Cities are changing as rapidly as ever due increased migration patterns, new hubs of innovation, and an evolving way we work. What does the city of the future look like and is Austin the new leader of that trend? Today we bring in Cullum Clark the Director of the George W. Bush Institute & SMU Economic Growth Initiative and an Adjunct Professor of Economics at SMU. We talk about Austin’s transformation, what does a future city model look like, and how do we plan for the future.
The city of the future is...What's next Austin?
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Our music is “Tech Talk” by Kevin MacLeod. Licensed under Creative Commons 4.0 License
Episode 39 Highlights
Michael Scharf: Austin is the new innovation powerhouse, not the next Silicon valley, but the first Austin, we are adapting to the future in real time.
Jason Scharf: I'm Jason Scharf a biotech executive, and early stage investor.
Michael Scharf: And I'm Michael Scharf advisor and board member for multiple private companies.
Jason Scharf: You can call us optimists abundance minded up wing, and even solutionists we see a bright future ahead that can be achieved through innovation and entrepreneurship.
Michael Scharf: In this podcast, we explore Austin superpowers, the people and companies driving our growth and the macro microtrends that come together to create Austin today.
Jason Scharf: This is Austin next.
Cities are changing as rapidly as ever due to increased migration patterns, new hubs of innovation and evolving way we work. What does the city of the future look like? And is Austin leading that trend today? We bring in Cullum Clark, the director of the George W. Bush Institute, an SMU economic growth initiative, and an adjunct professor of economics.
We talk about Austin's transformation. What does a future city model look like? And what comes next. Within the economic growth initiative, CU leads the Bush Institute's work on domestic economic policy and economic growth. Before joining SMU Clark worked in the investment industry for 25 years prior to investments, he served for one year on the staff of the US Senate select committee on intelligence. Cullum fulfilled a lifelong goal by earning his PhD in economics at SMU in May, 2017 and subsequently joined the faculty at SMUs department of economics.
As research is focused on monetary policy, fiscal policy, financial markets, economic GE. Urban economics, modern economic history and economic growth. Cullum's volunteer leadership activities include serving on the boards of uplift education. The Eugene McDermott foundation, the Yale university art gallery, and the foundation for the arts as well as the investment committee of SMU
Cullum,. Welcome to the Austin next podcast.
Cullum Clark: Thank you so much, Jason and Michael. Great to be with you.
Jason Scharf: All right. I'm gonna kick this off of the origin of this episode.. I was listening to the Fedual future podcast, cities of the future. And in the beginning of that podcast, they asked, what is the city of the future?
And you responded without hesitation, Austin. Why did you say Austin?
Cullum Clark: Well, thanks so much for having me short answer and then a slightly long answer. The short answer is I'm a student of how people are voting with their feet. They're clearly voting with their feet to come to the Austin. Metro in very big.
36% population growth in the Metro area from 2010 to 2021 that makes the Austin area easily, the fastest growing of the hundred largest metropolitan areas in the United States. The only one that I think of is kind of comparable is Raleigh. It's a little, a little bit slower. And then there are a number of places that are kind of destinations for retirees.
I would say that are growing pretty fast, but in terms of people voting with their feet to go to a place of high opportunity, you know, not to retire, but to work, live, play prosper. Austin is just hands down the the, you know, the champ of the last 11 years. That's the short answer, slightly longer answer is I'm a pretty close student of what's been happening around American cities and kind of what's working.
What's not. What characteristics of a city have tended to predict great success. And Austin is almost alone in combining four different features that I think E every one of them has been helpful to any city that has it. Number one, to be a big college town. To be a, you know, universities are more important than ever as knowledge generating institutions and creating the, the highly educated workforce that the economy needs.
College towns are outperformers in general in 21st century America. Number two is being arguably the biggest tech center between the. Clearly, it's been great to have a diverse economy led by tech over the last decade or two. So Austin clearly has that and that's been great. Number three.
I think it's been really important to have a great reputation as a kind of a cool lifestyle kind of place, a place that has a great live music scene, great outdoor amenities, you know all the trail systems lake and so forth. I, I think those factors have become more important than ever in the success of cities.
Increasingly, what we've seen is a change in the balance of power between employers and employees. And COVID kind of put that on steroids. Basically talented employees can live wherever they wanna live. And employers adapt to that either by letting 'em work remotely or over time, migrating operations to where the people they wanna hire.
Wanna live and and so quality of life's really important, you know, work, live play, and Austin just is a scores off the charts on those, on those things. And then fourthly, it's actually a little less glamorous, but it's actually really helped to be a state capital over the last the last decade or two you know, essentially government work is increasingly kind of work that attracts highly educated people who oftentimes, you know, come to the state capital for, to work in state government, but then go on to other things in the business world and so on. And in general state capitals are outperforming. So the only other metropolitan area that has that whole package, I would say is Nashville, which is also one of the fastest growing places in America.
