Plain English with Derek Thompson - How American Cities Can Avoid the ‘Urban Doom Loop’

Episode Date: April 18, 2023

Today’s episode is about the future of the American city. Many downtowns are "wounded renditions of their once-robust selves." Offices are empty. Commercial real estate is losing value, pulling down municipal tax revenue. Fewer commuters means less transit revenue. Fewer downtown shoppers means less downtown employment. This has led some economists to worry about an "urban doom loop." Dror Poleg, an author and adviser who writes about the future of cities, talks about the knock-on effects of urban change on finance, work, real estate, and technology. Host: Derek Thompson  Guest: Dror Poleg Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

Rough year for your favorite NFL team. Join me, Danny Hyfitz, along with Danny Kelly, Ben Silluck, and Craig Krollabak on the Ringer NFL Draft show where we talk about all things NFL draft. And more importantly, how to fix your mediocre team. Check out the Ringer NFL Draft show every Tuesday and Thursday. Before today's show, a couple of announcements. First, thanks to the many, many people who came to my talk in Washington, D.C. last week at the bookstore Politics and Prose.

It was a great crowd. Honestly, it was so good a crowd for this little book. This is an anthology of essays I'd written about the history and the future of work for the Atlantic over the last seven or eight years. The bookstore, I think, was like a little taken aback. The owner, I think, assumed that the Atlantic had filled out the store with our entire office. And at one point at the beginning of the event, and he goes, so how many of you people are just transplants from the Atlantic? And like only four people raised their hands. And I think if he had asked how many people in the crowd listened to this guy's podcast, there would have been a lot more hands that came up.

I mean, people who came up to me in lines, there's so many of you said you listened to this show. It just felt great. I don't know what to say. I'm not trying to be prideful, but it made me feel really, really good to see all of you. So thanks to all of you who came out for that. Announcement number two,

I'm going on book leave soon to write a bigger original book about the future of economic and technological progress in America and beyond how we can overcome these scarcity mindsets and small-mindedness that have so far defined this century. And I'm co-writing this book with the New York Times writer and podcaster, Ezra Klein. I'm thrilled about this project.

I've had so much fun working on it with him so far. I think a lot of you are going to love it. It is also the case that writing a book is, to be perfectly blunt, a huge pain in the ass. And so I am taking the next three months off of my Atlantic work to focus in that book. So what that means for the show,

So I love doing this job. I also don't want to literally kill myself with overwork. So in the short term, our solution, after talking to my producer, people at the ringer, our simple solution is we're going to try to move this podcast to one show per week with the goal of publishing every week's episodes on Tuesdays. So that's the goal. Please keep us in the rotation. We're going to offer the same blend of off the news questions and on the news analysis.

It'll just be once a week. like I'm sure so many of the other podcasts you love and listen to are. Doing this show really is one of the biggest thrills and most rewarding parts of my career. So I want to try to keep it up. Thank you guys for listening. Keep listening. We already have some really awesome, awesome episodes coming up, starting with this one. Today's episode is about the future of the American City.

As most of you know, I live in Washington, D.C. I really love D.C. I was born across the river in McLean, Virginia. I went to school in Chicago. I came back to D.C. for four years. Then I moved to New York between 2012 and 2019. And then my wife and I moved back to D.C. just before the pandemic in 2019. This city has changed immensely since the 1980s when I was born. It's also changed immensely since 2008. When I came back as a journalism intern at Slate, you know, you spent enough time in a place. you really ride the roller coaster of change. A lot of the cool places to hang out 15 years ago

are now totally over the hill. The hot restaurants of the aughts and the teens are now considered fusty and uninventive. The up-and-coming neighborhoods from the past years of 14th Street, 8th Street, are now very much here and arrived. Some of the coolest places for my 20s are sort of like the old Yogi Berra line.

Nobody goes there anymore. It's too crowded. So why am I subjecting you to all of this boring bit of potted autobiography? The answer is that there's a message here, a moral of the story. Cities change. Cities are always changing. And a city that isn't changing is probably dying. But in the last few years since the pandemic began,

there's no question that many of America's downtowns had a near-death experience followed by what can only be described as an urban recession. This is an article from the Washington Post on my own city, D.C., quote, as the third anniversary of the pandemic approaches, downtown Washington is a wounded rendition of its once robust self. Many streets at the city's core are pocked by vacant storefronts, moribund, sidewalks, and offices that even on the busiest days are just over half occupied. According to a 2022 survey by the D.C. Policy Center, 137 of the city's 733 large office buildings,

most of them downtown, have vacancy rates of more than 25%. End quote. And D.C. is not unique when it comes to this problem of downtown vacancy. The city has roughly the same share of workers coming into offices as New York, Los Angeles, San Francisco, Philadelphia. Those downtowns are also experiencing what D.C. is experiencing. A shocking decline in office occupancy, declining commercial real estate, declining property tax revenue that comes directly from falling real estate values, fewer commuters,

less transit revenue, fewer downtown shoppers, less downtown employment. And it's led some urban thinkers to worry are American cities, some of them, anyway, headed for an urban doom loop where economic activity declines in concert with tax revenue and services, which means that economic activity declines even more and services shrivel up until on and on in the city just, I don't know, shrivels up and dies. If you take a step back, if you take a deep breath, the U.S. is not in a recession. The U.S. economy is growing. Unemployment is 3.5%. So if economic activity is, at the margins, leaving some downtown areas, it's not disappearing.

It's going somewhere else. So where is it going? The answer is twofold. Some of it is going to the suburbs, and a lot of it is going to the sun. According to the most recent census report, the three cities, with the largest numeric increase in the last year of counting, for San Antonio, Phoenix, and Fort Worth near Dallas. All very sunny. If you look at the 15 cities with the largest numeric increase,

those cities are in the following states. Texas, Arizona, Texas, Florida, Nevada, Florida, Arizona, Texas, Texas, Texas, Idaho, Texas, Idaho, Texas, Florida, Texas. All sunny. The politics of this shift, by the way, are pretty interesting because those cities that I just named, all of them, maybe with the exception, I guess, of Nevada, Arizona, are red-leaning states. But the cities that are growing within those red-leaning states tend to vote for Democrats. This is not the time to go too deeply into this, but this general phenomenon, the idea that the most dynamic parts of the country aren't pure. blue or pure red, but rather bluish metros in reddish states, very important. Probably want to keep

our eye on. If you put all these things together, the remote work revolution, fears of an urban doom loop, the ongoing migration of Americans away from colder cities, northern cities, coastal cities, cities where I have lived, D.C., Chicago, New York City, toward the sunny swoop of the sunbelt, it got me thinking, what's happening to the American city? And how can we contextualize it? How can we frame it? Today's guest is very gifted at contextualizing and framing. His name is Dror Polig.

