The Maui Nui Food Alliance invites you to join our 2022 Food Summit, Collaboration and Stewardship: Building Resilience, taking place on Friday, October 21 from 10AM-3PM at Kamehameha Schools Maui Campus.
The MNFA 2022 Food Summit will be a space to talk story, hear from Maui Nui’s food system leaders, eat a local lunch with us, and learn how you can impact the Maui County Food and Nutrition Security Plan! We look forward to sharing the agenda with you soon.
To attend, please complete the registration survey by September 30, 2022. Mahalo!
If you have questions, please email us at mauinuifoodalliance@gmail.com.
As many of you already know, the Hawaii Department of Transportation has been studying implementation of a Road Usage Charge (RUC). Such a charge would be assessed to a driver based on how many miles they’ve driven on our highways and byways, and it’s (at least in theory) designed to replace the fuel tax that is now the primary contributor to the state’s Highway Fund.
HIDOT has now published its final report on its HiRUC website. Some of its key findings: First, Hawaii drivers have a high level of understanding (not sure how this is measured) and high initial acceptance of road usage charges with more support than opposition (noting that the questions asked drivers about their opinions of the RUC as a replacement for, not in addition to, the current gas tax). Second, public support grew when funds are dedicated to maintenance and improvement of roads and bridges (perhaps showing a recognition of the possibility that lawmakers might want to use the funds for something else, like public employee salaries or – gasp – rail). Third, support grew when rental cars are charged a higher rate than residents (of course they surveyed residents only, and not rental car drivers).
HIDOT’s plan for implementing the program sounds reasonable enough. It plans to introduce legislation, such as Senate Bill 3313 in the 2022 legislative session, to establish a RUC for electric vehicles only. It wouldn’t replace the fuel tax (which electric vehicle owners don’t pay anyway) but it would instead replace the flat $50 registration fee now imposed on electric vehicles. The longer-term game plan is then to phase out the gas tax and phase in the RUC for other vehicles.
When this plan is implemented, however, it might not go quite as smoothly as HIDOT envisions it.
First, there is a contingent of people who are pushing a carbon tax. A carbon tax collects money to pay for the societal costs of pollution, global warming, and other environmental damage wrought by fossil fuel burning. Given that many of the environmental damages have already occurred, the goal of the tax is to fix the past damage and not simply compensate for current social costs. Furthermore, it is there to disincentivize (i.e., penalize) fossil fuel use. Rather than getting rid of the existing tax on gasoline, they want to jack it up big time. This past session, House Bill 2278 proposed to change the barrel tax on gasoline from $1.05 to $5.27 per barrel initially, increasing in phases to $33.16 when fully phased in. That translates to 12.5 cents a gallon initially and 79 cents a gallon when fully phased in.
Not only would the carbon tax supporters seethe at the idea of getting rid of the fuel tax to support a RUC, but they also probably would have a tremendous problem with using the RUC money exclusively to fix roads and bridges as HIDOT wants. We need to plant those trees! Scrub those smokestacks! Encourage the adoption of alternative energy like photovoltaic and wind energy! How is this going to happen if we ONLY collect enough money to fix the roads and bridges? It’s nowhere near enough!
Political dynamics like these make me more than a little nervous that the plan put forward by HIDOT will morph into something entirely more gruesome during the legislative process.
It then becomes up to the rest of us, the constituents, to elect lawmakers who will come up with or follow reasonable policies and not allow lawmakers to go off the deep end with the RUC. Fasten your seatbelts for the 2023 legislative session. It may be a wild ride.
Canopy skydiver Robin Jandle has set a new record at this week’s 2022 Skydiving National Championships with a distance of nearly a mile at 129.98 meters. Canopy piloting involves skydivers swooping over water, clocking speeds up to 100 MPH, where they are judged in accuracy, distance and speed. This has broken the FAI North American Continental and Wisconsin state record, as well as secured Robin 3rd place overall, competing against both men and women.
This is a huge accomplishment in the sport, with skydiving being primarily male-dominated and just 14% of skydivers identifying as female.
With this feat, Robin has also secured her spot on the 2023 U.S. World Cup skydiving roster, where she will compete in Eloy, Arizona next year.
Robin took her first tandem skydive at Skydive Hawaii in 2010 and hasn’t looked back. Robin has been skydiving for over 12 years, jumping over 8,700 times. She also made the U.S. Parachute team in 2019 and holds world records for speed in U.S. women’s belly carving.
