Real estate is also marketing

There was once an investment bank, back in the day, that spent lavishly on its meeting rooms where clients came to visit and were entertained, while letting all the remnant spaces of its office area crumble. Other investment banks took a different approach, but the meeting rooms, no matter the firm’s budgetary decisions or constraints, were sacrosanct. Understandably.

When the industry gave rise to many smaller firms of lesser fame and balance sheets, the practice persisted, even to the point of leasing a shared location that seemed expansive to the untrained eye, although behind the shared facade there was a cubicle and a closet. When the excitement shifted away from Wall Street and to innovative tech, the idea evolved but the principle was constant: Incubators, WeWork locations, and the such, were, among other things, the outward expression of the tenant’s profile and desires, as previously palatial gathering grounds turned playful, glass-walled and gadget-conscious.

For all the issues of efficiency and team culture now under consideration in the centralized vs. decentralized commercial real estate discussion, as the distributed work-from-home routine becomes a universally accepted standard, the referenced aspect of outward presentation remains a theoretic challenge.

Beyond the meeting rooms and glass and all of that, the physical location is a symbol and advertisement. Companies spent fortunes for their logos to be on display at the building entrance, cities that became a magnet for buildings and logo’d entrances had emerged and differentiated on the basis of the tallness of these structures and the logos that moved in.

Banks had opened and maintained branches around town, even as mobile applications reduced the need for that, in large part as a testament to status and to entrench a presence to the customer’s perception, while the logo in the window was a billboard ad for everyone to see.

If physical space, in this way of looking at it, is a marketing expenditure as much as (or arguably now more than) a real estate expense, and if the current trend to reconfigure real estate persists, what will replace the marketing? And, beyond the firm’s offered product – which may or may not sell itself, which may or may not require a physical presence, which may or may not be digitized – how will the deepest pockets outwardly differentiate? How will the smaller pockets pretend to be less small? A bookshelf and some flowers in the video background can be had by anyone.

NY Times – Manhattan Faces a Reckoning

The journey back

Many stories are odysseys, even some that aren’t. The truest definition, I believe, is not a journey into the unknown, but a long return from it. Neal Stephenson recounts an odyssey 5,000 years in the making. But you can’t go home again, not really.


Imagine our world if the moon – which has been a sort of anchor since long before we existed, which has populated our images and songs and mathematical equations, and which we all distantly consider ours – were to break. Worse still, this steady object among our belongings turns against us.

It isn’t an eclipse but a shattering, which at first splits the moon into a few large pieces that in a two-year span divide and subdivide as they knock against each other. As the pieces become smaller and more numerous, they fall upon the earth like a “hard rain,” lasting millennia and rendering the world uninhabitable in its wake.

In this story about change, the world unites to engineer a colony in orbit where the species may survive. The plan is to wait – 5,000 years according to forecast – until it’s safe again to land. But the thing is complicated, because only some can escape in time, and because in orbit the living environment requires adaptation.

A new society of orbit dwellers will be in some ways similar and in some ways very different from the society we know. It is a new civilization of women and men on a long, long journey home. The distances are vast, the path is circular, and the destination is always in sight.

Some readers have complained about the enormity of the book’s technical detail — the physics, the mechanics, the small descriptions of the gadgets — filling the large space between plot points in a speculative fiction 900 pages long. These qualities, and the length, serve a melodic purpose. The rhythm is slow, and the song is beautiful and strange, like its title, which is a palindrome…

You can’t go home again, it says, because you are already there.

A lovely view of heaven but I’d rather be with you…

The option exercise market

Two aspects of the venture capital fund model are of interest to this discussion: a diversified portfolio of long-dated out-of-the-money options, and the reserves to exercise a few of these as the underlying stock value grows.

The first is most pronounced in the seed and early rounds of the startup cycle, the second in the doubling down that comes later. The first is a selection of big win possibilities, the second is a sifting through the outcomes and homing in on some probables.

It may be argued that during the progression from the first to the second case, the portfolio itself becomes more concentrated, as its value distribution as well as its financial allocation starts to skew.

Taken to a theoretical extreme, it’s conceivable to see a final outcome where there is one holding only, as the portfolio is through the course of maturation trimmed. It might also theoretically be argued, if first looks on optionality were not of consequence, that one could wait until that time and buy the most proven winner, or the one with the most potential from the group.


There is a case to make, in an environment in which trends and growth potential are reset, that capital is generally venture capital. There are many ways to play it, as there should be, given differences in risk appetite, hold periods, and liquidity objectives of the various investor types.

One could also argue that all the cash-rich and debt-free are in a similar position to the SPACs, enhanced in certain cases by select foundations that persist.


The exponential circularity

The circular effect is roughly as follows: If value is essentially a forecast, then the economy is the aggregation of all forecasts, and the markets – where assorted values are determined in anticipation – are a clearing exercise shaped by a view of how these forecasts are prone to change. The markets set a forecast to the forecast, which can reflexively influence the source.

