Make something people want

Paul Graham and his colleagues at Y Combinator use this as a motto for anybody who wants to build something new. In order to do that successfully, whatever they create must be something people want.

Strange as it sounds, I don’t think this rule ever really applied to the creation of new places. Real estate is an industry that has been mostly immune to the law of consumer demand.

Development of real estate was pushed by the location decisions of companies and institutions, not pulled by the consumer.

Most individuals had very little say in where they lived. Whatever their skillset, the set of employers they could work for determined which city they lived in. They may have some freedom to pick between a few major cities, but ultimately it came down to the presence of employers in a large labor market.

It didn’t matter if they thought the level of housing available for the price was ridiculous. If Company X was located in City Y, that person had to live within 60 minutes of Company X’s campus. If the company moved, so did the person.

In order to earn the salary that company offered, you would probably have to pay more in housing cost to live within driving distance of them. Often times this extra cost would negate the higher salary offered, but this wasn’t always obvious to people.

The Turntables

The script has now been flipped. Labor markets are becoming digital at a blistering pace. For pretty much all of human history, the answer to “How do I earn an income?” was also the answer to “Where will I live?”

When labor markets are digital it turns the question of “How do I earn an income?” and “Where do I want to live?” into two completely independent decisions.

People can now say, “I think this city is too expensive and not a very good place to raise a family, so I’m going to move.” People could move before, but not without trading off salary or career advancement. The important difference now is they can move without sacrificing either of those.

This is a really big deal for the individual. Their income usually stays the same, but their housing cost goes down by anywhere from 20-80%. Not only are people moving to areas that are a better fit for the life they want, they’re being made wealthier in the process!

Most important of all, people can decide where to live based on the value that a place offers them.

Value = Price/quality

Most really expensive places score pretty low on the value metric. Even if they’re nice places to live, they typically command very high costs of living. Lots of expensive places are not even nice to live in.

The holy grail is to build places that are high quality, but relatively inexpensive. Obviously that won’t be done in central New York or Chicago where land is millions of dollars per acre. It will be done in smaller, less expensive places. Places that have some infrastructure, but until recently have lacked the means to build a robust labor market. Most important, places that are pleasant.

If this is true and people do start moving out of low value places into higher value ones, we’re going to need to build more in those new places. Those places are already inexpensive, but to offer something compelling and high value we need to build high-quality real estate in them.

Make Someplace People Want

The motto to guide this new paradigm is “Make someplace people want”

It’s a reminder that the person who matters most in real estate development is no longer the equity investor, the bank, the anchor tenant, or the contractor. It’s the resident. Everything else follows from the needs of the resident.

For a long time developers could successfully ignore the resident because they would buy the product whether they liked it or not. Now the resident is the one in charge.

Paul Graham has another useful rule about how to do this in practice: talk to your users. In this case, talk to current or prospective residents.

What do they like about where they live? What do they not like? Why do they live where they do? If they could move, what sort of place would they move to?

The answers to these questions will lead you make someplace people want.

Control + Z

This is a very rare opportunity. It’s a chance to start over and rewrite some of the terrible, auto-dependent development that happened in the U.S. over the last 80 years. It’s an opportunity to build the best urbanism in the world, at scale.

This is great news for those who want to build places people actually want to spend time in and for people who want to live in better environments.

Europe is the world champ of centuries old great neighborhood design. Let’s make the United States the world champ of present-day great neighborhood design.

A fundamentally American attitude is not “This is the best nation in the world”. I think it’s something more like: “I see several ways in which we could improve the system as it operates today, so let’s work together to build something new.“

After all, the Founding Fathers simply felt the system as it existed then was not adequately serving their needs. So they struggled and eventually set up a new one. It was not perfect. But the point of creating something new isn’t to make something perfect. That’s impossible. The point of creating something new is to do the best we can with the circumstances we find ourselves in.

Hope you had a great Independence Day! Until next week,

Joel

Joel's Jambalaya

Make Someplace People Want