Its taken over four decades, but the newest edition of Suva: A History and Guide is now for sale on Amazon. It’s an eBook (on Amazon’s Kindle platform) with print on demand hardcopies available.
So what’s the story behind this book? And why did it take 44 years for a second edition to emerge?
Suva: A History and Guide was first published in 1978 by my friend Albert J. Schütz, affectionately known as Al.
A longtime linguistics professor at the University of Hawai‘i, he was one of the foremost scholars of the Fijian language. I’m using the past tense because Al passed away in early 2020, while we were in the midst of updating the book.
But I digress. Let’s talk about the genesis of this work.
The first edition of Suva–A History and Guide published in 1978
How Al came to write this book was a twist of fate.
As he told it to me years later, he had been managing the Fijian Dictionary Project (now known as iTaukei Institute of Language and Culture) in Suva and was stricken with dengue fever. Wracked by the disease, he put aside his linguistic pursuit and began to outline the basics for a tourist guide he hoped to write about the South Pacific city he had come to love.
As an academic, writing a “tourist guide” was a radical departure. But he adored history, and this one-time farm boy from Indiana was an expert in ferreting out facts from musty archives that would bring life and depth to his newfound passion.
He was the perfect candidate to write the book.
Al first arrived in Fiji in 1960, a decade before the British Crown colony would assume its independence. He had a reverence for tradition and the bygone characters who had lived in Suva. In those waning days of the colony, there were still denizens of a bygone era who walked the streets of the capital.
Even when I first set foot there in 1979, well-known characters such as the dowager Parham sisters, Beatrice (1903-1985) and Helena (1905-1987), and former mayor Len Usher (1907-2003) could be seen strolling down Suva’s main drag, Victoria Parade.
Al’s attention to detail and academic rigor are what distinguish Suva–A History and Guide from typical guidebooks. It is more a historical work clad as a tourist guide. The tack he took was entirely original. He understood that by knowing the origins of Suva’s street names, many bearing the names of its early settlers, he could bring life to the city’s storied past.
Suva in the early 1960s (Al Schütz photo)
For example, Verrier Road in Namadi Heights is named after Dr. Walter Lindsay Isaac Verrier, a former medical officer in the British Western Pacific High Commission. Dr. Verrier (1907-1981) might not ordinarily make it into a history book, but he didn’t escape Al’s notice.
The British-born émigré later played a key role investigating Fijian demography, including Fijian family histories. In doing so he made valuable contributions to the country’s Native Land Commission, which settled land disputes. Dr. Verrier is but one example of numerous Suva residents who deserved and received recognition in this book.
In this forensic study of Suva, Al has captured what sociologist Michael Bell has called “The Ghosts of Place.”
“A common feature of the experience of place is the sense of the presence of those who are not physically there,” wrote Bell in his 1997 essay that carried the same title as the concept.
Cover of thenew, improved Suva: a History and Guide
What Bell was saying is that the “ghosts” of a place can still be felt in the present. Through the examination of historical sights and street names, Al helped us connect with those long-gone characters, in living color.
I believe Al’s intermingling past and present resonates deeply with Fijian culture. The primacy that ancestral spirits had and the influence they exerted in the socio-politics of pre-colonial Fijian society cannot be understated. To this day, many Fijians recognize and honor familial spirits that dwell among us —even in modern-day Suva.
So how did this second edition of Suva–A History and Guide come to be written?
It was my idea. I suggested that we combine what info I had on Suva restaurants, hotels, etc. with Al’s historical content. He liked the idea and began to update the text. I went over to Suva in 2019, to take photos and followed up on some of Al’s queries. For example, he was curious if there was any significant development in Toorak and what impact investments from China-based companies might be having on Suva. (As far as Toorak, Suva a sleepy neighborhood, unsurprisingly, things were still pretty quiet on the development front. When it came to Chinese investments in Suva, on the surface it appeared there was a great deal to discuss. However, predictably, no one seemed to want to talk about it).
Naturally a few things had changed since 1978 and we did our best to do our homework.
The visit of Queen Elizabeth II on Victoria Parade captured by Al Schützin 1963
To help us with this endeavor, we were lucky enough to have wonderful collaborators, mostly from Fiji. These included:
Steve Yaqona, a Suva native steeped in Fijian tradition and former head of the Fiji Visitors Bureau, wrote the Foreword.