The investment decision – a strategic course of action by a business, group, or individual – takes its cue from the economy and markets, which take theirs from the investment that’s decided.

Over the course of time, the crisscross of influences and effects settles into a semblance of order, where all involved may start to get accustomed to a general direction until the order of the thing gets shaken and a period of volatility again takes root. The severity of this depends on the depth and reach of the shaking, and thus, too, the time to order on the other side, and its nature.

The present time and its triggering event are of a depth and reach that is (arguably) unprecedented, which makes the described flow particularly tricky, with little to look back to as a guide or by analogy to find the equilibrium.

At the basic fundamental level this presents a problem…

Howard Marks – Uncertainty

… ideally resolved with patience and close observation…

Paul Tudor Jones – May 2020 Market Outlook

… to the extent permissible by liquidity and funding…

WSJ – Banks Are Only as Sound as Their Models

… which circularly reflects back on value and is determined by it.

Untested medicine

The idea of negative interest rates is to discourage cash hoarding and encourage investment or spending in a depressed economy. If a deposited dollar will return less than a dollar over time, the incentive is to use that dollar elsewhere.

This assumes that using the dollar elsewhere is likely to return more than less, and that the depressed economy can be lifted by a spending and investment boost from its non-government participants.

In principle, as I understand it, that is the scope and purpose, and it conceptually might make sense in a deflationary environment, in which businesses and consumers choose to wait for better bargains by penalizing them effectively for the deflationary bargain hunt.

In the current environment, the deflationary context is different, I think. If there is cash hoarding, it isn’t to negotiate for a cheaper price, but to survive. The economy isn’t depressed because of timid consumers, it’s depressed because of fear and a level of uncertainty that is inordinately high and unalleviated.

So, in this context, what would be the economic scope and expectation of a negative rate environment? To force a skittish population into higher risk? To reduce the little interest income for those who have it and turn it into an expense? To shift the burden of the economic lift from the leadership (if you will) to the followers?

The backfire possibilities are vast, considered from this perspective, and the potential side effects of this untested medicine are entirely unknown.


The markets, however, are expecting it.

What you’re really selling

There is probably a scene in Mad Men in which a business executive is pitched by the ad creative on the positioning of an automotive product: “You’re not selling a car, you’re selling freedom!” Or something to that effect, it may have been a kitchen appliance. In the ’60s the pitch would have been the same.

Today, the general view is that distance-facilitating offerings will best succeed and gain in value. Predicated on the current state of remote locationing for everyone, products related to remote learning, remote work, remote medicine, remote entertainment, remote storage, remote provisioning, and so on, are in vogue, and the generally accepted principle is that the common thread for successful products is distance and remoteness.

That is the car, in any case. What’s being sold is something different and much broader, I believe. “You’re not selling cloud, you’re not selling virtualization, you’re not selling streaming, you’re not selling group messaging… you’re selling security, you’re selling caution, you’re selling defense.”

If the era at one time was about revolution and breaking boundaries, today it may be shifting to conservation and retreat. At least, these are the early signs. Voices as diversely confident as Soros, Druckenmiller, and Buffett, are expressing a lack of confidence. Markets are all over the place, as are the governing authorities. Opinions change from one day to the next, with greater or lesser assertiveness. In such an era, consumption is not unlikely to go in the direction of safety and trust.

Sometimes, this notion manifests itself in ways that are not Zoom or Netflix.


The option on the option

The nodes in the global network mesh have reset systems of engagement. The frequency, the links, the scope and goals of interaction are now different. Not necessarily better and not necessarily worse, but in some cases more or less, slower or faster, denser or thinner, skewed or balanced for individual clusters, some of which are tied and some of which are not, and overall, as a result, the network profile as we know it – the mesh of social, industrial, political, financial, economic flows and patterns – has been altered.

The process is continuing, and is likely to continue after the initial catalyst has passed, because a change in any network profile is known to lead to actions and reactions, dynamic responses within the network graph, with unintended consequences and side effects and ripples, all ultimately rooted in behavior, which might change or stay the same in brief or lasting ways, that aren’t easy to anticipate. Because it is a network, the farthest distant and most isolated node is not entirely without influence. It’s only a question of degree.

By the same token, the most central and most densely linked can stir things up most forcefully. This isn’t a matter of better or worse necessarily, as mentioned, but about the breadth and depth of change. A list of current examples follows, in no particular order, which could be regarded in terms of direct causes and effects, and, maybe more interestingly still, the indirect ones that are possible.

MIT Technology Review
NY Times
The Information
Joe Weisenthal / Bloomberg morning note

As mentioned, this isn’t about better or worse, necessarily, it’s about unpredictability and change. To which we will eventually adapt, as the network stabilizes.