He's an author and advisor who writes about the future of cities. And we talk about the knock-on effects of urban change on finance and work and real estate and technology. I'm Derek Thompson. This is plain English. Drogo Puleg, welcome to the show. Hi, Derek. So excited to be here with you. We have so much to talk about, but at the risk of going too big too soon, I want to make sure that we set the stage properly here. We are talking about the future of the American city, which, as I see it, is being transformed by both structural trends that go back decades, like the general shift of the American population from coastal and.

cold cities, toward sunbelt and warm suburbs, and by pandemic effects like remote work, which are short term, and thus a little bit more wobbly, a little bit more sensitive to change. So let's start there. Briefly catch us up. What is the state of remote work in America right now? So remote work, like many things, kind of shot up during COVID, particularly the comparison to e-commerce comes to mind, you know, suddenly everyone was at home, doing stuff from home. The problem was that once the world started to open up, e-commerce, for example, kind of converged back to its previous trend, which means it's still growing. It's higher than it was two, three years ago, but the kind of huge bulge that we saw went back down to reality. And the same is true for a lot of other things, both post-COVID and also post-zero interest rates.

It seems like a lot of behaviors that we thought, you know, are irreversible, we're indeed reversible. apart from one behavior, which is work from home. So the tendency of people to work from home did moderate somewhat, obviously over the past 12 months. But still, as we're speaking, in some cities, about half of offices are still empty. I think on average across the country, based on the latest data from Stanford's Nicholas Bloom,

I think about 25% of hours worked, more or less, are worked remotely. You'll note that I'm saying remotely, I'm not necessarily even saying from home because I think that the home story is less of the story as we look forward. It's more about people working in different places. They may even be in offices ultimately, but they're not in the offices that they previously used to go to. And at the same times that they were going there. In addition, there's a lot of related trends that we're seeing, you know, people moving out of large cities, some people moving back, some people moving to the sunbelt, people moving from the west of the country to the east of the country. But these are, I mean, they're very muddled and confused.

We can talk, we can dive into them. But the big picture is that half of offices are empty in a lot of cities. About a third of offices, I'd say, are empty in general. And a quarter of the hours worked are now worked remotely for many white-collar professions. And the fact that it's about, you know, 20 to 5 to 30 percent of hours worked, you now worked remotely presents an interesting sort of framing choice to pundits. because you can say, oh, well, that's down from a peak of 60%. So we're half of where we used to be.

So, you know, remote work is eroding. That is one take you sometimes here. But on the other hand, I'm looking at J.P. Morgan statistics right now. Before the pandemic, the share of hours worked remotely was 4%. So it's up by a factor of eight. Yes, it's down from peak by a factor of two, but it's up from pre-pandemic by a factor of eight. There's a great quote from Vornado Realty Trust, Steve Raw, where he said, Friday is dead forever and Monday is touch and go. I thought that was an interesting

way of framing this, that the bookends of the week are clearly eroding. So to your point, what is this erosion of office space utility doing in Chicago, in Los Angeles, in New York, Philadelphia, the Bay Area, Washington, D.C., in all these cities, more than 40% of office space is either vacant or underutilized. What kind of pressure? does that put on cities and on city budgets? The pressure is immense. And before we even get to what's happening now, I think there's a very relevant and compelling analogy

specifically to that counter argument of like, oh, it's only 20%, it's only 25, it used to be 50, maybe it will stabilize around 25, no big deal. The analogy I made two years ago in my New York Times article on this, which kind of preempted a lot of the landlord excuses because I know them very well, was what happened in retail. So with e-commerce, we've been talking about e-commerce for 30 years.

Everyone's been waiting for it. It attacked an industry that to begin with was much more dynamic, much more kind of with its hand on the pulse, responding to trends, used to reinventing itself all the time. And yet, it destroyed a lot of real estate assets. It destroyed a lot of city centers or big parts and expensive parts of cities. obviously destroyed a lot of jobs. And when you try to quantify what actually happened with online commerce,

you see that up until COVID, I'm not even talking about what happened later, but up until COVID, about 13% of retail sales shifted online over 20 years, only 13%. And out of a pie that was actually growing quite significantly during those 20 years, so not necessarily even cannibalizing on existing retail, just kind of like taking away the growth from offline retail. and we saw the damage that that has done. Now you look at offices and you ask yourself,

what happens if 13% or 20 or 25% of demand shifts into the ether, not over 20 years, and not to an industry that is expecting it and ready for it and not to assets that are priced to begin with to assume that the tenants are very fickle and they're trendy and you might have to change them all the time. And the damage is quite significant. So in cities like New York, let's say,

I think property taxes are about 40, 45% of all of the tax revenue of the city. Now, a big chunk of that is those beautiful, expensive offices that you have in Manhattan. A lot of it is also the housing that those office dwellers live in. And another huge chunk of the municipal budget is all of those businesses that support that office traffic, those millions of commuters that used to come into Manhattan. Some of them still do every day, nine to five, like clockwork, and buy a coffee and fix their shoes and get a massage and go to the doctor there and do everything else there. So more broadly, you can say that our whole world over the past century has been designed

around the office. You know, they don't just dominate the skyline. They dictate when we wake up. When do we take our kids to school? What their kids even do at school is dictated by the office. You know, they're trained to become office dwellers. Even after we retire, you know, we invest our savings in office real estate investment trust that generate those stable returns that allow us to live in retirement, or at least promised us

that they would allow us that. So once you start shaking up offices, even though the shakeup might not affect all offices in the world, and that offices are not the whole economy, it has a huge effect. I want to talk about banks in a second, but you make such a powerful point about municipal finances first. I'm very interested in the fact that while transit revenue isn't like the most important part of any city's budget. It's really important to point out, as you just did, that transit in American cities is way down from where it was in 2019. The New York statistic here is that the New York City subway,

which is about 30 to 40 percent below peak in 2019 in terms of the number of tickets, it's selling the number of swipes. In its 10-year forecast, and its entire 10-year forecast going forward, the city does not expect subway traffic to ever return to its 2019 high. It will be in a permanent recession compared to its 2019 high. What are city leaders saying about this? It seems to me like only one of two things can be true. Either these cities, their mayors, their comptrollers, raise taxes, find some other way to fill the hole in their budgets created by the implosion of offices, or they cut services.