Suva resident Paul Geraghty, a linguist, newspaper columnist and former colleague of Al’s at the Fijian Dictionary Project helped edit the book and wrote the Preface.
Josua Mudreilagi Namoce, a Suva-based photographer who works in the Fiji Parliament, contributed the lion’s share of the photography for this book.
Kate Hawkes, an American academic who spent a year in Fiji on a Fulbright Scholarship, contributed some great images.
The family of the late, great photographer, Rob Wright, allowed us to use his images of Suva of the mid 20th century.
Academics Nic Halter, at the University of the South Pacific, and Max Quanchi, Honorary Research Senior Fellow in History at the University of Queensland, assisted in fact-checking. Nic also provided several photos.
Gerry Takano, a Hawaii-born architect who spent a year in Levuka on a historical preservation grant provided some wonderful commentary on Suva architecture.
Fantasha Lockington, CEO of the Fiji Hotel and Tourism Association, has offered advice and assistance for this project from the beginning.
Suva Harbor circa 1960 (Al Schütz)
Al communicated to me that he wanted his Suva book part of his legacy. Fiji had been a very important part of his life and the book was a way to leave something to the Fijian people.
The original version was more of a history book cloaked as a guide and in this new edition, we have striven to make more visitor-friendly by offering advice where to dining, accommodations and an important new phenomena, the arts. We have also updated the walking tour, a popular feature, especially for day trippers from visiting cruise ships.
To the best of my knowledge, this is still the only guidebook dedicated to Suva.
I trust on your visit to Fiji’s capital this book will help connect you to its spirit of place.
Visitors interested in visiting Fiji can fly directly via Fiji Airways directly from Honolulu.
To: Honolulu City Council Tommy Waters, Chair Esther Kia‘aina, Vice Chair
From: Ted Kefalas Director of Strategic Campaigns Grassroot Institute of Hawaii
RE: BILL 10 (2022), CD1 — RELATING TO USE REGULATIONS
Dear Chair and Council Members:
The Grassroot Institute would like to offer comments on Bill 10 (2022), CD1, which would restructure the land-use ordinances contained in Chapter 21 of the 1990 Revised Ordinances of Honolulu.
The bill would update the county’s land-use regulations for agricultural, residential, commercial, nonprofit, government and other uses.
We commend the Council for its work to update the code and lower the cost of housing, but we are concerned that some elements of the bill will undermine that goal.
Expanding multi-unit and group housing
In Sec. 21-5.50-1: “Household living,” page 26, Bill 10 clarifies the guidelines for multi-unit dwellings in business zones and expands the business zones in which they can be constructed.
Multi-unit dwellings with one or two dwelling units would be allowed in business zones as long as they are on the second floor and meet certain size specifications.
The Grassroot Institute of Hawaii welcomes this proposal, since any step to allow more housing will likely reduce housing costs.
The National Multifamily Housing Council has studied this issue and concluded that government regulation makes up more than 40% of multifamily development costs.[1]
Additionally, the Brookings Institution has written that “in places where land is expensive, building multiple homes on a given lot is the most direct way to reduce housing costs because it spreads the cost of land across multiple homes.”[2]
On this front, Bill 10 is a step in the right direction.
But there is more that can be done to expand multi-unit dwellings and lower housing prices for Honolulu residents.
As amended on Aug. 25, Bill 10 would permit multi-unit dwellings only in B-1 and B-2 zones, but only if those units are in so-called transit-oriented development plan areas — in other words, areas near the Honolulu rail line.
This amendment should be reconsidered, as it constrains these multi-unit dwellings to a needlessly small area.
I would like to comment on one other section of the bill, which the Grassroot Institute of Hawaii believes is well-intentioned but misguided.
Creating government-owned housing for teachers
In Sec. 21-5.50-3: “Accessory residential,” page 36, Bill 10 allows the city to finance, construct and lease housing for teachers whose household income is 80% or below the area’s median income. The housing would be built on land owned by the city and under lease to the state Department of Education.
Unfortunately, research has shown that such government-owned housing often traps tenants.
“Once they are segregated in low-income housing, residents are disincentivized to get ahead in life or move to better housing,” the Manhattan Institute’s Michael Hendrix has written.[3]
Stuck in housing they do not own and cannot improve, tenants can end up in unacceptable living conditions.
