Retooling Detroit (with entrepreneurs)

[animatedmartian]

Video Link

For decades Detroit has been a poster child of the misfiring american dream but amid block after block of post-industrial decline there are signs that motor city is jump-starting its economy. Years of under investment have left a blank canvas for social entrepreneurs and small business owners keen to revitalize a broken metropolis. Monocle heads downtown to sample the green shoots of recovery.

[AccraGhana]

Detroit is a case study in the cause and effect relationship of self-fulfilling prophecy. In a capitalistic framework things rise when confidence is shown in something and falls when pessimism is seen in something. A good example of that are equity markets, commodity markets or any type of exchange in which people make predictions (prophecy…if you will) about the future, and it’s even true for the economy overall.


It works like this. Something happens that triggers a loss of confidence, in mass, in the future, which is often speculative in nature. Thus, people feel that they must act expeditiously to protect their wealth or investment by divesting or selling off their holding. In mass, this behavior, in and of itself, self-fulfills the fear that what they were invested in would go down creating a bear market. Regardless to the validity or invalidity of the trigger event, the speculation became valid as a result of the change in behavior of those making the speculation.


That has been evidenced also in many neighborhoods. You have a stable middle class neighborhood and then entities move into the neighborhood that creates speculation that the neighborhood will decline. Whether that is true or not, the speculation makes it true when existing homeowners in mass accept the no confidence speculation, then put their houses for sale. As a result of the demographic with the most means losing confidence in the community, existing homeowners cannot find buyers in that demographic and then are forced to lower prices to sell to a different demographic. The loss in confidence in the neighborhood from the demographic with means is actually what causes the neighborhood to decline.


On a larger scale, that is what happened to Detroit. The demographics with the most means - income, wealth and the like - lost confidence in Detroit in the late 60’s, 70’s, 80’s, 90’s, and did not start to reverse until a few years ago. Again, whether the speculation or reasons that made people flee Detroit in mass were justified or not, the fleeing by those with the most means, in and of itself, created the loss of demand, revenue and investment that ultimately is responsible for collapsing the city and creating horrendous per capita crime states that would otherwise have been offset by a more affluent demographic.

[montréaliste]

There is definitely a "there goes the neighborhood" speculative behavior in the wholesale abandonment of Detroit through the years you mentioned. That order of speculative values undermined is counterbalanced by the normality of prices for real estate in the outlying metro areas excepting those like Pontiac, Ecorse and parts of Warren where the confidence is bound to market depreciation. The mental game you suggest here is really pernicious in american cities and the racial division is increased in spite of the so-called policies of entitlement that visible minorities have been party to.
The reversal of Detroit's fortunes lies in the collaborative effort of the region, it will not come without the scale being tipped back to some kind of reinvestment of suburban players and appreciation of their core city.

[AccraGhana]

Originally Posted by montréaliste

There is definitely a "there goes the neighborhood" speculative behavior in the wholesale abandonment of Detroit through the years you mentioned. That order of speculative values undermined is counterbalanced by the normality of prices for real estate in the outlying metro areas excepting those like Pontiac, Ecorse and parts of Warren where the confidence is bound to market depreciation. The mental game you suggest here is really pernicious in american cities and the racial division is increased in spite of the so-called policies of entitlement that visible minorities have been party to.
The reversal of Detroit's fortunes lies in the collaborative effort of the region, it will not come without the scale being tipped back to some kind of reinvestment of suburban players and appreciation of their core city.

On the Brightside for Detroit is the fact that when bear speculative markets get really low in value…..they become bargains and many new investors become confident that they can profit at those price points. As these people start to invest and prosper confidence is slowly restored and others see an opportunity to profit and the self-fulfilling prophecy starts to work in reverse via the herd mentality.

I think Detroit is certainly at that inflexion point of confidence to reverse its fortune. The point I want to reiterate, though, is that Detroit's rise and fall is most profoundly a function of the mental speculation of more well to do demographics that leads to a change in their behavior which in turns manifest their fears or hopes into reality. Without this change in their behavior and actions, the rise or fall of markets and communities would not manifest, barring resource deprivation.

From a global perspective, Africa remains impoverished essentially because the global demographic with means demonstrate little confidence in Africans. While on the other hand, demonstrating high confidence in Asia and Asians, which translates to billions and trillions in direct foreign investment, which self-fulfills the rise of Asia. There are many stable governments in Africa.....but they just do not get the confidence and investment from the Global North or West.

