The Prof G Pod with Scott Galloway
00:44:16 · Scott Galloway, Kyla Scanlon, Aziz Sunderji
[00:44:16] S1: On to our next question. The question was how much are Wall Street landlords really to blame? What do you think of this law that's been, I think it's been passed actually that private companies can't own more than I think it's 25 or 30 single family homes. Kyla, any thoughts? [00:44:34] S2: I mean in terms of the Wall Street landlords, they're not that big of a part of single family rentals. This is something that I get a lot of comments about whenever I talk about housing that it's really the Wall Street landlords, but they don't own that many at the national level. But they do own quite a bit in some cities. Like, I think it's quite high in cities like Atlanta and Jacksonville. So I think that it it tends to be a scapegoat for this much broader problem. And I also think they're trying to buy up more and more properties, so, like, the rates rather than the level might be the issue here. But, yeah, the Wall Street landlords, they're not as big of a issue at the moment that could change as people make it out to be. [00:45:21] S3: Yeah. I I would I would agree with that. They're... I don't think they're they're a huge chunk of the market. They're they're very, like, visible and very easily vilified group. Know, like who who like who likes Wall Street investors? Like it's a pretty dunking on them is pretty safe politically. But like I just don't think it's I don't think it's a huge factor on the market.
00:45:21 · Aziz Sunderji, Scott Galloway
[00:45:21] S3: Yeah. I I would I would agree with that. They're... I don't think they're they're a huge chunk of the market. They're they're very, like, visible and very easily vilified group. Know, like who who like who likes Wall Street investors? Like it's a pretty dunking on them is pretty safe politically. But like I just don't think it's I don't think it's a huge factor on the market. [00:45:42] S1: There seems to be a general, mean people want to simplify the thought process. Mean you just you just gave an example, know, Wall Street bad. I think I bought an apartment from Colony Capital. A big hedge fund came in and bought a ton of real estate in Florida in the odds and it ended up being a very bad idea. And I remember the broker telling me that the best sellers are these big hedge funds because they just want to get rid of the places. So you know, it's, they're different type of owner. But you know, anytime you have ownership and renters, you're gonna have a similar dynamic. How should we, one of the other ways that I think people try to simplify the market is they say, oh, blue state versus red state. Red state it's build, baby build, you know, a lack of regulation. In a blue state it's everything's a historic district. And if there's some muskrat that was seen here, we need to do a study on it. Is it really that simple? Are we really seeing that kind of bifurcation in the ability to build between traditionally blue and traditionally red states?
00:46:46 · Aziz Sunderji
[00:46:46] S3: So you guys know the book Abundance, right? By Ezra Klein and Derek Thompson came a few years ago, right? And one of the arguments or maybe the central argument they made was that our failure to build is a function of regulation, which itself is downstream of politics. And in particular, that blue states put in place all this regulation that makes building slow and leads to higher home prices. And I think that argument is is not... It doesn't survive the data. It's just not right. Okay? So if you look at a place like New York, there's a whole constellation of, you know, characteristics about a place like New York. It is it is... The people who live here are quite highly skilled, highly educated, high earning. It's very productive. GDP per capita is really high. It's very, very dense. These are some of the most, like, dense... Even San Francisco, which people are accused of not being that dense, it's still pretty dense in a global perspective. They're also... You know, New York is hemmed in by water, so it can't really expand outwards. These characteristics, it's like this whole constellation of characteristic. That... You could say that about almost every big city in the world that has become really expensive. It's true about San Fran. It's true about Seattle, Miami. It's true about, you know, Paris and London and Copenhagen and Sydney. These are these are characteristics that you see around the world. And actually, all these places, may not be Democratic voters, but they're they're lefty. And so, you know, what what what Ezra Klein and Derek Thompson did was they they, like, they wove a very compelling narrative out of this. They they picked out a few variables, and they said blue equals regulation equals slow building equals expensive housing. And I don't think that's correct. I think it's density. It's really hard to build in dense places. And dense places happen to be the ones that attract highly skilled people who tend to be lefty. So, you know, I'm Canadian. I can't vote in this country. But I... If I could, I'd be a Democrat. And my worry is that the kind of vilification on, like, you know, weak empirical grounds is turning a bunch of people away from Democrats when it's partly their fault.