Since rent from lower-income individuals often does not keep pace with maintenance costs, governments must find the cash to pay for repairs. When they cannot, repairs are put off — sometimes with hazardous results.
In 2018, the New York City Housing Authority faced a lawsuit from residents alleging the agency “failed to provide tenants with heat and hot water” and did not “keep residents safe from lead.”[4]
Instead of spending more taxpayer money on housing, the city should incentivize private home development by liberalizing zoning regulations and cutting permitting delays — in the latter case, perhaps by reducing the number of permits needed.
In general, Bill 10 deserves praise for relaxing the zoning regulations on multi-unit homes, but it could and should do more.
Thank you for the opportunity to testify.
Sincerely,
Ted Kefalas Director of Strategic Campaigns Grassroot Institute of Hawaii
This article was originally published Aug. 19, 2022 in the Hawaii Filipino Chronicle. ___________
By Keli‘i Akina
With inflation soaring in our already-expensive state, wouldn’t it be nice to get a discount on a few of life’s necessities?
That might actually happen, if some of the candidates in the current election cycle get elected.
Finding popularity in an idea that has been kicking around for decades, the candidates have been talking about exempting food and medicine from the state general excise tax — and I’d like to encourage them to follow through on the idea if they make it into office.
Why exempt food from the GET? Because even before inflation drove grocery costs up by 8.7% this year alone, Hawaii residents were spending considerably more of their budgets on food than the residents of just about anywhere else in the U.S.
Given that Hawaii’s GET can be as high as 4.712% — when you include the surcharges imposed by the counties — an exemption for food would help alleviate some of the pain caused by Hawaii’s ever-increasing prices.
The GET, of course, is a regressive tax, which means it falls heaviest on those who can least afford it. Offhand, that would make it seem like a good idea right there to exempt food from the GET.
However, a prominent state official recently said a GET exemption for food wouldn’t help Hawaii’s poorest residents, since purchases with food stamps already are exempt. But this misses the larger point: Not everybody uses food stamps, and for most of Hawaii’s residents who don’t, every dollar counts. That’s why we like big-box stores, discount cards, coupons and kamaaina deals
Let’s face it: Hawaii is one of only 13 states that levies a sales tax on groceries. A GET exemption for food is one way policymakers could do something constructive about the large role that taxes play in Hawaii’s high cost of living. As for medicine, our prominent state official noted that prescription drugs also are already exempt from the GET. But there are many over-the-counter drugs that people buy for legitimate health-related reasons, and these are not exempted. If we want to help people save a few more dollars during these rough times, exempting all medicine products would be a way to do it. Nine other states and the District of Columbia do so, while a 10th state taxes OTC drugs at a lower rate.
In fact, not only should Hawaii lawmakers help Hawaii families save money on food and medicine, they should exempt medical services as well, as nearly all other states do.
Keli‘i Akina
Hawaii hospitals and medical groups don’t have to pay the GET, but private practice physicians do. Combined with the local cost of living, the high price of doing business in our state and the fact that the GET cannot be passed on to Medicare patients, the tax on physician services makes it very difficult to run a successful medical practice in Hawaii.
Physicians themselves have cited Hawaii’s tax on medical services as a contributing factor in their leaving the state to practice elsewhere. Hawaii already is suffering from a doctor shortage, overstressed hospitals and delays in access to care. The last thing we need is a tax that drives away qualified physicians and shuts down medical practices.
Most other states have already seen the wisdom in exempting groceries and medical services from their sales taxes. Will this be the election season that leads to Hawaii doing so as well? _____________
Keli‘i Akina is president and CEO of Grassroot Institute of Hawaii.
The evidence continues to mount that land-use, zoning and other homebuilding-related restrictions are the main force behind Hawaii’s ever-increasing housing prices.
Nevertheless, many people in Hawaii have for years been blaming the state’s housing crisis on “outsiders” — people from elsewhere in the U.S. or from foreign countries.
A recent policy brief for the Grassroot Institute of Hawaii, “The ‘outsider’ theory of Hawaii’s housing crisis,” shows this belief is far from reality, based on an analysis of data from all 50 states, the District of Columbia and more than 2,300 counties.[1]
Using home sales data from the Hawaii Bureau of Conveyances and a novel data set of nationwide tax-assessment records provided by the AEI Housing Center in Washington, D.C., the report found no meaningful pattern between “outside” buyers and median home prices — in Hawaii or anywhere else.
