Good Neighbors

By Matt McPheely

Ross Baird, One-Pocket Thinking, and How To Make Boots

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Good Neighbors
Welcome to the Good Neighbors Newsletter - except you “new strains of the coronavirus”, you are an Unwelcome Neighbor - where we’ll explore the ways in which real estate development and entrepreneurship can combine as a force for good in our neighborhoods.
Below you’ll find 3 sections: (1) A Few Things Worth Sharing, (2) An Exploration, and (3) Parting Thoughts.
Dive into whatever looks interesting, and don’t hesitate to respond and say hi if you have a moment. It’s good for the soul to hear what other people are excited about these days.
A Few Things Worth Sharing
  1. Podcast: Seth Godin on The Knowledge Project. Seth is the master of communicating in ways that are at the same time simple, challenging, and encouraging. I loved this conversation.
  2. Something That Made My Day Better:
  3. A Celebration! My wife was selected to be a part of the very first Forbes Next 1000. So proud of her and amazed how she’s navigated starting/running Base with 3 feral boys and me to deal with. Congrats Paige.
An Exploration:
Thoughts to challenge how we think about our places, our neighbors, our work, and our future
Ross Baird, One-Pocket Thinking, and How To Make Boots
It’s tough without a boat in a rising tide, and it’s tough to bootstrap if you don’t have boots.
Less than 2% of real estate investment capital goes to Black developers. Those who control the money, control who builds with that money. They control what gets built, decide what happens in our neighborhoods, and call anything that doesn’t look completely familiar “too risky.” So in comes a nice, safe credit tenant like Family Dollar with great deals on packaged food and sorrow. 
Structural change for the communities that need it most occurs when there are enough boat-builders and boot-makers to change the equation. These are the real estate developers, investors, bankers, and public officials with a one-pocket mindset (discussed below). The ones who invest in people first, not asset classes. The ones who see that positive social impact creates far more lasting value for an investment than our current definition of low-risk ever could. 
Ross Baird - through his work at Village Capital and now Blueprint Local - is building boats and making boots, one project at a time. He’s working within the system to change it, toward a future where Black and Latinx families have more than 1/10 the average wealth of white families. A future where capital to build things is accessible to more than those in big cities, and to more than those who don’t really need it. Over time, thoughtful projects build momentum and compound as others see new ways of doing things. They think to themselves, “I can do that too,” or “I can invest in that.” Here’s how Ross puts it:
“In 10 years, people will be competing to create the best way to thoughtfully invest in their community versus shipping money to boring coastal high-rises. That’s a great outcome.”
Ross was kind enough to chat with me a few weeks ago, and I’m grateful for the chance to share a few things I learned from this conversation and his work over the years. Below is a summary of our conversation, which you can also listen to here. I recommend listening on at least 1.5x speed to make us sound smarter.
Background
Ross co-founded Village Capital in 2009 with the goal of investing in entrepreneurs building successful businesses, but also making a difference in their communities. After making some initial investments in New Orleans in the wake of Hurricane Katrina, they had a realization: 
“If you invest in a successful business in New Orleans, post-Katrina, it means a lot more to that city if the business succeeds than if a startup in New York or San Francisco is successful. And so, over time we invested in over 100 businesses, and served over 1,000 businesses through various programs, and what spoke to me most were the people who had a broader sense of community and sense of place connected to what they were building.”
He is reminded of a conversation he had with John Hickenlooper, then the Governor of Colorado and now a U.S. Senator in the same state, in which Ross asked the Governor how Colorado could have 4 of the top 10 most dynamic entrepreneurial communities in the country (Fort Collins, Boulder, Denver, & Colorado Springs).
Hickenlooper replied with the word “topophilia.” It means “love of place” and it is the key ingredient in creating culture and the magic of a neighborhood or city. (Side note: If I start responding to any of your questions with a single Greek word and no explanation, just go with it).
Ross saw this idea of topophilia recurring over time while building Village Capital — through work with Access Ventures and their thoughtful investment into Shelby Park in Louisville, with the late Tony Hsieh and his Downtown Project in Las Vegas, and in meeting Dan Gilbert and learning about the massive scope of his work in Detroit. He realized that they weren’t just trying to build an index fund of startups at Village Capital, they were investing in people who were helping to provide a little piece of that magic of a place, beyond what you can quantify on a spreadsheet. 
Two-Pocket vs One-Pocket Thinking
One of the themes that comes up often in talking with Ross, and one he dedicated a whole section to in his book The Innovation Blind Spot (highly recommend it), is the idea oftwo-pocket vs one-pocket thinking. More common is two-pocket thinking, in which we separate “what we do for a living” and “what we really care about.” One pocket is for making as much money as possible, the other for “giving back.”
