What Disasters Reveal About Americans’ Economic Reality
COVID-19 provides another wake-up call. Maybe this time we’ll listen.
The Disaster Winners
Late last year, I found a message in my inbox extolling the many reasons why I should move to Buffalo, New York. While I never signed up for the “Be in Buffalo” mailing list, I found myself entertaining this inbox invasion, genuinely curious how long-hurting cities in western New York’s rust belt were selling themselves to the world.
One day while lazily using their handy calculator to compare your current city’s cost of living to Buffalo’s — it turns out San Francisco is more expensive — a featured article entitled Will Buffalo Become a Climate Change Haven? caught my eye.
The thrust of the article was that recent climate change modeling indicated that Buffalo was poised to thrive amid rising temperatures worldwide. City officials are running with this narrative, calling it a “Climate Refuge City” where they hope “the coming wave of climate refugees with revive Buffalo, filling its vacant lots and abandoned storefronts.”
It took me a moment to fully absorb the mentality underlying this aspiration: Buffalo is a city so desperate for rejuvenation, that according to its leaders, a best-case scenario for the future requires a global climate disaster.
As I read along, equal parts horrified and compelled, I realized that this perverse logic resonated with me personally. Over the past few years, I’ve noticed myself casually daydreaming about a fantasy disaster that would enable me to buy a home in a major American city — temporarily wrecking the financial system, while leaving my own economic status unscathed.
When I become aware of myself in these moments, I’m disquieted both by the fact that a dark corner of my brain has the emotional capacity to root for widespread financial devastation, but also that I believe on some level that such an event is the only way to gain an economic foothold.
When the guilt of allowing such a thought to sneak in from my subconscious washes away, I’m left with stacking explanations as to why I might harbor these thoughts. I seem to have absorbed two interrelated lessons that explain a great deal about the current American economic mentality:
#1 Based purely on unscientific personal experience, disasters tend to hit roughly once every 10 years. September 11th: my freshman year of high school; The Great Recession: the year I graduated college; COVID-19: right on time.
#2 Gains in financial and housing markets follow on the heels of such events. In the past few decades, disaster has been deeply connected with economic opportunity for those who have the means to take advantage of low stock prices and flagging housing markets. This, we have learned, is how you get ahead. With crash comes opportunity.
Aaron Glantz, who wrote a book about those who profited off America’s housing bust during the Great Recession, describes this dynamic nicely:
“I am one of the lucky ones. I profited off the housing bust. I leveraged the Great Recession to live the American Dream.
In May 2009, with the housing market in free fall, I bought a foreclosure. I scrounged money saved living in a nonprofit housing complex near the University of California at Berkeley, where I’d gone to school, and, with help from my parents, my wife’s parents, and my grandmother, cobbled together a down payment on a two-bedroom house.”
Unsurprisingly, the ability to leverage disasters for financial gain, is not evenly distributed across income brackets. According to a Pew Charitable Trust study, in the wake of the Great Recession, upper income earners had actually surpassed their 2007 net worth by 2016, unlike low- and middle-income groups who still lagged far behind their pre-recession net-worth.
Intuitively, this makes sense. Higher-income groups have less of their net worth tied to household ownership, enabling them to invest disposable assets during the recession lows and realize significant gains only a few years later.
Evidence suggests that the city of Buffalo and I are not the only ones who have internalized the notion that disasters can be an opportunity for arbitrage. The recent COVID-19 outbreak has catalyzed a “generational buying moment” particularly among millennials who fear being left behind yet again.
Robinhood, a stock-trading app whose median user age is 30 years old, added 3 million new accounts in the first quarter of 2020 alone — I was one of them. Those interviewed about why they were investing during the stock market crash gave exactly the response you might expect:
“At the time the market was very red. That is the perfect time for us to capitalize off of, especially during the pandemic.”
While not even the most depraved could actually hope for the sort of 10-year shocks we’ve experienced since 2001, people are also desperate for a leg up. And the past 20 years have taught us that drafting off the wreckage of financial calamities is a surefire way to realize a better life.
NASDAQ: HUMN
There’s another, deeper explanation for why so many are trying to pull themselves up during the COVID-19 pandemic: we, as individuals, have never acted more like mini-corporations in our history than we do today. And, as good corporations, we are trying to leverage the difference between current conditions (low) and expectations for the future (high) to our advantage.
Part of this is technological. We have the ability to trade stock on Robinhood at a moments notice. We can create businesses out of thin air with just a smartphone and our existing assets such as a car or spare bedroom. In short, we are primed to act on opportunities.
Part of this is economic. Any literate millennial with an internet connection can cite a litany of facts pointing to the shifting economic sands that have disadvantaged a generation: ballooning rent and living costs coupled with stagnating wages; entry level jobs that require a master’s degree combined with usurious tuition rates — conditions that force individuals to make harrowing choices.
Do I live in the city where there are plenty of jobs, but where I also have to pay 50% of my income in rent? Is investing in my education and pursuing a career that fascinates me worth paying $750 a month in student loans for the next 10 years? Can I afford that ambulance ride? What about my medication?
These choices have exacted enormous pressure on individuals, shaping one of the more farcical absurdities of late-stage capitalism: humans mimicking the behavior of corporations. Faced with impossible economic conditions, individuals seek cues from corporations on how to outperform others and weather financial storms — effectively a doubling down on capitalism, even as it fails to provide for us.
The trappings of this dynamic are so ubiquitous that they often blend seamlessly into everyday life. We have, of course, commoditized our personalities and lifestyles through brands blasted out through the same social media channels as our corporate role models. We aspire to machine-like levels of efficiency in the workplace, but also increasingly in our personal lives. And it’s now possible to buy an equity stake in a college student, with the right to a portion of their revenue into adulthood.
