Opportunity in the aftermath of an earthquake or fire

Stockton Street from Union Square, looking toward Market Street, Wikipedia

Choosing the right metaphor can be really important; the metaphor can, and often does, become the model and thereby reverses the process.  Instead of using the metaphor to help us visualize or describe something, we look to the metaphor to help us plan.  That may work, that is as long as the metaphor is applicable and remains so when you extend its use; just a word of caution, that rarely is true.  Today I was talking to a friend who owns a real estate franchise locally; he was talking about the challenges of the real estate business in Reno four years into the recession.  He has to hustle, look for opportunity in places he would have ignored in good times – now he needs to explore every possibility.

My friend told me about the beginning of his company over a hundred years ago; the two founding partners got their start in real estate in the aftermath of the San Francisco earthquake of 1906.  My friend is trying to take a page from his company’s history and follow some of the methods for developing business those two men used in the rubble of San Francisco.  It occurs to me that the aftermath of an earthquake might be a good metaphor for our times.  Weren’t we hit by a financial earthquake that destroyed a huge part of the financial, business and government structure?  Didn’t we loose hundreds of businesses and even industries in the quake?  I loved the metaphor and I was ready to run with it – but there is a major problem.  The earthquake in San Fransisco created an unprecedented building boom – all that was lost needed to be replaced and replaced as quickly as the resources could be found.  The good citizens and the city in 1906 needed workers, materials, financing, government regulations, government services, transportation infrastructure, land and the title to that land.  Out of that rubble jumped almost overnight a dynamic economy.

We, at least in my little corner of the world, sit in a pile of rubble, but there is no need or sense of urgency to replace any of the things that were lost.  Real estate, government and construction are in shambles, but there is no will, nor any need to recreate the world of 2007.  Nationally home sales were up in 2011, that is up from 2010 – they are still 30 percent below 2007 and Nevada is worse than any other state; and the largest percentage of sales are not to first time buyers (in the good years they accounted for 40 percent of total sales), but distressed sales- short sales, bankruptcies and foreclosures.  In our region, according to my friend the real estate guy, office vacancies run as high as 50 percent in some areas.  And we all have seen all of the empty retail space that litters our community.   There clearly is no need to build new houses, office buildings or retail space – retail vacancies in this region are as high as office vacancies.

So what about employment, after all people with jobs and money to spend are the engines of our economy? You can image how much consumer spending was generated by the thousands and thousands of workers rebuilding San Francisco. They needed housing, transportation, food, clothes, entertainment, recreation and, of course, something to drink.    In Reno we have regained just 1.6 percent of the jobs we lost; and our region lost nearly 20 percent of the total number of jobs that existed in 2007.  So we can’t look for newly hired people with money, we can’t look to real estate or construction.  How about government? It was hit probably worse than any other segment of our community.  Government in Nevada is still shrinking, each new budget cycle is still forcing more cut backs.  By law we have to balance our budgets, which means we can only spend what we take in taxes.  Taxes are down, government is down.  Not a pretty picture – but here we might go back to the metaphor and ask if it can help us?

In the aftermath of a major earthquake, or fire, we have more experience in Reno with major destructive fires than we have with earthquakes, any way in the aftermath of the destruction there is the need and the will to rebuild.  What might we do?  It is hardly practical or even legal to burn down a bunch of houses, empty office buildings or useless retail malls – but could we shake the earth and knock them down?  There are thousands of problems legal, financial and practical to such an idea.  But if we could suddenly be granted a wish or two; what if we could tear down hundreds of outdated, empty and under-performing  buildings and houses?  Just enough to create a need for new ones, just enough to create a bunch of jobs and investments, just enough to put some more money in the economy buying stuff.  Okay, it is foolish, but we are going to have to explore some new ideas, concepts and methods – this situation is not going to heal itself any time soon.  Like my real estate friend, we are going to have work harder and try some new things.

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