I just got back from Omaha, Nebraska, from my second Berkshire Hathaway Annual Meeting. The original plan was to land Thursday so I could spend all of Friday roaming the talks and the famous ecosystem that builds up around the event. Saturday would bring the main course —the shareholders meeting— followed by one more conference in the afternoon, and then the traditional Panamanian dinner at Gorat’s.
It didn’t go exactly as planned. A visa hiccup forced me to push back my flight, and between delays I ended up arriving Friday afternoon. Goodbye to Friday’s talks. People told me they were excellent, and that stung, because the thing I most wanted to confirm this year was whether the parallel ecosystem —the side conferences, the small groups, the investor meet-ups— was still alive. From what I heard and saw afterward: yes, it still has energy.
A hotel with a privileged view
I stayed at the Kimpton Cottonwood, on the famous Farnam Street. As it turns out, Warren Buffett’s offices are right next door, in Blackstone Plaza —the historic Kiewit Plaza, home to Berkshire Hathaway since 1962, which was renamed after it sold in 2019. Buffett’s house is on that same street, five minutes away. There’s a reason Shane Parrish’s excellent podcast is called Farnam Street: he devoted it to learning and writing about the wisdom of Warren Buffett and Charlie Munger, and named it after the street where the office sits.
Celebrities gathered at the Kimpton all weekend. One night there was a private Berkshire event in the lobby, and judging by the number of suited bodyguards outside, we figured Buffett was inside. Another day, right at the entrance, I had Bill Murray —yes, the actor— next to me; turns out he’s been a Berkshire shareholder since the 70s. And to top it off, Li Lu, the “Warren Buffett of China,” was hosting a private event on the 8th floor. Three of us Panamanians tried to sneak in, but we got stopped at the door: invitation only. For those who don’t know him, Li Lu is the only person Charlie Munger ever trusted to manage his personal money.
Blackstone Plaza at night —the historic Kiewit Plaza, home to Warren Buffett’s offices on Farnam Street.
The Greg Abel era: less charisma, more operations
Saturday was, in a word, transition. Greg Abel led his first meeting as CEO, with Buffett (95) sitting in the audience for the first time in 60 years. The play looks a lot like Apple’s when Tim Cook replaced Steve Jobs: when the founder-legend steps away, the new CEO elevates the executive bench to show the depth of management and prove the company is bigger than any one person.
Last year Buffett was very general —he barely talked about the business; it was all life wisdom, anecdotes, philosophy. This year, with Greg, the tone flipped 180°:
Metrics and rankings, no filter. BNSF moved from 5th to 4th among the six Class I railroads. Operating margin rose 250 basis points in 2025. Union Pacific, the leader, sits at 39.5%. Clear gap, clear plan. Warren probably would have been too shy to talk that way about an asset he owns in public; Greg said it without blinking.
In-house technology. The mantra: be builders of technology, not buyers. They moved GEICO’s tech lead into a senior role at Berkshire Hathaway Energy and BNSF to replicate the playbook.
“Narrow AI.” Greg hates the bare term “AI.” Three principles: a human always in the loop, reproducibility as a safeguard, and AI that is additive to the business (no “AI for AI’s sake”).
They brought the general managers of GEICO, BNSF and NetJets/Consumer Products on stage. For the first time we saw those operators live, defending their businesses.
Does Greg have Warren’s charisma? No. And nobody expects him to: he’s an operator, not a comedian. And I think that’s the right call: if you’re not charismatic, you’d better teach people how you think as a business. The Q&A reflected it too. Buffett used to get questions like “what would you do if you could spend one more day with Charlie Munger?” Nobody asks Greg that: they ask him about AI, insurance succession, autonomous trucking, decentralization, tariffs. It’s much more about the business. In a way, you come away understanding the company better this year.
The CHI Health Center at the first meeting with Greg Abel as CEO.
The tribute to Buffett —and the reality
The most moving part of the day: they officially raised Warren’s “jersey” —number 60, for his 60 years as CEO— to the rafters of the CHI Health Center, next to Charlie Munger’s. The arena erupted. Then Warren took the mic and, speaking about Greg, said: “He’s doing everything I did, and a little more, and he’s doing it better in every case.” 100% Buffett.
The “BUFFETT · 60 · 1965-2025” banner raised to the rafters, honoring his 60 years as CEO.
Warren went back to the Apple story —the $35 billion they invested ten years ago turned into $185 billion pre-tax, “and I didn’t have to do a damn thing”— and used the moment to recognize Tim Cook (also stepping down), who was in the audience. Later Becky Quick interviewed him live and he dropped lines that are already classics: “the market is a church with a casino next door” and “the best time to buy is when nobody answers the phone.”
Throughout the day, Warren drew the parallel more than once between himself and Steve Jobs, and between Greg Abel and Tim Cook: the visionary who creates, the operator who scales. I’m not the one making the comparison —he made it himself, from the stage.
The tribute in the exhibit hall: “With Gratitude, Warren Buffett, Chairman.”