[dc_denizen]

The idea that "SOCIAL ENTREPRENEURS" (WTF?!) or small business owners are going to revitalize a city with dozens of square miles of abandoned areas and a sharp urban/suburban racial divide, is delusional.

the DC_Denizen Detroit revitalization plan would include

* break up the city, with the most intact and functional areas becoming their own cities.

* assign various abandoned tracts to major homebuilders, and extend grants or loan guarantees (a better use of the government's balance sheet than supporting Chinese-made solar panel production btw) for them to rebuild these neighborhoods in their original form (small-lot woodframe single family homes). Offer incentives to individuals and families to move to these neighborhoods, like federal tax credits and property tax discounts. These areas would become their own cities, or be merged into adjacent suburban cities once population was large enough.

* Legalize all drugs in Michigan to destroy the drug distribution-based economy

* Outlaw all imported car ownership or sale in the US or raise tariffs by 200%

[hudkina]

Originally Posted by dc_denizen

The idea that "SOCIAL ENTREPRENEURS" (WTF?!) or small business owners are going to revitalize a city with dozens of square miles of abandoned areas and a sharp urban/suburban racial divide, is delusional.

But it's already happening. Sure dozens of square miles are abandoned, but all that matters right now is that the 10 sq. mi. that make up the urban core continue to grow strong. All that matters is that the dozens of square miles of solid, middle-class homes stem their losses and strengthen community ties. I don't understand why people think that for Detroit to succeed it needs to immediately focus on the very worst areas. Those areas can wait, and the successes of the remainder of the city will determine the city's future. As of right now, the good areas of the city are only getting better, and that bodes well for the future.

[AccraGhana]

Detroit is and will continue to rebound the same way it declined, which is one decision at a time, one business at a time, one household at a time, born from increased confidence in a particular section of the city, if not the city as a whole.

Just as decay spreads from a nucleus…..growth can and will. What is going on right now is not much when you look at the size of the city, but it is very crucial because it’s the inertia breaking phase that will eventually lead to momentum that will generate a critical mass of investment to come.

[J. Will]

Originally Posted by dc_denizen

* Outlaw all imported car ownership or sale in the US or raise tariffs by 200%

What a naive comment. You realize that many "foreign" cars are manufactured in the United States, and that many "American" cars are manufactured in Canada or Mexico right? And even amongst cars manufactured in the United States by American companies, many of the parts are imported.

Even if this were not the case, it's a ridiculous suggestion. You cannot just "outlaw" imported car ownership. For one, that would go against multiple trade agreements, making it illegal.


http://wheels.blogs.nytimes.com/2009...rn-in-the-usa/

“Which is the more American product, a Honda Accord built by Ohioans for a company with its headquarters in Japan, or a Ford Fusion built in Mexico for a corporation that is based in Michigan?”

[iheartthed]

Originally Posted by dc_denizen

The idea that "SOCIAL ENTREPRENEURS" (WTF?!) or small business owners are going to revitalize a city with dozens of square miles of abandoned areas and a sharp urban/suburban racial divide, is delusional.

Agreed.

Originally Posted by dc_denizen

the DC_Denizen Detroit revitalization plan would include

* break up the city, with the most intact and functional areas becoming their own cities.

* assign various abandoned tracts to major homebuilders, and extend grants or loan guarantees (a better use of the government's balance sheet than supporting Chinese-made solar panel production btw) for them to rebuild these neighborhoods in their original form (small-lot woodframe single family homes). Offer incentives to individuals and families to move to these neighborhoods, like federal tax credits and property tax discounts. These areas would become their own cities, or be merged into adjacent suburban cities once population was large enough.

* Legalize all drugs in Michigan to destroy the drug distribution-based economy

* Outlaw all imported car ownership or sale in the US or raise tariffs by 200%

Equally delusional.

I don't know what type of revitalization you expect to occur if you chop up one big broke city into a dozen little broke cities. In fact, if you want to see why this is such a bad idea then look no further than the two little broke cities that currently sit surrounded by Detroit: Hamtramck and Highland Park.

Highland Park is currently under state financial takeover now and I believe it has been for a decade. Hamtramck is on the verge of going back under state control for the second time in a decade.

[AccraGhana]

If small business leaving Detroit contributed to its decline, and they have, then why is it so incredulous to think that small business can contribute to its revitalization? (Note: Many large businesses are increasing their presence in the city).

