Devon Zuegel: How To Create A New Town - [Invest Like the Best, EP.413]

Devon Zuegel: How To Create A New Town - [Invest Like the Best, EP.413] My guest today is Devon Zuegel. Devon is the founder and president of the Esmerelda Institute, and she is creating a new town called Esmerelda in California wine country. Learning of Devon and her plan, I couldn’t help but wonder why there aren’t more people building new towns. She shares the origin story of her project Esmeralda, a modern reinvention of the Chautauqua community she cherished growing up, and we explore her fascinating work building communities and reimaging how we live together. We discuss how environments fundamentally shape human behavior, how cost of space impacts creativity, the financial challenges of town-building despite their potential for strong returns, and the plans in place for Esmerelda. Please enjoy this fascinating conversation with Devon Zuegel. Subscribe to Colossus Review. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Ramp. Ramp’s mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Ramp is the fastest-growing FinTech company in history, and it’s backed by more of my favorite past guests (at least 16 of them!) than probably any other company I’m aware of. Go to Ramp.com/invest to sign up for free and get a $250 welcome bonus. – This episode is brought to you by Ridgeline. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. I think this platform will become the standard for investment managers, and if you run an investing firm, I highly recommend you find time to speak with them. Head to ridgelineapps.com to learn more about the platform. – This episode is brought to you by AlphaSense. AlphaSense has completely transformed the research process with cutting-edge AI technology and a vast collection of top-tier, reliable business content. Imagine completing your research five to ten times faster with search that delivers the most relevant results, helping you make high-conviction decisions with confidence. Invest Like the Best listeners can get a free trial now at Alpha-Sense.com/Invest and experience firsthand how AlphaSense and Tegus help you make smarter decisions faster. ----- Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes: (00:00:00) Learn About Ramp, Ridgeline, & Alphasense (00:06:00) The Origin of Devon's Obsession with Places (00:08:07) Proximity and Cost of Space (00:10:02) The Chautauqua Inspiration (00:11:31) Building a New Town: Esmeralda (00:13:23) Urban Design and Street Importance (00:15:44) Community Values and Peer-to-Peer Learning (00:18:15) Edge Esmeralda: A Prototype Community (00:21:38) Challenges and Trust Building in Development (00:26:45) The Role of Cars in Urban Planning (00:31:10) Mortgages and Taxes: Shaping Communities (00:42:11) Devon's Journey: From Stanford Review to Esmeralda (00:43:41) Tools for Thought and Feedback Loops (00:46:33) Urban Design and Pop-Up Villages (00:50:06) Exploring Las Catalinas and Car-Free Living (00:52:31) Placemaking and Organic City Development (00:56:25) Frontier Camp and Creating Collaborative Spaces (01:02:39) Building New Towns: Financial and Infrastructure Challenges (01:12:05) The Kindest Thing Anyone Has Done For Devon

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai.

• 0:35Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review, along with all of our podcasts, at joincolossus.com.

• 1:00Speaker 01

  Patrick O'Neal is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.

• 1:29Patrick O'Shaughnessy?

  My guest today is Devon Zuegel. Devon is the founder and president of the Esmeralda Institute, and she is creating a new town called Esmeralda in California wine country. Learning of Devon and her plan, I couldn't help but wonder why there are more people building new towns. She shares the origin story of her project, a modern reinvention of the Chautauqua community she cherished growing up. And we explore her fascinating work building communities and reimagining how we live together. We discuss how environments fundamentally shape human behavior, how cost of space impacts creativity, the financial challenges of town building despite their potential for strong returns, and the plans in place for Esmeralda. Please enjoy this fascinating conversation with Devon Zuegel.

• 2:08Patrick O'Shaughnessy?

  Devin, I have to start by asking where your obsession with places came from. What are the ingredients of this deep interest of yours?

• 2:16Speaker 02

  Oh, such a fun question. I think it came from realizing just how much environments shape the way I think, the way I feel, and the way I behave. Even from small things like the shape of the floor plan of an office can make a huge difference in the way that team members interact and the weather outside affects how much I go outside and the layout of streets ends up affecting whether I walk somewhere or I take a car and realizing I'm kind of obsessed with trying to make my life better and make better decisions. And I realized that it's way easier to make better decisions if your environment supports and enables it. And so I've gotten really interested in the question of how do I shape my environment so that it shapes me in the ways that I want?

• 3:00Patrick O'Shaughnessy?

  Give us a sense or a flavor of some of the things in environment that shape you or the way that you think that might surprise us.

• 3:08Speaker 02

  So here's a silly one, but it's so true is if I have my phone next to me as it is right now versus behind my computer screen where I can't see it, I will not use my phone if it's behind the screen and I'll just forget that it even exists versus if it's next to me, I'll check it every few minutes and see if I have notifications. And so actually I'm going to hide it behind my screen right now. And at a more macro scale, I think how close you live near a friend makes a huge difference in how likely it is that you'll see them and the context in which you see them. So if you live on the same block, you might go just knock on their door and say, hey, what are you up to this Saturday? Let's go do something. But if you live a 10 minute walk away, you might text them before you go. And if you live 20 minutes away, you're going to probably plan ahead and you're going to say, let's

• 3:53Speaker 02

  meet at this time on Friday night. And so just realizing how much we are shaped by the distance of different things in our environments has been a huge unlock for me. And so I've tried shaping my own life such that the people that I want to spend the most time with are ideally as close to me as possible and the types of food that I want to eat and the types of activities I want to do. And I think it really makes a huge difference.

• 4:15Patrick O'Shaughnessy?

  So proximity is one key variable or dimension of your setup in life. What are the other key variables that interest you most?

• 4:24Speaker 02

  I think another really interesting one is cost of space. And you see this play out in just the way a restaurant might treat you. If you're in a restaurant in Manhattan, you can tell that the restaurant wants you to eat your food, get out, pay the check so that they can turn over the tables because that seat is expensive for them. Versus if you're in a lower cost city where the real estate isn't so expensive, there's often a little bit more of a, it's okay if you sit there for three hours and chit chat with your friends. Or at coffee shops in Manhattan, I think they often will glare at you if you have your computer out because they know that you're going to be sitting there forever. Whereas if you're in a diner in the middle of Nebraska, they're probably going to let you sit there for a while longer.

• 5:05Speaker 02

  So I think cost is really interesting and it also shapes the types of activities that people do. One theory that I've heard, I don't know, it's hard to test this, but one theory I've heard for why startups have taken root in California, especially the apocryphal startup garages for all the early companies, was because in California, there are these garages that are warm enough most of the year that you can actually work in them. And there's sort of this extra cheap space that is attached to a lot of people's homes. And so they turned into the workshops of various inventors and people who created things. Whereas on the East Coast, your garage is freezing cold half the year. So I think when you end up being able to treat space as something that's cheap and

• 5:49Speaker 02

  something that you don't necessarily have to pay for, you end up getting a different type of creativity coming out of it and more things that take a lot of physical space.

• 5:57Patrick O'Shaughnessy?

  What's the origin of your ambition to try to combine all the things you've learned about space to a very ambitious project that you're building in California? Maybe at a high level, describe what you hope to do and then why, what the backstory was.

• 6:11Speaker 02

  Yeah, so I grew up going to this town in Western New York called Chautauqua. My grandmother lives there. It's a small town of about 8,000 people and it was built about 150 years ago. I'd visit her every summer. And the thing that's really special about Chautauqua is that for nine weeks every summer, Chautauqua hosts what they call the season, which has workshops, live Lectures, performances, it has a symphony orchestra, an opera and a very active theater. You can kind of picture it like a college campus, except it's multi-generational. And I grew up going there and it's been my favorite place in the whole world since I was a little girl. But it wasn't until a few years ago, I brought my husband there for the first time.

