Friday News Digest

Yesterday was the "graduation" of six year old Stella from kindergarten, another milestone in a life that is proceeding way too quickly. We're getting ready for a summer schedule here and I am looking forward to being home again with the girls on Fridays, if not a little bit more at times. I've gotten used to Fridays being my quiet writing days, but I'm sure reverting to old form with some music, dancing and the like will be quite acceptable.

Enjoy the week's news.

• Memphis. A little over a year ago I wrote about the wonderful project you pulled off on Broad Avenue. For the past 12 months I've shared with audiences around the country the transformation this little step brought about. Now that little step has grown into a $350,000 grant award to take it to the next step. Most places start with focusing on the grant request and then languish, dreams unfulfilled. You did it first, one small step at a time, and now success is finding you. Awesome. I'm so inspired.

According to ArtPlace, “Binghampton Development Corporation and Historic Broad Business Association will transform an active warehouse loading dock on Historic Broad Avenue into an outdoor arts venue, convert a 140 foot tall water tower into an iconic public art beacon and activate The Water Tower Depot with eight weekends of community dance, followed by eight months of community-based programming.”

• I've met a lot of people through my work at Strong Towns. Matt Steele is one of those guys whose passion and enthusiasm grows on a guy. A last minute decision has him headed to CNU next week with our Minnesota delegation. A last minute decision also has him submitting a great challenge post on the Streets.MN website, providing a set of alternative designs to make a STROADy design into a solid street. Keep going, Matt.

Cycletracks are great. I love riding on them. But we don’t like cycletracks because they’re cycletracks, we like them because of their advantages. By defining what we really like, we open up the possibility that there are other alternatives which also meet our needs but have fewer opportunity costs and more synergies.

• This week our SID.tv video looked at front porches. My friend, the Restless Urbanist Edward Erfurt, then shared this piece with me on a front porch he liked. It is okay to love a good porch.

• If you are headed to Salt Lake City next week, here's a little early Duany fix. If you won't be joining us at CNU, well.....I'm very sorry to hear that. Maybe this will help.

• Two topics we talk about here that invoke the most dogmatic passions (and by that I mean a strong, certainty of belief) are anything about Keynesian economics and anything about stormwater. In terms of the latter, this week it was reported that new stormwater management rules have gone into effect for cities here in Minnesota. This is not how I would go about addressing water quality issues, but I could accept it if an equally aggressive standard were applied to the far more destructive (in terms of water pollution) suburban and agricultural land uses as well as all highway and STROAD corridors. Of course, that is not going to happen, largely because we equate environmental degradation with intense development when we should more properly be associated with unproductive development.

The cities, for the first time, will be required to maintain or reduce the volume of runoff leaving their systems, under a stormwater management plan approved Tuesday by the Minnesota Pollution Control Agency governing board. The plan also requires the cities to account for their share of pollutants such as phosphorus and sediment that foul many urban lakes and streams.

• I was emailed this article this week and it made me really sad. A town full of intelligent people given a $1 million donation for a library and the leaders of the community could not figure out a way to keep it in town. I think the most depressing thing was that they seemed to have all of the leadership and insight they needed to make it work -- from a local architect to a local attorney -- but instead went with the opinion of two consultants (who I assume are "not from there") who said the old opera house wouldn't work. By the way, here's a picture of the building that's just not good enough for this city of 5,100. Tragic and foolish.

• Here in Minnesota, reporting on a SBA report suggests that growing your own jobs locally is better than buying them. I sense that something got lost in translation, however, at the legislature who adjourned this week after "growing our own jobs" to the tune of $250,000,000 in subsidies for the Mall of America in addition to hundreds of millions for the Mayo Clinic and the Vikings football franchise. I find my growth to be more viable and productive when it is organic and not the result of a huge fertilizer/herbicide/insecticide dump.

Without the new tax breaks, the mall could have expanded on its own, but not at the density desired by the city or its owner, Canada-based Triple Five Group, Rudlang said. Now, a series of big-box stores could populate the megamall’s northern flank, which is now an unsightly patch of surface parking that was once home to the Met Center arena.

• And congratulations to our good friend George Linkert and the entire city of Mound whom the legislature randomly showered with over $300,000 in local government aid through a new and improved formula. Sometimes it is better to be lucky than good.

Changes to the formula state government uses made a difference for only one of the cities around Lake Minnetonka: Mound is due to get more than $300,000 in Local Government Aid funds in 2014.

Mound got zero in 2013, like Deephaven, Excelsior, Greenwood, Minnetrista, Orono, Shorewood, Spring Park, Tonka Bay and Wayzata.

Long Lake is the only other city to be allotted LGA money in 2013, and it's the only other city besides Mound getting it in 2014. Long Lake's take: $26,410.