00:48:56 · Aziz Sunderji, Scott Galloway
Maybe Democrats do regulate a little bit more, but a lot of it is just the fabric of these big dense cities full of people who earn very high incomes. [00:49:05] S1: And Kyla, before you weigh in here, isn't some of it also that young people, I don't think we can really ever appreciate the impact that Instagram is having on the world. And that is people see a life and think that's not a 0.01% life, that's aspirational. That is a normalized life that I should have access to. And everyone aspirational I know is either living in LA and going to hiking in Runyon Canyon and going to Nobuzuma, or they're in New York living in the West Village. And I should and deserve to have access to that. And young people flood into these cities and the prices go up. I couldn't, when I was your age, remember thinking I can't, I left New York because I just couldn't afford it. And that was sort of a natural part. And now I hear just young people say, York or die. We're a memetic species. Isn't some of this just a general expectation amongst young people that they failed if they aren't living in Beverly Hills or Soho? Or am I being, I say this stuff and I realize how boomer I sound. I want to acknowledge that I think housing is a huge issue and we have an obligation to shove more capital into the hands of younger people. But I get the sense that I wonder what percentage of people, young people now feel that a normal life is to live in the West Village or to live in Beverly Hills versus my generation.
00:50:45 · Kyla Scanlon, Aziz Sunderji, Scott Galloway
[00:50:45] S2: I mean, you see the stats on how much money younger folks feel like they need to be successful. It's like double, I think, even what millennials need. I think part of that is inflation, and I think part of that is inflated expectations. We have two types of inflation there. But I I I don't know if all of what's going on in the housing market is, you know, people going on Instagram and seeing influencers, you know, rent out homes and rent cars and pretending that they own them. I I mean, I think that definitely complicates the picture, and there is this sense that you should be able to move to a city, and it should be cheap, and it should be accessible. I think it could be cheaper and more accessible. Like, my rent's extremely high in LA, and sometimes I'm like, why is this so high? Like, what is, you know, the power goes out all the time. Like, what what am I paying for? And so I think that's also part of it, is that it it's almost like so high to the point that it it doesn't even make sense. But I don't know if aspiration is like the core driving force behind some of the dynamics. I think it complicates the picture in terms of financial knowledge and people believing in their economic future. But... Yeah. Aziz, what do you think? [00:51:59] S3: Yeah. I think I I think part of it, like, to be fair to to the folks who do wanna live in the West Village [00:52:04] S1: or New York City or
00:52:05 · Aziz Sunderji
[00:52:05] S3: San Francisco or wherever is that there's been a concentration of economic activity in cities. And so, you know, if you wanna, yeah, if you wanna have a seat at the table, like, one of the things I love about New York and the reason I pay, like, an exorbitant amount of my income in rent is that it's a place stuff is happening. Like, it's a great place to to meet people, to build a business. But I'm like, I'm paying through the nose for it. So I I think that they're... Like, people wanna be in cities partly for for good reasons. It's just... It's not just memeticism, but that's certainly part of it. I'm... I fully agree that walking around with phones in our pockets that are like wormholes to other realities where people are are, like, living much more lavish lifestyles than our own is very, very bad. I've done some work on looking at happiness across countries, and you see this with the... I mean, I'm not the only one who's looked at this, but if you look at the correlation between smartphones and happiness, it's a very strong correlation. It's very hard to deny. I think it's very bad for our mental health, and we should all spend less time on our phones. I I will... Let me ask... Let me add, like, one quick thing to to that, which is that this is part of the the problem. Right? Like, if you look... You know, economists talk about the demand curves and the elasticity of demand. And part of the problem with a place like New York or other big cities is that there's so much demand to live here. And so the amount of housing we would have to build to meaningfully move the needle on rents or home prices is really, really high. There's there's a study that argued that even if every single building in Manhattan was a skyscraper, it would only drop rents by 15%. There's just so much demand to be here.