• 6:56Speaker 02

  And as we were walking around, he just asked me a simple question, which was, why aren't there more places like Chautauqua? Why is this the only one? And that literally stopped me dead in my tracks. Like it felt like a movie almost. And I was like, wow, that's a great question. Why isn't there? Cause I'd been a fish in water, not really thinking about how Chautauqua came into being and why that wasn't more common. And so that was about five years ago now and it took me down the rabbit hole and I just kept thinking about it. And basically I ended up realizing I need to build a new Chautauqua in California, which is my home state and where my family is and my friends and my network. And so basically I'm building a modern version of Chautauqua.

• 7:39Patrick O'Shaughnessy?

  On a degree of difficulty scale, how hard is it to build an entirely new town? It seems so much like America is what it is. You don't hear about whole new towns anymore. You hear about very fancy, high-end discovery land properties or something like that that are designed from scratch, but usually not just a normal town. Why doesn't that happen very often anymore? Why doesn't it seem to?

• 8:05Speaker 02

  On some level, it shouldn't be that hard because we know how to build buildings. We know how to build roads. This is not rocket science. We're not making a technical breakthrough. But you are empirically correct that when you look around, there aren't a lot of new towns being built up. I think part of it is that there's sort of this sense that the frontier is closed in the United States. And I feel like it's more than just the physical frontier. I think that a lot of people in a lot of industries feel like we're at the end of history. And it's almost a more like philosophical reason. I could answer this question in a lot of ways. I think on one hand, I could answer this philosophical level. There's also a lot of technical reasons, but I think the biggest answer is just it's not in the space of things that people think are normal to do.

• 8:50Speaker 02

  But if you think about it, every town that exists had to be started at some point. Someone was the first person to move in. Somebody built that infrastructure. And I think it's just something that we've done less and less of. And as that frontier has closed, the physical frontier, more and more of that space has been taken up. And a lot of the really good locations for towns, and especially for big cities, is probably also taken.

• 9:13Patrick O'Shaughnessy?

  Maybe you could walk us through the most inspirational places that you've been, in addition to Chautauqua, that formed some of the ideas for what will be, I think you call it the hardware of Esmeralda, your new town. What are those elements? Where did they come from? I'm so curious how you decided what matters and gets to go into the project.

• 9:32Speaker 02

  But way before I started working on this project, I've been really obsessed with urban design and in particular, street design, because I actually think that streets are the single most important building block in a city. The way that the streets interact and how they interface with buildings and other public spaces is really the thing that defines the feeling of a city, in my opinion. And I've been studying and writing about it and befriending architects and developers for the last 10 years. And really, my poor husband, every time we travel somewhere, it's really an architecture tour where I talk to him all the time, like, oh, did you see the setbacks of this building from the street? Like, oh, it's interesting that they're mandating a 20-foot setback here.

• 10:15Speaker 02

  And so really, the biggest answer I would say is from my travels and just taking really detailed notes and making a lot of observations about the choices that are made in different cities and what works and what doesn't. And it's actually not a binary thing either. It depends on what your goals are. Is this community trying to be an industrial hub where a lot of big manufacturing happens? Is this trying to be a resort community where people can relax? Is this a place that's meant to be multi-generational or is it targeted towards a particular generation? And so tracking those things and building a very rich mental model of the specific details has been the most fun thing for me, honestly. That's my favorite thing to think about.

• 10:57Patrick O'Shaughnessy?

  If you think about somebody that buys a house there and lives there for a year, what do you hope is the way that that person describes Esmeralda to someone that hasn't been there?

• 11:07Speaker 02

  Oh, that's so fun. Okay, I'll give you a little persona of the type of person that I think would particularly love living in Esmeralda. So basically, somebody who is an adult who's got a young family, but also maybe their older parents or even their grandparents are still alive, they can all live in this community together, which is my experience at Chautauqua. I would stay with my grandmother and we'd have three and sometimes even four generations all in the same home. And I think I'd like them to describe it as a place where their kids have a lot of independence. Their kids can get around on foot rather than having to ask to be driven everywhere. A place where there's a really high level of trust within the community.

• 11:53Speaker 02

  And when you walk outside, you are very likely to meet people who share your values. And those values specifically being a love of learning and creation, but also of invention and building new things. I love the values that Chautauqua has. I think we would build on that. But I'll also point out two major values differences. I think on one hand, Chautauqua is much more about lifelong learning than it is about building. I think it's more of a place where you absorb a lot of information and experts come and talk. I don't want to downplay the cool things that Chautauquans are doing either, but it's much more emphasis on reading and consuming and learning.

• 12:34Speaker 02

  But I think I want to take that and build on it and also create more of a sense of action and people building businesses, creating pieces of art, doing the research, that kind of thing. So that's one difference. And then related to that is having it be a sense of more like peer to peer. So in Chautauqua, there's more of this sense that Jane Goodall will come and she'll talk to you about chimpanzees. And she presents on her experiences and people talk about it for a little while, but then it moves on versus Jane Goodall herself being part of the community and then hosting an expedition. With the kids in the community to go meet some chimpanzees and having it be more of a peer to peer where it's not sage on the stage, but rather the people around you are experts in their

• 13:18Speaker 02

  field, but you are also an expert in your field and creating that network. So I think those are the key values and experiences that I would love for people to have in this community.

• 13:27Patrick O'Shaughnessy?

  What things will you put there that make it easier or more fun to create and innovate together? How do you actually promote that in a town setting?

• 13:37Speaker 02

  You alluded to the hardware and software before. And so while we're currently building the hardware, which is functionally real estate development, I mean, at the end of the day, we're putting in infrastructure and we're building buildings and that is what real estate development is. So that's the hardware side and that has a very important role to play in this where, as we were talking about before, environments really shape the behavior that we do. And so on that side, we are building infrastructure and public spaces and event spaces where people can have these types of events. Really, you can think of it like a college campus where we're going to have lecture halls and pavilions and things like that throughout the community that will support this type of activity. On the software side, we've actually gotten things started because

• 14:22Speaker 02

  it's going to take a while to build all that hardware. And so we've got it and started with this pop-up village that we organized called Edge Esmeralda. And you can think of a pop-up village, kind of like a temporary college campus. We host it in Healdsburg, California, which is 15 minutes south of the property where we're building the hardware. And for this pop-up village, it runs for 30 days each summer and many people attend for the whole month, but also a lot of people come for just a week or just a weekend. Last year, we had 1,300 people attend Edge Esmeralda. And this year, we think it might be even a little bit more than that. And with Edge Esmeralda, we're experimenting with a lot of these ideas. I think last year, one of the key

• 15:05Speaker 02

  things that we did was we hosted nightly community dinners and they're not required to come. Many people will not come to every single night, but there's always one time and place during the day where you can come together and talk to the other people in the community. And honestly, we're taking a lot of lessons from how colleges work, like a dining hall where people come and you always know that you're going to bump into some friends and there's going to be a table with someone interesting to talk to. If you don't want to go to the dining hall, that's fine, but it's an option that's available. And I think those learnings that we're getting from Edge Esmeralda, which is a prototype for the permanent community that we're building, we will then transplant and end up putting in the permanent village that we're building.

• 15:49Patrick O'Shaughnessy?

  Anything really surprising from Edge relative to your expectations?

• 15:54Speaker 02

  One of the ways that we organize Edge is that it's basically a giant unconference. And for anyone who's not familiar with what an unconference is, instead of having the central organizers create a schedule and assign slots for speakers, we instead create a container for things to happen. So we provide the venues, any of the AV equipment, and we invite people. But then those people end up filling the slots and saying, hey, I want to do a presentation on the neurotechnology research that I'm doing, or I want to run a yoga session. So it ends up leaning into that peer-to-peer concept I was talking about. People end up populating the schedule themselves. And what that means is that there were a lot of surprises, a lot of things that we didn't

• 16:38Speaker 02

  even intend to have happened, but were awesome. I think one of the activities that I enjoyed seeing really blossom at the event was my friends Anton Yu and Nick Foley ended up working on these solar A-frames over the course of the month, where basically Nick had been wanting to work on this project for a while, I think, but had just never done it because life is busy. And he texted the group chat where all of the attendees were, and he said, hey, I'm going to be building these solar A-frames, which are basically camping shelters with solar panels on them, and so they have electricity. Does anybody want to help? And a ton of people raised their hand. And he ended up having a whole crew of people help build this A-frame out in the redwoods over the course of Edge Esmeralda.