Like, there's only two sides of this equation. There's revenue and there's outlays. Are they trying to do both? Are they leaning on one side of the equation more than the other? What do municipal leaders seem to be doing right now? So cities, like you pointed out, are facing what I call the urbanizer's dilemma. So it's a bit like the innovator's dilemma in the world of business. They're kind of being disrupted by something that they don't really understand.

And they have certain instincts that point them in certain directions, but these instincts might kind of lead to even more trouble. So for example, yes, fewer people are taking the subway. So New York City has to respond by, you know, making the subway a little less frequent, by maybe dedicating slightly less resources to the subway. And then you get into what some economists call the urban doom loop. You know, you have less money to spend. The city becomes worse.

More people move out, more crime, less pleasant subway, et cetera, et cetera. So what probably they have to do now is to balance two kind of conflict. needs. One is indeed to cut budgets, to become more efficient, maybe lower taxes where they can, but that too would be tricky now. And at the same time, to become really, really good and double down on the things that make them unique and irreplaceable. So again, amazing public transport, amazing public spaces, more restaurants, more outdoor eating, better education, more housing construction. So that might seem to be. like an impossible task, obviously, and I do think it's a tough one, and sometimes it might take a

decade or two to play out even in the best case. However, they do have some levers that they can pull right now. I mean, for example, more housing, they can just allow more housing, and then more housing will be built, and more people will live there. I personally think that when people can live anywhere, there's tons of people who would want to live in New York City and in London and in San Francisco even, maybe, and in Boston in a lot of other nice places. But you have to allow them to live there. At the moment, we're making it really, really tough for them. Second thing, I mentioned outdoor dining.

There's a lot of kind of cultural and uniquely in-person urban activities that cities currently, let's say, either are hostile to or at least deprioritize quite actively. So they can turn in a different direction. These are the type of things that they can do. In addition, I think we need a shift in mindset. So in my book, Rethinking Real Estate that came out just before COVID, one of the main points was that all locations are becoming consumer products, which means they're becoming a matter of choice,

whether it's an office building or a house or even a whole city. They have to start thinking not like, oh, we have this captive audience here, what can we squeeze out of them and, you know, what is the minimum that we can provide, into a mode of like, okay, I have customers and I have to convince them every day to come back and consume my product. And my product might be the whole city. And once you start thinking like that,

there's a lot of other little things, even bread and butter issues that suddenly become apparent to you in terms of, okay, what makes my city attractive rather than others. And I think when you do that, you also realize that people are willing to spend money and do it well.

But of course, it also means that you have to run your business properly and cut your own costs and we'll have to see that as well. I'm glad you don't see this as purely bad or purely good, but rather is a kind of multiple choice question facing city leaders where they might choose the good or the bad. So what I want to ask you, I wonder whether you see some cities that seem to be entering what you described and others have described as an urban doom loop where the city's cut, the city gets worse, more people leaves, the city has to cut, and then the city gets even worse, et cetera, versus crisis as a stimulant for creative policy.

So one could imagine a city, and to a certain extent, I think I live in Washington, D.C., there's aspects of this in my city, where if you see offices being kept empty, property values falling in those offices and therefore property taxes on that coming down, well, then maybe you are more open to building more housing. More housing is good. Maybe you're more open to keeping people in Washington, D.C. by allowing more outdoor dining. Outdoor dining is good. Maybe you see that as fewer people are using the metro, in Washington, D.C., you're more open to the idea of micro-mobility solutions, making it easier for people to say use electric bikes and electric scooters and sort of folding that into the urban transit portfolio that allows people to get around the city. I think that's wonderful. I love using these electric bikes and electric scooters. Where do you see category one, the urban doom loop happening, if at all? And are there cities where you think they're choosing door number two clearly? They are using crisis as an opportunity for creativity. So I'll start with the good one, you know, where I live in New York, New York City.

It's clear that Mayor Adams first, he was elected as kind of a changemaker within the confines of New York City politics, you know, still a single party city, but, you know, a very unusual candidate, I would say, even in the landscape of a kind of national or federal level Democrats. And he is leaning into all of those things that I just described, definitely first in terms of rhetoric and in terms of his approach, and even just in terms of the attitude, which is important, I think, in times of crisis. But he's leaning into a lot of these policies.

He understands a lot of what needs to be done. My only concern, which is not specific to Mayor Adams, is the level of urgency and intensity at which this has to be done. I think, and on that point, there's still a lot of denial in terms of how serious things really are and whether they will get even worse than they are. And I think at least for offices, the worst is still ahead of us in terms of actually pricing in all of the pain, including some of the pain that already happened. The opposite example at the opposite side of the country, I think almost obviously San Francisco seems to be a city that is intent on experimenting with how far it can push its businesses and residents and see how much they can tolerate.

This was true before COVID. but of course it's even more true now and it's particularly true when all sorts of other magic tricks no longer work. So when tech is slowing down, when zero interest rates are no longer there, the pressure is much higher. Even there, despite San Francisco's efforts

not to change so much, not in rhetoric and not in action, we're seeing some, like a mini revival, at least for tech, a lot of people are moving back, particularly because of recent advances in AI. There's kind of a new gold rush. But even that, it's a very small number of people at the end of the day. And I think them moving back is not necessarily going to solve the problems

because the problems were there before they moved out during COVID. I mean, they might even just exacerbate existing problems. There'll just be even bigger gaps. You know, there'll be people making new billions, and then the services in the streets are going to get worse than they were before. I'd say both cities and probably all cities in the U.S. are also still stuck in that zero interest rates mentality, which most of the economy has shaken off, but cities still assume that they can just keep paying for stuff

that they can't afford and they'll get bailed out and they'll get subsidies and the federal government will help them. You know, maybe they can keep it up for 20 years, but maybe not. But it's definitely becoming costlier and harder to justify when people are leaving and the streets don't look so good. We talked a little bit about municipal finances. I want to talk about finance in general. regional banks in America just went through this near-death experience. You had the literal death,

or at least business death of Silicon Valley Bank. Other banks failed as well. It seemed like contagion was going to set in before the FDIC and the Fed came in to rescue the day. Regional banks have much larger exposures to office and retail loans than larger banks. Regional banks accounted for 90% of the increase in bank commercial real estate loans between 2015 and 2022. And there is a ton of debt that is maturing in 2023 and 2024. So I want to talk about the fears that we are at the cusp of a tsunami in commercial real estate finances. You have a fantastic way, I think, to frame this part of the story.