Again, the only thing keeping Detroit from proving naysayers wrong…….are the naysayers. Again, it comes back to self-reinforcing prophecy. Detroit is a bear market because of negative speculation (nay saying) over the last 50 years. Naysayers create enough noise that essentially creates a negative marketing campaign that promotes the city decline. Then when people's negative marketing and speculation scares existing investment away, as well as potential investment, things decline as a result and the naysayers can lay claim to being prophetic.

Say there is a new guy on your job. You look the guy over and say to yourself, “this guy looks like a jerk or trouble maker”. Hence, as a result of this speculation, you then don’t treat the person with the dignity and respect that you treat someone else new who you don’t speculate to be a jerk. Hence, the new guy, reacting to the negative energy he encounters, manifest an equal and opposite reaction of negativity. Once that happens then the speculator confirms the validity of his speculation while never looking at or accepting his role in creating the reaction, as every action produces and equal and opposite reaction force.

To me it’s really a shame that people do not understand or respect the power of positive or negative thinking in regards to self-fulfilling a reality. Detroit Nay saying has been the trend. I think when enough stories start coming out of the city, that are positive, like this one and many others, Yea-saying will become the trend. This is why it is imperative that a city trying to rebound must get all the positive stories out in the media as possible.....without the "yeah but ...BUTTers"....who seem vested in Detroit's decline.

[iheartthed]

Originally Posted by AccraGhana

If small business leaving Detroit contributed to its decline, and they have, then why is it so incredulous to think that small business can contribute to its revitalization? (Note: Many large businesses are increasing their presence in the city).

Well, I don't think that small businesses leaving the city are the cause of the collapse. Small businesses leaving was symptomatic of deeper structural issues regarding Detroit. There is some progress on the structural issues being made, such as the newly formed regional transit authority, but it's still very slow progress because the necessary decisions are so politically controversial. It's taken 60 years and dozens of tries for them to get something as simple as an RTA. How long will it take for a regional planning policy? Something else that Detroit could desperately use. Will it take a couple of centuries for them to get around to that?

[AccraGhana]

Originally Posted by iheartthed

Well, I don't think that small businesses leaving the city are the cause of the collapse. Small businesses leaving was symptomatic of deeper structural issues regarding Detroit. There is some progress on the structural issues being made, such as the newly formed regional transit authority, but it's still very slow progress because the necessary decisions are so politically controversial. It's taken 60 years and dozens of tries for them to get something as simple as an RTA. How long will it take for a regional planning policy? Something else that Detroit could desperately use. Will it take a couple of centuries for them to get around to that?

....and therefore small businesses returning is symptomatic of what? Also, there is no law of nature that says if something has been one way that it will hence forth and forever stay that way. Slow progress is not necessarily a permanent condition. I do not think the region any longer lives under the myth that the regions fate can be divorced from the fate of the city proper.

[animatedmartian]

Originally Posted by AccraGhana

To me it’s really a shame that people do not understand or respect the power of positive or negative thinking in regards to self-fulfilling a reality. Detroit Nay saying has been the trend. I think when enough stories start coming out of the city, that are positive, like this one and many others, Yea-saying will become the trend. This is why it is imperative that a city trying to rebound must get all the positive stories out in the media as possible.....without the "yeah but ...BUTTers"....who seem vested in Detroit's decline.

I think Detroit is starting to comeback around. I was only born in the 90s so I never really experienced what previous 'hopeful upswings' might have felt like in decades prior, but Detroit's current optimistic upswing does seem to be a systematic change instead of just a visual one. I just found out that less than a month ago, Detroit's tourism company started this advertisement aimed at drawing in more conventions to the newly renovated Cobo Hall.

• Video Link

Yea, more realistic (pessimistic) folks will point at the decaying neighborhoods, but I think once the city government is sorted out, there will be obvious signs of improvement there as well. It may not happen as quickly as most would like, but Detroit at least doesn't feel like it's in a freefall towards doom and gloom which has to be a good thing. A little bit of it is some boosterism, but then go back to 2003 and try to recreate the same images in the above video and in the OP and it'd be near impossible. There just wasn't a lot going on in Detroit 10 years ago.

[AccraGhana]

Originally Posted by animatedmartian

I think Detroit is starting to comeback around. I was only born in the 90s so I never really experienced what previous 'hopeful upswings' might have felt like in decades prior, but Detroit's current optimistic upswing does seem to be a systematic change instead of just a visual one. I just found out that less than a month ago, Detroit's tourism company started this advertisement aimed at drawing in more conventions to the newly renovated Cobo Hall.


