Between 2001 and 2010, Detroit lost more than 200,000 jobs. It went from over 900,000 jobs to a low of about 690,000 jobs. All of this was happening while the United States was experiencing – up until 2008 at least – an economic growth cycle.
But we all know that Detroit is now a city on the move. According to City Observatory, Detroit has exhibited 5 consecutive years of job growth. And 2016 looks to be no different. Since bottoming out, Detroit has added more than 50,000 jobs.
The above chart is based on federal data for Wayne County, Michigan. It includes Detroit, Dearborn, and Livonia, but does not include any other counties within the Detroit metro area. (The above chart and stats are all via City Observatory.)
Of course, the big question is: Has Detroit made the requisite structural changes to its economy to keep this trend line continuing or is this simply a case of a rising tide lifting all boats?
I have visited Detroit basically every two years since 2009 and you can certainly feel the change, even in that short period of time.
And if you look at total non-farm employment growth over the last year (June 2015 to June 2016) for the entire Detroit metro area, you see that some of the fastest growing industries include: professional and business services (+14,200 jobs); leisure and hospitality (+10,500 jobs); education and health services (+9,300 jobs); and financial activities (+5,500 jobs). In fact, many of these industries are growing faster than national averages.
In case you were wondering, manufacturing added 1,200 jobs and government lost 1,800 jobs.
I’ve heard some people complain that the city, at least downtown, is now too controlled by one entity (Dan Gilbert). But that’s probably what had to happen to really kickstart the city’s renaissance. Somebody had to seed it before you could get the cool coffee shops, bars, restaurants, and coworking spaces.
There’s still heavy lifting to do, but the data suggests that the city is now headed in the right direction.
What are your thoughts? Also, if any of you are working on interesting projects in Detroit, I would love to hear from you.
I was recently talking to my good friend Jeremiah Shamess about the current state of development land sales in Toronto (he does this for a living) and he said something to me that I found really interesting.
He said that because the market is so competitive, you can really only win development sites in one of two ways. Either you’re willing to spend the most money or you see something and have a vision that nobody else sees.
And it was this second piece that really stood out to me because it reminds me of one of my favorite investing frameworks.
Warren Buffet is famous for saying that you should be fearful when others are greedy and you should be greedy when others are fearful. And what I’m about to talk about is really that same core philosophy.
Here’s how venture capitalist Fred Wilson put it (reiterating something that Bill Gurley said):
I saw Bill Gurley say that you can only make money by being right about something that most people think is wrong. His logic was that you can’t make money by being wrong. And you can’t make money by being right about something everyone else knows. So you have to be right about something that most people think is wrong. I really like that framework.
But this doesn’t just apply to technology companies or stocks. It applies to city building, most industries, and probably most things in life if you think about it.
If all you’re doing are things that everyone else is doing, then how can you expect to outperform? You’re going to revert to the mean.
Take, for example, billionaire Dan Gilbert and Detroit. Not everyone believes that Detroit will come back. In fact, I suspect there are probably more people who think it won’t come back, than people who think it will. Otherwise, it would already be back.
But Gilbert is unquestionably long on Detroit (via Forbes):
As you’ve likely heard, over the past four years Gilbert has become one of Detroit’s single-largest commercial landowners, renovating the city with the energy and impact of a modern-day Robert Moses, albeit bankrolled with his own money. He’s purchased and updated more than 60 properties downtown, at a total cost of $1.3 billion. He moved his own employees into many of them–12,000 in all, including 6,500 new hires–and cajoled other companies such as Chrysler, Microsoft and Twitter to follow.
If/when Gilbert proves to be right about Detroit, then he will have been right about something that most people thought was wrong. And because of that, he will no doubt make a lot of money.
Yesterday Adam Radwanski of the Globe and Mail published an interesting article called, Rust Belt revival: Lessons for southwest Ontario from America’s industrial heartland.
The article talks about some of the things that the Rust Belt is doing to revitalize their cities and the lessons that many cities in Ontario – which are facing similar fates – could learn from. It’s worth a read.