But I’ll be honest with you: Buffett made me sad. He looks very old. When he speaks he struggles to modulate, struggles to laugh, and there are moments you can’t fully understand him. He doesn’t have much time left, and that brings me to the elephant in the room.
Warren Buffett, 95, at the microphone in the blue sweater that went viral.
What happens the day Buffett is gone?
This year the energy was clearly lower. My eyeball estimate: 30-40% fewer attendees than last year (the press put it around 25,000, versus 40,000 in 2025). The exhibit hall was quieter at the register. And the question that haunts me is: what happens the year Warren isn’t there?
You can already see the moves to fill the vacuum, and it’s clear there will be competition to be the gathering place for value investors next year:
Tom Gayner (Markel) wants to build a whole weekend like Berkshire’s.
Bill Ackman said he’ll be much more active on social media and at public conferences, partly to promote his new funds.
Will any of them come close to Buffett? I doubt it. Warren combines something almost impossible to replicate: a six-decade track record, a legendary communicator, and a cultural figure beyond finance. But a power vacuum is clearly forming in the symbolic leadership of value investing, and several people will try to grab the baton. My bet: there won’t be a single successor, but a fragmentation —each great investor with their own “meeting” in a different town.
The after-party: Kanbrick and the Panamanian dinner
Walking out of the main meeting, I went to the exhibit hall for my annual shopping: Brooks sneakers (thanks, Dan Sheridan), a coffee mug, a signed baseball. It’s one of the nicest spaces of the weekend: you walk among Berkshire’s brands, discovering products and services you’d otherwise never see.
Then I had the good fortune of getting into a very good session by Kanbrick, the firm built by Tracy Britt Cool (former financial assistant to Buffett, former CEO of Pampered Chef) and her partner Brian Humphrey. What they’re doing is brilliant: a “Berkshire for smaller companies” —a long-term home, patient capital, 10+ year holds, conservative leverage (~2.5-3x, versus 4-6x for traditional PE), an identical philosophy at a more manageable scale. Their thesis: the world didn’t need another middle-market PE shop; it needed a long-term home with operator DNA.
Three ideas I took home and applied straight to Porta Norte:
The compounding equation. 20% a year for 20 years turns into ~38x. That’s the math any long-term builder should have written on the wall. In solarpunk real estate with a 50-year horizon, that discipline is our competitive advantage.
The 4 Ms to evaluate counterparties (developers, institutions, businesses entering Porta Norte): Market, Moat, Management, More potential. “More potential” is their personal version of the margin of safety: not in price, but in what you can co-create with the partner.
Patience compounds. Tracy and Brian have spent five years investing in their community of CEOs (~4,000 people), and two of their portfolio companies came out of it. The lesson: build community before you need the deal flow. It applies directly to how we cultivate relationships with investors, residents and operators at Porta Norte.
Then, at night, the traditional dinner at Gorat’s, the steakhouse Buffett made famous. We were about 12-14 Panamanians at the table (some had already left by the time I took the photo), and that’s a high number for any conference in the United States: the trip from Panama takes at least 12-14 hours with layovers, almost as long as flying to Madrid. The passion it takes to make this trip every year is high, and it says something about the kind of people who do it.
The traditional Panamanian dinner at Gorat’s, the steakhouse Buffett made famous.
The next day I flew back to Panama early. I still regret missing Friday’s talks, but Saturday —even with the lower energy— was worth every hour in the air.
Reflection
It’s my second year going, and I increasingly see this trip as investing practice, not financial tourism. Annual meetings are a powerful way to:
Get to know the companies you’re invested in better, and decide whether to add or trim your exposure.
Watch management: see their faces, hear how they think, judge how they’re aging (literally and figuratively).
Recharge your passion by surrounding yourself with people who care about these things. Let’s be honest: very few people in the world know —or want— to talk about combined ratios, capital allocation and moats in depth.
When you’re in a room with thousands of people who flew 12-14 hours to hear a CEO talk about the 10-Q, you realize something: there’s a tribe that thinks this way, and surrounding yourself with them makes you a better investor. More than any book or course.
I’m left wanting to go to other meetings —Markel, Constellation Software, Fairfax, maybe. If you want to learn to think like a long-term owner, events like these are the best education there is.
See you next year, Omaha. I hope Warren is still there.
And what do I think about BRK?
People ask me this a lot, so I’ll cut to it. Today BRK-A is around $750,000 and BRK-B around $500. It depends on what you’re after and the price you pay, but my read is this: Berkshire is fairly valued and the S&P 500 is, to me, overvalued. That’s why right now I like Berkshire quite a bit more than the index.
Don’t expect high returns over the medium term —I’d aim for something like 6% a year. I see it as almost as safe as a T-Bill, but with better yield: country diversification, a fortress balance sheet, and a common-sense discount. Very conservative.
That’s why I keep investing in it alongside my parents. For my personal portfolio I hold a position, but these days I prefer less conservative things with a better expected return. Different horses for different courses.
Acabo de regresar de Omaha, Nebraska, de mi segundo Berkshire Hathaway Annual Meeting. El plan original era llegar el jueves para aprovechar el viernes entero recorriendo charlas y el famoso ecosistema que se arma en paralelo al evento. El sábado caería el plato fuerte —la junta de accionistas— y en la tarde una conferencia más, antes de cerrar con la cena tradicional de los panameños en Gorat’s.