• I always love a good analogy. I'm also obsessed with the differences between top down and bottom up systems of innovation. Put them together and you get this excellent piece contrasting Hollywood cities and YouTube cities. (Not hard to guess which one I prefer.)

Our cities are – for the most part – heavily pre-moderated. They are designed primarily to prevent the wrong action and to not encourage the right ones or discover the unexpected ones. Even where things are actually permitted, rarely do they actually encourage and issue the invitation to do so. Of course, there are very good reasons why cities have evolved careful protections: after all, no one wants to risk the collapse of a shoddily constructed skyscraper.

But the reality is that most people aren’t trying to build skyscrapers. There were mostly good reasons (at the time) why Hollywood evolved its complex web of the legal and financial culture on which the place operates. There are equally good reasons why this doesn’t apply to YouTube films and there should be equally good reasons why some – not all – of the rules governing restaurants don’t need to apply to food trucks and rules designed for developers shouldn’t apply to pop-up shops. Space should be cheaper and simpler to use, rather than sitting idle.

• I lack the descriptive abilities to explain how bizarre this project is. That a state as broke as Florida would be doing something this dramatic and expensive, particularly given the trajectory of traffic counts, says a lot. I've been in this part of Florida and have been stunned with the random property decline, the endless miles of STROADs and, combining these two, the self-induced and senseless congestion. Someone help me here.

• Sadly, Florida is full of this kind of thing. Fortunately on this flyover project -- a 1950's solution to a 1990's problem -- there are people organizing to bring some sanity to bear. I'm happy to see that CNU is bringing some modern insight to this as well.

Scattered around the hectic intersection of State Road 436 and U.S. Highway 17-92 in Casselberry are dozens of signs pleading "Stop the 17-92 Flyover."

Less than mile away, an electronic billboard broadcasts the same message, and late last week, a "Stop the 17-92 Flyover" mailer went to 5,000 residents and businesses within a mile of the intersection, one of the busiest in the state.

The marketing blitz against the state's $80 million plan to build a bridge that will allow 17-92 to "fly over" 436 is being mounted by Richard Birdoff, president of the company that owns Orlando Jai-Alai. He said the flyover will reduce the access that motorists have to his business and others at the intersection.

• Andrew Burleson shared this with me this week. Brilliant.

• And finally, I was going to share this video of some synchronizing metronomes, that is until I came across this car commercial from OK Go. If this could be my commute, I might enjoy commuting. 

Enjoy your weekend. We'll see you back here next week for some live coverage from CNU 21 in Salt Lake City.

You can get more of Chuck Marohn's insights by reading his book, Thoughts on Building Strong Towns (Volume 1). It is a primer on the Strong Towns movement and an essential read for those wanting to get up to speed quickly.

You can also chat with Chuck, Nate Hood, Andrew Burleson, Justin Burslie and many others over at the Strong Towns Network. Join the ongoing conversation on how to make yours a strong town.

Return on Brain Damage

This morning I was part of a really interesting group discussion over email, which I thought the Strong Towns audience might enjoy hearing a bit of. Without copying the entire email chain, here's what regular Strong Towns contributor Ian Rasmussen and I had to say.

We've seen a number of studies that indicate the traditional development pattern generates more wealth than conventional, auto-exclusive development over the long-term. If this is so, why hasn't traditional, walkable development already come to dominate the development market?

Ian observed the following:

Its my belief that self interest lies at the core of capitalism, innovation and our entire economy.

The question should be... why is the [individual] developer's most profitable option to do the strip mall? -- right now it is. I think we'd all agree that if developers were allowed to truly do whatever they want, the forces of profit and innovation would drive them to urbanism. But, as we are all so painfully aware, real urbanism is not allowed under zoning, with streets too narrow for DOT or FD standards, with banks unwilling to lend for it, and people protesting at every public meeting that you're "urbanizing" their town.

The question is raised - if the traditional pattern creates more wealth over time, how can it not be better for the developer?

Here's my take:

What most developers face is this conundrum: in the time it takes me to get 1 traditional development built I could have done X conventional developments. X is going to be higher or lower based on the regulatory environment for a given market. When that number, X, is 3 or more, then traditional development has a really hard time competing.

From the perspective of the developer, even if you make a lower return on each of the three projects, you're distributing your risk over three projects instead of only one, and also you can reinvest the returns from the first project in the second and so on, meaning you have the chance to start "playing with house money" (at least to a certain extent) rather than your original capital investment.

If you dig into Complexity Theory you'll see that cities behave like Complex Adaptive Systems. In this case, one of the more interesting principles of Complex Adaptive Systems comes into play: the principle of sub-optimization.

This is easy to see applied to a small-scale CAS, like an ant-hill. What the principle means is that when the ants have made their nest and their foraging pattern "good enough" to succeed in their environment, they should not spend any more energy improving the nest or foraging pattern, but should instead concentrate all their energy on making more ants.

