Finding New Niches, Problems in Home Insurance, & How Neighbors Affect Economic Mobility
Small Cities Weekly | 08.30.2024
As part of the work we are doing on the Small City Segment, we send out a brief weekly post of thoughts, links, and research in progress that reflect the week’s work. I’d love to hear from you if you have any thoughts, questions, disagreements, or things to add. Please forward this on to people you think might enjoy reading it.
Finding New Niches
What do you do with cities that were founded on - and succeeded because of - geography and natural resources that are no longer relevant, advantageous, or existent?
I’ve been thinking a lot about this lately after visiting Butte, MT and doing our Anchors series on Wheeling, WV.
Both places still have a critical mass of people - tens of thousands - so these aren’t little boom towns that will just go by the wayside. They’ve survived the 75 years since their heydays, but they have lost their economic identities and it’s not simple to see where they go next.
What’s harder still is that as time marches on, any pivots or reuse of institutional knowledge that might become relevant again (I’m thinking about all the activity in the joining of software and the physical world), are fading fast. A small minority of the working populations of these cities have skills in the industries that built them. Even if those skills and knowledge became relevant again, does it still exist in a way that could build an advantaged local economy?
In the last year, I’ve had the chance to visit the one-time Nail, Toilet Paper, and Copper Capitals of the country. All niche, necessary, and at one time, sufficient to build a thriving city around. What emerged from that development - things like functioning institutions, infrastructure, social cohesion, and a sense of narrative and pride amongst residents - still exist. Those aren’t resources to be taken lightly. How do you use them to find a city’s next niche in the economy? How do you discover those niches when geography and mother nature might not make the answer so obvious?
Links
You can find links from this and all previous editions here.
Home Insurance is a Really Big Problem, Kyla Scanlon, Kyla’s Newsletter
US home insurers lost $15.2b last year, the most since 2000. Private insurance companies have to balance the risk of the policies they take on with plain vanilla investments and hedges. If the risk becomes too high, they stop writing policies!
Florida, California, and Louisiana all have had home insurers simply leave the market. But the problem is people like those states. California, Florida, Georgia, North Carolina, Texas, and Washington accounted for 53% of the country’s population growth between 2010 and 2020. Insurers don’t want to be there.
And you can’t live there if insurance isn’t there.
There is a lot of great analysis and gems in this article, but one of my biggest takeaways is the array of actors and solutions it is going to take to fix this problem. Buying a house is one cost that has becoming concerning - but owning comes with another set of costs that have become equally as concerning lately. One of her suggestions is “Microinsurance products: Offer small insurance alternative that are more flexible (and more expensive) but can patch coverage to homeowners who can’t find help”. That is part of our thesis behind our investment in Centinel - not just for homeownership, but for all the risk profiles being changed by these dynamics. If you want to learn more about home insurance and cities, the latest episode in Not Built for This by 99% Invisible is a good one.
The best, and worst, American cities for upward mobility, The Economist + What Gives Poor Kids a Shot at Better Lives? Economists Find an Unexpected Answer, Justin Lahart, WSJ
People across the world rightly see cities as places of opportunity. But in America the prospects for many children born to low-income families in urban areas are actually getting worse. A recent study by Raj Chetty, of Harvard University, and colleagues, showed that those born in 38 of the 50 most-populous cities in 1992 had lower salaries by the age of 27 than those born in 1978, when adjusted for inflation.
- The Economist
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Analyzing data covering a near universe of Americans born from 1978 to 1992, the researchers found that when employment among the poor parents of children in a community improves, those children are better off economically as adults. It is a dynamic that some researchers have suspected, but that has never been shown systematically. Importantly, it doesn’t rely on whether a child’s own parents are employed: Outcomes also improve for children who simply grow up in a neighborhood where more parents have jobs. In other words, their own parents might be unemployed, but if their schoolmates’ parents work, their outcomes will be better.
The dynamic works in reverse too: In places where parental employment deteriorates, the opposite happens—children do worse as adults.
- WSJ
Both of these articles are based on the findings from a new research paper called Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility (you can find it, summaries, and the data here). There are a lot of interesting takeaways across class, race, and geography, but fundamentally employment rates in the geographic surroundings of kids really matters to economic mobility. This feels like it has all sorts of interesting consequences for policy, but also for solutions in the built environment - housing, transportation, connectivity, etc.
The For-Profit City That Might Come Crashing Down, Rachel Corbett, NYTimes
There are more than 5,400 of these special economic zones in the world, ranging on a spectrum from free ports for duty-free trading all the way to the special administrative region of Hong Kong. About 1,000 zones have cropped up in just the past decade, including dozens of start-up cities — sometimes called charter cities — most of them in developing nations like Zambia and the Philippines. Some have actually grown into major urban centers, like Shenzhen, which went from a fishing village to one of China’s largest cities, with a G.D.P. of $482 billion, after it was designated a special economic zone in 1980.
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There are about three dozen charter cities currently operating in the world, according to an estimate from the Adrianople Group, an advisory firm that concentrates on special economic zones. Several others are under development, including the East Solano Plan, run by a real estate corporation that has spent the last seven years buying up $900 million of ranch land in the Bay Area to build a privatized alternative to San Francisco; Praxis, a forthcoming “cryptostate” on the Mediterranean; and the Free Republic of Liberland, a three-square-mile stretch of unclaimed floodplain between Serbia and Croatia.
In the Not Built for This episode mentioned above, there is a teaser at the end for the next episode which will cover what to do with cities that need to be “unbuilt” because of climate change. This begs an interesting question - will residents retreat to current cities or do we need to build new ones? The ‘new’ option begs all sorts of new questions - and this article is an interesting dive into one particular view of that future.
You can reach me at dustin@invanti.co if you want to chat more about the small city segment!