No salió exactamente como pensaba. Tuve un problema con la visa que me obligó a atrasar el vuelo, y entre tantos retrasos terminé llegando el viernes en la tarde. Adiós a las charlas del viernes. Me dijeron que estuvieron buenísimas y eso me dolió, porque lo que más quería confirmar este año era si el ecosistema paralelo —las side conferences, los grupos pequeños, los meet-ups de inversionistas— seguía vivo. Por lo que escuché y vi después: sí, sigue con energía.
El hotel con vista privilegiada
Me quedé en el Kimpton Cottonwood, sobre la famosa Farnam Street. Resulta que justo al lado quedan las oficinas de Warren Buffett, en Blackstone Plaza —el histórico Kiewit Plaza, sede de Berkshire Hathaway desde 1962, que cambió de nombre cuando lo compraron en 2019—. La casa de Buffett queda en esa misma calle, a cinco minutos. Por algo el magnífico podcast de Shane Parrish se llama Farnam Street: se dedicó a aprender y publicar sobre la sabiduría de Warren Buffett y Charlie Munger, y lo bautizó con la calle de la oficina.
En el Kimpton se congregaron celebridades todo el fin de semana. Una noche había un evento privado de Berkshire en el lobby, y por la cantidad de guardaespaldas trajeados afuera, pensamos que Buffett estaba adentro. Otro día, en la entrada, tenía al lado mío a Bill Murray —sí, el actor—, que resulta ser accionista de Berkshire desde los años 70. Y para rematar, Li Lu, el «Warren Buffett de China», hacía un evento privado en el piso 8. Tres panameños intentamos colarnos, pero nos pararon en la puerta: era con invitación. Para los que no lo conozcan, Li Lu es la única persona a quien Charlie Munger le confió su dinero personal para que se lo administrara.
Blackstone Plaza de noche —el histórico Kiewit Plaza, donde están las oficinas de Warren Buffett en Farnam Street.
La era Greg Abel: menos carisma, más operación
El sábado fue, en una palabra, transición. Greg Abel lideró su primera junta como CEO, con Buffett (95 años) sentado en la audiencia por primera vez en 60 años. La jugada se parece mucho a la de Apple cuando Tim Cook reemplazó a Steve Jobs: cuando se va el fundador-leyenda, el nuevo CEO realza al equipo ejecutivo para demostrar la profundidad del management y que la empresa va más allá de una sola persona.
El año pasado Buffett fue muy general —casi no habló del negocio; fue todo sabiduría de vida, anécdotas, filosofía—. Este año, con Greg, el tono cambió 180°:
Métricas y rankings, sin filtro. BNSF pasó del 5.º al 4.º lugar entre las seis Class I railroads. El margen operativo subió 250 puntos básicos en 2025. Union Pacific, el líder, está en 39.5%. Brecha clara, plan claro. A Warren probablemente le habría dado pena hablar así de un activo propio en público; Greg lo dijo sin pestañear.
Tecnología in-house. El mantra: ser builders de tecnología, no compradores. Movieron al líder técnico de GEICO a un rol senior en Berkshire Hathaway Energy y BNSF para replicar el playbook.
«Narrow AI». Greg detesta el término «AI» a secas. Tres principios: humano siempre en el loop, reproducibilidad como salvaguarda, y que la AI sea aditiva al negocio (nada de «AI por AI»).
Subieron a los gerentes generales de GEICO, BNSF y NetJets/Consumer Products al escenario. Por primera vez vimos a esos operadores en vivo, defendiendo sus negocios.
¿Tiene Greg el carisma de Warren? No. Y nadie pretende que lo tenga: él es un operador, no un comediante. Y me parece lo correcto: si no eres carismático, mejor enseñas cómo piensas como negocio. Las preguntas también lo reflejaron. A Buffett le hacían cosas tipo «¿qué harías si pudieras pasar un día más con Charlie Munger?». A Greg nadie le pregunta eso: le preguntan de AI, sucesión en seguros, autonomous trucking, descentralización, tarifas. Es mucho más sobre el negocio. Hasta cierto punto, uno termina conociendo mejor la empresa este año.
El CHI Health Center en la primera junta con Greg Abel como CEO.
El homenaje a Buffett —y la realidad
Lo más emotivo del día: izaron oficialmente el «jersey» de Warren —el número 60, por sus 60 años como CEO— hasta las vigas del CHI Health Center, junto al de Charlie Munger. La arena explotó en aplausos. Después Warren tomó el micrófono y, hablando de Greg, dijo: «Está haciendo todo lo que yo hacía, y un poco más, y lo está haciendo mejor en todos los casos.» 100% Buffett.
El banner «BUFFETT · 60 · 1965-2025» izado a las vigas, en homenaje a sus 60 años como CEO.