I’m not going to summarize his article, other than to say that some of the key points were around tax increment financing, tax incentives, University connections, a DIY/entrepreneurial culture, and the American tradition of philanthropy – which Radwanski points out is probably the least imitable for Canada.
And it’s this last point that I would like to focus on first. The US has a deep history of people getting rich and then giving back – certainly more so than in Canada in my opinion.
If you think about the resurgence of cities such as Detroit, you’d be hard pressed not to think of people like Dan Gilbert. He has become the poster boy for Detroit’s resurgence by moving his companies to downtown and buying up most of the office buildings. If and when Detroit comes back (I think it’s a when), Gilbert will easily be one of the biggest beneficiaries.
Now, you could argue that this is made possible because of greater income inequality, but there’s something to be said about powerful individuals acting on intrinsic passion. Gilbert is investing in Detroit because he personally wants to see his home city come back. And that’s hard to replace.
The second point I would like to focus on has to do with this snippet:
With oil’s current slide, Canada really can’t afford for it to remain a drag – and in fact there is some expectation that Ontario will instead reclaim its old role as the leader of Canada’s economic growth. Its premier, Kathleen Wynne, recently expressed optimism that plummeting oil prices and a sinking dollar will prove a boon to manufacturing. “I don’t wish for low oil prices and a low dollar for Alberta,” she said earlier this month. “But at the same time, we want our manufacturing sector to rebound. So if that [low oil price] helps, then that’s a good thing.”
I don’t know what context this was said in, but I continue to feel strongly that we cannot rely on low oil prices and a low Canadian dollar for Ontario’s competitiveness. That is a terrible business model, and an unsustainable one. We need to figure out ways to create value and grow the economy without relying on currency differentials and other macroeconomic factors. Radwanski is right to point that out in his article.
So let’s hope we don’t let any short term benefits go to our head. There’s lots of exciting work to be done.
Image: Old Detroit auto factory via Flickr
Between 2001 and 2010, Detroit lost more than 200,000 jobs. It went from over 900,000 jobs to a low of about 690,000 jobs. All of this was happening while the United States was experiencing – up until 2008 at least – an economic growth cycle.
But we all know that Detroit is now a city on the move. According to City Observatory, Detroit has exhibited 5 consecutive years of job growth. And 2016 looks to be no different. Since bottoming out, Detroit has added more than 50,000 jobs.
The above chart is based on federal data for Wayne County, Michigan. It includes Detroit, Dearborn, and Livonia, but does not include any other counties within the Detroit metro area. (The above chart and stats are all via City Observatory.)
Of course, the big question is: Has Detroit made the requisite structural changes to its economy to keep this trend line continuing or is this simply a case of a rising tide lifting all boats?
I have visited Detroit basically every two years since 2009 and you can certainly feel the change, even in that short period of time.
And if you look at total non-farm employment growth over the last year (June 2015 to June 2016) for the entire Detroit metro area, you see that some of the fastest growing industries include: professional and business services (+14,200 jobs); leisure and hospitality (+10,500 jobs); education and health services (+9,300 jobs); and financial activities (+5,500 jobs). In fact, many of these industries are growing faster than national averages.
In case you were wondering, manufacturing added 1,200 jobs and government lost 1,800 jobs.
I’ve heard some people complain that the city, at least downtown, is now too controlled by one entity (Dan Gilbert). But that’s probably what had to happen to really kickstart the city’s renaissance. Somebody had to seed it before you could get the cool coffee shops, bars, restaurants, and coworking spaces.
There’s still heavy lifting to do, but the data suggests that the city is now headed in the right direction.
What are your thoughts? Also, if any of you are working on interesting projects in Detroit, I would love to hear from you.
I was recently talking to my good friend Jeremiah Shamess about the current state of development land sales in Toronto (he does this for a living) and he said something to me that I found really interesting.