• 17:22Speaker 02

  And we had no intention for that to happen, but it was one of the coolest activities. And by the end of the month, it ended up growing and expanding, and they built a whole campsite. And we ended up having a solar-powered night market by the solar A-frames, where people cooked food, and there was a fun party, and it felt very solar punk out in the woods. And so that was one of the many surprises that happened during Edge.

• 17:47Patrick O'Shaughnessy?

  One other component of this that's fascinating is just the way you deal with the established communities and local stakeholders that are close to where you're building, or other towns, other cities, the people in them. I'm sure they have varying opinions about what you're doing and whether or not they want it nearby. What's been your approach to increase your odds of success by dealing with people near the project?

• 18:12Speaker 02

  Absolutely. That's one of the most important parts of this project. And I think of that as really a big trust building exercise. I think that this is a place where we've taken a unique approach. So to set a little bit of a backdrop, often in California, there's a lot of challenges to development. People tend to react, frankly, pretty negatively to people coming in and trying to build new buildings and new infrastructure for a variety of reasons. And we've taken a different tact. Basically, instead of coming in as a developer first and saying, hey, we want to bulldoze this and turn it into a big parking lot, we first come in as a community organizer. People who bring people together and we've

• 18:53Speaker 02

  had opportunities to build trust and local relationships through Edge Esmeralda. And really, our goal with that is to show the local community that we're committed partners. And we haven't even closed on the land yet, to tell you just how early we are on the process. We haven't even purchased the land, but we've already run a multimillion dollar event that brought thousands of people into the Sonoma community and brought millions of dollars of business to Sonoma County. And we've collaborated with local artists and we've worked with restaurateurs throughout Healdsburg and the surrounding area in Sonoma. The whole purpose is to build relationships in the local community so that when we do get to the point where we're building something, we actually are embedded and we understand

• 19:36Speaker 02

  what people want and what they are looking for and why they're excited and why they might be concerned, so that we can adjust our plans accordingly. I think a lot of real estate development these days has become something that's imposed from above. Like someone with external capital has decided this is going to happen, and then they're pushing it through and just trying to get it done. And people are more likely to react to that. One of the opportunities that we had last year at Edge was I invited the city managers of both Cloverdale and of Healdsburg, and I hosted them on a panel where they got to discuss their experience in local government. And that served a bunch of purposes. On one hand, it gave them an opportunity to talk about what they care about and got to

• 20:21Speaker 02

  highlight them. Also, the people on the Edge Esmeralda community who are interested in moving into the community we're building, give them a little more of a sense of the local region and the challenges and opportunities that exist. And afterwards, everyone chatted for a while, they got to ask a bunch of questions. And truly, I see this as a very long-term trust-building exercise. And I think it's more like tending a garden than it is like anything else. You're sort of planting the seeds and it takes time for them to grow. You can't expect people to immediately trust you on day one. You need to show up and earn their trust.

• 20:59Patrick O'Shaughnessy?

  It reminds me a little bit about the story in Wynwood in Miami, where the cops and the graffiti artists, once enemies, became collaborators and friends. And this crazy thing has come into existence out of that respect and reframing of a relationship. It's so cool.

• 21:16Speaker 02

  Totally. That reminds me of one of my favorite experiences last year when we announced that we were going to host Edge Esmeralda in Healdsburg. A local who is now a really close friend of mine, he came to a city council meeting and he said that he was going to make a custom sign that said, "Don't colonize Healdsburg." Not quite the message we were trying to get across. We're actually trying to build this really strong community. But then he decided, actually, I'm going to give them a chance. I'll show up to their first event and see what happens. And he ended up loving it so much that he ended up attending more sessions than anybody else the entire month of the pop-up. And by the end of the month, he was helping us out, us if he could run errands, go to the print shop for us, and ended up connecting us with a lot of people and just thought

• 22:01Speaker 02

  that what we were doing was super cool. And I found that really satisfying because it shows that just because someone might first seem like an enemy or something, they're coming out and attacking what you're trying to do, it's usually just because they may not understand what it is you're trying to do. And it's an opportunity to talk to them about it. And those starting points can be scary or intimidating at first. I wasn't thrilled when I heard about the sign that he was making, but it is an opportunity to jump in and say, hey, I actually think that we might have more similar goals than you realize. And I think a lot of people don't realize that that is possible and so maybe don't take the step to try. And don't get me wrong, you're not going to convince everybody, but many people I think

• 22:43Speaker 02

  are much more amenable to conversation and trying to find common ground than you might originally think.

• 22:51Patrick O'Shaughnessy?

  In your many travels, both in the US and elsewhere, can you tell me everything you've learned about the impact that cars have on towns and communities?

• 23:00Speaker 02

  Yeah, so first I want to say I am not anti-car. Actually, I really love cars and I think in my ideal world, they would still be there. But I think of cars the way I think of horses, where they're a really cool hobby and they have some cool applications, but we maybe shouldn't be shaping our entire cities around horses. So first I want to say that upfront, because sometimes people think that I hate cars or people in this direction hate cars. So you were asking earlier about why people don't build new towns anymore? And I think another answer to that question is at different times, there are new frontiers that open up. And so when railroads started to become a big deal in the United States, suddenly land that was previously inaccessible from transportation ended up having a train

• 23:45Speaker 02

  station on it and towns would sprout up around those transportation hubs. And cars had a similar effect, which was previously people had to stay within walking or pretty short distance of their home and their work. And maybe they had some public transportation, like trains or trams that could take them around, but they were constrained in how far they could go easily. The car opened up a new frontier on the outskirts of cities and that's how we ended up getting most of our suburbs in America. And on one hand, it really increased the opportunities that people had. People were excited to suddenly be able to go a little farther off the periphery and have more space and have more land. So

• 24:27Speaker 02

  I think in some ways it was great. However, I also think of cities as a bunch of coordination problems. And there's many we could get into, but I'll speak to one in particular, which is that Everybody's always making a trade off between, on one hand, people generally want more space. All things equal, people will take more space. If you could have a mansion in the middle of Manhattan and have the one house in the middle of Central Park and have all of Central Park as your own private yard, and then also have all the amenities of Manhattan around you, I think a lot of people would take that trade. That would be the most popular house on the market, probably in all of America. But on the other hand, people want access to amenities, they want access to their friends, they want to have access to job opportunities.

• 25:12Speaker 02

  And those two goals are directly at odds with each other. If you just think of the geometry of it, if you are closer together, there are more things close to you, but it also means that you have less space. One thing that happened naturally before we had the car was that people naturally stayed close together and there was very high amenity value. You could access all sorts of things within walking distance because everybody else was also within walking distance. As the Pareto frontier shifted, as people could make different trade offs and as more space opened up on the periphery of cities because of cars, suddenly people could make unilateral decisions to say, actually, I prefer more space over more amenities. And for any given individual, that trade off may have made a lot of sense.

• 25:57Speaker 02

  The one challenge with that is that you now are also affecting the rest of equilibrium for everybody else. Because when you go farther away, then suddenly you're also reducing the number of opportunities and interesting things happening in the core of the city. And so to me, one of the key things the car did was it changed the balance of that coordination problem. And I think one of the effects that I see is there are a lot of people who would love to live in a more dense, walkable place and they would actually make the trade to say, I'm happy to have a slightly smaller home in exchange for more access. But because society at large, in whatever city that they're in, has decided that they all want to be a little farther away

• 26:39Speaker 02

  and they prefer the space over the access, it makes it so that there aren't a lot of options for people who prefer that one. I don't think that everybody wants to live in a really dense, walkable city. I think there's plenty of people who actually just want to live in a rural place or maybe a suburban place. But I do think that there are more people who want to live in a walkable community than there are walkable communities, in large part because of this coordination problem.