You write, quote, banks tried to kill. remote work and now remote work is trying to kill banks. Explain what you mean by both of these sentences. How did banks try to kill remote work and now how do you see the remote work phenomenon working to kill banks? So at the heart of COVID, Wall Street was among the first and the most prominent and most vocal of calling people back to the office and saying that remote work, as David Solomon from Coleman Sachs said, is an aberration. Jamie Diamond said about two and a half years ago that, you know, expects everyone to be back at the office just like before by September, I think September 2020 or even maybe 2021. And they basically said, you know,

you can't work like that. Our employees are going to do what we tell them. And even before COVID, of course, they're famous for, you know, people just living at the office, sleeping under their desks, you know, wearing a suit, like the opposite of what everything that Silicon Valley has been trying to to do over the past 30 years. And of course, there's a lot of hubris in that, like, you know, we're going to tell people how it's going to be, and the rest of the economy is going to do what we tell them. And even beyond their own offices,

later when cities started to open up, and the banks realized that there are problems, and, you know, that a lot of other businesses will be in trouble if people don't come back to the office, and cities themselves will be in trouble. They kind of teamed up with mayors to, like, get the politicians, basically, to try to force people,

force government employees back, even set regulations or tax people if they're not coming to the office or make it difficult for them. So they're big advocates of that. But now what we're starting to see is that remote work itself is a threat to banks because of its impact on offices. Comically, I think when Silicon Valley Bank went down, there was an FD article that kind of hinted that maybe it went down because it let people work remotely. I mean, it's kind of a poster child. It's called Silicon Valley Bank. So it's kind of like, oh, this is not like the Wall Street banks that call people back. This bank lets people work remotely, even though even on Wall Street, a lot of people not work remotely.

And generally, fewer people work on Wall Street now than did a few years ago. But once you entangle that, remote work did cause a lot of damage to Silicon Valley Bank and to a lot of other regional banks, but not because their own employees were working remotely, but because office buildings are in trouble. And what happened with office buildings? As he pointed out, regional banks take most of the load in terms of commercial property lending. That's not a bad thing in itself. They do it because they are regional.

So they know their own markets. They know the assets better. They know the people better. So, you know, it makes sense that they will lend out this money. But over the past few years, they actually increased their appetite. So to begin with, they took a big share of it. But now it's really, like you said, it got to almost 90%. And they did a lot of it.

that, and that's an important point, because suddenly the original business model didn't make sense so much. So because interest rates were so low, and suddenly people's savings rates got so high during COVID because they got a lot of stimulus, and also just they didn't have what to spend on because they couldn't travel, they couldn't shop. Suddenly, there was a lot of money in the bank, and the bank has to lend that money or do something with it productively in order to make money on that money. So normally banks, they buy a lot of bonds and safe assets, but those bonds were barely paying anything. So they said, oh, let's do something else that is not too risky, but that maybe will pay us a little bit more. So let's lend that money out to people who are

building office buildings or refinancing office buildings or warehouses or retail stores. And they did that. And when they did that, they assumed that those office buildings are safe. And they listened to Jamie Diamond and David Solomon. They said, oh, everyone will be back soon. You know, it's nothing. Remote work is, you know, it's no big deal. It will go back to 5% in a year. So it's not necessarily that the offices that they lend to are all going to be destroyed now, but suddenly they turn out to be much riskier than they thought. So maybe they're going to be worth much less. Maybe their cash flow that they generate is going to be much more volatile.

So they're not going to behave like government bonds or like high quality corporate bonds. They're going to behave like some business that you invested in, and now you have to see what actually happens to it. And unfortunately, I think this is a, an irreversible shift in the nature of real estate itself. This too was one of the main predictions in my 2019 book, is that offices now, even the ones that people are coming back to, they have to allow people more flexibility,

so people are assigning shorter leases. They have to offer all sorts of services and cool things, just like Adam Newman kind of prophesized and messed up, but now they need all the amenities, they need the services, they need the community stuff. So their operating expenses are going up, and at the same time, the quality of commitments that they get from the customers are going down. So it no longer looks like a financial asset that is very stable and great. Again, it looks like any other business, which is not necessarily terrible, but it means that you have to value and price it and treat it now very differently than you would in the past.

So the role of real estate in financial portfolios is changing. What's the takeaway here for regional banks? Like, J.P. Morgan's Investment Bank did this bank stress test, and they said, all right, well, let's say that about 20 percent, we have a, let's assume a 20 percent delinquency rate for office loans, 15 percent for retail, a recovery rate of 60 percent for both. And they said that their result from this stress test assumed a big hit to regional bank capital. Theoretically, that could create a second wave of regional bank jitters. So all those headlines that people saw, like, you know, a month, a month and a half ago about, oh, Silicon Valley Bank, it's gone, you know, signature bank or whatever

it is, it's gone, we could theoretically have a new round of jitters, not about sort of deposit flight, but rather about the commercial real estate component of these banks' sort of capital portfolios. What do you think is the, is what do you think is going to happen for the banking system? And then what do you think is going to happen to like the future of offices? So offices alone cannot destroy these banks. But the thing is, these banks are now facing all sorts of other issues and challenges. You know, general economic slow down, higher interest rates, a lot of pressure on their business model. So the offices aren't helping, and these are specifically the assets that they thought will be there for them when other things slow down. So this is where

the risk is. This risk on its own is not enough to destroy them, although it will probably do cause some bank failures, but, you know, there's thousands of banks in the U.S., so maybe most of those will just live with that. The bigger risk is, you know, cascading failure. Like you mentioned the JPMorgan model, according to bankers model, Silicon Valley Bank wasn't supposed to implode to begin with. And a lot of other things weren't supposed to happen, you know, 15 years ago and everything in between. So once things start to move, if you're leaning on all sorts of trenches like they had with the bonds in 2018, you kind of assume, oh, only this trench is bad, the others are good. But then the office trench is not so good. The small business lending is not

so good. The housing market is not so good. At the end of the day, something has to offer support. And the more pressure there is on each one of those layers, the more pressure there is on all the others. Because if one gets messed up, suddenly they have to make money on other things. They take even more risk or consumer expectations change. A lot of companies now that are about to renew their lease are probably saying, maybe I shouldn't renew now. Maybe I shouldn't expand at all, even if I want to expand, because maybe prices will be much lower in six months or in a year. Or they're saying, okay, I'll just commit to a year or two instead of 10, even though from my own business perspective,

I'm comfortable in signing a 10-year lease. But when I look at the market, why should I? So, you know, it's a dynamic situation, and this is the risk here. And these are exactly the type of dynamic things that these models and these bankers are not very good at thinking about. And generally, it's hard for humans to think about them. Do you think we need a new conceptualization of what offices are for, or what offices should be like in an age

where they're going to be 40% empty in a lot of America's richest and most productive cities. You mentioned Adam Newman, a former CEO of WeWork, and I can't get over the fact that I wrote a lot of mean things about Adam Newman. I was in a Hulu documentary

about the collapse of WeWork's valuation, but there are definitely some times where I look around thinking like, man, it's kind of a weirdly ideal time for a suburban work-sharing startup to get the same kind of buzz that we work had. Like, we work still exists. And, you know, work sharing and, you know, office space sharing companies exist. But I just, I just wonder whether some new generation of innovation around the concept of the office is unbelievable. unbelievably overdue, considering that offices haven't really changed, but the state of work clearly has.