Even within the philanthropy world this is true, in which foundations are only required to give 5% of their assets each year to charitable causes, invest in the market similar to hedge funds, and are often as risk-averse as any commercial bank. Ross’ work, on a simplistic level, is to usher in more one-pocket thinking to the world. One in which financial returns and social impact are infused and interconnected, where money and mission can not be torn apart, and the result is greater than the sum of its parts.
What this doesn’t mean, however, is that we can ignore market fundamentals. I often get questions about whether Chapel’s main goal is to make profit, or create an impact in the neighborhood. One-pocket thinking rejects this question and answers “both.” But realities beyond our control still play a huge role in deciding what projects get the green light. Banks, as I am intimately aware, will very quickly reject a project that strays too far off the well-trodden path. Same with most investors. Ross mentioned a quote by a mentor of his, Steve Case (founder of AOL), who said “Revolutions happen in evolutionary ways.” There seems to be an art to producing meaningful change - it is done step-by-step, with patience, and usually messy or imperfect. And unless you can overthrow the current system and start a new one, change must happen from within.
Blueprint Local
These ideas come full circle in the creation of a new investment group. Ross founded Blueprint Local a few years ago, with a focus on getting more local capital invested thoughtfully in local communities. They want to connect the investors, entrepreneurs, developers, and institutions to “create opportunity and economic dynamism.” He gave me an example:
A huge issue is that the wealthiest investors in any city are its institutions - the city’s pension fund, big university endowments, the insurance company that is taking premiums from teachers and bus drivers in that city for auto or home insurance. A lot of those institutions are invested in real estate. But the retirement funds for the teachers of Greenville are almost never invested in Greenville. They’re invested in luxury loft apartment buildings in New York City, because the pension fund money is sent to New York and fund managers say, “Oh, we could never invest in a town like Greenville” - even though that’s where the money comes from! My sense is, if the people of Greenville - or any other town like it - knew that their institutional money was invested in fancy apartments in Manhattan or Miami, and nothing that benefits their own city, they would be upset.  I can’t convince the Greenville teachers pension fund to invest in a very small scale, very thoughtful community redevelopment in Greenville, tomorrow. What I can do is try and build up a body of work. I want these these large pools of capital to go into more projects like Chapel. And for the long-term I can work on structural and policy change to help fund investors have more transparency where their dollars are invested. That’s somewhat out of my control, but to achieve what we really want — the people of Greenville investing in thoughtful things in Greenville — you need better deals and projects, but you also need structural change around how many money flows.
Wealth-Building & Displacement
Structural change takes time, and it can be thorny along the way when you’re dealing with sensitive issues around race, class, wealth, power, and the ever-present G-word (rhymes with zentrification). Ross breaks it down to a couple simple questions that were helpful for me:
  • Blueprint has a strict “no active displacement” policy. If a development forces people to move from their neighborhood, or somehow gives them no choice but to leave, it should not happen. 
  • Passive displacement is a bit trickier, especially when low-income neighborhoods tend to see higher turnover of residents in the first place. How do you accurately measure something like this, or determine the real cause of people leaving? The best we can do is to ask the right questions:
    If values rise, how can we allow more people to benefit from this rise? Build boats for the rising tide.
    What kind of businesses are we bringing in? Are they creating jobs and adding vibrancy to the community, or are they from out of town and sucking money out of the community (payday lenders, dollar stores, etc)?
    If new jobs and new businesses are created, is there a thoughtful allocation of workforce housing and market-rate housing?
..
Here’s to a future with more people like Ross Baird, more investors like Village Capital and Blueprint Local, and more magic in our neighborhoods.
Parting Thoughts & Updates
Chapel Progress
We continue moving forward one step at a time. Chapel continues to add tenants, and we are underway on final designs for the project. I look forward to sharing new floor plans soon, and submitting for permits as soon as possible.
A New Project Underway
This is a fun one. My partner and I have owned this property for a few years now, and it just hasn’t worked out as planned for various reasons. We decided to get creative, rather than bang our heads against the wall yet again. The result is the first of its kind: single-family homes designed specifically for coliving. More info here.
Finally, the little share button below is the Good Neighbors version of bringing over a tin of cookies to someone who just moved in across the street. You want to be a Good Neighbor, don’t you?? :)
Until next time,
Matt
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Matt McPheely
Matt McPheely @mattmcpheely

The Magic of Places and How To Build Them

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Greenville, SC