And maybe a slightly smaller version of Austin with its own country Western brand of cool. It's great to have all of those things. We could go on about some of the other, other ways where Austin has it been at least a moderate outperformer relative to other places, but when you put it all together, it's got the best package of probably of any big city in America today.
Michael Scharf: It's really interesting. I wanna open up that statement. You made about Austin being capital. Our first episode was John Shipley Butler out of UT, and he talked about how Austin needed to in essence convert. From just being the state capital and teach a lot of the folks who were used to interacting with the state to accept interacting with tech companies.
The examples he used were both accounting firms and law firms using red money. If you will, stocks and options, as opposed to currency and accepting that for payment. Now it's interesting cuz your take shows the synergy and the fusion. Between those two elements now. And, and that's really a change from where Austin was to where Austin is.
Cullum Clark: Well, you know what, I guess what I would say, Michael. Cities that are state capitals and nothing else in general are pretty sleepy places. You know, we had a a kind of this slightly strange tendency in the 19th century for states to move the capital out of the biggest city into a kind of de novo place.
The, you know, like Jefferson city, Missouri, or something. Not, not, I don't mean to pick on them, but it's, it's a really, really small city right now, kind of a sleepy little place. So that alone isn't necessarily a great winning package. Although I guess small cities would rather be the capital than not, but it is the it's the synergy among multiple multiple strengths.
So, you know, in general, I would say. It's really good news. If you have a highly educated population who can move between different types of jobs, like IE could move from a government job to a tech job, or you know, someone who could you know, work in government, but also in some form be involved in the, I don't know, the bicycling scene or the music scene or something like that.
You know, when, when all of that is in one place, I think it turns out that it has been good news to be. To be a state government city, you know, but, but then the question becomes, well, if people come there, so typically the, you know, the crowd that actually works full works as an actual paying job in state government is usually very, very young.
Right. And it doesn't pay very well, but it's kind of maybe pays an experience and then most of the time people get out. And then the question is, do they when they get out, do they wanna stick around. Where they were working and you know, in a much smaller, sort of low energy place, they'd probably say, well, obviously I'm gonna leave the state capital.
Now I go back to the big city, but I, I would wager that if we had good data, we would find that the people who come to work in Austin as very young people working in like you know, the, the offices of members of the legislature are something I'll bet they stay in Austin after they leave that job in very high proportions.
Jason Scharf: It's the difference between a Sacramento and an Albany. As state capitals versus in Austin and Atlanta, right? Both Austin, Atlanta are very obviously big. Growing a lot as well. Right?
Cullum Clark: Well there, yeah, Atlanta's a great example. That's grow. That's booming. Denver is a state capital. It's booming. Madison, Wisconsin is both state capital and higher ed center.
And while doesn't have the climate of Austin, it's booming a little bit less, but it's still basically booming. The, the pure state capitals. I think, you know, Albany and Sacramento are not small places. I mean, having being the state capitals of big states they, they actually are pretty substantial cities.
But they clearly do not have the energy level and the vibe of the places that we're talking about.
Jason Scharf: We're talking a lot of, you know, you use use the word energy level and vibe, and I wonder if throw like narrative in there as well, because what I find interesting is people have been voting with their feet with, to, to your point, Nashville and Raleigh for a long time as well.
Austin seems to punch above some of them in terms of the one, the data, but also just in the zeitgeist and in the narrative. I wanna bring maybe another city into that example, being Miami. Which some of the numbers actually recently haven't been great in terms of actual movement and so forth. But, you know, with the tweet heard around the world, you know, they, they really, and I think if you look at the last year and a half, they replaced Nashville in terms of the narrative everyone's talking about in the, in the beginning of the pandemic it's Austin and Nashville.
And then it suddenly my, it was Austin and Miami. Thoughts on how that plays into everything.
Cullum Clark: You know, I put Miami into a slightly separate bucket. Miami, if you really look at the data, it has a really different set of strengths and a really different set of, of, you know, weaknesses and challenges as well.
If we look at where people are moving around in the United States domestically, Miami has actually seen net outflows over the last decade. That's a gigantic contrast with all these other places we're talking about led by Austin, but also including Nashville and Raleigh and Atlanta and so forth. On the other hand, it's a huge immigration magnet being in a sense, the, if you will, kind of the offshore capital of Latin America, right?
I mean the place that just enormous numbers of people, particularly like fleeing dysfunctional regimes in Venezuela and this sort of. Or just, you know, kind of parking money and some of the family lives in Miami while others are running the business back in the original country, that is a dynamic that is clearly not present in any significant way in Austin.
And that's huge in Miami. So, you know, that's just a different kind of place. I think the enormous immigrant population, many of whom are well educated and, and actually, you know, pretty wealthy as well. You know, there can be pretty big, consumers have been a, that's been a huge source of energy in Miami.