Yea, more realistic (pessimistic) folks will point at the decaying neighborhoods, but I think once the city government is sorted out, there will be obvious signs of improvement there as well. It may not happen as quickly as most would like, but Detroit at least doesn't feel like it's in a freefall towards doom and gloom which has to be a good thing. A little bit of it is some boosterism, but then go back to 2003 and try to recreate the same images in the above video and in the OP and it'd be near impossible. There just wasn't a lot going on in Detroit 10 years ago.

That is the type of promotion that Detroit should have been doing a long time ago….even if it did not have all the new investment that it has now. Nearly all advertisement is hyperbole to one degree or another or they only tell you the good things and not the bad sides. That is just the nature of advertising. Detroit has always had good things to talk about and present to the outside world, as well as bad things. However, the areas media and the people just allowed the bad news to dominate, which in turn helped to incubate more bad news as it helped to destroy confidence in the city.

It’s important to note that these positive changes are going on despite a recent uptick in the homicide rate and a city government likely at its lowest point ever in dysfunction or irrelevance. I am saying this to suggest that Detroit is not held hostage by its statistics and government, as many like to believe. In other words, many believe that corruption and crime is why Detroit declined. Rather than causing the decline, the decline, caused by other factors, simply left the crime and corruption exposed.

[dc_denizen]

Originally Posted by J. Will

What a naive comment. You realize that many "foreign" cars are manufactured in the United States, and that many "American" cars are manufactured in Canada or Mexico right? And even amongst cars manufactured in the United States by American companies, many of the parts are imported.

Yes, and many cars sold in Canada are imported from the US and Mexico (saw this firsthand on my visits--lot of Caddies and F-150s driving around). Many of the parts in cars manufactured in Canada are imported from the US and Mexico (and other countries). It's a continental economy. You'll notice I wanted to reduce imports, not foreign-make production in the US. Perhaps an exception should be made for Canadian and Mexican imports.

Arguably, too many parts are imported and sourced from overseas. We should not allow sourcing of auto parts from China or India, since such action directly lead to unemployment in parts-producing locations like Michigan, Ohio, and Ontario, to the detriment of cities in these regions. Whereas most of the benefit goes solely to the shareholders and managers of auto companies (very little being passed on to the consumer). Why is the belief that jobs should be protected and parts imports limited, which directly benefits cities, 'naive'?

Originally Posted by J. Will

Even if this were not the case, it's a ridiculous suggestion. You cannot just "outlaw" imported car ownership. For one, that would go against multiple trade agreements, making it illegal.


http://wheels.blogs.nytimes.com/2009...rn-in-the-usa/

Plenty of nations that are de jure part of free trade agreements, are de facto protectionist. Indirect pressure could be brought on the big three and the foreign makes to source from the US. The benefit of free trade (in this case, BMWs, Mercedes, and Prius's for the US and Canadian elites, as well as cheap auto parts to benefit auto company shareholders and mgmt) must be weighed against the costs (unemployment and social problems in the Midwest and Ontario cities). I'm not sure how this is a foreign debate to someone in Canada--Canadian manufacturers are just if not more exposed to cheap competition.

[iheartthed]

Originally Posted by AccraGhana

....and therefore small businesses returning is symptomatic of what? Also, there is no law of nature that says if something has been one way that it will hence forth and forever stay that way. Slow progress is not necessarily a permanent condition. I do not think the region any longer lives under the myth that the regions fate can be divorced from the fate of the city proper.

I'm not convinced that small businesses are returning en masse yet, so at this point I would say there is no symptom. Detroit is clearly net negative in small business for the decade ending 2010.

But it does seem like southeast Michigan is at least mulling the value of an urban core once again, rather than just outright dismissing the need for it as it has done for the past several decades. That's promising, but the recovery is still fledgling.

[dc_denizen]

Originally Posted by AccraGhana

Detroit is and will continue to rebound the same way it declined, which is one decision at a time, one business at a time, one household at a time, born from increased confidence in a particular section of the city, if not the city as a whole.

Just as decay spreads from a nucleus…..growth can and will. What is going on right now is not much when you look at the size of the city, but it is very crucial because it’s the inertia breaking phase that will eventually lead to momentum that will generate a critical mass of investment to come.