• 27:03Patrick O'Shaughnessy?

  I'm so interested by how these forces shape the places around us. How do taxes and mortgages and the history of those things in the US shape places?

• 27:13Speaker 02

  Such a good question. They shape things a lot. Do we have 10 hours to go into this?

• 27:18Patrick O'Shaughnessy?

  Go for it.

• 27:19Speaker 02

  So, start with mortgages. A mortgage is a loan and it's really important to look at the structure of what a loan is. So, when a bank lends you money, if things go really well with whatever you're doing with that money, they will get some interest on top of the principal that they gave you, but they don't really get the crazy upside if things turn out really well. However, if things go really badly, they lose their principal and they're screwed. And this is important because it means that lenders are inherently cautious. They do not want the borrower to take any interesting risks with that money because they don't get any upside from it. They only get the downside. This is to contrast against equity, which,

• 28:00Speaker 02

  yeah, also bears the downside if things go badly, but if things go really well, then they get to benefit from the upside. And so, what this means in practices is that mortgages and other forms of debt end up locking in a status quo because the lenders want to see that there's comparables or comps, they're used in the real estate industry. They want to see that there's comps for similar homes or units or buildings on the market. If you come in and say, "I have this crazy new idea. I think it's going to change the world," they go, "That's nice, but what do we get out of it?" So, that's one really important dynamic. Another important piece is through the FHA, the Federal Housing Administration.

• 28:41Speaker 02

  So, during the Great Depression, a lot of people had taken out short-term, what are called balloon loans, and they were a few years, maybe five years long, very different from the 30-year mortgages that we had today. That was a huge part of the problem with the Great Depression. A lot of people's loans came due just when the depression was hitting and they were not able to get new loans. So, many people lost their homes. The FHA, the Federal Housing Administration, and some other government agencies stepped in and said, this is not a tenable situation. We need to create some form of mortgage that is a much longer term so that people have a sense of stability in the place that they live, which I think is a really laudable goal. But when they ended up doing that,

• 29:25Speaker 02

  they created agencies like Fannie Mae and Freddie Mac, and they also ended up creating rule sets for what was and wasn't worthy of a home loan, of a mortgage. And they ended up frankly locking in a lot of the ideals of what an ideal home was at that time period. And the people who just happened to be in charge ended up defining a lot of those factors. And so there were things like, we don't want to give a loan to a home where the corridor is not at least this wide so that people can bring furniture in. Like, they got into really granular detail, which might be a reasonable rule. But the thing is that this is a very centralized decision-making power that just applies across the whole country all at once.

• 30:09Speaker 02

  And so it gets rid of a lot of the evolutionary pressures that you would normally get in a more free market system. Those rules have evolved over time, but it ended up creating some conventions and norms around 30-year mortgage. And also frankly, if you're lending money at a bank for 30 whole years, you are even less risk-taking than any normal lender because 30 years is a long time. Just think about where this country was 30 years ago versus today. It's a completely different place. The whole world order is totally different. And so making a bet on that timeline results in people being extremely cautious and locking in the status quo.

• 30:49Patrick O'Shaughnessy?

  It's so interesting to think about those incentives and how used to 30-year mortgages everybody is. Basically, everyone I know has a long-term mortgage on their home. Do you think that to snap that and create innovation in the building of new towns, those towns just need to be built with equity as a result? How are you thinking about types of financing for Esmeralda itself?

• 31:08Speaker 02

  Yeah, so let's split it up into a few different pieces because building a town requires a lot of different steps. So there's the land purchase. Then there's building the infrastructure, which is the roads, the sewage, the electrical, et cetera, the gas. Then there's the what's called the vertical development, which is what it sounds like. It's like the buildings. In our case, we're going to be building a bunch of homes. There will be a hotel or two. There will be cafes and restaurants. There will be event spaces that I talked about. And each of those phases and pieces attracts a different type of capital. And I could say the options for how you could finance it. And then I'll say how we're thinking about it.

• 31:51Speaker 02

  So one important principle is that the earlier you are in this project, the riskier it is, kind of intuitive. But when you're buying raw land that doesn't have any infrastructure on it, or if it doesn't have approvals yet of what you're allowed to build, that's considered the highest risk, but also highest reward part of any project. And some people do borrow money for that stage, but it's much harder to get land loans because it's higher risk. And frankly, it's also, I think, in my opinion, not that desirable because you end up putting this ticking clock on your project. And at that stage, there's a lot of things that need to happen before you have any cash flows coming in.

• 32:35Speaker 02

  All those things I just mentioned, like the infrastructure and all that, and then also the vertical construction. And so for us, we strongly prefer to do land purchase with all equity. We think that if you're playing a long game and you really think that this is going to be a long-term value, it's worth not taking a loan. The downside of that is that when you do borrow and you leverage your returns, and if things go well, you end up with higher returns because you need less equity to fund the project. So that's what you're trading off when you're deciding on equity versus debt. And so what we're doing is we're purchasing the land all equity. Then the infrastructure stage, because it's one click farther, is a bit less risky. Have the land, you have the approvals, so you know what you're going to be allowed to build.

• 33:19Speaker 02

  There's still other risks in the future that may affect the returns, like market demand. Did you actually do a good job of predicting what people want? In our situation, the whole Esmeralda concept, it's got some examples of it working. You know, Chautauqua works well and there's other communities I've studied that I think are really good comparables. But at the end of the day, there is nothing quite like it in this part of California. And there's real risk that we're wrong. And so in that situation, it's one click farther and it's maybe a slightly better idea to take debt than when you're doing it at the land stage. But there's still a lot of risk.

• 34:01Speaker 02

  In that situation, we have not decided exactly how we're going to fund the infrastructure. We're in talks right now, actually, with several investors who are interested in doing a full equity deal, both for the land purchase and for infrastructure build out. And that's really exciting to us because we wouldn't be as dependent on interest rate fluctuations. But it could go either way, and I think that there's arguments on both sides. Then getting to the vertical and the housing, which is more related to the mortgages that we were talking about. I think that mortgages make buying a home a lot more affordable for people. And there's a lot of good reasons to use mortgages.

• 34:41Speaker 02

  And my view is that there's other ways that we could de-risk the project to make it attractive to lenders. There's a few specific choices that we've made. For example, many of the homes in the community will be fee simple lots. So basically, people will just own their lots outright, which makes the ownership model a lot simpler and more straightforward. Or other things that are very tactical but important where we plan to have zero lot line homes instead of townhomes, which have a shared wall. And from the outside, they both look like townhomes. But in the zero lot line model, you don't share a wall with your neighbor. And so, again, ownership is a lot simpler.

• 35:24Speaker 02

  And so, there's a lot of tactical decisions like that that we can make that I think that allow it to fit cleanly into a mortgage lender's box while still actually being quite innovative and interesting. To do innovative stuff, especially at the urban planning stage, that is the place where you really don't want to take on the debt. But I think as you go through and you get closer to finished product that you can sell to people, it makes less of a difference and you get more of a benefit.

• 35:51Patrick O'Shaughnessy?

  Anything worth mentioning about the way that taxes impact everything? I'm so interested by the mortgage answer. Anything on tax that you've learned that might surprise people?

• 35:59Speaker 02

  Property tax. Different cities and states have different property tax levels. People who own a home or a building will pay something on the order of 1% a year on the value of their home back to the state. Property taxes are very unpopular. Taxes in general are pretty unpopular. And so, in California in particular, there's this rule on the books called Proposition 13, which was passed in the 1970s. And it basically froze property tax increases to, I think it's a maximum of 2% a year increase. And that ends up having a huge number of knock on effects. One is it has a huge impact on the budget.

