“Will NYC Die?” It’s Up To You.
“It’s up to you New York, New York” — Frank Sinatra, Theme From New York, New York
The magnitude of change that the coronavirus (COVID) ushered in is truly astonishing. It’s upheaved industries, professions, and the very fabric of many lives. Among the apparent victims in New York City (NYC). Not only are businesses such as hotels, restaurants, bars, and theaters struggling to operate, but the city is rapidly depopulating. Watching my friends leave and my favorite places close is incredibly sad. Like many, I find myself wondering: Is the NYC that I love so dearly dead for good? Or will it bounce back?
NYC Is My Home
NYC is my home. Sure, I’ve lived here most of my life. More importantly, though, it’s where my heart lies. I work here, met my wife here, and am raising a family here. Most of my friends and family are also nearby. I love NYC: the energy; the walkability; the variety; the aesthetic; the activities; the food; the music; the sports; the entertainment; the people. There’s simply no other place on Earth I’d rather live.
Of course, I daydream of elsewhere. NYC’s benefits carry a hefty price tag—a nauseating cost of living. I make trade-offs to living here. Thus, I often try to imagine a better place: a dense city, with world-class art, food, entertainment, nightlife; with competitive jobs, a temperate climate, access to nature, no traffic, and above all, a lower cost of living. I’ve yet to best NYC.
The hollowing out of this city shakes me to my core. My stakes are high. I have significant amounts of human and financial capital invested here, so I often wonder about its future. Are NYC’s best days behind it? Should I cut my losses and move on? Or should I sit tight and wait for its ensuing recovery?
Start Spreading the News
Much has been said about NYC’s current state of affairs. To some, it’s curtains for the Big Apple. The internet has made it easier than ever for people and businesses to move away. Movers are so busy with fleeing New Yorkers that they are turning people away! With the people goes NYC’s culture, food, and energy. Buildings will vacate and high taxes will keep people away. NYC is dead forever. To be sure, the argument is good.
There won’t be business opportunities for years. Businesses move on. People move on. It will be cheaper for businesses to function more remotely and bandwidth is only getting faster.
James Altucher, NYC IS DEAD FOREVER. HERE’S WHY
To others, the best has yet to come. NYC has been here before. It’s been down and out only to come roaring back better than ever: 9/11, the ‘70s, etc. Why? Because NYC has a unique energy and attitude that technology can’t recreate; because New Yorkers are tough; because when you cram millions of people onto a tiny island amazing things happen; because greatness is rare and you just don’t walk away from greatness. Here too, I’m in agreement.
Real, live, inspiring human energy exists when we coagulate together in crazy places like New York City.
Jerry Seinfeld, So You Think New York Is ‘Dead’
I’ll Make a Brand New Start of It
Plenty of prominent (and not so prominent) people have voiced their opinions. However, I’m not big on predictions. Rather, I will attempt to apply what I learned from Philip Tetlock’s and Dan Gardner’s insightful Superforecasting book. I’ll start with a base assumption and updated it as time progresses.
It’s tough to make predictions, especially about the future.
First, I’ll form an “outside view” using the historical record of big, culturally important cities. Then, I’ll look at NYC’s specific attributes to construct an “inside view.” Lastly, I’ll compile a list of signposts to monitor as time unfolds. This last piece should help me evaluate down which path NYC is progressing.
These Little Town Blues
The argument that NYC will bounce back because it always has is weak, in my view. To be sure this has been a trustworthy heuristic over our lifetimes. However, a rudimentary scan of history reveals its shortcomings. In the U.S., cities such as Detroit, Philadelphia, and Chicago were once prominent cultural centers. Even a walk through downtown Cleveland reveals remnants of grandeur in its architecture and public monuments. However, all have lost their luster.
The same can be said for Buenos Ares, Caracas, and Beirut whose international prominence significantly waned. Lastly, there are the renowned cities of antiquity such as Carthage, Constantinople, and Cairo that no longer sit at civilization’s epicenter. Thus, cities do in fact die.
Yet, not all suffer this fate. The likes of London, Paris, and Rome have been important cultural centers for eons. Thus, an outside view of NYC provides evidence for either outcome. Renaissance is not certain.