Warren volvió al cuento de Apple —los 35 mil millones que invirtieron hace diez años se convirtieron en 185 mil millones pre-tax, «y no tuve que hacer ni una maldita cosa»— y aprovechó para reconocer a Tim Cook (también retirándose) que estaba en la audiencia. Más tarde Becky Quick lo entrevistó en vivo y soltó frases ya antológicas: «el mercado es una iglesia con un casino al lado» y «los mejores tiempos para comprar son cuando nadie contesta el teléfono.»
A lo largo del día, Warren trazó varias veces el paralelo entre él y Steve Jobs, y entre Greg Abel y Tim Cook: el visionario que crea, el operador que escala. La comparación no la inventé yo —la hizo él mismo desde el escenario.
El homenaje en el exhibit hall: «With Gratitude, Warren Buffett, Chairman».
Pero te voy a ser honesto: Buffett me dio tristeza. Se ve muy viejo. Cuando habla le cuesta modular, le cuesta reírse, hay momentos en que no se le entiende del todo. Le queda poco tiempo, y eso me lleva al elefante en la sala.
Warren Buffett, 95 años, al micrófono con la sudadera azul que se hizo viral.
¿Qué pasa el día que Buffett no esté?
Este año la energía estaba claramente más baja. Mi estimado a ojo: 30-40% menos asistentes que el año pasado (la prensa habló de unos 25,000, contra 40,000 en 2025). El exhibit hall estuvo más mudo a la hora de comprar. Y la pregunta que me persigue es: ¿qué pasa el año en que falte Warren?
Ya se empiezan a ver movimientos para llenar el vacío, y se nota que va a haber competencia por ser la sede de los inversionistas value el próximo año:
Tom Gayner (Markel) quiere armar un fin de semana entero parecido al de Berkshire.
Bill Ackman dijo que va a ser mucho más activo en redes y conferencias públicas, en parte promocionando sus nuevos fondos.
¿Alguno le va a llegar a los talones a Buffett? Lo dudo. Warren combina algo casi imposible de replicar: track record de seis décadas, comunicador legendario y figura cultural más allá de las finanzas. Pero está claro que se está formando un vacío de poder en el liderazgo simbólico de los inversionistas value, y van a ser varios los que intenten agarrar la batuta. Mi apuesta: no habrá un sucesor único, sino una fragmentación —cada gran inversionista tendrá su propia «junta» en distintos pueblos—.
El after: Kanbrick y la cena de los panameños
Saliendo de la junta principal, fui al exhibit hall a hacer mi compra anual: zapatillas Brooks (gracias, Dan Sheridan), una taza de café, una bola de béisbol firmada. Es uno de los espacios más bonitos del fin de semana: uno camina entre las marcas de Berkshire conociendo productos y servicios que de otra forma no vería.
Después tuve la fortuna de meterme a una sesión muy buena de Kanbrick, la firma que armó Tracy Britt Cool (ex–financial assistant de Buffett, ex-CEO de Pampered Chef) con su socio Brian Humphrey. Lo que están haciendo me parece brillante: un «Berkshire para empresas más pequeñas» —long-term home, capital paciente, hold de 10+ años, leverage conservador (~2.5-3x, contra 4-6x del PE tradicional), filosofía idéntica pero a una escala más manejable—. Su tesis: el mundo no necesitaba otro middle-market PE; necesitaba un home de largo plazo con ADN de operador.
Tres ideas que me llevé y que aterricé directo a Porta Norte:
La ecuación del compounding. 20% anual durante 20 años se convierte en ~38x. Es la matemática que cualquier builder de largo plazo debería tener escrita en la pared. En real estate solarpunk con horizonte de 50 años, esa disciplina es nuestra ventaja competitiva.
Las 4 Ms para evaluar contrapartes (developers, instituciones, comerciantes que entran a Porta Norte): Market, Moat, Management, More potential. El «more potential» es su versión personal del margin of safety: no en el precio, sino en lo que pueden co-crear con el partner.
Patience compounds. Tracy y Brian llevan cinco años invirtiendo en su comunidad de CEOs (~4,000 personas), y dos de sus portfolio companies salieron de ahí. La lección: construir comunidad antes de necesitar el deal flow. Aplicable directo a cómo cultivamos relaciones con inversionistas, residentes y operadores en Porta Norte.
Ya en la noche, la cena tradicional en Gorat’s, el steakhouse que Buffett popularizó. Éramos como 12-14 panameños en la mesa (algunos ya se habían ido cuando tomé la foto), y ese es un número alto para cualquier conferencia en Estados Unidos: el viaje desde Panamá toma mínimo 12-14 horas con escalas, casi tanto como ir a Madrid. La pasión que hay que tener para hacer este viaje cada año es muy alta, y dice algo del grupo de gente que lo hace.
La cena tradicional de los panameños en Gorat’s, el steakhouse que Buffett popularizó.
Al día siguiente regresé temprano a Panamá. Sigo lamentando haberme perdido las charlas del viernes, pero la jornada del sábado —aún con la energía más baja— valió cada hora de vuelo.
Reflexión
Es mi segundo año yendo, y cada vez veo más este viaje como práctica de inversionista, no como turismo financiero. Las juntas de accionistas son una forma poderosa de:
Conocer mejor las empresas en las que uno está invertido, y decidir si subir o bajar la exposición.