However I would argue ultimately the, the lifeblood of a thriving metropolitan area is a well educated workforce. Who's, you know, prepared to work in a lot of industries and do a lot of things. Miami actually has pretty relatively low education levels, comparatively, whereas Austin, Nashville and Raleigh have very good education levels.
And so that I think is a challenge for Miami. You know, Miami has got, they definitely have a good buzz, a good narrative. I think it's a different narrative. I think that they benefited certainly in terms of the story, it's not quite as visible in the numbers from the idea of people leaving New York during the pandemic and wanting to go someplace that's, you know I don't know, better weather and they can work remotely and so on.
And, and they also have a mayor, mayor Suarez. Who's been very very good at telling this whole story about how it's gonna be a tech center and it's gonna, you know, be a big crypto, you know, kind of headquarters and so on. There's some real strengths, but I, I think I, I, I don't put it in the same bucket in the, the, you know, the population growth.
Isn't. To anything like the same degree. So so I'm not, I'm not bearish on them because actually I like what, what I mentioned that great strength in terms of being a magnet for talented people, primarily from, from Latin America. But but I'm much more bullish on Austin.
Jason Scharf: No, and I think that difference of being unique, you know, Miami is its own thing. Austin's own thing. One of the biggest things that we constantly pound the table about is. I've never been a big fan of the Silicon X, right? Silicon alley, Silicon Hills, whatever. We don't wanna be the next Silicon valley. We want to be the first Austin. And big thing that we've done is try to figure out what's the special sauce, the uniqueness of Austin.
And, you know, you laying out some of those things was, was interesting. One of our, we, we have, you know, we call'em the superpowers, the reputation, the coolness factor actually is one of the ones that we've identified. But I wanted to throw a couple other ones at you in terms of, and see what you think. One of the big ones that we think is very different and unique in this era is that we build things.
We build, we have a manufacturing base that, I mean, we EVs rockets, semiconductors, 3d printed houses, CPGs. Like we build physical products here. A lot of them at the intersection of technology and software. How do you think if that affects our, you know, city of a future possibility?
Cullum Clark: Well, I think, I think you're absolutely right. I think you're, you're very much onto something. Jason. I think that the contrast with what the west coast, particularly along the California coastline from San Francisco, really right on down to LA and San Diego what that's become the contrast couldn't be starker. I I'd like to put what you said into a slightly wider context.
You may or may not know. I had the opportunity to, co-write a book called the Texas triangle with former San Antonio mayor. Henry Cisneros and Bill Fulton of the Kinder Institute in Houston and David Hendricks, a long time journalist in San Antonio. So anyway, we really tried to tell the story of the rise of a mega region as we, as we and others call it, that is formed by the triangle, connecting Dallas Fort worth, houston San Antonio and Austin, some say only in Texas where we connect four points on a map with a triangle. But as, as you all know, being Austinians, it works. But part of the story is that Texas triangle in general makes things. It is an, the, the, the manufacturing prowess and position of the mega region is an undertold story.
And yes, that applies to Austin. It also applies to San Antonio. And Fort worth, not, not quite Dallas to a moderate degree, but Fort worth in a big way. It, so, and, and then of course in Houston, they process raw materials into, you know, final products into a bigger degree than any place else in, in north America.
So it, we, we actually are kind of a manufacturing power any rising one while I think rising certainly relative to the traditional, you know, manufacturing Heartland in the, you know, in the upper Midwest. And so. You know, and I think companies that make things are also betting with their feet, nobody's building any new wafer fabs or any new you know electric car manufacturing plants, or anything else along the west coast anymore.
You know, and I think that reflects a, just a radically different business environment, radically different costs to operate. I think tech Austin, the city of Austin of course, has this kind of deep blue reputation. We can talk about politics in a bit if you want, but the truth is when you take the Metro area as a whole, it's a pretty great place to do business.
You know, it scores pretty high in you know, ease of doing business rankings. And I have colleagues at SMU who put out a a score for what they call economic freedom, basically like the regulatory environment, the taxing environment, and so forth at the Metro area level. We know Texas is a pretty attractive place to do business, but you might one might think, oh, well, the, you know, kind of the deep blue heart of Texas might be kind of a contrast.
But the reality is if you take the whole Metro area, I, I, I would say it's it probably gonna score higher in ease of doing business, you know, attractive place to build a facility of some of, of some kind than the vast majority of other Metro areas around the United States. I think it's notable a friend of mine who really knows real estate well pointed out that that the it's kind of a technical point, but the Austin extraterritorial jurisdiction, the ETJ.
Where, which is where Elon Musk is building the enormous Tesla Gigafactory is arguably the best place in America for him to do. City of Austin, maybe not quite so much, but the ETJ, which essentially has a in effect, all the good of being in Austin in a reasonably central location and mitigates certain of the, you know, more challenging aspects.
