Last modified at 2020-09-06 17:08:38 +0000

In Summary

TL;DR: I’m focusing my long term investment strategy at Haas Capital around high-bandwidth rural areas and the growth of remote work. Short term, I believe that the next 6-18 months will feature a substantial slowly (if not outright decline) in the growth of cities across the globe.

To be abundantly transparent, I am taking a substantial net short position against the products and services that support cities. I believe increases in network bandwidth across the world coupled with technologies like Virtual Private Networks (VPN), BeyondCorp, and cloud-based SaaS services diminish the overall value proposition of having workers reside in a centralized location.

N.B. I’ve lived in cities for the entirety of my adult life. I harbor nothing but positive emotions towards cities. My bet is against their business model, not their vision.

Why cities

For nearly a century, the major metropolitan areas of the United States have operated as academic, economic, and cultural hubs for the country — bringing in countless highly skilled immigrants, attracting college-educated young people from all over the US, and providing a destination for tourists from all over the world.

Cities have a lot going for them. What they lack in space, they make up for in convenience. Want to see your friend? Just a quick subway ride. Slice of pizza at 3 in the morning? Walk around, download an app, or hop back on that subway. Sure, your studio apartment may run you $2,500 a month, but you’re in the thick of it all — surrounded by the greatest minds the world has to offer. With museums for every fascination, people of every culture, and cuisines to truly ensnare the palette — cities offer unrivaled access to the many wonders of the world.

Advancements in technology promoted urbanization— where in the past a child may have been required to stay at home and support the family farm, new techniques and tools have removed them from the process entirely, allowing them to pursue higher-education (a trait common in urbanites, as referenced above). Advances in refrigeration, supply chain logistics, and long-haul trucking have reduced our need for being anywhere near the actual resources we consume.

Over the course of a few centuries, subsistence agriculture — previously performed by a vast majority of the population — became obsolete. Commerce, trade, and industry all launched us towards emerging population centres — turning every sufficiently large area with a port into a sprawling metropolis. Products and services enabled this: apartments sprung up, public transit was laid out, and the workforce found various ways to extract capital from those around us.

The immense increase in globalization over the past century further provided fuel to this shift — the ability to outsource labor, R&D, and manufacturing to places and people that present a lower net cost encourages us to have these population centres. If one can get something at a lower cost (both monetarily and in terms of pure resource consumption — including time), why wouldn’t they? The only thing required of them is access to these markets — and where do these markets reside? Cities.

Does this alone drive us to cities? Sort-of. Purely rural areas do not reap these benefits as heavily. The value proposition of Amazon is less impactful when you don’t live anywhere near a post office. International shipping is slightly less impressive when every package takes a month to get to you.

But cities aren’t just where the people and markets are at — it’s where the money is.

Another driver is the shape of modern economies, specifically the increasing concentration of wealth creation and the specialized nature of modern workforces. When wealth is concentrated in smaller groups and more occupations revolve around products and services that support these centers of wealth creation, there is a natural pull towards those centers.

Where does this leave us

Cities maintain a relatively bullish brand-image — bolstered by publications like the Economist lauding their immense growth and prosperity. Fans of these cities (commonly but not exclusively their residents) strongly believe in the resilience of their city.

Most conversations I’ve had regarding this topic devolve into some combination of the following:

We’re a strong city, and people would never want to leave the magic of [city name]!

Maybe. But more people are leaving cities in vast droves — and the amount of people leaving is only increasing. San Francisco has seen one of the largest exodus of individuals it’s ever had. Robert Herjavec of Shark Tank fame postures that the global housing market is experiencing “…one of the greatest moves to the suburbs from urban areas since the 1950s or the ’60s”

As people leave these cities, so too does their wealth. Sure, residencey over an established period of time will result in taxes that fund the city — but such tax considerations will only narrowly offset the billions lost as a result of COVID-19.

Okay, so people are leaving — but we’ve been through worse — they’ll come back!

Have you? We’re seeing a pandemic on a completely unprecedented scale. Even during the Polio epidemic, which sprung up in 1916, the first viable attempts at a cure did not happen until 1935, with thousands of cases and hundreds of deaths since passed. In the US alone, as of the time of writing, we currently have 622,000 cases confirmed, with 11,229 deaths. We’re edging closer to a vaccine, but progress is measured in months, not weeks — and all the while, cities linger in the brink.

Okay, so we’re not in a great spot — but look, we’ve got so much to offer.

Except right now, cities don’t have a lot to offer. And it doesn’t seem like they will again, for a very very long time. The wonderful things about cities: the people, the close-ness, the shared identity, all of these depend on everyone in close proximity.

What’s next

COVID-19 struck cities strongly and swiftly. Right now, 1 in every 3 New Yorkers is out of work. 60% of COVID-19 related restaurant closures nationally are permanent. The owners of these restaurants — left with no customers as their customers have left or cannot afford to eat out — cannot pay their landlords. Their landlords in turn cannot pay their banks. What once was a system capable of extracting immense wealth from those within it turns into a deflationary spiral — falling demand begets falling prices which in turn results in debt defaults.

So, what happens next? For starers — people don’t come back to the cities. If COVID-19 has shown us anything, it’s that the system we relied upon every day was incredibly fragile. A singular month into quarantine ground the US to an economic halt. Workers still worked, albeit remotely, around the coffee shops of their hometowns and out of the bedrooms from their youth. But they didn’t come back to cities. They got the same work done, and if anything — they’re more productive. Every output an employee can produce (presuming the tangible work product they create can be done remotely) can now be directly measured. Goofing off on social media? Companies can check for that too.


High bandwidth has penetrated our everyday lives, allowing for unparalled access to the world around us. The markets in the cities we rely upon are empty, but the markets on our phones haven’t skipped a beat. Usage of Amazon and similar services has dramatically increased — and it shows no sign of stopping. Ultimately, this is the area I hope to extract value from, watching the slow but certain unbundling of the city — extracted into products and services that can be applied the world over. Technology once again enables this, spinning the perpetual wheel of change.