• 36:40Speaker 02

  And so, for example, my parents have owned a home in California since the early 1980s. And since the 1980s, the value of their home has appreciated a huge amount. But the property tax that they have to pay does not appreciate too much. And one way that you can think of property tax is that it's something that makes sure that people are making good use of the land. Because if you are in a place that's super, super productive, let's say you're in the heart of Silicon Valley and it's a place where there's a lot of jobs, usually the real estate prices will go up. And having a higher property tax that reflects those higher prices is a way to basically send a price signal to people to say, hey, you should be here.

• 37:23Speaker 02

  You're going to be able to participate in this economy. And I say this descriptively, not normatively. That's just actionably what it does. And when you end up freezing property taxes at a much lower level, you end up deadening that price signal. As a result, I was walking around San Francisco yesterday and there's this empty lot. I looked it up and it's in a very central place, in a place where people are paying thousands of dollars a month for rent, for a crummy little apartment. And then there's this empty lot where people would love to live, if only someone would build a building there. And I looked it up and the owner had just owned it for decades. And so their property tax is super low and it doesn't cost them very much to just hold on to it indefinitely.

• 38:07Speaker 02

  And so you end up having this empty lot in a place that otherwise could house a lot of people. And so rules like Prop 13 make a huge impact on how people live and how people end up using space.

• 38:20Patrick O'Shaughnessy?

  If I investigate some of your other experience and how it impacts, how you're thinking about the world now. If you think back to your time as the editor in chief at the Stanford Review, why did you do it? What was the interest that led you to apply to do it or rise to do it? Why bother?

• 38:35Speaker 02

  I joined the Stanford Review, which is a smaller paper on campus and at times somewhat controversial. I joined because when I read it as an incoming freshman, I thought, wow, this is a place where people can really talk about ideas seriously. They can take these ideas seriously, even if there's taboos and things that maybe we're not supposed to talk about. It's a place where I can actually explore that. And it felt like there was an intellectual freedom and curiosity that I didn't always feel was super common on the Stanford campus. And it wasn't that I agreed with everything in the paper. Actually, there were many things that I strongly disagreed with, but that was kind of the point. I liked that there was a diversity of viewpoints and people who would challenge me and ask hard questions.

• 39:20Speaker 02

  Whereas I felt like a lot of the rest of the discourse that I found on campus felt much more like one track mind. A lot of things that people would write, I felt like anyone might have written. And I just didn't feel as challenged. So I wanted to join the review because I want to seek the truth. And I don't necessarily think that I'm ever going to find the truth, but I think that being around people who will challenge me makes it much more likely that I make some progress on that.

• 39:49Patrick O'Shaughnessy?

  Another thing I've seen you write about is this notion of tools for thought and the ability to be in some sort of tight feedback loop between the tools you're using to build something and the actual creation itself. Why is that such an interesting thing for you?

• 40:03Speaker 02

  I'm really glad you actually see that connection. So the way I think of tools for thought is environments to think in and cities are environments to live in. And sort of like what we were talking about at the beginning, the environments that we're in shape our behavior a lot. And I think the tools that we use shape our behavior a lot as well. And so we end up taking different actions as a result of the tools and the spaces that we inhabit. And so I actually think of it as a very similar thread, but manifests in very different ways. I basically believe that we are almost defined by the things that we put around ourselves and the tools and spaces that we use. And so making sure that those actually define you in the way you want. I'm not saying this very articulately,

• 40:47Speaker 02

  but I don't think of my identity as just myself. I think of it as also the tools and the places that I'm in and how they shape me. Because when I'm in San Francisco, for example, I have very different thoughts and take very different actions than when I'm in New York City, or when I'm in Miami, or when I'm in Buenos Aires. Those places end up having natural gradients in different directions. And I think that's similar with tools, where if you have a tool that makes it really easy to do one thing and much harder to do another thing, you're going to tend to do the first thing more. One thing I've been thinking about recently is I have almost too good of a feedback loop with my email inbox. I have these hot keys. I have a system that I really like. And I say it's almost

• 41:30Speaker 02

  too good because I find myself drawn to responding to my email more than doing other types of work that I think maybe are more important. And that's largely because I've basically turned my inbox into a video game where I have like a counter and I have like points and I'm burning down the number of emails that I've responded to. But if I step back and I think, how do I actually want to be spending my time? What are the problems that I actually want to be solving? Email is a part of that. Email is a useful tool, but it shouldn't draw me in so much. And so I think of tools for thought as like building a video game for your life, where you make certain types of actions a lot easier or more interesting and more fun.

• 42:09Patrick O'Shaughnessy?

  Really interesting part of what you said to me, just to be really mindful of your frictions. And lower friction is not always better because if you create lower frictions through the tools you use or the places you live, you're going to bias your behavior towards low friction stuff. I've never really thought about it that way. It's just like really interesting. How you think about the fact that it's very high friction and very long feedback loops to building a town. But ultimately, a town is an environment to think in too, an environment for thought, not just a tool for thought and maybe to make that connection.

• 42:41Speaker 02

  Totally. This, I actually think is the hardest part of this project is just the timelines involved. Every single step of the way takes way longer. My background is in software. I was a software engineer for many years and then I ran a team of software engineers. And the iteration speed in software is so fast. You can deploy a change in literally three seconds if you want. I mean, assuming you have the change done. In fact, I updated something on my website today and it took literally 20 seconds. Nothing in real estate takes 20 seconds, nothing. Even moving a shrub or something is not going to take you 20 seconds. And so this is something I've thought a lot about and it's a big part of why we have the pop-up village, Edge Esmeralda, the 30-day event that we host 15 minutes from the site.

• 43:25Speaker 02

  Because I asked myself, how do we take this huge thing and turn it into smaller bite-sized pieces that we can learn from? Because imagine if we create this whole site plan, we pour a bunch of concrete, we build all this infrastructure, we build these beautiful homes. But then it's not quite what people want and it doesn't quite actually encourage the type of community that I'm interested in. That would be a real shame. And so trying to figure out ways to tighten that feedback loop is really important. And the Papa Village is one way that we do that, where we've brought it really close to the property. And this summer, when we hosted it, I'm planning to bring people to the property and we'll go on hikes around it. I'll show people the site plans and get their reactions on what they think, get their

• 44:10Speaker 02

  feedback. It was also interesting, Healdsburg, which is the town 15 minutes south where we're hosting the Papa Village. Healdsburg is a really charming little walkable town as well, centered around a plaza, basically a town square. And I got to get a lot of hands-on experience of seeing how the different aspects of urban design in Healdsburg informed the way that people interacted with each other in Edges Merold. And there were a lot of really great things that we want to learn from, like having that central plaza is amazing for what we're doing. People always know to find each other in the plaza. But then there's other aspects, like right near the plaza, there's a super wide road called Healdsburg Avenue, which has a lot of fast cars. And I noticed every time I have to cross from the plaza to the other side, there's

• 44:54Speaker 02

  this friction where I'm like, oh, it better be really worth it for me to get to the other side of this road compared to the other direction, which has like much more narrow roads and easier to cross. So that event has really tightened the feedback loop. I've also organized over the last few years, what I call traveling neighborhoods, where I basically invite friends and friends of friends to come travel with me in different places in the world that have inspired what we're trying to build. A recent one was this beautiful town in Costa Rica called Las Catalinas. And I could talk for days about Las Catalinas, but there's a lot of things that I am inspired by in that community. And I could have just gone there by myself, but when you go somewhere by yourself, you

• 45:35Speaker 02

  don't fully experience what it's like to live there because you don't have your community. Whereas I was down there with, I think, about 20 people and we were there for a whole week and we experienced what it was actually like to be there embedded in more of a community. Of course, not the same thing as living there full-time, having a job, but it simulates the experience more. Long story short is I spent a lot of time thinking about how to get those feedback loops. And I actually think that the fact that feedback loops are so long and frankly, getting longer in real estate is a big part of why people don't like a lot of the stuff that gets developed. And I could speak for days about why those feedback loops are getting longer.

• 46:15Patrick O'Shaughnessy?

  What was it that most stood out about that town that you visited, Las Catalinas?

