Jackson Hole News

EVEN RICH WEST STILL HAS POOR MAN'S MENTALITY

What Jackson Hole Can Learn From The Big Apple

By Jonathan Schechter, 3-20-07

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
– Warren Buffett, American investor

At some level, all writing is an exercise in narcissism: Something interests authors, and they are vain enough to assume the subject also will interest readers. Today, I’ll be rather brazen with my narcissism, presenting another installment of: “Trips I’ve taken; things I’ve learned.”

Last month, I ended a string of travels in Revelstoke, a small, isolated town in eastern British Columbia. Last weekend, I ended a string of travels in New York City, the anti-Revelstoke.

A friend of mine believes Central Park is the Jackson Hole, Wyoming of New York, an oasis of nature surrounded by high peaks (albeit without an airport). More to the point, even though the thought might cause Teton County residents to gag, there are some pretty significant parallels between Manhattan and Jackson Hole.

For starters, both are extraordinarily wealthy: In the most recent Bureau of Economic Analysis study, New York and Teton counties rated second and third, respectively, among all U.S. counties in per-capita income.

Geographically, both are islands – New York surrounded by water; Jackson Hole by public lands – with limited amounts of private land available for development. And because New York has been dealing with land restraints for far longer than we have, it offers lessons for us, both good and ill.

I was in New York for a party honoring a close friend. He works in finance, so many of the people at the party were wheels on Wall Street. Naturally, they talked shop, and since I didn’t have much to contribute on that score, I did a lot of listening.

The gestalt impression I took away from those conversations was just how much money is out there to be invested. A former roommate of mine runs an $800 million investment fund in Israel. One guy I met runs a $2 billion hedge fund; another runs a private equity firm of a similar size. However, the bragging rights went to a couple of friends who each run investment funds worth tens of billions. Even for Wall Street, that’s a lot of money.

But not that much.

Regardless of how much money they were managing, each of these folks saw his or her fund as a mere drop in the worldwide investment bucket. As a result, each independently commented on how hard it is becoming to find “good” investments, i.e. that which deliver above-average returns without undue risks.

As with everything else, supply and demand applies to investments, and with so much investment money out there, the consensus view was that quite a few investments are being made simply because all that money has to go somewhere.

Asking the party-goers what made for a “good” investment, most talked about the long term. “I tell my investors we’re in it for the long haul,” one said. “Focusing on the short-term is for people who want to be in the business for the short term.”

Thinking about Jackson Hole and similar communities in the West, I took two things away from these conversations.

First, there are a lot of wealthy people out there. As a result, the wealth-driven trends we’ve seen in Jackson Hole during the last decade are not just here to stay but will likely intensify. We may not like it but we’d best get used to it.

The only real question is whether we’re going to thoughtfully plan for it or simply remain in denial.

Second, the outside world is far more appreciative than we are of just how special this community is.

By “this community,” I mean the “greater Jackson Hole area”: the two Teton counties and Star Valley. Politically, the “greater Jackson Hole area” took its current form in the late 1920s, when Teton County, Wyo., was carved out of the northern half of Lincoln County. The 1930 census counted 16,470 people living in the three counties. Four decades later, very little had changed: In 1970, 16,011 people were living in the three counties, a decline of 3 percent in 40 years.

During that same 40 years, the population of the United States increased by two-thirds; the population of the world by four-fifths.

Since 1970, however, things have completely reversed themselves: The population of the United States has increased by two-fifths; the population of the world by two-thirds; and the population of the greater Jackson Hole area by one and a half times.

We’re growing at this rate for two basic reasons: Because people want to live here, and because they can. People want to live here because the greater Jackson Hole area offers a combination of environmental quality and quality of life few places can match; people can live here because technology is allowing more and more kinds of work to be done anywhere. As a result, we’re growing at a rate far greater than our fast-growing nation or world. And because technology is only going to become cheaper and more powerful, we can expect more of the same.

Unless, of course, we foul our own nest and make it an undesirable place to live. That’s where our lack of appreciation for what we have comes into play.

As the population figures suggest, until 1970 or so, the greater Jackson Hole area was essentially impoverished: remote, isolated, dependent on agriculture and a bit of tourism. With the founding of the Jackson Hole Ski Area in the mid-1960s, things started to improve, but only gradually (and recall that, to help it get going, the ski area needed a huge economic development loan from the feds, the kind designed to help the poorest areas of Appalachia).

Because of three forces – this relative poverty, a legal system and culture that emphasize private property rights, and the land-rich, cash-poor nature of local agriculture – the greater Jackson Hole area has long had a “poor man’s” approach to land development, wherein we’ve been more than grateful anytime someone has wanted to develop something here, no matter what its quality or relationship to the landscape. And while this mind-set is slowly starting to change, at the end of the day, it’s still a pretty favorable environment for developers, especially in the Teton and Star valleys.

Why does this matter? Because of what’s happening in the rest of the world.

With so much investment money and so much powerful technology, it’s becoming increasingly easier to replicate anything anywhere. This is why major ski areas and shopping malls have a similar feel; this is why you can ski in Dubai or surf in Arizona or eat Maine lobster in Singapore.

What can’t be easily replicated is what the greater Jackson Hole area has in spades: abundant wildlife and its habitats, stunning scenic vistas, easily accessed recreational opportunities. Living with these things every day, we don’t see them as non-replicable or scarce; to us, they’re just the way of the world. To someone from the outside, however, what we have is not only extraordinarily valuable, but becoming more so with every passing year.

The greater Jackson Hole area is booming right now, with a lot of outside investment money pouring into development. A dynamic like that makes my investor friends uneasy, because oftentimes it means decisions are being made with a short-term focus.

Viewed as an investment, the long-term value of the greater Jackson Hole area will depend on how well our decisions complement and enhance our truly unique assets; to paraphrase the greatest investor of all, communities take a long time to build but can be ruined in short order.

EDITOR’S NOTE: Jonathan Schechter owns Summit Management Consulting and is a regular columnist for the Jackson Hole News & Guide.

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