The trend towards aping the behavior of billion-dollar corporations is understandably exaggerated in the face of a disaster like COVID-19. Our economic weaknesses are laid bare — it’s become a depressing trope to discover how few Americans have any amount of emergency savings during a financial downturn. Simultaneously, the impulse to interpret disaster as an opportunity, “Here is my personal chance to buy low and sell high!” is undeniable. You have no choice but to look for opportunity in disaster because the status quo is bleak.
This dynamic is fueled by a vocabulary and culture fostered by those who benefit the most from our hard work. A generation’s embrace of performative work enables those toiling away to feel empowered as they work 60, 80, or 100 hour weeks across multiple jobs. We take on these “side hustles” undermined by the conceit that we are all, at our hearts, entrepreneurs — an obvious lie.
The notion that if we just hustle harder and want it the most, we’ll one day achieve our dreams is important because it puts individuals in direct competition. If you can’t afford a house, it’s not the economic system that’s broken, you’ve just failed. Hustle culture places responsibility solely on the shoulders of individuals and ignores the broader picture.
We aren’t corporations. The rules aren’t the same for us. And disasters like COVID-19 show us exactly why.
Zero-Sum Capitalism?
Aaron Glantz, the lucky writer who “leveraged the Great Recession to live the American dream” didn’t have a lot of company. In fact, he was in the extreme minority of individuals who were able to translate national disaster into personal gain.
Instead, according to his research, many of the foreclosures were purchased not by individuals but by corporate investors, who snapped up homes at bargain prices, often with cash. In Oakland, 40% of the 10,508 homes that went into foreclosure between 2007 and 2011 were purchased by real estate investment firms. By 2016, the US had hit the lowest levels of home ownership in over 50 years.
Today, we see similar trends taking shape. COVID-19 has inspired those fortunate enough to work remotely to consider moving out of cities to less expensive locales and continue to do their job from afar (when companies do this, it’s called cutting overhead expenses). Desperate renters in San Francisco, who had previously been forced to choose between Odyssey-sized commutes and median one-bedroom rent prices of $3,720, are now gleefully trading the Bay Area for moderate cost of living alternatives.
While data suggests that companies themselves stand to save significantly from remote work — early data indicates that Sun Microsystems has already saved $68 million in real estate costs due to COVID-19 — their responses to employee attempts to similarly leverage current conditions to their benefit are telling.
Facebook was first out of the gate, announcing the company will cut employee pay if they move to a city with a lower cost of living. To be clear, in this scenario Facebook would be getting the exact same work product. They would also realize significant overhead efficiencies as they pass on the cost of housing and feeding employees. But that is not enough. The company would pocket the cost of living differential between the Bay Area and the employee’s new hometown.
I’m perhaps least concerned for Facebook employees out of any demographic on earth, but logic is important here. Any slack in the system is scooped up by corporations well before it has a chance to benefit individuals and, in this case, relieve economic pressures in high-cost metropolitan areas. You can act like your own personal corporation, but that doesn’t mean you get to keep the profits.
A totem of free market economics is the concept that by “growing the pie” economies expand, raising standards of living and wealth for all. Increasingly, Americans find themselves in a situation in which the pie continues to grow, but all of the growth is siphoned by companies and wealthy individuals, pitting everyone who isn’t part of those groups against each other. By disincentivizing tech workers from leaving metropolitan areas, Facebook is encouraging the same competitive status quo that has people desperate for a disaster in the first place.
My favorite example of this dynamic from the COVID-19 era comes from Airbnb, who recently asked guests to donate to hosts to help defray the hosts’ pandemic-related losses. It turns out in their attempts to create fledgling real-estate enterprises, many hosts had over-extended, buying multiple properties whose mortgage they could not afford when guests stopped showing up.
Airbnb represents a perfect model in which the “individual as corporation” bears all of the risk. Airbnb doesn’t own anything. It makes money off your capital expenditures. If your housing investments go belly-up, Airbnb loses a host while you are financially ruined. Again, the rules are not the same between individuals and companies.
Airbnb’s reaction is particularly apt because the company immediately tried to frame their hosts’ losses as an issue tightly focused between guests and renters. This relationship is already contentious, as Airbnb has been accused of contributing to housing crises in many cities. In the words of one Twitter user “Airbnb has lost its fucking head. Why would I donate to my host? I can’t even afford one house.” Rather than helping to relieve these pressures, Airbnb chose to amplify them, contributing to more competition among individuals.
Disasters tend to pull back the curtain on the reality of the American economy. Individuals, desperate for financial security, are trying to use corporate playbooks to take advantage of COVID-19. The ineffectiveness of these efforts, puts individuals in continued direct competition for scarce resources, shaping our perspectives on how to succeed.
Increasingly, we are adopting a zero-sum mentality towards financial opportunities, requiring some of us to lose for any of us to win.
The logic embedded in both Buffalo’s aspiration to become a climate refuge and my own daydream about a system-wide shock is fundamentally the same, an assumption that the only way to thrive in the current economic environment is at the expense of others. This is a dangerous mentality because it ignores the root causes of our economic circumstances.
It’s well past time to stop pretending that each of us can or should act like a business, hustling to no end and capitalizing on tragedies in order to realize some measure of financial security. Disasters are good for something much more meaningful than betting your stimulus check on the stock market.
They provide the type of jolt necessary to recognize the mundane systemic inequities that are easier to identify in the middle of a pandemic, than say, walking to work in February 2020. Disasters allow us the luxury to lift our gaze beyond the narrow scope of the everyday, and provide a necessary reminder that winning at the expense of others is not the business of humanity.