Supervisar al management: verle la cara, escuchar cómo piensa, evaluar cómo está envejeciendo (literal y figuradamente).
Recargar la pasión rodeándote de gente que valora estos temas. Seamos honestos: muy poca gente en el mundo sabe —o quiere— hablar de combined ratios, capital allocation y moats con profundidad.
Cuando estás en una sala con miles de personas que volaron 12-14 horas para escuchar a un CEO hablar del 10-Q, te das cuenta de algo: hay una tribu de gente que piensa así, y rodearte de ellos te hace mejor inversionista. Más que cualquier libro o curso.
Me quedo con ganas de ir a otras juntas —Markel, Constellation Software, Fairfax, tal vez—. Si uno quiere aprender a pensar como dueño de largo plazo, este tipo de eventos son la mejor educación que existe.
Hasta el año que viene, Omaha. Espero que Warren todavía esté ahí.
¿Y qué pienso de BRK?
Me lo preguntan seguido, así que voy directo. Hoy BRK-A ronda los $750,000 y BRK-B unos $500. Depende de qué busques y del precio al que entres, pero mi lectura es esta: Berkshire está fairly valued y el S&P 500 está, para mí, overvalued. Por eso ahorita me gusta bastante más Berkshire que el índice.
No esperes retornos altos a mediano plazo —yo apuntaría a algo como 6% anual—. Lo veo casi tan seguro como un T-Bill, pero con mejor rendimiento: diversificación de país, balance de fortaleza y un descuento de puro sentido común. Súper conservador.
Por eso le sigo invirtiendo junto a mis padres. Para mi portafolio personal tengo una posición, pero hoy prefiero cosas menos conservadoras y con mejor expectativa de retorno. Caballos distintos para carreras distintas.
A few years ago I set myself a goal: sharpen my investment judgment and become a wiser steward of my family’s financial future. The deeper I dug, the more hooked I became. I read dozens of investing books, and every path eventually pointed to Berkshire Hathaway. It soon became clear that Warren Buffett and Charlie Munger are the gold standard for learning how to invest—and, by extension, how to run any business with discipline and common sense.
Many nights, after work, I unwind by watching the Q&A sessions from the Annual Meeting or old Buffett & Munger lectures. Their philosophy hooked me so hard I promised myself I’d attend the meeting one day.
In 2025, I finally made the pilgrimage to Berkshire Hathaway’s Annual Shareholders Meeting. Seeing 40,000 investors under one roof felt surreal, and Saturday’s marathon Q&A anchored the whole weekend.
I left Panama on Friday morning. We had a connecting flight in Houston and almost missed the meeting because of bad weather. We waited inside the plane for about two hours. The airport almost shut down. In the end, the skies cleared, and we took off.
On the plane, I reread the Annual Report. In it you can find his annual letter, where Buffett writes a very instructive essay. He discusses Berkshire’s results and his investment principles. In the Annual Report you can also find the agenda and some events in Omaha for shareholders.
We arrived at the hotel at midnight and agreed to meet in the lobby at 6 a.m. to walk to the arena. They have to hold it in an arena because there are about 40,000 attendees.
I woke up at 5:30 a.m., and off we went. The lines were shockingly long. Some people even camped throughout the night. We were lucky that part of our group arrived even earlier, and we joined them. The energy while waiting in line was intense. When the doors opened, people shouted, filmed, and pushed. It felt like an oversold concert.
Shareholders waiting outside for the Annual Meeting.
Seating is first come, first served. We managed to get good seats together. There were about ten Panamanians in our group and more scattered around. I was surprised by how many Panamanians attended. One even asked a question online. Also, there were a lot of celebrities there; I saw Tim Cook, Li Lu, and Bill Ackman a few meters away.
The event began at 8 a.m. sharp. Warren Buffett, Greg Abel—the future CEO of Berkshire—and Ajit Jain, head of insurance, were all seated at the podium.
Warren Buffett, Greg Abel and Ajit Jain.
They usually make one video each year, but this time there was no video. He had already announced a “change of plans” in the Annual Report. The event usually starts with ten minutes of Warren summarizing the financial statements. This includes operating earnings and changes in the outstanding shares.
The whole event lasts five hours, which consists mainly of questions and answers. Questions are divided between shareholders attending in person and Becky Quick from CNBC, who chooses the best questions submitted online.
The shareholder questions vary wildly in quality. But Warren has the art of answering them with something wise. He adds an anecdote and always includes a touch of humor. He is very funny. The questions span from investment to life philosophy.
You can watch and read the Q&A online. Which I highly recommend. To give you a taste, here are 5 examples:
1. On real estate
Audience Member (Zone 2): Good morning, Warren, Greg and Ajit. My name is Jackie Han. I’m from China and now work in Toronto, Canada. This is my eighth Berkshire Hathaway meeting. At this point, I’ve probably spent more time with you than most people spend on Netflix. As you might guess, coming from a Chinese family, we always had a soft spot for real estate. So the question isn’t why don’t you own a house, it’s why are you still buying stocks instead of more property? So here is my question: With today’s high interest rates and global uncertainty, do you still believe in being greedy when others are fearful, or is value investing facing new challenges in today’s environment? Thank you.
