Sailing in Fog without Radar
July 1, 2020
Fred E. Taylor Professor of Real Estate, W.P. Carey School of Business | ASU
“Perfection of means and confusion of ends seem to characterize our age” – Albert Einstein
Two thundering shocks to our society. First a global pandemic then bubbling social unrest that boils over. The topic of this issue is: Greater Phoenix: Growth, Impacts, & Trends the implication being “How do we respond to these shocks?” Most are certain that post pandemic, people will want to leave large, densely populated urban areas and those who can are likely to opt for less dense communities than in the past decades. Most also believe a similar impact on business because business will need to follow those workers and workers will seek lower density. Places that are more spacious, rely more heavily on car travel, provide ample access to single-family housing, and have lots of accessible open space are likely to emerge as more attractive to people and business. For these reasons Phoenix and Tucson might fare better than most other places. Our low density, new infrastructure, strong economy and lack of dependence on public transit will help us.
Although we know these trends are likely, we are still debating the impact of these shocks. We will not know their full impact for another couple months. How will things change? Will behaviors of enough people change to impact demand? We don’t know. If there are changes will they last? We don’t know. Will they cause new trends, spark new business models and concepts? Likely yes, but we just don’t know exactly what they are right now. And what about those who cannot opt to move and follow the trends? Will they be left to dwell in less desirable environments with less opportunity? Will this cause more social unrest? We can’t see that far ahead. We are sailing in fog without radar.
One of my charges in life is educating future real estate and community development business leaders. Part of that education is teaching them to deal with these kinds of shocks and uncertainties. Starting in August, the 15th class of the Master of Real Estate Development program at W. P. Carey School of Business begins. How do you teach business leaders to deal with this unprecedented social and economic environment where uncertainty and distress bounds? Is this simply a perfect scenario for teaching students what“Black Swan” events are or about how these shocks impact trends? Is this simply a good time for discussing how to account for risks and uncertainty in analyzing opportunities or how to pivot your business? Is our challenge how we teach – pushing us to a hybrid learning model, using online and “Zoom” classes? These economic conditions make real the theories and concepts. But the real learning, the takeaway, the thinking that will create leaders is much more.
It is not just the methods and theories but the why, the end, the reasons for our response and the consequences – how do we respond, what is our role, what is the best way to proceed? Now, more so than in recent times, we need to go beyond pragmatic thinking and focus on achieving meaningful, sustainable impact. These shocks to society underscore the need for learning how to think about consequences, and not just do what has always been done, simply repeating the normative hoping for a better outcome. Hope is not a plan.
Real estate is more than a way to build wealth and make money. Real estate is the physical space, the armature of our communities. It is where society functions and when society is dysfunctional the question becomes how can we help correct the problems and why should we care? It is about wealth – building wealth for everyone and creating a system that promotes and supports that notion. A system and industry that ensures quality, secure housing to increase health and educational outcomes equally for all. To build community assets that serve everyone so quality food, education, healthcare, and recreation is accessible, not just to some but all. To recognize the value of our assets is derived not from our ownership but from the community. That’s why we care. Who builds these assets? Who finances them, resides in them, sells them, operates them? Who buys them, pays the rent, and frequents our places? The community! These shocks have laid bare the reality that real estate is a social science, it’s not just about making money. I want my students to be aware of this, to keep this in the back of their minds and to know it is not just a good idea, but an imperative to directly and indirectly build and maintain a sought-after community that raises values for everyone. That builds value.
The leadership lesson in this moment is recognizing the deep-seated forces at work in our community, business and political system that affect community value. When nobody really knows the answers to all the questions how do you make decisions? When sailing in fog you are taught to slow your speed, listen carefully to signals and noise in front and alongside you. Move forward with caution. Right now, that is all we can do – pay attention to and believe in the essential aural threads in our social fabric. The deep-seated forces are tugging on the lose stings of that fabric. Think about those who can’t move, who can’t respond to trends yet deserve the same opportunities. Think about how we build our community. What does it take to build a community that withstands these shocks and builds value for all and how can we help achieve that objective? These times are the perfect opportunity to teach my students to be future industry and community leaders who build value for all. We know the means, but during the chase for our fortune and wellbeing we forget the real end – it’s not hoping we get back to normal, it’s ensuring we create a better place for everyone.