Tuesday, March 27, 2007

An e-mail from a friend has prompted me to remind everyone that I am not anti-growth, per se. I am anti irrational and unsustainable growth. It is the gray area between the two that I'm trying to explore.

I grew up in Bend. It was a nice small town, and always had a sense of vibrancy that I didn't feel in other small towns. But the town I grew up in wouldn't have supported my store. It didn't have bookstore at all, and only one theater. It was conservative and slow to change.

I also have a memory of a time when Bend was struggling, when it was hard to sell a house, or create a business, when downtown was 40% vacant and the malls could never seem to really
ever get going. And I have the unique experience of going through 7 or 8 bubbles in my business; baseball cards, comics, pogs, beanie babies, pokemon, etc. and knowing how destructive bubbles can be.

So growth is fine, as long as it is grounded in reality. What I'm trying to narrow is the gap between the perception of what Bend is and what it will support, and the reality of what Bend is and what it will support. I want my rent to reflect the true level of sales, I would prefer to face competition that is based on a true level of customers. I would like to cut through the B.S. that the Chamber of Commerce and the promotional side of Bend (real estate, financials, developers, insurance agents, etc.) tend to spin.

It has got me thinking about what I truly think is going to happen in Bend.

I don't expect a collapse. Mostly, because I think big money has been invested in Bend, and big money isn't going to pull out without losing their investment. My sense is that there is too much momentum. Bend has gotten big enough that it would probably take a perfect storm to bring it down to an early 80's level downturn. (Sure, if the economy falls into recession, the housing bubble bursts, their is a major terrorist strike, etc. it could happen.) But if that happens, we're all in trouble, and there isn't much you can do to avoid it.

Sure, we could be economic survivalists, and hole up waiting for a disaster. I have a friend who has maintained for a couple of decades now that the economy is going down the drain. He'll be right, one of these days. And there are probably still survivalists holed up in cabins in the mountains waiting for the U.S.S.R. to rain nuclear missiles down on our heads. Thing is, in both cases, holing up would only delay the inevitable.

There is something very satisfying in predicting doom, and watching it happen. Years ago, my sports card distributors talked about how we needed a nice solid slowdown to weed out the bad businesses. I bought into that notion. But I was wrong. Any downturn bad enough to weed out the bad businesses, will inevitably bring down good businesses, and hurt the survivors. On the other hand, excesses do need to be wrung out of the economy before they get so big they bring us all down.

I do think there are some unreasonable levels of retail in Bend. I think there are unreasonable expectations of growth and prices. There has been a housing bubble. I suspect there are some financial shenanigans going on. I don't think millionaires are going to buy all the condo's downtown, I don't believe the Old Mill District is truly profitable, I believe we have overbuilt motels and that a lot of developments are going to fall flat. I believe we are in danger of driving out viable businesses through rent increases, and being replaced by vanity businesses.

Right now, the gray areas is a little too wide for comfort. But reality will eventually reassert itself. I'm just hoping it will be about the time I'm negotiating for a new lease, and that I've managed to bring down my debt, and even have some cash in the bank. I'm hoping that my businesses will be solid enough to withstand a downturn, and that the froth of irrational and unsustainable growth doesn't drown my more reasonable ambitions.

2 comments:

Anonymous said...

New consumer confidence numbers may point to housing-led recession: http://infohype.blogspot.com

Bend Economy Man said...

Dunc, I think you are right. I would add "unsustainable lifestyles" to that list of local excesses.

Sure, people with more money have moved to Bend. Long-timers have benefited from the boom. But unless all of these folks are cheating on their taxes (not reporting income, which in a community with a lot of builders and under-the-table laborers I guess is realistic), there are a lot of people stretching to buy fancy cars, recreational toys, fancy home remodels and so on.

In the Bend I grew up in, which was probably about 25 years behind you, firewood was a primary source of heat for probably a majority of homes. People hunted elk and deer as a food source as much as a form of recreation, and the schools even allowed kids to have excused absences for hunting. Parents formed babysitting co-ops to take care of kids. The percentage of families who had Bachelor season passes was much lower, even at the cheaper prices they had back then. People made deals with local livestock farmers to buy whole lambs, pigs, etc. to save on meat. The schools had desks so old they featured inkwells.

I guess what I'm saying is that if you take away the promotion and hype of "checking out of the rat race" and the "recreational lifestyle," or if the economy gets bad enough that people are more concerned with putting food on the table than playing, that's what Bend is like. It's never been easy, take away the last 15 years or so, to make a good living in this isolated area.

Don't get me wrong. I'm not complaining about how Bend was 25 years ago. It was nice in its own way, and the pace of life was slower and people still had a lot of fun. And things have changed since then. People can telecommute, and for some jobs Bend's isolation is no problem. But if we're talking about a reversion to the mean, and I think we are, then the folks who are living at the upper-right-hand corner of the envelope, consumption-wise, will have to live more simply. As all of us probably will, with a few exceptions.

I would guess that there are probably a lot of people who think that Bend has experienced some kind of "paradigm shift," somehow "turned the corner" into a permanently prosperous future. I think that true paradigm shifts happen exceedingly rarely, and that most of the time when people start saying "oh, don't worry about that any more - things have changed," hang on to your wallet.