For an ‘Edge’ in Real Estate Investing, Follow the TalentJul 28, 2017
My law firm has an internal message called “ATR”. It stands for:
Attract, train and retain talent!
For a law firm it is the whole game. Clients sometimes leave or even get merged or go out of business; however, if you have a high-quality legal product you can always get more clients. If, on the other hand, you lose your talent – i.e. your lawyers – it is game over – because you have nothing left to sell. Also, once the talent starts to leave it is like a run on a bank and almost impossible to stop.
So we focus relentlessly on this message internally.
Also – I can’t resist a very dramatic movie quote from a movie I like called Rock Star. In the (dramatic) scene the band is shouting at each other and breaking up. Mark Wahlberg – the lead singer – walks out angrily. The remaining band leader turns to Jennifer Aniston and offers that even without Wahlberg she can still manage the band. Aniston replies:
“There is one rule in the music business and that is ‘follow the talent.’ Well all the talent in this band just walked out the door.”
Aniston leaves and the movie unfolds and I won’t spoil what happens with more about it here….
In any case, I have been wondering whether that is what real estate investors should be focusing on when they determine where to invest?
Consider an obvious situation unfolding now – Hartford versus New York City. Aetna – a long-time stalwart in Hartford – just took the step of going to New York City for its top brass – and it is big news. Why did they do that? Obviously New York City is a place where the top talent already is, and wants to go, and stays. Even after 9/11 the talent didn’t leave.
Hartford is known informally as the insurance capital is of the US. But – I genuinely mean no offense – for many people Hartford is not as attractive a place to live as New York City. Does this mean that other insurance companies will follow Aetna’s lead? Can they compete with Aetna without also being in New York City – or another place that would attract top talent?
Hartford is a lot cheaper than New York City, but where would you want to invest in real estate right now?
I made this point in my “Brexit and London and Talent, Oh My” article, where I took the position that London would be just fine post-Brexit, because London is a cool and exciting place where the talent just wouldn’t want to leave, so one way or another London would be just fine. So far – a year later – that seems to be the case.
I made this point eight years ago in the depths of the financial crisis – when I was giving a speech to my firm. They will no doubt recall how afraid we all were. My speech said effectively that New York had nothing to worry about since the talent wasn’t going anywhere – indeed, where was the talent going to go after all? I don’t like to be a humbug (that much), but I was certainly right about that as New York has continued its position as the global center of finance, and much more. This is all because the talent has stuck around.
Indeed, our ATR message is one for cities – and you regularly see them competing for businesses that will attract jobs for talented people.
And you even see the ATR message for countries now, as they try to prevent their talented citizens – especially the wealthy ones – from leaving. Indeed, sometimes they compete a bit unfairly, by making laws stopping you from leaving.
My point is that ATR is – or should be – the message for just about every organization – every city – and every country. See also my article, “Why Are You in Business” from November 2016, which was my ‘first’ Real Estate Philosopher article, where I suggested that ATR should be a focal point for just about any organization.
If you follow my thinking, then a real estate investor that is considering where to invest should add to its demographic due diligence a Talent Analysis, which analyzes whether talented people are coming or going.
How would one do this? I admit I don’t know. Certainly just reading local news articles for the past three to five years would give insight. And I bet the predictive analytics types and the tech people could come up with programs and heuristics to figure this out too.
In any case, that is my recommendation – before investing, do a Talent Analysis of the jurisdiction in which you are investing. And if the jurisdiction (A) isn’t trying hard to do ATR and (B) isn’t succeeding in ATR, then just don’t invest there.
By the way – as an aside – for all those who think NYC is crazily overpriced, I wonder if your pricing determination takes into account a NYC Talent Analysis?