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walkitoutI was reading an article (opinion piece) about malls over at Bloomberg (sorry probably behind paywall):
“It negotiated a three-year extension on a $300 million loan on its prized Santa Monica Place in California, giving it time to fill in empty anchor stores with experiential art exhibition company Arte Museum and the popular Taiwanese dumpling chain Din Tai Fung.”
That is such an amazing sentence. It can be very hard to tell when people are sincere in the financial press, and when they are knowingly saying something they know is absolutely absurd, but with a completely straight face because if they don’t acknowledge the absurdity, it’ll get published, but if they snark, they’ll never get it out there. I’m leaning on the second option in this case, but I get it wrong more often than I get it right.
There was a recent Odd Lots podcast about commercial real estate, and there were some brief remarks about LTV for mall loans being much higher than the rest of the commercial real estate space.
A recurring theme for me has been trying to identify where we can just sort of get rid of a labor-intensive component of our economy without too much hardship. You have to be careful what you get rid of, because a lot of labor-intensive things replace uncounted home labor. If you get rid of childcare, and one person from each household has to stay out of the paid workforce, or if the adults in the household have to collectively reduce their hours to provide the childcare, or if you redirect children to care for other children, you’ll have workforce losses now or in the near future that more than wipeout any savings from getting rid of childcare.
You also can’t get rid of labor-intensive components of our economy in which the workers are essentially choosing between not engaging in compensated labor at all or engaging in whatever it is they are doing in the labor-intensive component of our economy. There are a variety of examples, ranging from people who _can_ be a greeter at Wal-Mart but who it is otherwise difficult to find appropriate employment for. They either work as a greeter at Wal-Mart or they don’t work. Also, someone who does not need the compensation for their labor and is doing it for the love of the work probably isn’t going to respond to Sorry You Can’t Make Crappy Sculptures Any More by going to work as a cashier at Wal-Mart. They’ll just keep sculpting and not sell it. Finally, there are people who are nearing retirement anyway, and by the time they are retrained, they will really be retired (or dead), so removing them from the workforce isn’t going to gain you anything either.
NONE of these examples are clearcut. If the sculptor sees that her efforts are really needed in some paid position, she might dial back the hours she devotes to sculpting, and go do That Thing for a while instead. If you automated a position out of existence that was a great place for a certain kind of person to work, you may be able to find some alternative work that is also accessible to them. And there are going to be some retired people who come out of retirement, if you structure it so they can earn some money while keeping their retirement benefits.
Companies used to have typing pools. Even after word processors entered the workplace, some still did, but they stopped growing, shrank by attrition or retraining, and eventually withered into non-existence. You can kinda tell that a labor-intensive component of the economy is headed into its twilight when there is a much more highly automated way of doing the thing, and a much more labor-intensive way of doing the thing. However, it can be surprisingly difficult to tell whether something truly is more automated or not. If you could send a runner down to a restaurant to pick up a meal, and then you installed phones and so now you could call to the restaurant to order a meal, you still had to somehow have the meal delivered. One way or another, there’s a round trip between the person who ordered the meal and the restaurant. If the restaurant can combine lots of deliveries, it can stack round trips, but rarely with anything more than a single digit improvement in efficiency. Letting people place that order on the web probably improves communication and accuracy, but again, still gotta do that round trip. And for all that Mark Rober’s video about Zipline’s drone delivery service is super cool, and for all that there are robots driving meals around in some California towns, it’s just not clear that we’ve meaningfully reduced the labor _of the delivery_ of the meal. And anyone who has been in any commercial kitchen anywhere can tell you that we still haven’t really reduced the labor-intensiveness of meal production.
OK, we totally _could have_ reduced the labor-intensiveness of meal production, but in much the same way that escalating housekeeping standards mean that for decades, women spent roughly the same amount of time caring for their homes despite “labor-saving products”, restaurant meals have also compensated for reduction in labor in producing meals by producing more complicated meals.
