GROWTH IS A CHOICE

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I was in Santa Fe, New Mexico recently on business. Let me tell you about Santa Fe. If I were to use a word to describe that town, I would call it a “hamlet” or “village” or something like that. I would not even call it a city. It’s not even really a town. It’s cute. It’s quaint. It’s a pretty amazing place, actually--one of the biggest art markets in the country, ensconced within this absolutely gorgeous topography and natural beauty. If I wasn’t gasping for air because of the altitude, it would be one of my favorite places, ever.

Funny thing about Santa Fe is that there are a lot of smart people and lots and lots of money. Usually when you get smart people and money together, cool things happen, like, big buildings go up, or big businesses get started. But there are no big buildings in Santa Fe. It is a village, or a hamlet.

Well, the primary reason there are no big buildings in Santa Fe is because there is a law prohibiting them. But why would somebody do something like that? I mean, don’t we all want to start awesome businesses and work in skyscrapers and get rich? Isn’t that what life is all about?

Maybe, but as it turns out, people like to compartmentalize their lives, they like to work and get rich over here, and relax over there. The rich people who call Santa Fe their home (along with the rich people who have second homes there) don’t want Santa Fe to be a bustling metropolis. They want it to stay small, and relaxing. If they want to work in an awesome business in a huge skyscraper they can always go somewhere else to do that, like New York.
But it’s not like Santa Fe is unusual, no, not at all. Santa Fe is really the rule rather than the exception. As you travel around the country, there are more places that don’t want growth than places that do want growth. It’s almost like the concept of a “free speech zone”--there are a few places, like New York, that are growth zones, with skyscrapers and all--but almost nobody else wants it. And even among growth zones, New York is special. Chicago puts up a massive fight anytime someone wants to build something. And San Francisco, forget about it. They threw a huge fit about building the Transamerica building, and now, everyone loves it as part of the skyline.

So why are so many people against growth? Why would people rather live in villages and hamlets? Not sure I have an answer to that question, except to say that growth is scary for some people. I mean, if you think about it, if you think about the progress of human civilization over centuries, here it is, the year 2013, and we have only a handful of big cities and most of the world is still unsettled nothingness. Sure, we’ve had progress, but over several generations? Not really. Most of us still live in villages and hamlets.

Growth can be tough, though, because if you don’t manage it properly, it can be not very aesthetically pleasing. In particular, I am thinking of Myrtle Beach, with its haphazard zoning laws. Being a free market/freedom sort of guy, I have a difficult time reconciling many aspects of zoning laws with my personal philosophy of life, but if I am being honest with myself, I will say that I enjoy places with good zoning. It’s easy to find incompetents in local government who will allow anything to be built, and it’s easy to find incompetents in local government who will allow nothing to be built, but it’s hard to find smart people in local government who will seek the highest rate of economic growth possible, while doing it in an organized and well-thought-out fashion.

I think most of all, though, people just fear change. Change is scary to human beings. Where I grew up, in Connecticut, there were plans to put a couple of baseball fields near the reservoir across the street from my house. Predictably, lots of people made a stink about it, about the traffic and the this and the that, and it turned out to be nothing. I don’t think they even use those fields anymore. I think they’re just there for vandals.

The same applies for business owners. Growth is scary. You have a restaurant, people like it, it makes money--you could make twice or three times as much money if you opened up additional restaurants, and turned into a chain, but why do it? What a hassle. It’s a big enough hassle running one restaurant, I can’t imagine running three. So even people who are risk takers who take risks and open a business, usually become complacent and unwilling to take even more risks. Rare is the person who just keeps pushing the envelope.
I’ve written about this before; this is why I really like New York, because New York is just not nostalgic about anything. Old building standing in the way? Nuke it, tear it down, start over, build something three times the size. I mean, look at Yankee Stadium. They nuked the old Yankee Stadium, with a century of baseball history, and built a gaudy monstrosity. Would they ever do that with Wrigley Field? NOT A CHANCE.

I don’t think there’s any magic formula to growth at all. Either you want it or you don’t. We get tangled up in all this social engineering about tax rates and incentives and disincentives, and what it really comes down to is this: are people in the mood to build things, or not? In Santa Fe, they are not, and that makes them happy. Not a knock on Santa Fe, it’s an amazing place and probably people don’t want to shop for expensive art in between an Isuzu dealership and a Golden Corral. But what really gets me down is when some village or hamlet is working to undermine some guy’s proposal to build a building/business/hotel/whatever when it is clear that the town really needs it, just because growth is scary and new things are scary and change is scary. Someone sent me a quote yesterday, and I’m paraphrasing: change is constant, and it is your job to adapt to it.

I think our job as investors is to look around the country, and especially the world, for those pockets of humanity where people are not afraid of growth. China is certainly not afraid of growth. Brazil is not afraid of growth. You know, for as much as people have been beating up the EM countries over the last year, it’s important to remember that Brazil, China, etc. actually want to grow, where the U.S., and especially Europe, really do not. People seem surprised when Europe turns in 0% GDP growth every quarter, but I’m not really sure why. More than any place in the world, people really like things to stay the same in Europe. As a society, it is important for us to stay hungry. Or not, I guess. Maybe we have all made enough money, and we can sit back and relax. Forget about the solar power and the electric cars and the hyperloops and the spaceships. We have one more season of Game of Thrones.