Monday, January 29, 2007

The following is rank speculation and dubious math -- but it's my blog, and I'll do what I want to.

No really, I'd love to hear contrary opinions, and I wouldn't mind if anyone shows me where I've gone off the path. But here is what I have come up with. I've tried not to drop any decimal points, but as I said, math isn't my strong suit.

Yesterday's Bulletin talked about how much 'investment' income Deschutes County had; 22% average, instead of the national average of 15.8. My first thought is, regardless if that income comes from dividends, interest, or rent, it represents an enormous chunk of capital that residents of Deschutes County own. The national family median income in 2004, according to Wikipedia is 46,300. The average Deschutes County, 56,500 in 2005, so an assumption of 20% more income is reasonable.

Assume the population of Deschutes County to be 150,000.

The next step is purely speculation, but I'm going to assume a 5% return on the investment captital.

So: 6.2 % of 56,500 is 3500.00. At 5% interest, that represents 70,000 in capital. Multiply that by 150 thousand residents, and up that by 20%, and residents of Deschutes County have something in the neighborhood of 125 million dollars above the national average in capital.

To get really speculative, we can guess that 10% of that population owns 90% of that extra amount of money. So, we've got 15,000 people walking around who own between them about 112.5 million.

Anyway, even if the specifics are wrong, I think it is undeniable that there is extra capital in this here county.

All of this is a long way to make the point I wanted to make, which is: 112.5 million can open alot of marginal, vanity businesses. If I'm making tens of thousands in investment income every year, losing a few bucks in my dream business is no big deal. Of course, I always say, no one, even the rich -- especially the rich -- likes to lose money. Thus the turnover in businesses.

If I'm completely off base with my assumptions or math, I'd love to hear it. But I think that the basic points, that we have way more capital in Bend than is normal, and that that capital explains why we have so many frakkin businesses, are valid.

3 comments:

Wes said...

Dunc,

My guess is that many of the boutique businesses are in Bend because of the market created by excess capital, rather than as the result of investors placing their money in an expensive hobby. Investors usually want a high return or great security, neither of which are attributes of a start up retail business.

Besides, consumers and city managers like more businesses.

Hope all is well.

Regards,

Wes

Duncan McGeary said...

Yeah,

Those city manager types will doing anything to get business....

Hey, Wes!

What you said. I think the excess capital gets brought to Bend and spent, rather than the other way around.

Dunc

IHateToBurstYourBubble said...

You quote the MEDIAN family income for the US, and the AVERAGE for Deschutes county. Average incomes are ALWAYS far higher than medians. Deschutes County median family income is $47,615 (barely higher than the US) vs it's average of $59,546.
http://homes.point2.com/Neighborhood/
US/Oregon/Deschutes-County/
Bend-Demographics.aspx
(sorry, the URL breaks if I leave it all on one line)

I came away from this article thinking that Bend depends disproportionately on non-working income... or that our "capital base" is temporarily inflated FAR higher than the national average, a situation that has not always existed.