Warren Buffett: Well, in respect to real estate, it’s so much harder than stocks in terms of negotiation of deals, time spent, and the involvement of multiple parties in the ownership. Usually when real estate gets in trouble, you find out you’re dealing with more than just the equity holder.
There have been times when large amounts of real estate have changed hands at bargain prices, but usually stocks were cheaper and they were a lot easier to do. Charlie did more real estate. Charlie enjoyed real estate transactions, and he actually did a fair number of them in the last 5 years of his life. But he was playing a game that was interesting to him.
I think if you’d asked him to make a choice when he was 21 – either be in stocks exclusively for the rest of his life or real estate for the rest of his life – he would have chosen stocks. There’s just so much more opportunity, at least in the United States, that presents itself in the security market than in real estate.
In real estate, you’re usually dealing with a single owner or a family that owns a large property they’ve had a long time. Maybe they’ve borrowed too much money against it. Maybe the population trends are against them. But to them, it’s an enormous decision.
When you walk down to the New York Stock Exchange, you can do billions of dollars worth of business, totally anonymous, and you can do it in 5 minutes. The trades are complete when they’re complete. In real estate, when you make a deal with a distressed lender, when you sign the deal, that’s just the beginning. Then people start negotiating more things, and it’s a whole different game with a different type of person who enjoys the game.
We did a few real estate deals that came our way in 2008 and 2009, but the amount of time they would take compared to doing something intelligent and probably better in securities – there was just no comparison. In a real estate deal, every sentence is important to the person. In stocks, if somebody needs to sell 20,000 shares of Berkshire and they call us and the price is right, it’s done in 5 seconds and it closes right away.
The completion rate for working on anything in stocks, assuming you’ve got a meeting of the minds on price, is essentially 100%. In real estate, the negotiation just begins when you agree on deals, and then they take forever. For a 94-year-old, it’s not the most interesting thing to get involved in something where the negotiations could take years.
We have seen some huge failures in real estate. If you go all the way back to Zeckendorf in the 1960s, he was going to change the world, and Century City in California is a product of his vision. If you go to Reichmann with the Canary Wharf buildings in London, he was sitting on top of the world, but people tend to get in trouble in that business.
The banks usually don’t want to recognize problems, but it takes a long time to go through the bank processes. They just got through redoing the Musk loan that he made when he was buying Twitter three years ago. Real estate transactions have parties on both sides that aren’t ready to act. We find it much better when people are ready to pick up the phone and you can do hundreds of millions of dollars worth of business in a day. I’ve been spoiled, but I like being spoiled, so we’ll keep it that way.
2. On patience
Audience Member (Zone 4): Hi, Mr. Buffett. My name is Daniel and I’m from Tenafly, New Jersey. First of all, I just want to say how grateful I am for getting the opportunity to ask you a question. When it comes to your principles of investing, you often talk about how important it is to be patient. Has there ever been a situation in your investing career where breaking that principle and acting fast has benefited you? Thank you.
Warren Buffett: That’s a good question. There are times when you have to act fast. In fact, we’ve made a great deal of money because we’re willing to act faster than anybody around.
Jessica Pune is the step-granddaughter of Ben Rosner, a manager of ours. In 1966, I got a call from a fellow named Phil Steinberg in New York. He said, “I represent Mrs. Anenberg. We have a business we’d like to sell you.” So I called Charlie up, got a few details, and it sounded very interesting.
Charlie and I went to Will Steinberg’s office in New York – he was a marvelous guy. He was handling things for Mrs. Anenberg, whose husband had been the partner of Ben Rosner, but he had died, and Ben got kind of tense about working with her.
So he offered us this business at a bargain price – $6 million. It had $2 million of cash, a $2 million piece of property on Market Street in Philadelphia, and it was making $2 million a year pre-tax.
Ben Rosner was there, and he was upset about doing business with his partner’s widow. She was extremely wealthy. He said to me and Charlie, “I’ll run this business for you until December 31st, and then I’m out of here.” Charlie and I went out in the hallway, and I said, “If this guy quits at the end of the year, you can throw away every book on psychology I’ve ever read.”
That began a wonderful relationship. We bought the company and had a great partnership. People in the East had a stereotype in their mind of what people from the Midwest were like. Ben had been married first to a woman from Iowa, and he just figured that anybody from the Midwest was okay.
The trick when you get in business with somebody who wants to sell you something for $6 million that’s got $2 million of cash, a couple million of real estate, and is making $2 million a year, is you don’t want to be patient at that moment. You want to be patient in waiting to get the occasional call. My phone will ring sometime with something that wakes me up. You just never know when it’ll happen.
That’s what makes it fun. So patience is a combination of patience and a willingness to do something that afternoon if it comes to you. You don’t want to be patient about acting on deals that make sense, and you don’t want to be very patient with people talking to you about things that will never happen.