However, the report did find a strong correlation between high home prices and government land-use, zoning and other homebuilding-related regulations.
In the study, there is a scatter plot of all 50 states showing a statistically significant linear and positive correlation between nationwide median home prices and land-use restrictiveness.[2] The graph is based on research provided by the Cato Institute’s land-use freedom index, which in 2021 ranked Hawaii at No. 44, or among the most burdensome.[3]
The Cato index is an extension of the highly respected Wharton Residential Land Use Regulatory Index, or simply the Wharton Index, developed by Joseph Gyourko and other economists at the University of Pennsylvania.[4]
The methodological tool of the Wharton Index is to survey planning officials in counties nationwide about issues such as public participation in the regulatory process, the range of rules used to regulate the housing market, and the outcomes of restrictions “such as changes in the costs of lot development and the number of re-zoning permits applied for by developers.”[5] In 2018, the survey covered 2,400 counties, but excluded Hawaii.[6]
Jensen Ahokovi
Earlier this year, researchers with the University of Hawaii Economic Research Organization noted that “home prices in Hawaii are among the highest in the nation”[7] and decided to test the theory that government regulations have something to do with it. So they applied the Wharton Index to Hawaii’s four counties and found that “average regulatory burdens in Hawaii are significantly higher than those found in any other state.”[8]
Other studies that have made similar connections include:
>> In 2021, Jaehee Song of Yale University found that minimum-lot restrictions, which determine the minimum lot size allowed for construction, “play significant roles in increasing housing prices and limiting housing supply.”[9]
>> In 2019, land-use policy expert Randal O’Toole found “a strong negative correlation between growth-management planning and housing affordability.” He noted that in 2018, “18 of the 20 least-affordable urbanized areas out of 437 nationwide, with value-to-income ratios above 5.8, were in California, Hawaii and Oregon. The other two were Boulder, Colorado, and Flagstaff, Arizona. It’s fair to say that virtually all of the 45 urban areas with value-to-in- come ratios above 5.0 practice some form of growth management.”[10]
>> In 2018, economists Edward Glaeser of Harvard University and Gyourko of the University of Pennsylvania wrote, “The general conclusion of existing research is that local land-use regulation reduces the elasticity of housing supply, and that this results in a smaller stock of housing, higher house prices, greater volatility of house prices and less volatility of new construction.”[11]
Glaeser and Gyourko also observed that “empirical investigations of the local costs and benefits of restricting [homebuilding] generally conclude that the negative externalities are not nearly large enough to justify the costs [housing] regulation.”[12]
>> In 2017, Vanessa Brown Calder of the Cato Institute found that “in general, the states that have increased the amount of rules and restrictions on land–use the most have higher housing prices.”[13]
>> Also in 2017, Gyourko and Federal Reserve economist Raven Molloy conducted a review of previous housing research and found “the vast majority” concluded that “locations with more regulation have higher house prices and less construction.”[14]
>> In 2009, four economists wrote in the U.S. Department of Housing and Urban Development’s academic journal Cityscape that from 1988 to 2005, inclusionary zoning policies in California had “measurable effects” on housing in the jurisdictions that adopted them, specifically: “The price of single-family houses increases and the size of single-family houses decreases.”[15]
>> In 2009, a group of researchers found that in six U.S. metropolitan areas, high-density zoning “as practiced by suburban governments … limits the construction of multifamily housing below market-determined levels.”[16]
>> In 2002, Gyourko and Glaeser looked at high-cost areas in the U.S. where the price of homes exceeded the costs of construction and found that, “The bulk of the evidence … suggests that zoning and other land-use controls are more responsible for high prices where we see them, [and] measures of zoning strictness are highly correlated with high prices.”[17]
>> In 1996, University of Wisconsin-Madison economist Stephen Malpezzi looked at 56 metropolitan areas and discovered that housing regulations raised both rent and home values while reducing homeownership.[18]
>> Just two months ago, in July, economists Kevin Corinth and Hugo Dante provided new estimates of housing shortages for each state and found that Hawaii and the District of Columbia had the highest housing shortages in the nation.[19]
Published by the Institute of Labor Economics, this study is especially noteworthy because Corinth and Dante did not use the typical definition of “housing shortage.”
Most people define a housing shortage as the difference between new housing units and the expected number of new units, given historical trends. Corinth and Dante, however, said a housing shortage is determined by taking the difference between the current housing stock and the number of homes that would exist absent housing regulations.