I think it's a bit pernicious to expect virtuous individuals acting alone or in small groups, to revitalize even a part of Detroit on their own efforts. Typically, these individuals are not able to tap the resources needed (financial, expertise, etc) to effect large change in downturned cities like Detroit, besides on the very localized level. It's a particularly American belief that individuals like those profiled in the video can make a major difference, but this belief rarely accords with reality. Whereas if you get the government and the large-scale private sector involved (with billions of dollars on balance sheet and revenues), change at a larger scale and in a faster timeframe is possible.

Entites with 3CDC in Cincinnati (a coalition of local businesses working successfully to improve OTR and downtown) show how effective a government-corporate partnership can be - imagine would could be achieved with a larger base of participant companies, and the federal and state governments (and financiers/lenders).

It also seems to me that having more actual residents would solve or pre-empt a lot of the problems. Residents need services, which small businesses would come to supply. Currently, Detroit is losing residents, due to continued fears of crime and better quality of life in the detroit suburbs. Thus the lack of small businesses.

...and the best way to add more residents, would be to break up the city. why?
(1) perception: new cities would not have the stigma of Detroit. school districts would be separated, city governments would separated, etc., allowing income and class-based distinctions to emerge (which exist in every city).
(2) efficiency: decisions in the local cities would be made faster and more efficiently than in today's Detroit.
(3) varying needs better met: one city might consist of largely abandoned properties (and in the process of rebuilding as I described above). Another might be a stable middle class area. City policy would not have to conform to a broad set of requirements, as today, making rebuilding easier.

[montréaliste]

Detroit needs not only an effective all-encompassing regional transit authority, but a regional government for the metro. The resources of the metropolitan area have to come together for the full rebound to occur. Herein lies the problem cited by AccraGhana; the confidence game. Who will give the region a vision of what metro Detroit can become?

[AccraGhana]

Originally Posted by dc_denizen

I think it's a bit pernicious to expect virtuous individuals acting alone or in small groups, to revitalize even a part of Detroit on their own efforts. Typically, these individuals are not able to tap the resources needed (financial, expertise, etc) to effect large change in downturned cities like Detroit, besides on the very localized level. It's a particularly American belief that individuals like those profiled in the video can make a major difference, but this belief rarely accords with reality. Whereas if you get the government and the large-scale private sector involved (with billions of dollars on balance sheet and revenues), change at a larger scale and in a faster timeframe is possible.

They don't have to. All they need to do is set the stage....to be the pioneers...if you will. The demand for urban living is a big trend among young adults....but people are scared of Detroit. When different demographics starts living and doing business in Detroit that will lay the foundation for others to come as well. I mean......from my visits its actually happening already without question.

It also seems to me that having more actual residents would solve or pre-empt a lot of the problems. Residents need services, which small businesses would come to supply. Currently, Detroit is losing residents, due to continued fears of crime and better quality of life in the detroit suburbs. Thus the lack of small businesses.

Detroits massive population loss (which is overstated in my estimation), was primarily the result of what was going on nationally with the housing industry, lending, CDO's and the like. There was not a mass exodus born from crime and poor schools, but rather, a mass relaxing of lending standards and interest rates which allowed people to move into homes that they previously, under normal lending standards, would not have been allowed to do. Thus, people in the inner ring suburbs wanted to move up into bigger homes but could not do it unless they sold their existing home. The only demand for those inner ring suburbs was coming from city residents, who looked at is as an opportunity. It was not a matter, for the most part, that people could not deal with the crime and schools anymore, because the crime rate has certainly been worse without the same people moving then. They left because the housing market opened up to them in many suburbs that normally was off limits.

In light of that, they are not giving away mortgages like they were the previous decade and thus Detroit population decline likely has slowed as mobility has slowed due to tight lending standards. Also, many residents did not move to the suburbs, but left for places like Georgia and North Carolina during the time Michigan was in recession but those places were still booming, prior to 2007. Well, most of those states now have unemployment rates as high as Michigan, if not higher. So the grass is not that greener on the other side as it used to be and the economy is not as terrible (but still bad) as it had been in the region. So many of the factors that contributed to the losses of the last decade are not as strong and the degree of hopelessness is not as bad either, given how the core is revitalizing from big business investment, as well as small businesses.

[hudkina]

Originally Posted by montréaliste

Detroit needs not only an effective all-encompassing regional transit authority, but a regional government for the metro.

Detroit now has a regional transit authority, and it also has a regional planning agency in SEMCOG. Obviously SEMCOG has no legislative teeth, but no region has an all-encompassing regional government.