So, you know I guess Elon Musk is a pretty smart guy as, as I'm not the first person to point that out. So the fact of making things in general you know, manufacturing related jobs actually typically pay more than the average job and require higher than average skills these days. You know, it's not an assembly line anymore.
It's, you know, operating robotic arms and so on. It's a, it's a skilled thing. Manufacturing employment in America is probably not going to go up very much because we will figure out how to automate more and more more and more activities. And yet there's a significant geographic shift and it's coming towards the Texas triangle.
Michael Scharf: You know, it's interesting. You talk about this. The manufacturing shift as comparing Texas and California now I grew up in LA and at the time there was a Chevy plant, not too far from my home. And more and more, the manufacturing base of California has gone. And with it is a lot of the middle class.
And one of the things we've seen about Texas is that with that ability to build things with that desire to build things, whether it's here in central Texas and in San Antonio, as well as Fort worth, all three are good places for middle class. and the more we can promote that and maintain, that ability to support middle class families.
I think the better off we all are.
Cullum Clark: I couldn't agree more, Michael. One thing that I've had a lot of chance to think about, write about and speak about is what's going on in, in housing markets, which is, is, is very fundamental to how, the extent to which cities are thriving these days. You know, one calculation one can, can readily do.
I, I've kind of borrowed this from a a colleague Wendell Cox is a great long time thinker about. Housing cost is to adjust local income levels for the true cost of living in a place, including the cost of buying and, you know, paying for a home. And you know, on that basis, all of the Texas triangle metros score quite well, right.
We score kind of well for the, a, the just absolute income level. But once you adjust for housing costs, we actually score. Quite well that's the case in Austin. It's also the case in a, in really all of the other Texas triangle metros. So I think like an interesting contrast and we should talk more about housing, maybe even in the city of Austin, which I know is a topic that everybody talks about all the time when they live there.
It's not a happy topic, nor is the traffic congestion right on I 35. But that said, when you actually look at the Metro area level as a whole, if you look at the, just the number of units built. Over the five years ending in . Cause I don't have the more up to date data, 2021. I'll I'll update. but the number built in Austin as a percentage of the the population is actually among the highest places in America.
And if we compare it to places that Austin May like to compare itself to like other big tech centers, right. It's three or four times higher than a number of them like San Francisco and Boston. It's actually more than six times higher. That not, not total number of units, but total number of units as a percentage of the population, more than six times higher than the Silicon valley, you know, San Jose Metro, and even on also, by the way, if you could, it's higher than, you know, than Dallas Fort worth Houston, San Antonio, higher than than you know, Nashville actually a little lower than Raleigh.
But when you look at that yes, a lot of people have been pouring into Austin and you always have to ask, like, what's the direction of causality, right? The people are coming, therefore builders build, or it's possible to build. Therefore the housing is a little more affordable than on the west coast.
And therefore people come, you know, as an economist, I would say the causation runs in both ways, but the, but the, but the result is clear. The greater Austin Metro area has built enough new housing to house the people coming at prices that are expensive, but they're not totally insane by US standards today.
Now that said, we've gotta put in a great big caveat, Michael, and say there sure have been big price increases over the last decade. And in fact of, of all of the top 100 metros in the United States, On at least one measure. I keep track of Austin ranked first for the percentage increase. So the, the, the problem is growing, but if we look backwards, at least at this enormous tidal wave of people moving into the Texas triangle and more than anywhere else moving into the Austin area that's been a big competitive advantage relative to the west coast and some other places.
Jason Scharf: Well, and I think as some, by the way, first as someone who recently bought a house here in Austin. Yeah. I, I can definitely fill that, that price increase. But I think one of the things, and you said the numbers you're putting out, you keep mentioning the Austin Metro, which I think is important to note that yes, the city of Austin and the Austin Metro are, you know, it's a part of the whole thing.
It's not that it's not as centralized. We really are turning into this kind of multi hub. Each city has its own innovation flavor and its own downtown. How does this play into our growth and transformation? Because this seems to. A unique thing, recent and also a more Texas thing as far as I've. You could describe Dallas probably the same way.
Cullum Clark: I think that's that's that's exactly right. So contrast between the core city and the wider Metro is a really important story all over America, but to an even greater degree than in most other places in the big Texas Metro. So let's, let's explore that one thing that we wrote about in our Texas triangle book.
And I've had a chance to kind of write about and speak about a lot is the Texas triangle metros are kind of exaggerate. They have a development pattern, a growth pattern in recent. Decades. That is like an exaggerated version of what's happening everywhere. All over America, big metropolitan areas are growing outwards more than they're growing upwards, right?
The core cities aren't really growing more dense. There's a an academic Shlomo Angel who showed that over the last hundred years, every major metropolitan area or core urban area, I should say. Has grown less dense over time, and maybe that's flattened out a little bit on the 21st century, but there is no, there is no clear tendency for even the most successful cities to actually grow denser on the, on the contrary, as people pour in as substantially, all the population growth is, is on the periphery.