Using this approach, they found a positive correlation between housing shortages and housing regulations.
They concluded that “restrictions on housing supply have a negative impact on the economy and the well-being of American families by driving up the cost of homes in the United States.”
Their findings, they said, “show that the scope of the problem is far larger and more widespread than policymakers currently recognize” and “proposed solutions are likely to fall short of solving the problem.”
They added that, “In order to address these challenges, policymakers require an accurate understanding of the scope of the housing-supply problem.”[20]
As the Grassroot Institute’s outsider report states: “Land-use regulations are not the only driver of home prices across the country, but the data suggests that they are, at least, a substantially better predictor of home prices [than out-of-state buyers].”[21]
If local lawmakers want to make a dent in Hawaii’s housing crisis, they would do well to reform or even repeal state and county restrictions that unreasonably block or hinder new homebuilding. _____________
Jensen Ahokovi is a research associate for Grassroot Institute of Hawaii.
[3] William Ruger and Jason Sorens, “Hawaii — #44 Land,” in “Freedom in the 50 States: An Index of Personal and Economic Freedom,” Cato Institute, 2021.
It’s been no secret that housing costs are astronomical here in Hawaii (even if you aren’t the TMT observatory). It’s been a tougher problem to determine why this is so, and then try to find solutions.
Lawmakers have often latched onto the theory that out-of-state buyers bid the price up. “Many in Hawaii cannot compete with outside investors to purchase homes and condos beyond their economic reach,” said a Civil Beat opinion piece in 2020 written by Brian Schatz, Ron Kouchi, Scott Saiki, Donovan Dela Cruz, Sylvia Luke, and Derek Kawakami.
To fight this perceived abuse by outsiders, our lawmakers introduced a number of punitive measures. One was the “vacant homes tax,” which would impose additional levies on property that isn’t lived in. The state Senate introduced a bill in 2020 to do that, SB 2216 (2020), which passed the Senate but stalled in the House. The Honolulu City Council then took up the torch with Bill 76 (2020), which didn’t get too far either. Other punishing tax measures did make it into law, including hikes in the state conveyance tax for residences that don’t qualify for a county home exemption, and hikes in county real property tax for such residences (Honolulu’s “Residential A” tax classification, for example). Even in this year’s legislative session, a bill (SB 2237) was introduced to more than triple conveyance tax rates for residences selling for at least $2 million. It would have imposed a staggering $1 million conveyance tax on the sale of a $20 million single family home if the seller didn’t qualify for a home exemption—and that would be in addition to any other taxes like capital gains.
Recently, the Grassroot Institute of Hawaii put out a research report essentially throwing lots of cold water on the outside buyer theory. The author performed a regression analysis for the period 2008 to 2021 of average prices for homes bought by local residents versus the percentage of out-of-state buyers. The analysis found a statistically significant negative correlation, suggesting that home prices for local residents have been relatively more expensive in periods when there have been fewer out-of-state buyers. That is the opposite of what would be expected if the outside buyer theory were correct. The study went on to review more local and national data, and concluded: “In short, the popular belief that out-of-state residents are the reason for Hawaii’s high housing prices is just that — a popular belief — but not one supported by the evidence analyzed in this study.”
The study instead pointed to permitting delays and land use regulations as the primary culprits. ”[M]ost research finds that land-use regulations comprise the primary reason for the current condition and large increase of home prices in the nation’s most expensive locales,” it said. “Rather than scapegoat out-of-state buyers, Hawaii policymakers should focus on reducing the number of governmental regulatory barriers that restrain the state’s housing supply.”
Coincidentally, the release of this report was shortly followed by a revelation out of the City & County of Honolulu. As reported by Pacific Business News, as of August 11, 2022, there were 3,499 building permit applications in the initial processing or pre-screening phase; 4,780 permits in plans review with plan examiners; and 1,113 permits approved and waiting to be picked up. That’s eight thousand building permit applications in the processing queue. A 2020 City audit (Report No. 20-01) found that the average time to process a residential building permit application was 108 days, while a commercial project of between $1 and $10 million took 432 days. That’s a lot of delay, and if you borrow money to get the construction done the bank will charge you for every day, even if you are waiting for a permit.
Do we want to get the problem solved? Then let’s not spend time and energy punishing those who aren’t responsible!