Yeah, so I like to say that landlords can say that Adam Newman died for their sins. He kind of got everything right, and he let them continue and survive and laugh at him, but I think now they're facing the consequences of their own denial and their own hubris. But 100%. But I think the tricky part there, I mean, you were kind of looking for a new answer, for an old question, what is the purpose of the office? And what I see in the banking and real estate industry is that people are really eager to just get the new answer and move on with their lives.

Just tell us what it is. Is it open space now? Is it cubicles? Just tell us and let's move on. But I think the reality is that it's just going to become a much more dynamic market than it has ever been. It's going to be much more similar to retail and hospitality, which means you constantly have to segment your product, focus on a specific group of people, constantly.

respond to their needs, that idea of, you know, I'm going to build a big box and whoever's going to live in it or going to work in it. I don't really care. It could be an ad agency or a lawyer or a bank. I'm just going to build the same thing and leave it to them to figure out. That's out of the question, especially if you want to make money. And even worse, even just thinking within the building is no longer enough. You suddenly have to think about the whole neighborhood and what other things you connect to and the whole lifestyle and the customer journey from beginning to end, because again, you're now in a consumer business. So it's going to get trickier.

It also means that we are going to see, and we're seeing some experiments already, of everything you just described, you know, suburban shared spaces, urban spaces, coffee shops acting as offices, hotels acting as offices, as daycares, apartments adding offices. Like, everyone is trying to be an office.

And then you also realize that a lot of other types of buildings can be offices, but office cannot be those other types of buildings. so easily. So it's really tricky. And also from a business perspective, it means a deeper change in the real estate industry because in the hotel world, you might get too much into inside baseball here. But you know, there's the Marriott's of the world, which are a brand company, a consumer company. And then there's real estate investment trust that actually own most of the buildings that Marriott actually manages. So the flag is not necessarily the owner of the building. Now 30, 40, 40 and definitely 80 years ago, these two businesses were the same company.

company. And that's the state of offices right now. You have these people that kind of own buildings, but they also face the customers and they also give them the names. But once you start adding those services and branding, and real branding, not just putting a logo, but a brand with a meaning becomes a thing, you have to decide whether that's your business. And if it's your business, you probably have to split your company into two because each of those doesn't just require a different type of management and know-how, but also it has a very different financial profile. You know, one has that stable return, collecting rent. And one has that, okay, we're going to experiment with crazy stuff and be creative and go up and down. So that has to change as well. And here too, WeWork was a pioneer

with some failed experiments, but of trying to kind of mix together venture capital and real estate capital and bank loans and stories and kind of see, we take VC money, we use it to do construction, we take real estate money, we use it to buy it to develop technology. I think we're going to see a kind of a reshuffle there as well in terms of how you finance those things, how you give people what they actually want, because even Adam Newman, he showed that people wanted that thing, but he didn't figure out how to actually make money delivering that thing to them. So it's going to take a while before we do, but ultimately we will, just like hotels figured it up.

Something you just said that was very generative for me is that the pre-COVID world was exquisitely bifurcated for a lot of workers. Their home was just their home. Their office was just their office. When they went to get coffee, they were just going to get coffee. But now they work at home. So the home is blended. They work in the coffee shop if they get tired of home

and they don't have an office to go to. So now the coffee shop itself is blended. You mentioned that hotels are experimenting with being sort of co-working space lobbies. I know that the Ace Hotel in New York City, where maybe you've been is basically you go in there and it's like a lot of beautiful people people in their 20s on their computers.

And I mean, I don't like, maybe they're working, maybe they're just talking to each other. Yeah, they're all 30 now, but they're still beautiful. There you go, exactly. They're all in the 30s now, right. They're all part of my millennial generation. So we're all aging at the exact same rate. But they're all there.

And this idea of the future of urban spaces being extremely blended strikes me as one that's quite plausible. This is not exactly the kind of example that you were pointing to, but just something that jumped to mind, one of my, I love cocktails, and I also love great restaurants, and one of my favorite restaurants is also basically a cocktail bar,

and you can use it as either. You can go there for a, they have a coffee thing in the morning that you can go to, you can go there for dinner, and then it also has like a cocktail bar. So even there within the food away industry, you have this concept of blending, that maybe this culture of blended spaces

is just in the ether, so that people are trying out different hybridizations and reconfigurations, I find that to be an incredibly compelling and plausible vision of the future of the American urban space. Yeah, and you know, this is not just the future. It's also the past. So urban offices started in coffee shops. You know, Lloyd's insurance most famously in London. It was Lloyd's coffee shop. People started coming there, exchanging information, signing paperwork. At some point, they realized that they have to move and get their own place. even the New York Stock Exchange started on the Tonteen coffee shop. I think it's 82 Wall Street.

It started in a coffee shop. People started trading securities and at some point it kind of graduated into its own house. So this idea of cities being, you know, very, very mixed places. This is what cities have been to begin with. And I think the industrial era over the past 150 years was an aberration from an historical perspective. And it also gave rise to all sorts of things that created path dependencies, particularly zoning. So, you know, when industry moved into cities, suddenly there was a lot of smoke, there were a lot of people that worked in factories that other people didn't want to live next to. So cities enacted about 100, 110 years ago, started enacting zoning laws to really separate very clearly different types of uses, which maybe made sense when

you had a factory in Manhattan. But, you know, when you're separating offices and restaurants and houses and all sorts of other things, it no longer makes as much sense. And we're seeing that in cities that are much more mixed or much more lenient in terms of their zoning or just zone differently, like Tokyo or even some European cities like London and Paris, urban life is much more vibrant and remains attractive even when midtown is empty. And I think that's another shift that we're going to see. Like the best cities are going to, again, double down on what makes them unique to begin with. There's not a lot to even reinvent here. It's really going back to stuff that used to exist before. one of my favorite statistics is, you know, 100 years ago, Manhattan's population was higher than it is today by about 600,000 people.

