Mobility Is Destiny: The New American Dream
Joining Jason on The Creating Wealth Podcast recently was author Parag Khanna to discuss his latest book Move: The Forces Uprooting Us. In early 2020, Jason accurately predicted the mass exodus from large cities to suburbia and rural markets as soon as lockdowns were lifted. But was this the largest migration on a per capita basis since the Dust Bowl and the Great Depression, as represented in John Steinbeck’s haunting classic The Grapes of Wrath? Turns out the development of the interstate highway system and westward expansion of the ’60s was the highest rate of American per capita resettlement, but Khanna goes on to confirm that we are getting back towards those levels. Americans were quite stuck in the ’80s, ’90s and 2000s, staying in one place, accumulating houses, mortgage debt, etc., but that is now changing. Skilled workers are moving to where the jobs are and unskilled workers are considering moving to cities that are more affordable, but growing and looking attractive to the possibility of inward migration as discussed in Move.
Many years ago, right in the thick of the Great Recession, Jason suggested that the best thing you could offer on a resume was mobility. So where is this new geography of opportunity? When the cost of living in coastal cities is prohibitive, where are people migrating? How is climate change affecting the way people migrate? After the lockdowns, Khanna tracked this phenomenon and saw people moving to cities such as Miami, Austin, Denver, Boise, Nashville and Atlanta. But not all of these places are climate resilient. In his book, Khanna talks about “climate oases,” or the places that are affordable, attract young people with a liberal lifestyle and are also climate resilient. These factors should be considered by property investors. He suggests you look at the climate model first. Are there places that you can buy into today that will appreciate quickly because they are in climate oases zones? Khanna encourages young property investors to get “unstuck,” do the math concerning these locations and then wisely pick their destinations.
Climate Change and Other Variables
Carefully consider the climate element of each city. If you were thinking about moving to Miami for example, you must be aware that flooding is an issue. The US has many cities with climate risks including too much water, rising sea levels and flooding, or too little water, droughts, forest fires, etc. FEMA has just updated their guidance by county of risk assessment for various climate challenges, which will affect insurance premiums, so you must be mindful of these risks where you are and where you might be going. However, there are also climate opportunities. Khanna tries to synthesize all these variables — economic, fiscal, socio economic, demographic and climate into an integrated picture of the kinds of places you want to be. We can see where people are going now, where they will go and where they should go.
Some of the most densely populated countries including China, India, Iran and countries across Africa are places that will experience devastating effects of climate change, whereas much of North America and Europe is in a climate oasis and will remain livable. Populations are shrinking in these areas, so it will become even more attractive for migrants. Projecting out to 2040, a climate impact study indicates which areas will experience the largest GDP loss in their economies as temperatures and sea levels rise. You might also consider how expensive certain areas with bad air quality have become and take a look at places that have the highest clean air rating. Or take a look at places with the most solar and wind power potential because you might not always be able to trust your grid.
Climate is not always the most significant factor in determining where people go, so you must consider it from a broad, geographical perspective. You might try to avoid gulf storms and hurricanes like Ida or Katrina by locating to a place such as the Great Lakes region, however, economically it is in decline. Michigan is losing people right now. So even if climate models are telling you to go to Michigan, it’s not rebounding yet or revitalized at the moment, so what are you going to do there? That’s not to say it won’t be, but it would require people moving there and investing in better infrastructure and creating jobs and so forth.
As with many things, you cannot be absolutely sure of any of these variables while trying to determine where a city is going. Khanna’s research does scenario based forecasting, which allows you to test a hypothesis and generate a forecast around the price of a real estate asset into the future based upon variables. For example, how would something like temperature changes or abolished income taxes play out? Would it attract people to that area? What effect would it have on government revenue and expenditure, population density, the price of real estate, etc.
Political climate and cost of living, as well as other nuances that can’t necessarily be accounted for in attracting certain demographics of people factor in here as well. Khanna mentions how some states are incentivizing people to move there. Oklahoma is offering people $10,000 to move there, while Vermont is adopting a tax free policy for digital nomads.
Mobility Is Destiny
The dominant way of thinking in the past has been that home ownership is better for society, but now it’s clear that many areas with high ownership rates had economies in atrophied states because people couldn’t move as easily for jobs. They were stuck in the homes that they owned, whereas renters had much more mobility. The ability to move makes a society much more dynamic. It helps the economy allocate resources to the right places.
Does this call for a restatement of the American dream? It’s not just about owning a home and having a degree anymore, but it’s about being mobile and accessing the shifting geographies of opportunities and building skills relevant to the market where you live and work.
Hence the new American dream: mobility is our destiny. And this certainly applies to all of mankind. History shows that we have been a nomadic, mobile species. This is nothing new for us. We have all the technology at our disposal to voluntarily move individually or relocate en masse, and into new kinds of housing. Just look at billionaire Elon Musk: he lives in one of his 50k Boxabl homes! The main point is that people can embrace technology, survive when disaster strikes and move whenever they need to. Why rebuild another susceptible asset when you can just move to an area that won’t be affected? Also, if homes are too expensive in your area, don’t take on the debt because you will tie up the money that you’re not spending. We live in a services economy and if everyone is locked into debt in a home they can’t afford, that takes money off the economic table.
Khanna is very bullish on Europe in terms of potential migration patterns. Europe’s high latitude means fewer heat waves, abundant water supply, renewable energy investments and shrinking populations. It presents an opportunity to buy assets cheaply if you can stomach the responsibility and work. European countries are acutely aware that they are facing a demographic collapse if they don’t increase migration. Their current dependency ratio (the number of young people whose tax payments finance the social security payments of the elderly and retirees) is much higher than ours. Russia and Japan have a similar problem and the US is certainly not in a position to gloat. But you’ll see countries such as Germany importing migrants in large numbers despite cultural inhibitions, absorbing the next generation in order to have workers, tax payers, care givers, entrepreneurs, etc. And you’ll see more and more that our economic survival is dependent upon it.
In the near future, we could see Asians migrating outwards more due to changes in climate, political issues, etc. If that happens, the countries that are able to attract the young, mobile, cash rich, dynamic, entrepreneurial, industrious Asians are going to be winners. The US has historically captured some of the best and brightest Asians. There are twenty-five million Asian Americans today and only four million Asian Europeans (a term coined in his book) and Khanna predicts between ten to twenty million more Asians will migrate to Europe in the coming years.
How do we sustainably relocate the world’s population or even relocate the people within America? As a species, we need to be more mobile for our survival and resilience, but also more sustainable while building new houses and cities with more wind and solar power, rainwater collection, wastewater treatment and recycling, hydro and aquaponic agriculture. We certainly have all of these capabilities today.
As people start voting with their feet, climate change crises arise, economies collapse, governments destabilize and technology disrupts, there is no doubt that we are entering a new age of mass migration. But the question is, where will you be?
Ashley & The Jason Hartman Team