There is an old adage that opportunities do not go away, they just move on to someone else. A case in point can be found in observing the behavior of 401(k) participants in down markets. Specifically, there is a veritable boatload of data illustrating the tendency of plan participants to both halt their contributions to employer plans during market downturns and to move their savings out of stock mutual funds and into investments they perceive to be safer such as bond and money market funds. These are exactly the opposite responses retirement savers should have when faced with a bear market.
These mistakes are typically fueled by a lack of financial literacy and the flawed way evolution has hardwired our brains to cause us to fear bear markets in the same manner in which we have justifiably been conditioned to fear an actual grizzly bear. As a financial planner, one of my greatest frustrations is watching people make these mistakes over and over again. It is also why I am so passionate about educating consumers to help them realize that what they perceive as adversity may actually represent a remarkable opportunity to catch up.
Making the Stock Market Tangible
The first step in helping consumers overcome their fear of market volatility is to help fundamentally understand the investments they own in their retirement accounts. In my experience, most consumers view the stock market as a complex, ephemeral, intangible entity whose gyrations are manipulated according to the whims of some mystical higher power. In my opinion, the financial news media does a tremendous disservice to consumers by perpetuating this myth. In truth, the underlying investments in the stock mutual funds in your retirement accounts are ownership shares in companies that are every bit as tangible as your house, your car, and your bank account.
To help people understand this, I often break out a list of the companies that comprise the S&P 500 Index. Most of these companies are household names that make products or provide services that we all use and value. Most importantly, I point out that the vast majority of these companies have long histories of profitability and that, while the share prices tend to bounce up and down seemingly at random, the real reason why the stock market has always gone up over time is that as the companies’ earnings grow over time, they are inherently worth more, and eventually this value is recognized in the value of their share prices. Of course, some companies fail over time but if you have enough companies, you can diversify away much of the company-specific risk. Investing in stock mutual funds for long term growth in a 401(k) plan really is that simple and that tangible.
Overcoming Loss Aversion
Behavioral finance research has demonstrated that consumers feel the pain of investment losses more than they value investment gains. This is often illustrated through the example of how most consumers would gladly wager $1 on a bet to win $2 on the outcome of a coin flip, but few would wager $100,000 to win $200,000. The pain of loss far outweighs the gratification one would receive from even a disproportionately large gain. In applying this to investing, consumers are always happy when the stock market is rising, but they disproportionately feel losses when those gains evaporate in market downturns.
Helping consumers to differentiate between temporary declines in value and permanent losses is a key to overcoming loss aversion. To do this, I often show plan participants how there have been many, many declines in the stock market of 20%-50%+ over the past half century. Some, such as the 1987 “crash” and the COVID-induced bear market in 2020, were short in duration, while others, such as the back-to-back bear markets of 2000-2002 and 2007-2009 took a few years to unfold and few more years to recover. The causes of all declines are different, but the reason why the stock market has eventually recovered 100% of the time is that most of the companies that comprise the stock market continue to be profitable and eventually their value is recognized.
Armed with this knowledge, retirement savers need to proactively rewire their minds to view stock market downturns not as adversity but as opportunities to buy more shares when the markets are depressed. In fact, as counter-instinctive as it may seem, if you are saving for retirement many years from now, you should actually hope for prolonged periods of depressed markets during your working years. To illustrate this concept by example, every dollar that you invest when the stock market is down 50% from its previous high will double in value when the market eventually just gets back to even.
Conversely, if you sell in panic when the stock market is down 50%, you will indeed suffer a permanent loss. Why on Earth would you do that when (A) you know that has been a losing bet 100% of the time in the past, and (B) you are pretty darn sure the companies you own are not only not going away, but are likely to continue to grow their profits for many years to come?
Advice for Today – The Power of Negative Thinking
As of this writing the U.S. stock market has been bouncing around between 15-20% below the all-time high it reached in late 2021. It is well-established that most American workers are far behind in saving for retirement. If you are one of them, I hope this article inspires you to recognize the current downturn for the opportunity that it is. Understand that the near-term direction of the stock market is inherently unpredictable, and that there is no way to discern in advance whether this latest bear market will continue or whether a recovery is imminent. From your perspective, you should keep your fingers crossed that the market stays depressed enough and lasts long enough for you to invest enough money to enable you to catch up when the recovery eventually occurs.