• 46:20Speaker 02

  So Las Catalinas is really spectacular. I highly recommend that people visit. So Las Catalinas is on the west coast of Costa Rica and it's comprised of 1,200 acres, which is approximately the same size as Golden Gate Park in San Francisco or Central Park, more give or take. So it's a lot of land. And Las Catalinas has a really interesting model of development where they've decided that they're going to preserve 1,000 out of the 1,200 acres as natural rainforest. And then the remaining 200 acres will be developed into basically an Italian hill town on the side of Costa Rican coast. So it's as beautiful as it sounds. Right now, they've developed 20 of the acres, which is not that much land.

• 47:04Speaker 02

  It's got about 200 homes and it's got 10 restaurants, a hotel. Something that's really striking about Las Catalinas is that in the 20 acres, it's completely car free. In other parts of their development, they're going to have some car access, but in the first phase, it was completely car free. And I went there thinking, how is this going to work? I don't really get it, but something magical happened when I was there, which is I realized that once you take cars fully out of the equation of a residential neighborhood, suddenly everything can be a lot closer together. Because I think something most people don't realize is that cars take an incredible amount of space. I urge you next time you go outside to just look around and really think about how much space is devoted to cars and getting them around.

• 47:48Speaker 02

  Some of that space is totally warranted. I want emergency vehicles to be able to access my home if I have a problem and being able to drop off my groceries is really nice. There's a lot of really good use cases for cars, but it is a trade off that we have made. And I think people are not often aware of that trade off of just how much space is taken. And so Las Catalinas can fit a lot into 20 acres. 200 homes in usual American development would take multiples of that space usually when you have cars involved. And so just getting to experience what that was like and realize that. I think we can push that idea farther of having more car-free or car-light spaces. I really like studying things that are extremes on a particular dimension because I think that you end up learning a lot about the limits of the system.

• 48:33Speaker 02

  And I expected to hit up against the limits of that system much sooner than the extreme that last Catalinas took it to.

• 48:40Patrick O'Shaughnessy?

  Is there anything else about your study of, I think the term is placemaking, that is strange in its origins? Is there anything else that interests you in that topic area?

• 48:54Speaker 02

  I think it's really interesting to look at how cities across different places and times have developed based on different local constraints. Like historically, we've piled on a lot more rules over the years and over the centuries of how places get built. And it used to be that cities were much more developed by like an organic process. So when you go to old towns in Europe or Asia or anywhere, places that were built hundreds of years ago, they tend to have more human-scale, winding streets. And it's almost more like a garden that's been left to overgrow, but it grows in interesting ways. And you can tell pretty quickly how planned a place has been. And I think a shift that I've seen over time is it used to be that we wouldn't plan cities

• 49:38Speaker 02

  very much at all, and that had some real problems, especially as we started living more densely with each other. There would be more issues of cholera in the water system, which would kill a lot of people, like real, real problems that precipitated more planning. But then we ended up getting to this place where we thought, oh, everything has to be controlled, everything has to be planned, the width of your hallways, the distance of your house from the road. And we ended up, I think, overdoing it, frankly. I think it's important for us to revisit what should be planned and what should be left to a more organic process where people can solve their problems on their own. My basic framework is that there are some core decisions, like making sure that everybody

• 50:19Speaker 02

  has access to clean water and that there are reasonable transportation networks throughout a city that allow things to be connected, that do have to be planned in advance. But things like what color do you paint your house, especially for a big city, doesn't necessarily have to be so controlled. I do think that you might have subsets of communities that still choose to do that. Sort of like a federal system, you want to have as many decisions pushed to the lowest level as possible. So that the local level can make choices, but then also recognizing that there are some that require a more global solution, but always trying to push it down to that local level as much as possible.

• 50:58Patrick O'Shaughnessy?

  It was interesting to see some of the people that you've interviewed or talked to. What have you learned from Michael Nielsen? Such an interesting person.

• 51:05Speaker 02

  Oh, I've learned so much from Michael Nielsen. I think probably the number one biggest thing from Michael is always having a sense of wonder in everything I do and everything I see and I learn. I was traveling in Japan last year and Michael happened to be in Japan as well. So we ended up hanging around Japan for a while together. And he was doing a world tour at the time of all these different iconic places. Like in Japan, he was going to like bamboo forests. Also, he went to Hiroshima to see where the bomb was dropped. And he went to all these world historic places. It made me realize that I had gotten jaded where I thought, oh, there's all these tourists. That's a tourist spot. I'm not going to go there.

• 51:49Speaker 02

  But seeing Michael go like, no, this is one of the most important places in the world for world history. In the case of Hiroshima, it was the place where one of the first atomic bombs was dropped. That is an inflection point in world history. And I think basically, Michael has reminded me to not be jaded and always see the wonder and how special things are as opposed to getting into a more perhaps cynical worldview.

• 52:15Patrick O'Shaughnessy?

  I know one of the things that maybe helped inspire some of what you're doing is an unconference that you helped host that brought together frontiers, people and innovators in a very cool way. What have you learned about people that thrive well at a frontier? Whether that's physical, digital, mental, spiritual, whatever?

• 52:33Speaker 02

  Yeah, so this is the really fun event I host with some friends each year called Frontier Camp. And we've take about 120 people that we admire to go camping for a weekend in Northern California. And the theme is frontier technology that we define that really broadly. It includes things from gene editing and supersonic flight, but also people who are working on the frontier of California land use policy and things like that. Basically, anyone who's pushing the frontier of what they're doing is fair game with a particular focus on hard tech. I think the biggest thing I've learned is that People are really seeking out containers for them to live in and for them to act and to

• 53:15Speaker 02

  meet people. And they're almost looking for places that will give them a social infrastructure to have particular types of conversations. So I'll be concrete. There were some people who actually already knew each other before coming to Frontier Camp last year. I knew that they knew each other, but it wasn't until they were put in this context where it was explicitly about talking about a particular type of work and it was explicitly about optimism for the future, where they started exploring potential collaborations for each other. I have two people in particular in mind, but one of them gave a session about something they were thinking about. It was again, this unconference format, so people could add their own sessions and did a session about what they were working on and someone

• 53:57Speaker 02

  else who they knew and even knew that they were working on this, they came up to them afterwards and they said, hey, do you want to collaborate on this? This was almost six months ago now, and now they've written some papers together and introduced each other to other people. And so I really think that by creating containers with a particular purpose in mind, you can end up creating opportunities for people that they might not naturally create themselves. I love it because it feels like such low hanging fruit. If you know the concept of a shelling point, it's like, here's this idea that you're gonna pick a place to meet and just people go there. In the way that the Healdsburg Plaza in Healdsburg, it's a shelling point where if I tell you let's meet in Healdsburg, but I don't tell you where, it's obviously going to be in the center of the plaza. I think you can

• 54:41Speaker 02

  create a shelling point for a community too, quite easily by simply calling it out. Another example of this that I love is a friend of mine named Jason created something that he calls the neighborhood in San Francisco. And he did a lot of work on the neighborhood, but I think the key thing that he did was actually really simple, which was he told our friends and our loose network of friends of friends beyond that, he picked a point in the middle of San Francisco and drew, I think it was a quarter mile circle around it. And he just said, next time you consider moving, move to this area and then we can all live close to each other. And it's so simple. It's literally just a circle on a map. But the next thing I knew, within the next six months, that became the center of gravity for a lot of the people that I want to talk to.

• 55:25Speaker 02

  And now it's the obvious place for me to spend my time in San Francisco, because all he did was he had to draw that circle. I'm really obsessed with the question of coordination. And what are the key, small things that you can do or you can say to get people to behave in the ways that they want to behave, but may not come naturally to them if they're working unilaterally?

• 55:46Patrick O'Shaughnessy?

  You've sought out so many places to be inspired. What kinds of people do you seek out? I think you're very broadly curious and interested in lots of different things. But what's your taste in people that you tend to seek out to learn the marginal thing about this passion area that you've developed?