Greg Abel: As you’re being patient, I happen to know – and I think that goes for Ajit also and all our managers – while we’re looking at opportunities and as you touched on, we want to act quickly, but never underestimate the amount of reading and work that’s being done to be prepared to act quickly. We know that when the opportunity presents itself, whether it be equities or private companies, we’re ready to act, and that’s a large part of being patient – using the time to be prepared.
Warren Buffett: And of course it doesn’t come in anything like an even flow. It’s the most uneven sort of activity you could get into. The main thing is you have to be willing to hang up after 5 seconds and you have to be willing to say yes after 5 seconds. You can’t be filled with self-doubt in this business.
One of the great pleasures – it is the great pleasure actually in this business – is having people trust you. That’s really why I work at 94 when I’ve got more money than anybody could count. It means nothing in terms of how I’m going to live or how my children are going to live or anything else.
But both Charlie and I just enjoyed the fact that people trusted us. They trusted us 60 or 70 years ago in partnerships we had. We never sought out professional investors to join our partnerships. Among all my partners, I never had a single institution – I never wanted an institution. I wanted people. I didn’t want people who were sitting around having presentations every three months and being told what they wanted to hear. That’s what we got, and that’s why we’ve got this group here today.
It’s all worked out. But you don’t want to be patient when the time comes to act – you want to get it done that day.
3. On advice for young investors
Audience Member (Zone 7): Hi, my name is Marie. I’m from Melrose, Massachusetts. Thank you for the time today. As a young person interested in investing like myself, I would love to hear your insights, Mr. Buffett. What were some pivotal lessons you learned early in your career? And what advice do you have for young investors who are looking to develop their investment philosophy? Thank you.
Warren Buffett: Those are good questions. Who you associate with is just enormously important. Don’t expect that you’ll make every decision right on that, but you are going to have your life progress in the general direction of the people that you work with, that you admire, that become your friends.
I mentioned a few fellows that have died in the last couple years. All of those people were people that, if we were working together on something one-ten-thousandth the size of Berkshire, they’d be the kind of people you’d choose. They’re people that make you want to be better than you are. You want to hang out with people that are better than you are and that you feel are better than you are because you’re going to go in the direction of the people you associate with.
That’s something you learn later in life – it’s hard to really appreciate how important some of those factors are until you get much older. But when you’ve got people around you like Tom Murphy and Sandy Gottesman and Walter Scott, you’re just going to live a better life than if you just go out and look at somebody that’s making a lot of money and decide you’re going to try and copy them.
I would try to be associated with smart people too where I could learn a lot from them, and I would try to look for something that I would do if I didn’t need the money. What you’re really looking for in life is something where you’ve got a job that you’d hold if you didn’t need the money, and I’ve had that for a very long time.
All the fellows I named had it, and they also always did more than their share and never sought more than their share of the credit. They behaved the way you’d like anybody you work with to behave. When you find them, you treasure them, and when you don’t find them, you still keep doing whatever enables you to eat. But you don’t give up on looking around, and you will find people who do wonderful things for you.
I mentioned earlier going down to GEICO and knocking on the door when the door was locked. Who knows what was behind that door? But in 10 minutes, I found that I had a man that was going to be just wonderfully helpful to me. And of course, if somebody’s going to be helpful to you, you want to try to figure out ways to be helpful to them. So you get a compounding of good intentions and good behavior. Unfortunately, you can get the reverse of that in life, too.
I was lucky in having a good environment for living that kind of life, and other people have a whole different environmental situation they have to overcome. But don’t feel guilty about your good luck if you’ve got it. If you live in the United States, with 8 billion people in the world and 330 million in the United States, you’ve already won the game to a great degree. Just keep making the most of it.
You don’t want to associate with people or enterprises that ask you to do something that you shouldn’t be doing. Different professions select for different types of people. It’s interesting to me that in the investment business, so many people get out of it after they’ve made a pile of money. You really want something that you’ll stick around for whether you need the money or not.
Greg doesn’t need the money, Ajit doesn’t need the money – not remotely – but they enjoy what they do and they’re so damn good at it. I’ve had the advantage of seeing how that works over time.
The best manager I ever knew – and there’s a lot of contention for who that would be – but actually was Tom Murphy Sr., who lived to almost 98. I’ve never seen anybody who could get the potential out of other people more than Murph. If you wanted to become a better person, you’d want to work for Tom Murphy. There are all kinds of successful people that don’t bring that to the party. I’m not saying that’s the only way to succeed, but I think it’s the most pleasant way to succeed for sure.
The Berkshire experience is pretty dramatic – to operate with Sandy Gottesman from 1963 until he died a couple years ago, Walter Scott for 30 years – you really can’t miss it. You’ll learn all the time, but you’ll not only learn how to be successful at business, you’ll learn how to be successful at life.
So that’s my recommendation. And for some reason, apparently you live longer too. It’s pretty amazing – these people I’m talking about, including myself. I think a happy person lives longer than somebody that’s doing things they don’t really admire that much in life.