It has always seemed clear, that the human race was on a collision course: continuous war, unhesitating destruction of natural habitats for quick profits, unbridled expansion, toxic industrial development, overconsumption; indifferent, rapacious creatures, believing themselves to be above and outside of nature — special, superior — never yielding their assumed right of way, entitled to do and have whatever they desire, without pause or consequence. And now, here we are, facing imminent global, environmental meltdown and mass extinction. Produced, directed by and starring… us. Surprise? Hardly.
Well, let’s not be hasty with judgement. Perhaps, there is a bright side, to this grim, rapidly approaching, end of story.
What if, it all has been predetermined . . . ordained? What if, in fact, we are included in a dynamic continuum of universal process, in an infinite, unbroken web of evolving life and consciousness? Not separate and detached, not the prime mover, as we have led ourselves to believe.
Confusion may be a simple matter of the relativity of perspective. From the up-close, myopic perception of contemporary man, human activity may appear destructive, careless, arrogant … even insane. Let’s face it; what kind of organism willfully and deliberately persists in destroying the host environment on which its very own existence and survival depend? How evolved, superior and special is that?
But, let’s back up a bit and view this self-generated, extinction scenario from a distance. Maybe we are special … in that an impersonal universal force has selected an evolving species (us) to unwittingly engineer the adverse environmental conditions necessary to drive a radical, adaptive response from the entire spectrum of life inhabiting earth. Picture it as a sort of turbo – charged, evolutionary twitch.
Think of it. Humanity, propelled by universal impulse (some might say, “grand” or “divine” plan), sets up and stokes a planetary extinction machine whose momentum builds to a level that decimates all life on earth. Well, it’s never all. Some vestiges and remnants survive, having had the odd, anomalous gene that allows mutation, adaptation and survival. The seminal beginnings of a new balance . . . metamorphosis, transformation and emergence of a more evolved cycle of life. A new world order!
Let’s take this notion one step further. MARS! That’s right, other worlds! The scientific/technical community is currently spending billions in preparation for a human settlement on Mars. Perhaps, our destiny to erase life, in preparation for a next cycle, extends beyond planet earth. We may ultimately be the cosmic broom, sweeping away the old and ushering in the new . . . throughout the entire solar system … the galaxy!
CNN headline on February 11, 2015: “Mars is the next step for humanity — we must take it.” Elon Musk has built a $12 billion company in an endeavor to pave the way to Mars for humanity. He insists that Mars is a “long-term insurance policy” for “the light of consciousness” in the face of climate change, extinction events, and our recklessness with technology. With genius insight, he boldly suggests that we might effect a rapid, positive terraforming result on Mars by “nuking it.”
So, lighten up! Even now, on the very eve of extinction, we continue to move forward with strength, courage and determination to complete the task of annihilation with the almost certain knowledge that our own demise is part of the package. Perhaps, in some distant and hazy future, archaeologists will discover a thin, toxic layer in the geological record of planet earth and reverently intone, “this is what remains of original human civilization… that legendary and special race of beings, avatars of change, martyrs, who sacrificed themselves so that we could be here”.
Motu Dog
A lone dog surveys his remote but peaceful and intact island domain. He quietly utters (in dog – speak), “Ahhhhh, how nice . . . finally . . . the last of those fools finally got off to Mars.”
***********************
Joseph Carlisi – Biography
Born and raised in New York City, he earned BA and MA degrees in Philosophy at Hunter College of the City University of New York and then continued his graduate studies in Philosophy and Artificial Intelligence at Massachusetts Institute of Technology working under the mentorship of Marvin Minsky. Joseph worked as a part time content and copy editor for Harvard University Press (science and medicine) while attending M.I.T.
After ten years as a university lecturer, researcher and administrator, he started and managed an advertising / public relations firm in San Diego, CA that handled a wide range of commercial accounts. On the academic side, he published a series of seven articles on animal behavior for Harvard Magazine and two books: “A Guide to Personal Power” and most recently “Playing God on the Eve of Extinction”.
Joseph Carlisi creates oil on canvas paintings that can be described as vivid, surreal and unexpected. His paintings have been exhibited and sold in: Honolulu, Los Angeles, Las Vegas, New York City, Miami, Tokyo, Yokohama, Amsterdam, Berlin and Salvador Brazil.
Joe’s art is available for purchase.
Contact him at carlisijoseph@yahoo.com.Advertisements