This is why I believe that Tactical Urbanism, proceeding towards a philosophy of "good enough urbanism" is so important. If we can determine a specific quality level for the built-environment that is "good enough" then we should focus our energy on creating as much of it as possible, instead of trying to further perfect the model.

This is similar in application to the law of diminishing returns, it's all about the tipping point between evolution and reproduction -- or innovation vs. market share. Or, as our friend Will Dowdy so nicely described it, Return on Brain Damage.

When we go back now and look at developers participation in the Complex Adaptive System of the city, we can see that they are following their instinctive best-interest, which is to come up with a product that is "good enough" to be reasonably profitable, and then focus on making as much of it as they can. The problem we have is that our regulatory environment has established a "good enough" form which is not directly habitable by human beings, nor financially productive to society as a whole.

Now, in the discussion this morning, some objected to this observation, stating that people can act irrationally and "against their own best interest" all the time. People vote, invest, and spend their money in all kinds of irational ways, so why would the larger human ecosystem be rational?

Ian replied:

I would agree if we were looking at an individual, or few, actors. That is where the straight-up rational actor theory breaks down. But, when you look at 1,000's of developers across the country, almost all of them pursuing the CSD model, I believe that is evidence that it is -- at least for now, and incorporating all the costs -- the most profitable option for them. That is not to say that urbanism wouldn't be the most profitable option in the absence of "the system." But the system (laws, finance, etc) is real.

And, if CSD is not currently the most profitable model, than how else to explain its dominance?

The obvious excuse is that developers just don't know about urbanism. But I don't think that evidence supports that. People in RE development know all about new urbanism by now. And, if that were true -- urbanism were truly more profitable at this moment, all things considered --  then the developers pursuing urbanism would be putting the CSD developers out of business. But that, for the most part, does not appear to be happening yet.

I do believe the results reflects the truth of the matter here. That's the brilliance of the market.

So, to sum up, from the perspective of the individual developer, the long-term wealth creation of the traditional pattern is not enough motivation to cause them to walk away from the conventional development model as long as the traditional pattern is still encumbered by significant regulatory barriers. The challenge for Strong Towns is to look closely at the way they control what can and cannot be built, and to ask the question carefully: are we getting what we really want, what is in our own long-term best interest? If not, then we've got to change these rules.

Financial Deformation

I'm in the final quarter of The Great Deformation - The Corruption of Capitalism in America by David Stockman. If the book was not so long I would want to do it twice because I feel like half of it or more has not sunk in. This is an intense tome that dispels financial legend after financial legend, from the narrative of the Great Depression (it was caused by the gold standard -- not, it was leveraged over-speculation in the 1920's) to the Reagan Revolution (it was a triumph of supply side tax cutting -- not, it was excesses of debt and deficit spending in a free floating currency), TARP and the Obama stimulus (it saved Main Street -- not, it hurt Main Street and savers while rewarding reckless Wall Street speculation) and BAIN Capital (it is in the business of saving and strengthening struggling companies -- not, it is a predator that lives off of artificial liquidity generated by the Fed and has sucked dry a string of now zombie companies).

No political party is spared in this book that has been called an "intense rant by an angry man." Well, Stockman has plenty of reason to be angry. And so do you. If you'd like a short, short version, here's an opinion piece Stockman wrote recently for the NY Times.

I started reading this book because the early reviews and reactions coming from the quarters I inherently distrust were so shrill and dismissive. You can take this interview with CNBC's Larry Kudlow as Exhibit A. A recurring critique skips over the spot-on analysis of the eight decades of financial deformation and focuses on his strategies for making changes today. This is a critique I am sympathetic too -- as with the Suburban Ponzi Scheme, with such large financial deformations there are no real "solutions" and few strategies that could be effective that will appear anything but ultra-radical to insiders and other deeply vested interests.

As I sat at my desk yesterday, a CNBC anchor reported that the stock price of something like a hundred companies had reached all time highs that day. It reminded me of a conversation I had with a close relative a couple months ago. Said relative remarked on the robust nature of the stock market as of late, the pitiful (actually negative) returns they were getting with their retirement savings in more prudent investments and their gut insight that it was a good time to get in.

Personally, I think that's just the class of sucker this rigged market is waiting for.

A couple years ago I did a podcast on Peter's Schiff's 2006 speech to the Mortgage Bankers. It was a powerful talk where, in very much this style of David Stockman's book, he provided a complete and thorough explanation of the housing bubble and ensuing financial crisis a full two years before it unfolded.

Last week a new speech by Schiff was uploaded to YouTube. Before you move your money into the stock market to take part in this bull run at the exchange, you should really take a half hour and watch this.

If you want to discuss this particular article, I enourage you to enjoy some bonus thoughts I've written at the Strong Towns Network and then hang out with us there to go deeper in this topic.