We still had some tenements there, so I'm not saying let's go back to that, but you think of all the construction that has happened since then, and what did we get in return? So I think there's no reason why Manhattan shouldn't have a million more people in, you know, in 15 years. But it should allow it to happen, and to allow it to happen requires some change of thinking in terms of government. the demand for it is there. You know, it's an amazing place. And there's a lot of great cities on Earth, obviously, not just Manhattan. And if they welcome people, people will go there. I want to pivot a bit from talking about the pandemic and ways in which the pandemic might be

in some lovely ways forcing us to be more creative, thrusting us back into a better version of our cities 100 years ago. But I want to talk about some structural changes as well. So the future of cities is never one story. Like, if you were telling the story of cities in the second half the 20th century, you could say, you know, well, here's Youngstown, Ohio, and here's San Francisco. Completely different trajectories. One city absolutely collapsed after the collapse of the steel industry and the other became the tech capital of the world. It's happening now, too.

So that divergence in city fortunes. So the University of Toronto Downtown Recovery Project uses mobile phone data to assess recovery in urban areas. And I share the findings with you so you could take a little glimpse at them, but I'll reiterate them right now, both for your benefit and for listeners. According to the University of Toronto Downtown Recovery Project, the American downtowns that have had the strongest recovery since the pandemic are, number one, Salt Lake City. The recovery there is 135% in terms of downtown traffic. The rest of the top 10 is a lot of Central Valley, California places, Bakersfield, California, Fresno, San Diego is in the top five, and also a lot of southwest cities, El Paso, Albuquerque.

We see full recoveries there too. And this matches a structural trend of the last few years, the last few decades, really, of Americans slowly leaving colder and coastal cities like, say, Chicago or cities in the northeast, and moving into the sunbelt. And indeed, the weakest recovery in downtown areas are pretty much on the coasts or in cold, Midwestern cities. San Francisco is the city that has had the weakest recovery of a downtown area. After that, it's Cleveland, Indianapolis, Louisville, Portland and Seattle, also coastal, are on this list of weakest downtown recoveries. I've sort of, you know, shared with you my cheat sheet of what I'm seeing here, which is that for all of the acute changes that we've

seen to the state of the American city, we are all. also seeing a continuation of stories that began long before the pandemic and that those stories are revealing themselves to us in this kind of downtown recovery data. What else do you see when you look at this data and this divergence in city fortunes that is made so clear by this study? So I see a couple of other things. I don't deny or kind of I don't have anything to counter anything that you just said, and I agree with it as a general trend.

But there's a couple of other things to keep in mind. One is the kind of economic structure of those cities. Cities that are dependent on really extremely innovative and extremely high-paid employees seem to do worse because those employees have leverage and the ability to not come to the office that most people in most cities in America don't have. Second, and there's an overlap here as well, cities that have really strong dependence on public transport and on people commuting into those cities. for like an hour plus to begin with suffer more at the moment.

And again, a lot of those other smaller cities, which are most cities in America, are smaller cities, or very car-dependent to begin with. You know, there was no significant change in lifestyle from today to three years ago. But in New York and San Francisco, there has been. So I think these are two important things to keep in mind. And then connecting it to the broader trend,

it's true that before COVID, like New York, even San Francisco, even L.A., I think, in certain years. And again, also London, Paris. We're losing population definitely on a net domestic basis and even like on an overall basis in certain years. And I think overall over like from 2015 or so in particular. And I think there has been a pre-COVID trend there. But I think most urban economists didn't really understand that trend when it was. happening then and most of them don't really understand it now. What was happening then, I think, is that a lot of employers suddenly realized that a single city is no longer enough for them in terms of a labor pool. So if in the past, they would go to the Bay Area or to New York because they could hire and match with the kind of as specialized talent as possible, they suddenly realize that in that trade-off between accessing a very large talent pool and enabling people to work in person, suddenly these are, the big city is no longer the answer to both questions. It's not the yes to both questions. Suddenly, if you're only focused on one city, you'll get more

in-person interaction and also more interaction with vendors and other companies, but you'll get less of that access and the kind of superior matching with talent that you get in a larger pool. And in around 2015, we started to see a strong tendency starting to emerge for that other side, like to say, okay, we would rather hire for multiple cities rather than just, be in one place. You know, we saw it with Amazon HQ2, but we also saw it with Stripes, the HQ in the cloud that they kind of announced officially, I think, in 2019. And I think that was the real shift that something in the original purpose of cities was already starting to change and that it was no longer necessary for the most innovative companies to just be in one place

all the time next to each other and have all their employees in one place. Like they started opening, not branches, but really R&D activities, splitting them up into two, three, four, or five. And once they start doing that, you have to ask yourself, you know, what is the limiting factor here? Why not higher from 10 places or 20 places or 50 places? And I think this is a big trend that we're seeing now. So it's like really the kind of abundance agenda for cities where people suddenly have choice. Hey, here we go. Yeah, but the fact that they have choice doesn't mean that they're all going to move to Salt Lake City or to, you know, to somewhere small. I think what we'll probably see is very similar to what happened in music, which is kind of like,

part of what the long tail predicted and also part of what it didn't predict, where the biggest winners are actually going to be bigger than ever, but we are going to have a longer and thicker tail of more places where people can go and live and still earn, you know, a six-figure or like middle six-figure salaries. So the point is the story here is not everybody's moving out of New York or in San Francisco and moving to Utah and to Florida. The story is, yes, every city on the map now has a chance to compete, just like every person with a phone can become a YouTube star. At the same time, the biggest stars are in a position to get bigger than ever, but they have to learn to play the game and to do it differently and to also recycle, just like we see in the world of

hits and blockbusters, to recycle what made them great to begin with, to double down on that. And another kind of slightly darker undertone, which I think you and I discussed over email, I think, is also this new potential for self-selection of people into locations that kind of are with other people that are like them, which is nice in one way, but in another way it might mean that we'll end up with a more segregated city, particularly because some people have more choice than others. So one of the things we're seeing in cities is that those that can afford it move out, and then cities become poorer and average, more minority on average. So instead of being these kind of melting pods that allow people to move forward,

they just become these service centers where, you know, the people who could afford it just go and do whatever they want. And the people who have to live there, just live there and provide services to whoever is willing to come and visit them. So that's a huge risk as well. That, again, brings us back to the attitudes of cities of, you know, we have to accommodate everyone. We have to be an engine for prosperity for everyone. But we don't want to alienate, you know, people are already successful.