• 56:02Speaker 02

  A lot of my communities, especially over the last few years, have become disjoint because they are very different from each other. So my core network and friend group and people that I know is people in San Francisco and the broader Bay area who are working on frontier technology, for lack of a better term. But as I've gotten really into what's functionally real estate development, that's actually not as relevant of an interest directly for those people. And they don't necessarily know about it. And so I've spent the last few years getting to know various developers and architects and engineers who do work on this kind of thing. And I often meet them through Twitter or through email. I'm a really big believer in what I call the lighthouse approach,

• 56:47Speaker 02

  where if you talk about the stuff that you find interesting online enough, people will come to you and they'll often share those interests and values. I'm friends with a Dutch street designer who lives in Harlem, the original Harlem in the Netherlands. We talk about street design and we met online. I also try to reach out to particular groups that I think are useful. So there's this one group called the National Town Builders Association. And it's people who have done or are doing exactly the kind of thing that I'm doing, where they're trying to build a traditional walkable community where there's a clear soul to the community. And it used to be that places were built with downtowns. And now, modern developments tend not to really build downtowns.

• 57:31Speaker 02

  They just build the residential piece because you can flip it and turn it faster. But the National Town Builders Association is filled with people who think, no, actually, both the way that you can build a much higher level of value is if you do invest more upfronts to create incredible public places. And yes, that will cost more money on day one, but people will end up paying way more for it in year five, year 10, than if you just churn out another tiki-taki box. Actually, that reminds me of a question you had asked earlier, which is why don't people build towns anymore? And I think it really depends on how you define it. People are building a lot of housing in some parts of the country. There's large subdivisions that get built, which are at the scale of towns.

• 58:12Speaker 02

  But I would never call those towns because they usually don't have very many public spaces. They're usually just a bunch of homes that all get built all at once. And it's just a place that you can have a private space of your own, but there's nowhere to walk to. There's maybe not even anything that close to drive to. And so, the National Town Builders say, no, the way to create long-term value in places that people actually value and will ultimately pay for is to build that. It just takes a bit longer. So that's been an incredibly helpful group.

• 58:42Patrick O'Shaughnessy?

  It makes me wonder if part of the answer to the question of why there's not more towns is that there's not enough money in it? How do you think about the prospective returns to be earned by someone that builds a new town? Maybe there's a version of this where you demonstrate really high risk-adjusted returns to the equity that goes into the project or something. And that becomes a model that's replicable and attracts more capital because the returns are high. So how do you think about the financial return-based part of a project like this? And whether or not that might be an impediment to new town creation?

• 59:13Speaker 02

  I had the same question when I first started working on this. When my husband asked the question five years ago, I was like, yeah, it'd be nice if there was another Chautauqua, but is it really a good business? And the thing that actually got me to think, oh, I should actually work on this, was I started digging in Zillow at property values and realizing that homes in Chautauqua sell for dramatically more than outside of Chautauqua. I think it's 2X more. And those are just the homes that are like just outside of the town. So it understates it, I think, because if you're just outside the town, you still have some access. And then I kept going and asking myself, is that an anomaly? Or is Chautauqua unique? But then I studied some of these other new towns, the ones that the people in the National Town Builders Association build,

• 59:56Speaker 02

  such as Serenby in Atlanta, or Seaside in Florida, or Trilith, or Seabrook. And I have a long, long list of these. And Las Catalinas, the one I mentioned in Costa Rica. And started to realize that, no, when people build this way, they actually do make more money. It does take longer, though. So I think the next natural question was, why aren't more of these being built if this is a good business? And I think it's a mixture of things. I think one key factor is because it takes longer, it often doesn't fit into the fund length for a traditional real estate fund. Often, traditional real estate funds need to return capital in five to seven years.

• 1:00:37Speaker 02

  And these projects tend to take 10, 15, maybe 20 years to return the capital. And so just the fund length is a mismatch. And so when I did really intensive research to be like, for the ones that do exist, how did they get funded? And many of them ended up being things like one wealthy family who just decided to go all in on this project. And they ended up making huge returns, including on an IRR basis, by the way. So I'm not just saying equity multiple. They ended up making huge returns, but it was 15 years later, which is just a long time for a fund. Or there's another one where in the Florida Panhandle, of all places, there's a lumber company called St. Joe. And they own a huge amount of the land in the Florida Panhandle.

• 1:01:21Speaker 02

  And they have long looking time horizon. So they decided to turn some of their former lumber lands into building these communities.

• 1:01:30Speaker 02

  Basically, what I realize is when patient capital comes in, they can and do make a huge amount of money. But your traditional real estate funds don't fit that timeline. So that's one reason that there aren't more of these. I think another reason from a financial perspective is related to what we were talking about before with comps and all the other forces that cause real estate to be quite conservative. Because a lot of real estate is done with debt, including at the infrastructure level and like earlier on, there's a lot of pressure to not try something new. Even if it sounds like a good idea, it's like, you know what? If you try something new and it wins, we, the lenders, don't really benefit from that upside, but we do have to bear the downside. I can't blame them. Like, if I was a lender, I would say exactly the same thing.

• 1:02:15Speaker 02

  Much of real estate development does assume that you're going to take on debt. And it's just in the water and part of the culture of how people do projects. I think it also means that when you're doing something, if you're not going to take on debt, you will hurt your returns. And so what you're doing better be sufficiently innovative that it makes up for the lost leverage. And if you make something really incredible, like a Chitacua, then I think you can jump over that hurdle. But if you're only innovating on one or two things, then you're going to end up falling flat. And you do lose out on the leverage without the benefit of much higher property values. So I think there's a bit of a chasm, basically, between more conventional development, which has debt and is more conservative versus taking a really big swing and saying,

• 1:03:00Speaker 02

  we're going to do things like really differently. The second one is a little discouraging because it means that there's a lot of players in the ecosystem who don't want to act on this. But I also think it's encouraging because once we do have enough examples, and we get more and more every few years, there's now a few dozen of these across America. As we have more of these examples, the more conservative capital will be more interested in participating and say, oh, okay, we've seen this work now. A lot of these small towns have been built throughout the American Southeast, places like Georgia, Florida, South Carolina. And there's now a growing community of practice of developers who build in this way. And there's starting to be understanding in that region.

• 1:03:44Speaker 02

  And more and more institutional capital is coming in. Right now in California, there's basically none. I mean, there's some debatable cases, but there's none that I would really put cleanly in the category. One that we've found really helpful when talking to investors and to our partners is this beautiful little town in Washington State called Seabrook. It's about two and a half hours from San Francisco and I'm friends with the developer. His name is Casey and it's been built over the last 20 years and it's been a tremendous financial success. It's a place that a lot of people in Seattle go for vacation.

• 1:04:20Speaker 02

  And that's been a helpful one to have because Seattle and San Francisco have a lot more similarities than Atlanta or Birmingham, Alabama. And so being able to point to that and saying, hey, look, it worked in Washington. Maybe it can work in California. It's a slow and steady process, but I think as we develop more comps, more and more people will build in this way.

• 1:04:41Patrick O'Shaughnessy?

  What have you learned so far about sales and marketing for something like this?

• 1:04:45Speaker 02

  Probably the number one thing is something that we all learned in elementary school, but I've seen more examples of is the idea of show, don't tell. I have talked off a lot of my friends' ears for years now about the benefits of walkability and being able to go and get a coffee in the morning and having your friends within a few minutes of your home. One of my friends in particular, and she'll know who she is when she's listening to this, I think has not really been sold on that for a very long time. And she says, okay, Devin, okay, Devin, that's nice. But then when she and her family came and visited Edges Maral the last year, the pop-up village, she lived the lifestyle for that week that I had been describing to her for so long. And a few days in, she was like, oh, I get it.

• 1:05:28Speaker 02

  I see why you've been talking about this for so long. This is great. And on one hand, I kind of laughed because it was quite funny to see that. And I was really happy that it clicked for her at that moment. But on the other hand, I'm like, man, if I can't even explain this verbally to one of my closest friends, how could I possibly communicate it with other people? And so that's another reason why the pop up is so useful because it's been a way to bring people up to the place where we're actually building this community and the town where we're hosting in Healdsburg, it's not the same. We're going to do things differently from Healdsburg to some degree, but on the spectrum of American cities, it's much closer to what we ultimately want to build than not.