Now in a place like San Antonio or Austin, there's been room to grow kind of on the periphery of the core cities that the core cities are still growing. You might have noticed that the core cities of Dallas and Houston shrank over the last year. And that that's, that sounds crazy. Cuz living here in Dallas, the Metro area is seeing an enormous boom and you know, suburbs like Frisco are among the fastest growing places in, in the world really.
But there is this, just this enormous tendency for these metropolitan areas to grow outwards that I think reflects an unusually benign environment in a lot of suburban places for new housing development, because we live in a time all over America where increasingly. Communities everywhere are getting really well organized to block new housing development which is a, a pretty big concern.
I think of mine and a great many, many Americans, but we have a better approach to it than just about any place else in the major Texas metropolitan areas. And that's been good news, but it's not just about the regulations. It's something beyond that. It is the, the rise of what I would call a more polycentric geography.
Throughout the major metropolitan areas of of, of Texas. And in fact, I think this is more highly developed in places that are bigger than Austin, like the Dallas Fort worth area and the Houston area. But it's clear what the trend line is in Austin. And the trend is to create lots of alternative downtowns.
Not just the suburban office park of the eighties say, but rather places that have high rises D relatively dense work, live play environments with, you know, multi-family housing within close walking distance of, of job centers with, you know, parks and coffee shops and everything else. So walkable centers all over the metropolitan area, there's a guy named Chris Leinberger.
He's a professor at George Washington university and he's kind of like America's chief apostle of Walkable urbanism. And he has done the great service of literally just naming what he calls walkable, urban places. Walkups all, all over America, at least in bigger metropolitan areas. I know the Dallas data better than the Austin data.
Sorry about this, but I can tell you Austin's heading the same way. On his own count. There are more walkable, urban places in the Dallas Fort worth area, outside the core cities of Dallas and Fort worth than in the core cities of Dallas and Fort worth put together. That's pretty interesting. And Dallas, the cities of Dallas Fort worth, basically aren't at least Dallas isn't building any new ones.
Whereas new ones are popping up almost, you know, by the month in in high growth suburbs to the outside. Now, Austin. If we look at the population of the core city as a percentage of the metropolitan area, the core city is still kind of big as a percentage, but you can say with certainty, it's going down, right?
The city just isn't the population isn't going to grow very much going forward. I would wager maybe it'll manage some degree of growth, but I would, it's very, we can debate what should happen. But I think what will happen is not an enormous increase in density. In fact, if anything, the city's made it very, very difficult to build new housing of any kind of type.
So so the, the, city's not even if people like, you know, new urbanists in the city would sort of welcome the idea of greater density. There there're gonna be pretty big changes in the policy set up for that to actually occur. And that experience of cities everywhere else suggests it's not real probable maybe you'll get some, you know, luxury towers built and a handful of really, really attractive locations.
And that'll feel like density, but it, you know, it'll be a relatively small number of people. On the contrary, I think what's clearly happening is Georgetown round rock. I, I, I don't know very much about the, the town of Hutto but then my I had a chance, a guy that we know brought a real estate deal to me and showed me this, the demographics of Hutto.
And I can tell you, we invested the moment we looked into it because it's really growing fast. So you know, Bastrop is growing fast, all really on all sides. San Hayes county is I think by some measures, the fastest growing county in America, or at least over a certain size, it's very, very high up there at any rate to the Southwest.
I would wager that essentially the whole area along I, 35, between Austin and San Antonio will experience enormous development. As far as the eye can see in one day, the us census bureau will declare Austin and San Antonio to be a single Metro area like Dallas and Fort. Like Minneapolis and St. Paul.
And at that point it'll be one of America's biggest and fastest growing, probably the single fastest growing. So, you know, let me say a little bit about this polycentric model, if I could not everybody loves it. Many people think that main you know, focus of energy should be on like revitalizing in the case of places like Dallas and Houston, or maybe making even more economically vital downtown areas like downtown.
Because downtown Austin is in pretty good shape, but that said, what we have found is this polycentric model works. I would argue that in 21st century metropolitan economies. You have basically the situation that as the economy has grown richer over time, you have ever more ever more job specializations, right?
Greater and greater division of labor to be at the cutting edge of being a big, highly productive, highly innovative cities, a city. You it's basically have to have really a lot of people doing a lot of different things. It's just a complex thing. And the issue has, as it has always been throughout the history of cities is how can you best organize?
Large numbers of people, you know, given the challenges of bringing lots of people into one place. And I think it has turned out that mono centric cities with a really big central business district, and then just kind of radiating outwards, everyone trying to commute into the city center. That was a model that already was peaking in the middle part of the 20th century.
And it's really been in decline ever since it just doesn't turn out to be a good way to organize 21st century economic.