We don't want to alienate business. We need to find a way for everyone to get along. And there is such a way, you know, America has been pretty good at figuring it out, even though imperfectly. And we kind of have to figure out a new agenda and a new kind of social contract that will make cities work. You mentioned the suburbanization part of this. And I definitely can't let you leave without talking about that.

Because you look at the work of, you've already mentioned, Nicholas Bloom, and what he calls the donut effect, where he's essentially seen that real estate values in a lot of cities, Washington, D.C., New York, Chicago, Los Angeles, San Francisco, real estate values have hollowed out in the downtown areas and have plumped up in the suburbs. And if you sort of draw that sort of circle around a lot of cities, it ends up looking like a donut, so a donut effect. And it makes me wonder, it's just one aspect of the donut effect, and the suburbanization of America is probably a totally other podcasts. But it does make me wonder that as millennials, and as you mentioned, it tends to be

higher income millennials that are moving from the cities to these inner ring suburbs, as they take their tastes with them, as they take their urban tastes with them, because famously, high-income millennials really flooded to downtown urban areas in the 2010s and 2000s, will we see what is essentially, or what might essentially be called the urbanization of the suburbs, which is to say more townships, more suburban offices, more many downtowns and many downtown aesthetics in suburban areas. Is that a piece of this picture that we should make sure that we include? 100%.

So this two is something that's been going on for a long time. 70 years, 50 years, depending when do you want to start counting. But in the year 2000, there were a lot of books written about it. And already back then, only about half of New York's metro area offices were in Manhattan. So most of them were in the same way. So most of them are in the suburbs. In most cities, it's about 70, 80% for the suburbs in terms of employment areas, in terms of shopping, in terms of everything else. So we're definitely going to see more of that.

Even more so, in a lot of cities, a huge chunk of offices were not even in any type of concentration. So they were just like spread all over the place, not near anything, just like all over the place. And I think we're going to see more of that. But with a millennial urbanish twist, it's not going to be your grandma's office park or your grandma's shopping mall, but it's going to be much more urban, villagey style to the extent possible. I think this is what the market wants, you know, this kind of more like towns. Like I live now in Port Washington, which is just outside New York City, NASA County,

so the county next to Queens. NASA County in itself is more dense than I think any city in America are like three or four cities, which is, you know, that's just a suburban. New York, it has a lot of towns that have a high street that have already the trendy coffee shops and the sushi and the yoga and the bar and the whatever. I think we'll see more of that. I think the market wants a lot more of that. The problem is that it's really, really hard to build these type of things because most of the suburbs are zoned very, very aggressively towards single family houses, no mixed use. We're seeing some experiments now both in California and now New York are catching up as well of the states themselves trying to force different districts and suburbs to.

allow more housing and allow more mixed use. We'll see how that goes. So far, there's a lot of resistance. And unfortunately, some of that resistance is even justified because beyond, you know, things like, you know, racism or whatever, people are also just worried about, oh, we don't have enough infrastructure to support more people. The roads are not good. The water infrastructure is not good.

And the reality is that it is not so good. And, you know, people have to trust government also to kind of, that government will take care of there if government wants to build more housing. So I think we need to work, I want more housing and more density in the suburbs, but I think government will have to prove itself to kind of allay the fears, at least of kind of the middle of the map voters. I think that's right. When you mentioned the future of white-collar work as being somewhat akin to the music market, it made me think about the AI revolution. And I think it's appropriate to leave this for the last question because it is so speculative. We are in the first half of the

first inning of whatever chat TBT and generative AI are ultimately going to be. But I do wonder, if we've already seen one labor revolution, which is remote work, change the texture of cities in so many ways for rich people allowing them to decamp to the suburbs, for lower income workers because it depresses downtown shopping, which means that there are fewer people that can be employed by whatever restaurants and retail shops are getting that foot traffic and that window shopping traffic. The remote work revolution just had all these extraordinarily fascinating spillover effects. I don't think a lot of people would have predicted three years ago. In similar ways, do you anticipate that the mainstreaming of technologies like large language

models and other genitive AI might have similarly spooky, weird ripple effects in the American labor force in the future of the American city. Yes. So I think both remote work and artificial intelligence are about to mix up our world far beyond whatever we can imagine. I think I was very kind of moderate and reasonable in all of my answers so far, but here I'm allowing myself to be a little crazier. Yeah, let the freak fly fly now. And actually, I don't think think it's so crazy, but I think over the next 20 years, we're going to go through the craziest time that humans have ever went through in terms of the pace of change and the kind of things that we're going to see. In particular, if we mentioned music, you know, what happened to music was that I mentioned,

like the biggest superstars could suddenly be bigger than ever, you know, you can have some guy from Korea, have a billion views just because he's jumping on the sidewalk somewhere and even more amateurish people suddenly become huge, while a lot of the middle of the market it completely disappears and some of the old stars can also become big. In the past, we had a choice, particularly in the industrial past, where most of us chose to have a real job. You know, go study something useful, get a career, work for the same company for 40 years. Even if you don't work for it for 40 years, you know, you still work in the same field

for 40 years and, you know, you retire, you own a house, you get a pension and you're going to be okay. or the few of us that chose, you know, I want to be an athlete or I want to be a music star or I want to be an artist and then they went and chose those so-called scalable careers of, you know, maybe I'll be really rich, but probably I'm just going to fail and, you know, make a living doing something else. What technology is doing to us now is that gradually, but relatively quickly, it's going to make almost all occupations scalable, which means some people are going to be able to make much more money than ever and service more customers.

and produce more than ever before. But everybody will be competing with everybody else, both domestically and internationally, which means to just cruise through the middle and be reasonable will no longer be an option, definitely not over a 40-year horizon for a lot of people. It also means that even the winners are not going to sleep well at night.

Just like Brad Pitt probably doesn't sleep well at night. You always know that you're one mistake away from becoming irrelevant or just the time is working against you and that your career, your shelf life is shorter and shorter. And I think, again, that's going to happen to lawyers, that's going to happen to gym instructors. That's going to happen to everyone, even the most in-person professions, are going to experience it. Again, gym instructors, Peloton. I don't know how many instructors, maybe about 60, serving about three, five million customers.