• 1:06:09Speaker 02

  And so getting to just show people the lifestyle that we're trying to create and the types of values that we want people to have in this community has been huge. And I think especially for something like this, we're essentially creating a real life social network. When people move places, they're not just moving for the house and the physical place, but also who do I know who lives there? Who's someone that I would like to know who lives there? By being able to show them the types of people who come to Edge as Maralda and are drawn to that, it helps them start to imagine, oh, my 12 year old kid could be friends with this other 12 year old kid whose family is also thinking of moving there. And people can start to picture themselves in it. So I think that's the number one takeaway for me is do less talking and do more showing.

• 1:06:52Patrick O'Shaughnessy?

  Of all the people you presented this to, I'm sure there's many with amazing perspectives. What question should people ask you more that they don't tend to ask you?

• 1:07:01Speaker 02

  It depends on who I'm talking to, but I think the infrastructure costs to build something like this are astronomical. People don't really understand how expensive infrastructure is, even quote unquote, basics like roads and electricity. I'm not even talking about a fancy suspension bridge or something, just a road. Costs a lot of money to build this stuff. And I think that many people I talk to are just not aware of it. Cause also a lot of the infrastructure costs are not even visible. They're underground. And so I spend most of my day in spreadsheets and talking to our general contractor and civil engineer, thinking about how do we make sure that we both design this in a way that's beautiful and supportive of the type of

• 1:07:44Speaker 02

  living that we want to have, but also pays for itself and is not crazy expensive. And people almost never ask me about the infrastructure. I think they just assume that it'll be handled and I can tell you that it will not just be handled. It's a whole thing and I'm not worried about it. We're going to do it, but it's something that you have to think a lot about. And frankly, it's the thing that can make a project sink or swim. If your infrastructure costs end up being 10% more than you expect, that could be the difference between having a successful project versus not.

• 1:08:14Patrick O'Shaughnessy?

  I'd love you to just dream a little bit and think ahead however long, 10, 15 years, whether it's Esmeralda number one, or there's multiple towns that you've built, to imagine the most successful version of this story.

• 1:08:29Speaker 02

  Yeah, the most successful version of the story, I'll give the big abstract answer, and then also the personal answer. At the high level, the most successful version of the story is that we prove out this model, and I and my team get to go build many, many more of these in the world. Not just that, but also it then inspires other people to build in this way. We're not even trying to do particularly crazy things. Some of them, to me, you just feel very low key, but for many developers, they're like, oh, that's so hard to even imagine doing. And so just giving them an existence proof that this is possible, I think would then inspire people to do more.

• 1:09:12Speaker 02

  And I've already seen this play out in the Southeast. And I think it could go even farther. It's not the dominant form of development happening in the Southeast, but it is a growing form. So that's the biggest one is we would have a chain of these villages all across the country, maybe also bigger ones, like I'd love to build something even a larger scale one day, and then also for people to copy. And then I think at the personal level, I mean, I'm building this because I want to live here. I'm building the place that I would like to raise my future family in and spend my life in. And so success to me is building a place that I like.

• 1:09:49Patrick O'Shaughnessy?

  Fantastic. This has been so much fun to explore with you, and it's been so fun to learn about separately through all the stuff that you've created to teach people about it. When I do these, I always ask everyone the same traditional closing question. What's the kindest thing that anyone's ever done for you?

• 1:10:01Speaker 02

  This is very out of left field and not related to anything we've been talking about, but it rings true anyway. So a few years ago, I had a really bad hand injury and I won't go into all the details. My life is fine now, but it was one of those things where I ended up having an antibiotic resistant infection and weird stuff ended up happening. And I just went down very odd parts of the probability tree, had many different surgeries. And the way that the doctors treated me, I had two doctors in particular, Dr. Miki and Dr. Buntyk, who are both hand surgeons, and they treated me with so much respect and they particularly encouraged my curiosity and made it so that I was part of the decision-making process,

• 1:10:42Speaker 02

  which I don't think always happens in the medical sphere. And in fact, because it was so unclear what was going on with my hand injury, Dr. Buntyk actually asked me, would you be interested in having a conference about your hand? And I was like, what does that mean? He's like, well, we could bring 12 of the leading hand experts to all talk about your hand injury with you and talk about different possibilities of what could happen and what we think is a likely outcome. And I was like, yeah, absolutely. I would love that. And so we spent a morning having a conference all about my hand and they really took me seriously, even though I'm not an expert. They knew that obviously I didn't have the expertise that

• 1:11:24Speaker 02

  they had, but also it's my hand and I want it to work. So being given the opportunity to have that experience and to really be taken seriously meant a lot. And honestly, it was just fascinating as well, at no additional cost, as far as I can tell. My insurance company might think differently, but they just genuinely wanted to make sure that I ended up with the best outcome and that I felt like I was the decision maker with a lot of experts around me.

• 1:11:50Patrick O'Shaughnessy?

  Can I ask you one more?

• 1:11:51Speaker 02

  Yeah, absolutely.

• 1:11:52Patrick O'Shaughnessy?

  I'm curious why you care so much about this notion of unlocking human potential? It seems like that's really a through line. If I think about your thinking in Tools for Thought, Environments for Thought, Frontier Camp, all these things that you've built or been a part of seem to be about people that are curious to eke the most out of their own potential? Is that right? And if so, why do you care so much about that?

• 1:12:18Speaker 02

  My first reaction is it's almost like a terminal value. So it's kind of hard to explain. This is going to sound a little cheesy, but we only get to live one life and getting to do... The most with that time that we can and working on truly interesting things that we care about and pushing ourselves as far as possible in that limited time that we have, I think is really great. And if I think back a thousand years ago, people's lives were so much more constrained. The possibility for how they could spend their life was quite limited to just making sure that they got enough food and that their children weren't starving. And I think the arc of progress is allowing people to have a broader range of things they can do and broadening the sense of possibility, I think,

• 1:13:03Speaker 02

  really brings me awe.

• 1:13:04Patrick O'Shaughnessy?

  What's the first time you can remember feeling an expansion of your own capacity?

• 1:13:11Speaker 02

  So I grew up with a brother with special needs. I still have a brother with special needs. He's five years younger than me. And as a result, I had to grow up pretty quickly because I helped take care of him and love him to death. He's wonderful. And I think the fact that my parents trusted me from a very young age to help take care of him, that was very empowering for me and I always appreciated it. I was taken seriously early. And being in a position where they'd leave me at home to help take care of him while they had to go run groceries, things like that, it just made me feel like my parents believed that I can handle this. And it then made me want to step in those shoes and handle it. So I think that's probably the first that really comes to mind.

• 1:13:53Patrick O'Shaughnessy?

  How old were you?

• 1:13:54Speaker 02

  They planted the seed really early, from the moment we first realized that he was developing differently than most kids. And that was when I was maybe six or seven. But then it just grew from there. And I feel like it wasn't one moment. It was something that we cultivated. And each time I'd earn a little bit more trust and it would expand from there. I think it's interesting to compare it to the experience with the doctors who helped me with the hand surgeries. I don't think they would have necessarily behaved that way with every patient, because some people are going to be more difficult or they may not have the curiosity or they might just want to be upset. And I get it. I was in a lot of pain and I was really stressed. So I had my moments too, don't get me wrong.

• 1:14:36Speaker 02

  But I think empowerment is something that requires trust. And for someone to empower you, you also have to give them a reason to do so. And it's sort of a give and take. It's not just one person bestowing it upon you.

• 1:14:49Patrick O'Shaughnessy?

  Beautiful place to close. Thank you so much for your time.

• 1:14:51Speaker 02

  Thank you, Patrick. This was so fun.

• 1:14:54Patrick O'Shaughnessy?

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