Ignoring meals, however, there are packaged goods, whether that is a box of toothpaste or a box of pasta or tennis balls. We discovered during the last few years that we had separate supply chains for commercial vs residential use and ordering; at the same time, we’ve been creating duplicate supply chains for e-commerce vs. ?-commerce.
(A digression:
Once upon a time, diapers were cloth diapers. Then there were paper diapers, and diapers and diapers were cloth diapers unless they were paper diapers. Then there were paper diapers and cloth diapers and if someone said diapers, people would ask which one they meant. Finally, there are cloth diapers and diapers, and diapers are NOT cloth. You can see roughly the same thing with mail: mail vs. e-mail, snail mail and e-mail, finally mail is increasingly e-mail and people act like snail mail doesn’t even exist anymore.)
Where are we on the transition from a default understanding of “retail” as occurring in person to a default understanding of “retail” as occurring online? I think we are roughly at the specify both stage: brick-and-mortar retail / online retail. However, the fact that the entire invisible logistics industry is recreating itself to support e-commerce suggests that once that process is complete, we’ll probably see big changes rapidly in in-person shopping. We won’t _necessarily_ get a ton of workers back with the dramatic reduction in in-person shopping _from the stores themselves_. However, maintaining duplicate logistics is A Lot, so we’ll probably get something from automating that industry in the direction of e-commerce. But even if there are not that many jobs “working retail” doesn’t mean there are not a lot of jobs connected to supporting the built environment of retail, and the financial infrastructure of retail. Finally, the transition to e-commerce in logistics is forcing logistics to automate _at all_ which it has resisted quite strenuously.
Will malls go away entirely? *shrug* Will malls as a central focus of suburban living continue to atrophy? Almost certainly. Destination malls are obviously an entirely different animal.
Anyway. None of that was really worth writing or reading, but now that you’re hear, didn’t that sentence from the Bloomberg article make you snort laugh? A third of a billion dollars so that they could have projected Arte and street food. Love it!
“It negotiated a three-year extension on a $300 million loan on its prized Santa Monica Place in California, giving it time to fill in empty anchor stores with experiential art exhibition company Arte Museum and the popular Taiwanese dumpling chain Din Tai Fung.”
That is such an amazing sentence. It can be very hard to tell when people are sincere in the financial press, and when they are knowingly saying something they know is absolutely absurd, but with a completely straight face because if they don’t acknowledge the absurdity, it’ll get published, but if they snark, they’ll never get it out there. I’m leaning on the second option in this case, but I get it wrong more often than I get it right.
There was a recent Odd Lots podcast about commercial real estate, and there were some brief remarks about LTV for mall loans being much higher than the rest of the commercial real estate space.
A recurring theme for me has been trying to identify where we can just sort of get rid of a labor-intensive component of our economy without too much hardship. You have to be careful what you get rid of, because a lot of labor-intensive things replace uncounted home labor. If you get rid of childcare, and one person from each household has to stay out of the paid workforce, or if the adults in the household have to collectively reduce their hours to provide the childcare, or if you redirect children to care for other children, you’ll have workforce losses now or in the near future that more than wipeout any savings from getting rid of childcare.
You also can’t get rid of labor-intensive components of our economy in which the workers are essentially choosing between not engaging in compensated labor at all or engaging in whatever it is they are doing in the labor-intensive component of our economy. There are a variety of examples, ranging from people who _can_ be a greeter at Wal-Mart but who it is otherwise difficult to find appropriate employment for. They either work as a greeter at Wal-Mart or they don’t work. Also, someone who does not need the compensation for their labor and is doing it for the love of the work probably isn’t going to respond to Sorry You Can’t Make Crappy Sculptures Any More by going to work as a cashier at Wal-Mart. They’ll just keep sculpting and not sell it. Finally, there are people who are nearing retirement anyway, and by the time they are retrained, they will really be retired (or dead), so removing them from the workforce isn’t going to gain you anything either.