In comparison, similar market, New York State has about 40,000 people that work in the offline gym industry. And, you know, I don't know how many fitness instructors, but maybe. about 8,000 to serve the same type of customer base. So the Peloton instructor makes 20 times more than the kind of offline gym instructor. I think we're going to see the same dynamic in a lot of other professions. And AI and remote work interact. In a way, remote work set the scene for AI because it made work much more modular, much more kind of output based rather than presentees and based, much more text-based and kind of internet communication based. So you can kind of plug in all sorts of things now into how I worked already changed over the past few years, and it'll be much easier

for AI to participate. In general, AI also increases the value of expertise and increases the need for even more specialized matching of talent, which means that you have to hire from a bigger talent pool and that you're willing to put up with whatever those annoying employees want from you as long as they can help you deliver that thing that's going to make you $100 billion. So how much you pay them or what you let them get away with is irrelevant as long as they can deliver what they promised. So, and at the tale of that, you know, we'll have to come up with all sorts of new social solutions, with all sorts of support systems, with all sorts of ways of entertaining ourselves

and finding meaning, because I think work was, I think you wrote about that as well. It was our religion for the last hundred years, at least, you know, it gave us meaning. It was the place that we went to. And now we have to find meaning in other things. And I trust humans to do that, but what they might come up with is going to be really weird in some cases, and we'll just have to sit and watch and hope for the best. You said so many things that were sending my head in a thousand different daydreams, but just to reduce those thousand daydreams into one follow-up question,

it seems to me that what you're describing is what some economists call superstar effects. The idea that before music technology existed, it was very difficult to be a global superstar, right? How would a 19th century Michael Jackson be Michael Jackson? You need a CD, and you need the popularization of radio and CD players across the world in order for Thriller to be Thriller. And we might be seeing the possibility of those same superstar effects in everything from, you know, whatever, interior decorator to Peloton instructor and all sorts of other categories that might be inflected by AI might take on these kind of superstar effects where the reward to the top one or 0.1% becomes just astronomical relative to what we're used to. seems to me that previously Superstar Effects had a geographical implication.

The superstars in entertainment lived in Los Angeles. The superstars in finance lived in New York or whatever parts of Connecticut could easily get into New York. The superstars in tech lived in Seattle and of course

San Francisco in the Bay Area. But in the future, again, if we're twinning these two ideas of remote work and AI, there's no reason why superstars need to be geographically concentrated in the same way that they used to be. We might have more superstars in more industries without the same kind of geographical agglomeration effects that we saw previously. I know that you said that you think that some cities are going to get bigger and more spectacular than ever, and they might win the superstar effects too. So maybe that pushes against, or my implication pushes against that theory.

But I wonder how you think about this idea that maybe superstars won't necessarily need to live together, the same way that in the 1950s, 2010s, they really just did kind of all live in the same place. And various cities were defined by the industries in which they start. Yeah. So interestingly, the size of cities themselves is also parallel distributed. So they're superstars and, you know, they diminish based on a parallel curve more or less. and this is going to continue, but what will change is that the internet itself

is also a place, and it's going to be added to that chart, and it's going to be much bigger than all of those other cities. So we'll still have cities that are big, they might be bigger than ever, but the biggest agglomeration is going to be the internet, and even several places within the internet, I would say, depending on which industry that you're in.

So in a way, I'd say 20 years ago, my friend Richard Florida wrote an incredible book called The Rise of the Creative Class. I think what we're going to see now is the rise of the scalable class. So of a new group of people that understand that it's not enough just to now study something creative and go live in a city and live a comfortable life. But you have to fight much more aggressively. You have to compete on a global scale.

And you have to constantly stay vigilant because just being part of this class is not a stable position like it has been for the past 20, 25 years for a lot of people. So yeah, cities will remain. but they'll become in themselves less important, I think, from an economic perspective, because the Internet as a whole, which is still, I think, even bigger than this AI story, what the Internet is doing to us is something that we're just starting to understand.

And we're barely even understanding what the telephone did to us. You know, when you study cities, you read articles from the 90s that describe, even the talk about remote work, they talk about phones. They're like, oh, phones now. Interstate phone calls are now cheaper. It doesn't cost $10. an hour anymore or for a call. So that's going to change everything.

And you're like, wow, in the 90s, people were still like thinking, like trying to understand what the telephone did to them. And look what's happening to us now. To think that we even have a clue about what's going to change over the next 20 years, let alone 100, I think it's just going to be crazy. Yeah. One last observation, and unfortunately you have to go. But it makes me think I want to do an entire other episode about the implication.

that one of the most important skills for the workforce of the future, as we all become more media-facing, is the quality of performativeness. And I'm not sure that's entirely a good thing. I don't think humans are necessarily at their best when they are broadcasting. I think we're at our best when we're talking to individuals privately, not when we're talking one to one thousand.

It's actually some interesting research from Harvard that I remember when I was doing reporting for my last book showed that in a one-to-one conversation, we tend to talk to the other person. We tend to look at their facial expressions. We want to connect with them. Into one-to-one-1,000 broadcast, we tend to talk about ourselves because it's impossible to talk to any individual in a broadcast. And so what are you going to do? You become focused on the interior. You become a little bit more narcissistic. And a world that is performative and where there are very real superstar economic returns to being the best performer is going to be a fascinating and wonderful world in all sorts of ways,

but it is also a world where performativeness becomes a virtue, an economic virtue, in a way that I'm not entirely sure if it's a civic virtue. So, I don't know, if you have like a 30-second reaction to that, we can do it. I'll give you some hope on that, but that's definitely a separate discussion. I think that people can become scalable even without becoming performers. One of the things we're starting to see now with AI, is that notion of selling your own style or selling your own expertise and allowing people to use it and mix and match it and for you to get royalties in return. So you don't necessarily have to be the face of it. You don't necessarily even have to be the one bringing it to market, but you have to produce some kind of valuable building block that

other people can take away. In a way, the crazy stuff that we saw with NFTs was an early experiment of that, of how can I build this kind of fragmented royalty systems that allow people to leverage on top of them all sorts of things? Obviously, that was mostly nonsense. But it gave you a hint of where the future is going. And it would allow people that produce real value to get a piece of that value, even if they don't become, you know, King Kardashian. Absolutely fascinating. Thank you so much.

Thank you for listening. Plain English is produced by Devin Manzi. If you like the show, please go to Apple Podcast or Spotify. Give us a five-star rating. Leave a review. And don't forget to check out our TikTok at Plain English underscore. That's at Plain English underscore. score on TikTok.