Michael Scharf: I'm sorry, I'm laughing. There's, there's a group of people and it's not just Austin. And we saw it in California where we used to live, but they really, really believe in densification.
There are some places that are even talking about outlawing the zoning of single family homes, and one of the ways that they seem to do this, or try to get this done is via large transportation infrastructure projects. And I'm looking at project connect and I'm looking at a fixed rail line thinking, gee, I wonder if they planned the right direction.
I wonder if trying to bring everybody downtown in this hub and spoke model where, you know, the, the state capital and the central business district in Austin is the one and only place where people are going. Isn't that the wrong model these days?
Cullum Clark: Well, there's no evidence of it succeeding any place.
There's a strong sentiment among a number of thinkers and, you know, academics and so forth that it would be desirable to have much denser cities like one might find. And for example, major cities in Western Europe. But of course those cities, the, you know, the, the, the whole street plan and so forth was built out in many cases in the middle ages or in early modern times at the latest in the 19th century, before automobiles existed.
And since the rise of the automobile, essentially, no new city in the west may the, the Chinese communist party may have managed in one or two cases just by ordering that it'd be so, but, but no major city in the west has really arisen. With the degree of density that I think you know, a number of people would really like to see in America.
So let's say a little bit about density. Michael first thing to say is, well, what would happen if cities not be not, not even getting to, trying to force it? What would just happen if cities. Allowed for it to a greater degree, because in, in many cases, all kinds of rules make it more difficult to grow highly dense opposition of the neighbors among other things tends to be a pretty powerful force.
But, but well I think what you'd find is that in the vast majority of the physical space, in big metropolitan areas in America, that economics would not support building at very high density, for example, to build apartment buildings over I'm, I'm not an expert in development, but you know, probably past about four stories requires a steel frame and requires all kinds of engineering aspects that dramatically increase the cost of building it.
And it only works if you're gonna have pretty high income in there pretty, you know, pretty, pretty wealthy people. And so in general the vast majority of places you could change the rules all day long as a thought experiment. And it wouldn't change a thing because the economics do not support it in a small number of very wealthy places.
The eco, there, there are developers who would dearly love. Certainly this applies in central Austin would dearly love to build more high rise towers if they can possibly get permission to do so. And to a limited degree probably we will see that happen. But it just won't happen in very much of the city.
So that's because it just doesn't work now. I've had the opportunity to collaborate a number of times with my, my colleague Joel Kotkin, who was a great thinker about American cities and, you know, he's, he lives out in orange county. I think he's a fan of Texas. I'm always saying, Joel, you know, like the water's warm you can come here, but you know, he, he, he doesn't do that.
But he likes to visit, I think. And he talks about how in California, there are a lot of people who would like to, to use Joel's word frog, March people into dense urban centers. Like ie try to force it to happen. I, you know, I guess at some level I would say, I don't know, is that really like. Is that how things work in America?
You know, I mean, I think that to, to a certain degree, like suppose that you could pass a rule that not just banned single family zoning. Okay. That's one thing, but literally banned even the building of new single family homes. Right. I mean, it is a thought experiment, right? Well, first of all, at some point you have to say is that does a, does a good society actually ban the creation of a product that very large numbers of people want?
You know, I, I, it's hard for me as a, you know, to get, to get my, as someone who kind of appreciates freedom and human choice to a pretty high degree to get my head around the idea that that would be desirable. But even when you look into the details, like in Minneapolis, they ban single family zoning.
Okay. And that's great hoopla and fanfare people who are, you know activists on behalf of like, you know, affordable housing activists who are really concerned about the availability of affordable housing in Minneapolis are universally disappointed by the results. If you actually think it through well, in some neighborhoods, if you actually ban single family zoning you, you in sense, make it more economical to build luxury multi-family than you could do before in that exact spot.
And so you're likely to see the elimination of a certain number of affordable old, single family homes. They get replaced by new midrise or Highrise luxury multifamily and the net number of relatively affordable homes goes down, not up. So that's a, that's a problem. And another problem is just a great big yawn, right?
I mean, you say that like, okay now we've changed the zoning of this or that relatively low income neighborhood to multifamily and you know, Hey developers, you're free to come build multifamily. Crickets. Nobody shows up cuz the economics aren't good. Right. And on top of that, Minneapolis has pretty big challenges reputationally about, you know, public safety and so on these days.
So so I think that trying to force it to happen in general, the tools aren't there when even some weak version of the tools has been tried, it's not been successful. Now. Some would say if only we built out transit. To the degree that we have in, you know, in major European capitals or in like Tokyo or something like that.
Well then then of course density would follow. I think we have a bit of a problem in America though. When you start talk, talking about building light rail and subways and so on. I mean, I look, I mean, I'm not opposed to when it, when the economics make sense, when you can demonstrate that the ridership is, is going to be there and that the, you know, ROI is reasonable.