NONE of these examples are clearcut. If the sculptor sees that her efforts are really needed in some paid position, she might dial back the hours she devotes to sculpting, and go do That Thing for a while instead. If you automated a position out of existence that was a great place for a certain kind of person to work, you may be able to find some alternative work that is also accessible to them. And there are going to be some retired people who come out of retirement, if you structure it so they can earn some money while keeping their retirement benefits.
Companies used to have typing pools. Even after word processors entered the workplace, some still did, but they stopped growing, shrank by attrition or retraining, and eventually withered into non-existence. You can kinda tell that a labor-intensive component of the economy is headed into its twilight when there is a much more highly automated way of doing the thing, and a much more labor-intensive way of doing the thing. However, it can be surprisingly difficult to tell whether something truly is more automated or not. If you could send a runner down to a restaurant to pick up a meal, and then you installed phones and so now you could call to the restaurant to order a meal, you still had to somehow have the meal delivered. One way or another, there’s a round trip between the person who ordered the meal and the restaurant. If the restaurant can combine lots of deliveries, it can stack round trips, but rarely with anything more than a single digit improvement in efficiency. Letting people place that order on the web probably improves communication and accuracy, but again, still gotta do that round trip. And for all that Mark Rober’s video about Zipline’s drone delivery service is super cool, and for all that there are robots driving meals around in some California towns, it’s just not clear that we’ve meaningfully reduced the labor _of the delivery_ of the meal. And anyone who has been in any commercial kitchen anywhere can tell you that we still haven’t really reduced the labor-intensiveness of meal production.
OK, we totally _could have_ reduced the labor-intensiveness of meal production, but in much the same way that escalating housekeeping standards mean that for decades, women spent roughly the same amount of time caring for their homes despite “labor-saving products”, restaurant meals have also compensated for reduction in labor in producing meals by producing more complicated meals.
Ignoring meals, however, there are packaged goods, whether that is a box of toothpaste or a box of pasta or tennis balls. We discovered during the last few years that we had separate supply chains for commercial vs residential use and ordering; at the same time, we’ve been creating duplicate supply chains for e-commerce vs. ?-commerce.
(A digression:
Once upon a time, diapers were cloth diapers. Then there were paper diapers, and diapers and diapers were cloth diapers unless they were paper diapers. Then there were paper diapers and cloth diapers and if someone said diapers, people would ask which one they meant. Finally, there are cloth diapers and diapers, and diapers are NOT cloth. You can see roughly the same thing with mail: mail vs. e-mail, snail mail and e-mail, finally mail is increasingly e-mail and people act like snail mail doesn’t even exist anymore.)
Where are we on the transition from a default understanding of “retail” as occurring in person to a default understanding of “retail” as occurring online? I think we are roughly at the specify both stage: brick-and-mortar retail / online retail. However, the fact that the entire invisible logistics industry is recreating itself to support e-commerce suggests that once that process is complete, we’ll probably see big changes rapidly in in-person shopping. We won’t _necessarily_ get a ton of workers back with the dramatic reduction in in-person shopping _from the stores themselves_. However, maintaining duplicate logistics is A Lot, so we’ll probably get something from automating that industry in the direction of e-commerce. But even if there are not that many jobs “working retail” doesn’t mean there are not a lot of jobs connected to supporting the built environment of retail, and the financial infrastructure of retail. Finally, the transition to e-commerce in logistics is forcing logistics to automate _at all_ which it has resisted quite strenuously.
Will malls go away entirely? *shrug* Will malls as a central focus of suburban living continue to atrophy? Almost certainly. Destination malls are obviously an entirely different animal.
Anyway. None of that was really worth writing or reading, but now that you’re hear, didn’t that sentence from the Bloomberg article make you snort laugh? A third of a billion dollars so that they could have projected Arte and street food. Love it!