, densely populated cities (in developed markets) will evolve after Covid-19. I don’t think the soul of the city will change, and reading Here is New York (by E.B. White) from the 1940’s affirms this, but I do think the city will go through an evolution over the near to medium term.
New York City has gotten more and more expensive which has resulted in it shrinking (net population loss). The growth of the suburbs continues to be good (across the US) particularly from immigrants who tend to have less disposable income and seek better value for money. This podcast episode with Alex Danco and David Perell also is a fun discussion on the subject that is worth checking out if you’re interested in the subject.
The continued rise of eCommerce/delivery, distributed work and autonomous vehicles, are all shifts that are likely going to accelerate changes in megacities (some of which were catalyzed by physical distancing).
Fully distributed or partially distributed is a particularly powerful trend as many technology and finance jobs may no longer require living in places like NYC as a prerequisite but can still pay the same wages.
Here are a few of my predictions:
- Offices centered around collaboration, not individual contribution: Office in the future will look different. I imagine they will have more meeting space, and more collaboration space versus single person desks designed for individuals. These collaboration spaces will be shared, and only a portion of the company will be in the office on any given day.
- Less office space, more (and larger) residential spaces: Individual contribution work will happen outside the office, and much of it from home or other flexible work spaces (coffee shops, shared office space). Office space will be repurposed into residential space or other gathering (e.g. bars or restaurants) or ‘multipurpose’ spaces. Homes will be larger to accommodate flexible working spaces or dedicated offices.
- More young people, more old people and fewer families: Young people love densely populated places, and so do healthy empty nesters. Megacities will have more of them particularly as empty nesters are fitter and healthier for longer. The food, culture and nightlife scene will become even more vibrant.
- Growth of the suburbs around megacities for families: Families all move outside the city epicenter, where dual-income parents can still easily go to their offices for occasional collaboration sessions (e.g. 1-2 times a week) but spend most of the time working from their home. The quality and comfort of these homes becomes even more important for families. The transport from homes to offices becomes even easier and faster because of driverless cars (5-10 years away).
- More pedestrianized, car free zones, and even more delivery: Purchase of ‘staples’ happens more and more via delivery vs. in person and ares of the city (e.g. Flatiron) become fully pedestrianized and cycle zones with delivery permitted during certain windows.
I don’t have any real unique insight into this topic, beyond personal interest. I’ve spoken to a number of business owners who are not extending their office lease, and also a number of friends (particularly with families) who are leaving the city for the suburbs.
I would personally not invest in real estate in Manhattan over the next few years until we see how it’s going to shake out. I think that investing in the city suburbs, and in ‘up and coming’ cities with net population growth, growing income/capital and with great culture but lower cost of living is likely still a solid call.
From time to time, I have an opinion on how the world may evolve and have not found a good way to invest in these kinds of macro theses. It’s too difficult or time consuming to find public (or private) products that provide access to these types of investment opportunities.
I would love to find a platform that surfaced more niche, long tail investment strategies or figure out how to enable folks to create packages of investment products for themselves around macro theses and then offer them externally. If this could be made much simpler, we could see a decentralization / democratization of ‘funds’ and fund managers and many more niche funds/investment products that would allow investors to create much more customized portfolios.
A selection of these macro theses are below, together with how I’ve tried to invest in them (and mostly failed).
- Technology entrepreneurship in Africa: I think that a number of significant companies will come out of Africa in the next few decades but the timing of when these companies will ‘hit’ is hard to predict and unclear. This is the only ‘thesis’ which I’m actually getting exposure to in a systematic way. I’m planning to invest consistently and conservatively in a wide range of sectors over the next 3-5 years and see how the market evolves through Musha Ventures.
- Esports: In 2014, after spending a few years playing games like Starcraft and League of Legends I became convinced that Esports would be as big or bigger than ‘traditional sports’. There are opportunities in Esports for professional players to create much deeper relationships with their fans because of the nature of the platform (e.g. livestreaming on Twitch). I wanted to invest in ‘Esports’ at a macro level but could not find a way to get exposure at this level. One idea I had was to buy a small percentage of every large Esports team (Cloud9, FNATIC, SKTelcom etc) and use this as proxy for the Esports market without taking any individual team risk. There was no comparable product that existed and it would have done quite well over the last 5 years and still think it would do well over the next 5-10 years.
- Up and coming cities: I’m short real estate in ‘mega-cities’ like NYC and London over the next 10-20 years. I think that the nature of work will change to be more distributed, and prestigious (high paying) jobs that drive up real estate prices in major cities will be more accessible from other cities in similar time zones like Nashville, Austin, Denver, Atlanta etc. I wish there was a way to invest in some sort of property index / REIT for these cities vs. buying a house or apartment in a major city where I currently live – surprisingly difficult to find.
- Mental health: We have neglected mental health for too long. We have improved our tools as a species of fixing physical ailments but are still behind on mental health. There are scenarios where we, as humans, may not die of normal age related disease and can maintain younger, healthier bodies for longer periods of time. Currently 1.5% of deaths per year are driven by suicide (from Homodeus) and this will likely get worse over time. How could I best invest this macro thesis as a value investor beyond individual public/private companies – meditation, psychology, hallucinogens etc?
- Meat Alternatives / Niche meat producers: I think that only very high quality meat producers of rare meat (e.g. Wagyu beef, Iberico Pork etc) will survive, albeit at a much higher price point, and the rest of normal meat consumption will be fulfilled through plant based and lab grown alternatives which will both be cheaper and better for our environment – again I can’t find an investment product for this in the public markets. I could invest in a single company like Beyond Meat but I’m looking for a basket of companies to support the thesis.