He said that because the market is so competitive, you can really only win development sites in one of two ways. Either you’re willing to spend the most money or you see something and have a vision that nobody else sees.
And it was this second piece that really stood out to me because it reminds me of one of my favorite investing frameworks.
Warren Buffet is famous for saying that you should be fearful when others are greedy and you should be greedy when others are fearful. And what I’m about to talk about is really that same core philosophy.
Here’s how venture capitalist Fred Wilson put it (reiterating something that Bill Gurley said):
I saw Bill Gurley say that you can only make money by being right about something that most people think is wrong. His logic was that you can’t make money by being wrong. And you can’t make money by being right about something everyone else knows. So you have to be right about something that most people think is wrong. I really like that framework.
But this doesn’t just apply to technology companies or stocks. It applies to city building, most industries, and probably most things in life if you think about it.
If all you’re doing are things that everyone else is doing, then how can you expect to outperform? You’re going to revert to the mean.
Take, for example, billionaire Dan Gilbert and Detroit. Not everyone believes that Detroit will come back. In fact, I suspect there are probably more people who think it won’t come back, than people who think it will. Otherwise, it would already be back.
But Gilbert is unquestionably long on Detroit (via Forbes):
As you’ve likely heard, over the past four years Gilbert has become one of Detroit’s single-largest commercial landowners, renovating the city with the energy and impact of a modern-day Robert Moses, albeit bankrolled with his own money. He’s purchased and updated more than 60 properties downtown, at a total cost of $1.3 billion. He moved his own employees into many of them–12,000 in all, including 6,500 new hires–and cajoled other companies such as Chrysler, Microsoft and Twitter to follow.
If/when Gilbert proves to be right about Detroit, then he will have been right about something that most people thought was wrong. And because of that, he will no doubt make a lot of money.
Yesterday Adam Radwanski of the Globe and Mail published an interesting article called, Rust Belt revival: Lessons for southwest Ontario from America’s industrial heartland.
The article talks about some of the things that the Rust Belt is doing to revitalize their cities and the lessons that many cities in Ontario – which are facing similar fates – could learn from. It’s worth a read.
I’m not going to summarize his article, other than to say that some of the key points were around tax increment financing, tax incentives, University connections, a DIY/entrepreneurial culture, and the American tradition of philanthropy – which Radwanski points out is probably the least imitable for Canada.
And it’s this last point that I would like to focus on first. The US has a deep history of people getting rich and then giving back – certainly more so than in Canada in my opinion.
If you think about the resurgence of cities such as Detroit, you’d be hard pressed not to think of people like Dan Gilbert. He has become the poster boy for Detroit’s resurgence by moving his companies to downtown and buying up most of the office buildings. If and when Detroit comes back (I think it’s a when), Gilbert will easily be one of the biggest beneficiaries.
Now, you could argue that this is made possible because of greater income inequality, but there’s something to be said about powerful individuals acting on intrinsic passion. Gilbert is investing in Detroit because he personally wants to see his home city come back. And that’s hard to replace.
The second point I would like to focus on has to do with this snippet:
With oil’s current slide, Canada really can’t afford for it to remain a drag – and in fact there is some expectation that Ontario will instead reclaim its old role as the leader of Canada’s economic growth. Its premier, Kathleen Wynne, recently expressed optimism that plummeting oil prices and a sinking dollar will prove a boon to manufacturing. “I don’t wish for low oil prices and a low dollar for Alberta,” she said earlier this month. “But at the same time, we want our manufacturing sector to rebound. So if that [low oil price] helps, then that’s a good thing.”
I don’t know what context this was said in, but I continue to feel strongly that we cannot rely on low oil prices and a low Canadian dollar for Ontario’s competitiveness. That is a terrible business model, and an unsustainable one. We need to figure out ways to create value and grow the economy without relying on currency differentials and other macroeconomic factors. Radwanski is right to point that out in his article.
So let’s hope we don’t let any short term benefits go to our head. There’s lots of exciting work to be done.
Image: Old Detroit auto factory via Flickr
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