I Want to Be a Part of It
Next, I’ll need to form an inside view by teasing out NYC’s unique attributes. Both articles above correctly identify that NYC is not so much a geography as it is a culture. Whether it’s business, music, film, theater, museums, sports, ethnic diversity, comedy, nightlife, architecture, or food, NYC ranks among the top places in the world to find the best. This is no accident.
Note that climate, natural beauty, or other physical attributes do not make the list. NYC’s virtues are all man-made. The crucial ingredient are humans. Said simply, it’s the people that make NYC great. The composition of its population will dictate NYC’s direction.
These Vagabond Shoes
The central role that culture plays is precisely the challenge with prognosticating NYC’s future. The people are currently in flux. While anecdotes are plentiful, reliable estimates are not. One analysis of U.S. Postal Service data estimates that 16,000 addresses changed from NYC to Connecticut through June 2020. Another one pegs total NYC move-outs around 40,000 to 50,000. Let’s face it, these are guesses at best.
However, there are some “harder” data to evaluate. Manhattan vacancy rates are the highest level in over a decade and rents appear to be falling. These more clearly indicate people vacating NYC.
While the trend seems negative, its magnitude and duration are unknown. How many people moved out temporarily, just for the lockdown period? Did many move just for the summer? How many will return if/when they can no longer work from home fulltime? What about when schools fully reopen? Will many return if the cost of living falls? How many would have moved anyway absent COVID? These are all open and complicating questions as there are many motivations at play.
Right Through the Very Heart of It
In my view, neither renaissance nor ruin is obvious from this cursory examination of inside and outside views. While my conclusion is vague, it’s valuable nonetheless. I’ve narrowed the lynchpin down to people. So goes the people, so goes NYC. For now, I remain open to either option for NYC and will update my stance as new facts develop?
But what exactly should I be looking for? What are the essentials components of the NYC culture that I love? What specifically about “people” is important?
I Wanna Wake up in a City That Doesn’t Sleep
What I love about NYC is its productiveness; the rugged individualism; the intense drive to suck the marrow out of life, and the willingness to make hard trade-offs to do so. To be sure, these are my preferences. With the top of mind, I can compile some signposts that can clue me in to the culture’s trend.
At the top of my list is the upcoming mayoral election. While I’m not into the red-team vs. blue-team of today’s politics, I do find political philosophy important. It reflects the deep principles by which people live. Since political offices are literally filled by a popularity contest (even if just two options are presented in the voting booth), elections can provide some insight into the culture. They reveal the dominant political philosophy.
Usually, I find little difference among candidates (hence my apathy). However, given the state of NYC, I’d view a win for (another) extreme left or right-wing candidate as a clear warning signal to me. Liberty is the lifeblood of my beloved NYC culture. A continuation down the current path will bleed out the patient (ask me to elaborate in the comment section if you’re interested in why).
The other items on my list are more obvious: trends in crime, vacancies, and riots. The last item—social unrest—is particularly important in light of recent events. Productiveness requires respect for property rights. If productive people leave, the cultural decline is inevitable.
It’s up to You (Us)
To me, whether NYC rebounds or breaks the way of Detroit or Beirut is an open question. Those asserting strong views appear to be acting on emotion alone. Both historical precedents and NYC-specific issues suggest that either fate is possible. This is because NYC is a culture more than geography.
Due to COVID, many dramatic changes are happening at once. NYC’s fate is potentially one. However, we need not be paralyzed by uncertainty, succumb to emotion, or turn to heuristics (like NYC always comes back). Rather, we can look for signposts that corroborate either scenario.
For now, my life depends on NYC’s fate. I neither want to witness its destruction nor miss its renaissance. This is a trade I want to get right.
So what’s it going to be New York? It’s up to you (us).
Seth Levine is a professional, institutional investor. He is also the creator of The Integrating Investor where he blogs about macroeconomic and investment strategy related themes. Seth holds a Bachelor of Science degree in Mechanical Engineering from Cornell University and is a CFA charterholder. You can learn more about Seth at www.integratinginvestor.com and follow him on Twitter at @SethLevine2. Please note that any opinions and views he expresses are solely his own and do not reflect those of his current of former employers.