I'm not you know, ideologically opposed to it or anything like let's be sensible. But, but in general I think that kind of that in most metropolitan areas, that ship has sailed. We spent many decades becoming very big, physically big spread out in places like Dallas and Austin kind of medium density, not very high density places.
And I don't think the, the numbers are gonna work. I, I don't think you can make the economics work in kind of any big metropolitan area of America. That didn't become dense back in the 19th century and which only applies to about like five or six places. And indeed, I think not so far below half of all the people who ride public transit to work each day and all of America are in a single Metro area, right.
New York city. So you know, I, I think that that the, the answer for getting people, you know, Around is not try, try to build like European or Asian style highly dense subway networks or something. I think it is 21st century solutions. That's gonna involve a whole lot more like, well designed bus routes, bus, rapid transit.
It's gonna involve a whole lot more Uber pool type approaches, you know, and all of that put together. Probably isn't gonna have the results of increasing density in itself. It's gonna actually just provide better ways for people to live in a medium density, not a high density environment and still get to work.
And I hope that we do all those things, cuz I think there's a lot of room to improve. I guess last thing I'd say is you know, green considerations, I'm pretty green myself. I mean I care intensely about clean air and water and so forth and I actually really appreciate parks trails in the natural.
In general, you know, I think the really strong sentiment for high density out there in American cities, part of it is just aesthetic. You know, part of, it's just, there's a certain crowd of people that just looks at it and thinks. Better, you know, prettier, I mean like a better way for human beings to live, which is fine for them to think that, and there are many places where they can choose to live like that, but it's a little bit hard to sort of force that view on other people who disagree as to what is desirable.
But then there's the view that you know, very long commutes are likely to be bad news for you know carbon emissions and for the environment and the planet and so forth. And. I, I don't disagree, but the good news is there's good. There's good news out there. One bit of good news is that in the increasingly polycentric environment of Austin area and the Dallas area and other big, big metropolitan areas that are booming, actually the, the a whole lot of people commute essentially from one suburban place to another suburban place.
And in general, the people living in the suburban area. In many cases have shorter commutes than the people living in the core city because they live, they live relatively close to suburban job centers and don't go all that far. So so the, you know, the sprawl quote unquote is kind of a dirty word, but the idea of these kind of outwardly growing metropolitan areas have in many cases been.
You know, maybe not ideal there's work to be done, but not so bad on the on the carbon emissions front. And then on top of that, we potentially have a future of a whole lot more electric vehicles and that also will mitigate that issue to a, to a certain degree. So you know, but there there's plenty of challenges you know, as we kind of sprawl outwards I think very, oftentimes we under provide parks and green space and we don't, we pave over too many things and have too little respect for.
Natural world in ways that we will come to regret in Texas. But I think that it's fine for people to say if only we could be as dense as Brooklyn, but I just think it ain't gonna happen.
Michael Scharf: I think one of the reasons why it may not happen is that it seems that that not only Austin, but most other cities just don't seem to be able to do long range planning anymore.
I had two examples from Austin. I mean, we've got a 20 year old airport plan that called for additional jet jet fuel storage. While the location for the jet fuel storage was great in the mid nineties. It's not the right place, the right amount and the right location anymore. More recently, the city of Austin got slapped around by a judge regarding their land use ordinances.
Also 20 years old, and everybody agrees it's outta date, but nobody seems to be able to plan for that long in advance. How do you see that? Changing. Is there anything we can do?
Cullum Clark: Well, you know, there's a lot of people and I kind of put myself in this camp who basically. Washington DC is so hopelessly dysfunctional that the best hope in terms of governance in America is local.
The, the mayors are our salvation much more than, you know, presidents and senators and so forth. And I'm inclined to agree with that, but then it's true. On the other hand, you look too closely at what actually happens in particular cities in particular local government. And we have to say In all too many cases local government has, has, has been behaving in pretty dysfunctional fashion as well.
I think that's one of the real challenges of our time. We may, maybe we need a, kind of a, a sort of a new like in the progressive era of the early 20th century, there was, you know, a lot of, kind of sense of, we need to like professionalize the management of cities and kind of just do a lot of things more smartly at the local level.
Maybe we need a new progressive era that really rethinks how we actually govern. And plan in American cities, cuz I think on the whole there's no city where you can go big, big cities where people would say it's working all that. Great. Now I will say there are signs of hope there too. I'm kind of an eternal optimist, Michael
Jason Scharf: as are we,
Cullum Clark: I actually have have in here in the Dallas area, I've spent a lot of time following the, some of the high growth suburban places such.
Frisco and Alan and Plano and McKinney and so forth. I need to pay more attention to the ones near Austin and I, and I will cuz I want to see whether the same thing applies there. But I do think there you're seeing more planning for the long range future of those cities. Then you're used to hearing about in America and I mean, I had a drive.
