Open this if you aren’t easily offended by “covid stuff”…
Hey everyone!
Honestly, I’ve put off writing anything related to Covid because it’s one of the most divisive issues in the World and I’m almost guaranteed to piss half of you off.
But I would like to discuss something very specific that I think people are underestimating.. (that holds true regardless of what you think about lockdowns)
Cities and States are BUSINESSES TOO.
Honestly, it kind of boggles my mind that most people don’t understand this.
Technically, in order for a city or state to FUNCTION, it needs money, right?
Where does it get that money?
From tax revenue….
Here’s where it gets really serious, and why I think certain cities will take DECADES to recover from this (if they ever recover…)
20% of the population pays more taxes than the rest of the 80% combined.
Honestly, it’s probably closer to the 1% rule again, which we discussed from yesterday…
1% of the population pays more taxes than the rest of the 99% combined….
This is just the truth, it’s how things have been for hundreds of years (if not forever).
It’s why the Pareto Principle (commonly referred to as the 80/20 rule) is so deadly in this situation…
Now let’s think critically about this 1% of the population… what characteristics do they have?
1) Optionality.
If you are a multi-millionaire, you have options, plain and simple. You can shop where you want, live where you want, and travel where you want, at the drop of a hat.
2) Adaptability.
It’s rare that someone generates multi-millions without being adaptive. They’ve likely crossed multiple career paths or started multiple enterprises (sometimes in different industries) before landing on success. They’ve lived and worked in more places than the average person.
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I could go on with more characteristics, but those are the only two that are necessary.
I would argue that the 1%, who pay the majority of the taxes in every important city and state in the World, have EXTREME optionality and adaptability…
Now, let me ask you a question…
If you are treated badly at a business, ONCE, even if you are a REGULAR CUSTOMER, will you EVER go back?
Of course not. At least I wouldn’t.
Now, what do you think the 1%’ers would do in the same situation?
Of course they won’t go back.
You can argue your case for lockdowns or Covid in the comments if you want, I really don’t care.
But here’s what I know…
A) The “Business” of the city or state is pissing people off. They are treating their best “customers” with disdain.
B) Their best “customers” don’t have to stay, and won’t stay.
C) They also probably will NEVER come back.
I’m not trying to make a political statement here, I’m just telling you what I’m hearing from a LOT of 1%’ers in ALL the major hubs that have been heavily locked down this entire time…
New York City
San Francisco
Los Angeles
Chicago
Seattle
There is a MASS exodus from those cities, and it’s not PROPORTIONAL.
The rich are leaving, and my argument is that they are NOT going to go back…
For instance, my wife and I have been blessed enough to work with a realtor in Miami recently.
Miami is wide open, and honestly quite wonderful.
People are happy, and living their lives.
He isn’t even a popular realtor, far from it.
But he is doing 7-10 one year leases PER DAY for people moving in from those cities I listed above…
PER DAY….
I realize that’s a small sample size…
But you don’t have to be a genius to understand that most of those people are never going to go back….
Why should they?
The taxes are higher, they’ve already been burned, and that trust has been completely eroded.
It’s like SAYING you’re going to go back and eat at that restaurant with that waitress who was extremely rude to you….
But you NEVER ACTUALLY DO IT…..
I just think it’s CRAZY how big of an effect this is going to have, and for how long….
I think people are TOTALLY underestimating it….
It’s not like all these rich people are broadcasting their movements…
It’s not exactly the most popular topic to discuss these days…
But they are moving, nonetheless…
And when you consider that cities and states REALLY ARE BUSINESSES at their core…
We need to ask ourselves…
Will this business SURVIVE?
Are my revenues too small to support my expenses?
When they are… what do we cut?
Maintenance of roads?
The schools?
The police force?
The city halls and courtrooms?
I don’t know guys, I’m not saying I have all the answers, and I REALLY hope I’m wrong about this…
But if there was a “stock market” for cities, I would be SUPER EXTREMELY BEARISH on the outlook of those cities that have had prolonged lockdowns, and EXTREMELY BULLISH on the cities that haven’t.
Because, regardless of politics and viewpoints, the money is moving.
And when the money moves, things change, and change forever.
Just food for thought.
See you tomorrow (tenses up for the dumpster fire in the comments)
Kale
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