Moving On from Sunk Costs

Back in the middle of August I wrote an article about the Rolling Acres Mall in Akron, Ohio, as part of our ongoing engagement with Akron and its residents. My goal was to set up a conversation about where community wealth comes from, how cities become stronger, and how Akron is poised for a renaissance of prosperity, if they can recognize the opportunity.

My approach sought to first empathize with the notion that nobody gives a damn about Akron, at least nobody outside of Akron. In my conversations and interactions with Akron residents, both on the ground there and online, that’s been a common theme. It’s the theme of the underdog. The forgotten. We have that here in my hometown as well.

In a panel discussion at New York University last year, when I asked a bunch of Wall Street-funded mall developers about Rolling Acres, one of them said, “Nobody gives a #&%! about Akron.” Certainly, Wall Street doesn’t, at least not in any high-end investment kind of way.

Yet while I care about Akron a lot—the city, the people, their story all motivate me deeply—somehow not giving a #&%! about Akron was a statement attributed to me, personally, at least in some quarters. I’m not sure how you get that out of the article I wrote, and I have been kind of paralyzed by it.

That’s because empathizing with the notion that Akron is, for the most part, on its own was an introduction to a broader conversation, one that our work there has been building up to. That conversation both forgives past mistakes and seeks to refocus current efforts. It’s a conversation that needs to happen, not only in Akron but in communities across North America.

Rolling Acres Mall was a mistake, just like the mall in my hometown—which I recently wrote about—was a mistake. It’s the kind of mistake, however, that doesn’t lend itself well to blame. We can’t lay it at the feet of one person, one city council, or one bureaucracy. That’s because we, as a general cultural consensus, were on board with the building of these malls. We thought they signaled prosperity. We were wrong.

And that’s what makes that empty, collapsing box so painful to us. It was originally placed where it was to be prominent and visible, especially to people driving by. Now in decline, its visibility taunts us. Akron got their big empty box torn down; I don’t know that we’ll be able to do the same here.

There is a lot of anger here in my hometown. A lot of bitterness. I find the same thing in Akron, particularly among regular people. Social media brings it out, but it’s there even without Facebook and Twitter. Atrophy creates disillusion and resentment, like having a chair pulled out from underneath you. At Thanksgiving dinner. In front of your closest friends and family.

A lot of destructive narratives come from this bitterness. I hear them here, repeated among the well-connected and the downtrodden alike. The people at City Hall are idiots. All developers are evil and they’re going to screw us over. “Those people” are the ones messing things up; “they” lack basic human decency; “they “aren’t like us.

As ugly as these sentiments can be, the people saying them are not wholly ugly. They are our neighbors and our partners in this community. We need them. And, truth be told, while they are not right, they are not completely wrong.

The lack of someone or something to blame does not mean there weren’t mistakes. More importantly, it doesn’t mean we get a pass from acknowledging our mistakes and learning from them. That lack of a reckoning fuels the bitterness. As painful as it might be—and the haters will make it really painful—I think we would be better off publicly coming to grips with what went wrong, what that has cost us, and how we can avoid repeating those mistakes.

For example, there is a hope and a wish here among many in my hometown to prop up the failing mall, to find a combination of subsidy and incentives to attract one of those lesser Wall Street-backed developers—the ones who don’t give a #&%! about an old railroad/mill town in Central Minnesota—to come here and show us some love.

Doing so would signal to many that those in charge are on the job, that they are doing whatever it takes to bring this city back. Ribbon cuttings and golden shovel ceremonies would get positive press coverage. We would talk about all the jobs and how this is a huge deal for the community. At the very least, getting rid of the visual blight would make everyone around here feel a whole lot better about things. I understand all this in a deep and intimate way.

Yet it doesn’t change the fact constructing the mall back in the 1980s was a mistake. A huge mistake. It was part of a series of policies that destroyed the economic ecosystem of our downtown. As the downtown became less of a destination for people in the community, neighborhood disinvestment followed. We spent millions playing that game—taking out sidewalks and widening streets in the belief that we could make the city more attractive by making it less like a city—and now we’re overwhelmed with maintenance obligations, expenses that weren’t remotely covered by the tax base that the new development created. From a policy standpoint, this was a disaster—and that’s before the mall started to fail. Even with a moderately successful mall, we were going broke.

Can we acknowledge that? And if we did, would it change what our approach would be tomorrow?

Jim Kunstler calls this the psychology of previous investment, a way to describe the sunk cost of post-World War II investments. The phrase is important because it correctly identifies both the problem—bad investments—and the social condition that keeps us from dealing with it. Psychologists call the latter the “sunk cost fallacy.” I like Dave Ramsey’s definition:

The Misconception: You make rational decisions based on the future value of objects, investments and experiences.

The Truth: Your decisions are tainted by the emotional investments you accumulate, and the more you invest in something the harder it becomes to abandon it.

Part of confronting the truth that we would be better off here in my hometown abandoning the mall rather than sinking yet more money into it is, without assigning blame, acknowledging a mistake of the past. Another part is embracing a more productive vision of the future, one where our capital investments go further, make us wealthier, and increase our real prosperity.

If our goal is to grow our tax base, there are ways to do that at lower cost and with less risk. Small amounts of property value appreciation over an entire neighborhood will grow the tax base more than a massive improvement in a single site. And it will do so in a way that helps more people—our neighbors and partners in the community—more directly. What does it take to have small, steady gains in property value throughout a neighborhood? Here’s a hint: It looks more like basic maintenance than something that would involve a ribbon cutting.

The same goes for creating jobs. If our goal is to create jobs, adding one job to a thousand businesses is far better for everyone than trying to add one business with a thousand jobs. Again, this is gritty and often thankless work, the slow grind of many small steps taken in many different places, instead of the satisfying great leap forward in a single spot.

Last week I shared my presentation from Baltimore’s Old Goucher neighborhood. I’m going to be in Akron later this month to share this same concept there. We call it Neighborhoods First, and it illustrates a way to make low-risk, wealth-building investments in a community while also improving the quality of life. I’m hoping a good share of the couple thousand people we’ve connected with there make it out for that conversation. It’s time for it.

After my August article on the Rolling Acres Mall came out, city officials in Akron informed me that they would no longer work with us. They called my article “grossly inaccurate and condescending.” They canceled all the interviews we had lined up with them and indicated that they would not participate in any engagement with Strong Towns. That’s not the outcome I was anticipating, and I’ve been really depressed about it, but I get it. This stuff is tough. Sometimes it’s painful. Akron is another reminder of that.

Top image from Mike Kalasnika