I think I had a driving tour of Frisco, Texas north of Dallas, not so long ago. And it was very interesting. The person who was touring me around is deeply knowledgeable about the economic development of Frisco pointing out things that were going to happen in the 2040s. Wow. As we drove around, like on this site in the 2040s, we think this is gonna happen.
You don't hear about that in the city of Austin or the city of Dallas and that. That's a problem, particularly because we can kind of see where the puck is going and attempt to skate towards it a little bit. I mean, like the future's mysterious, but it's not totally unpredictable. You know, for example, I think it's very probable that you know, the air travel in and out of the greater Austin area will go up considerably, not down and that.
Obviously demands a certain amount of planning, right? The, the airport authority whoever's in charge of, it's gotta kind of figure that, that one out, I'm not an expert on it, but they clearly need to figure it out. The big Texas metropolitan areas will face all kinds of water challenges, like two little water in the case of nor Northern Texas and maybe Austin.
I'm not a hundred percent sure. Too much water in the wrong places in the Houston area, coming down from the sky and so forth. So you know that that's gonna take a bunch of planning that I, you know, I don't think we're doing yet. And so you know, I think we have to be honest, look at our, look at ourselves in the mirror and say that in the Austin area and in the other big Texas metropolitan areas that why central planning to create really prosperous cities is, has not been our forte.
Right? The, the success that we've experienced has. For the most part, despite some of the you know, the many issues in local government rather than because of the great far seeing central plan. I'm not sure any city has been great at doing central planning in America. And I'm, I'm not sure that I'd wanna see too much of a move towards central planning, but I do think that on the whole, the success here is a function of the free market playing out in very particular ways in Texas amidst in general, a good environment for doing business and building new homes. And that formula has worked really, really well, but it's a little frayed around the edges that the failure to do basic tasks of government. Well, in some cases is showing and it's gonna show to a greater degree as time goes by.
Jason Scharf: This has been great. And we always like to ask the same question. What's next Austin.
Cullum Clark: I think that what's next for the Austin. Metro is I think that it on the whole, you will see in all directions, some of the suburban cities. Balloon outwards, physically and demographically to a degree that will amaze everybody and will be in not the, not so far distant future, you know, among the standalone, large, relatively large, very fast growing cities of the world.
And I'm not sure the region is totally you know, kind of mentally prepared for. It's maybe more than Dallas, I think still a little bit inclined to think that basically what, you know, Austin really is, is this kind of cool central city just sort of surrounded by you know, by suburbs, like kind of old fashioned suburbs.
But I think that, that that's, it's, it's not going to be that it's gonna be increasingly, you know, urbanized suburbs, places that perform all the functions of a traditional city. And it's not hard for me to predict that because we already have it in the Houston and Dallas areas to a greater degree. I just don't see any reason why Austin would not follow in the same footsteps as it grows even faster than the Dallas Fort worth and Houston area.
So I think that's a big thing. I think that if the core city, I think the core city has a balancing act to walk, I think, you know, on the whole, it's done better than most cities in around America. You know, I think that if Austin the city of Austin sort of be, becomes overly Californian in its approach to things, you know, I mean, Austin's kind of like the west coast of America, right.
I I, I mean, by the, the, the west coast of Texas, I should say, I think that the, the, the degree of dysfunction in the major cities of the west coast is, is, is reaching kind of dystopian levels. And, you know, I think that. Austin is gonna be at the cutting edge by the standards of Texas cities in wrestling with, okay.
How do you reconcile the need to maintain good public safety? And at the same time, build trust among diverse communities in policing. How do you do these kind of hard things in you know, in 21st century America, that cities aren't always doing a great you know, a great job. Note out in California, Michael, Shellenberger running for governor, right?
A guy who is a liberal Democrat, I think, but who actually says, you know what, we've lost our minds out here in terms of how we manage like the homelessness issue and the drugs on the streets and so forth. You know, I think if, if people in, if there's a certain crowd in Austin who basically thinks it'd be great to be more like San Francisco, I suggest they should visit San Francisco and walk around a little bit.
And I, I don't mean that as like a ideological statement, you know? I mean, I, I, I just think that as, as I think Michael Shellenberger is no conservative ideolog, he's just saying. We're trashing the place it's becoming unlivable. Right. You know, if, if any core city in Texas is going to experiment with creating conditions that will make life unlivable, Austin is likely to be at the cutting edge of that.
I hope Austin doesn't go that way and continues to strike a balance that makes the maintains not just the whole Metro area, but the city is a great place to live, great place to do business, great place to, you know, pursue the American dream and have a good life. And so far it has been let's keep fingers crossed.
I'm ultimately optimistic.
Jason Scharf: I think it's a great note to end on Cullum Clark. Thank you so much for joining us.
Cullum Clark: Thanks for having me. It was great to visit with y'all.
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