4. Greg Abel on capital allocation
Becky Quick: This question comes from David Rubin, a shareholder from Scottsdale, Arizona. It’s a question for Greg. We’ve heard over the decades and are familiar with Warren and Charlie’s investment thesis and their circle of competence. During the first 10 years after taking over as CEO, Greg will be tasked with allocating more capital during that time than Berkshire has had to allocate in its history. Given this, I’d like to hear from Greg about his views on capital allocation, particularly into new businesses.
Greg Abel: This bar is not too high! We start from a great place at Berkshire. We’ve got a great culture within the business. We have values that we as a management team, as defined by Warren and Charlie and everybody associated with the business – we’ve got great values that really set Berkshire up well for the future.
As we deploy capital and allocate capital, it’s critical to Berkshire going forward, and equally it’s around managing risk. When I think of our values, a couple are absolutely critical. One: we will maintain the reputation of Berkshire and that of our company. I view that in investing or how we operate things across each of our businesses. That will always be a priority and something we’ll ensure is in the forefront of our minds.
Looking at our balance sheet, as Warren commented, we will have a fortress of a balance sheet. I thought Sue Decker, our lead director, said it well yesterday. We’ve got a significant amount of cash right now, but it’s an enormous asset to have that and that will continue to be a philosophy. When we can deploy it, we’ll deploy it well. We recognize it as a strategic asset that allows us to weather difficult times and not be dependent on anybody.
We will remain Berkshire and will never be dependent on a bank or some other party for Berkshire to be successful. With allocation of capital comes management of risk and understanding risk. That falls upon all our managers, insurance and non-insurance, but we’ll bring that across Berkshire.
The other value I would touch on relates to where I’m going: ultimately we have a great set of operating companies that produce significant cash flows, be it in the insurance companies creating float or our various non-insurance companies producing significant cash flows on an annual basis. We intend to continue to ensure that’s a strength of Berkshire going forward.
With those cash flows and with the float, and with significant resources already on our balance sheet, we’ll continue to move forward with a very similar philosophy. It’s an identical philosophy to what we’ve had currently and for the past 60 years.
We’ll start by looking at opportunities within our business – are our insurance and non-insurance businesses properly capitalized and do they have the opportunity to manage their business? They’ll operate in an autonomous way, but Berkshire still manages the capital that will go into those businesses or what potentially will come out of them.
The next opportunity is to acquire businesses in their totality, 100%. There are great times when we can do that. Warren touched on the $10 billion acquisition in the last quarter. But the value relative to the risk have to be right. If it’s right, we want to own it. If it’s not the time, there’ll be another time to own assets like that.
Then there’s the opportunity to own pieces of companies through equity. But as Warren’s always highlighted, though we own a piece of a company, we own a piece of that cash flow, a piece of their balance sheet. It’s not just a share certificate. We’ll approach it with the thought that we’re going to own this company for the long term.
We need to thoroughly understand what the economic prospects of those companies will look like – as Warren said earlier – 5 years from now, 10 years from now, 20 years from now. If we don’t have a view of that, we won’t be investing, be it 100% or 2% of a company through equities. We have to thoroughly understand what those prospects look like and the underlying risks of the businesses. It’s really the investment philosophy and how Warren and the team have allocated capital for the past 60 years. It will not change, and it’s the approach we’ll take going forward.
5. On investor vs. operator
Audience Member (Zone 5): Hi Warren Greg. My name is Pig Huang Chen. I’m from Taiwan. This is my seventh time here. First of all, I want to thank you Warren for your generosity of sharing your wisdom and lesson. You changed my life and you are my role model and my hero. And my question is, Warren, you mentioned that Greg will be in charge of capital allocation in the future and I’d like to know your perspective on is it easier for business operator to be an investor or for investor to be a business operator. Thank you.
Warren Buffett: No, that’s a good question. I see we call him Greg even. Thank you. And I’ll – you’ll take it and it’s a lot tougher to be an operator. I mean it is. It’s easier to sit in a room like I do and play around with money. It’s just an easier life. That doesn’t mean it’s a more admirable life. It doesn’t, but it’s actually been a pleasant life for me. So, I don’t complain in the least.
And I’ve been able to choose my friends, which has made an enormous difference in my life. I’ve never had to work for anybody that I really didn’t admire. I mean, that’s a luxury in life. I had five different people I worked for and they were fantastic, whether it was the manager of the local Penneys which used to be located a couple miles from here, and newspaper managers, everything. I have never been really disappointed by any teacher I’ve had.
But I have to admit that I’ve been able to choose what I do with my day to an extraordinary degree compared to being a business operator. And in many cases, I wouldn’t like to compete to be a top-notch business operator in terms of some of the behavior that might be forced upon me.
I am the master. I mean, I’ve found myself in this position where I can run the kind of company I want to run and that’s an extraordinary luxury.
Buffett’s last words as CEO
Warren Buffett: I have a five-minute warning, so I would like to turn to a subject that I want to discuss with you for a few minutes.
Tomorrow we’re having a board meeting of Berkshire and we have 11 directors. Two of the directors who are my children, Howie and Susie, know of what I’m going to talk about. The rest of them – this will come as news to them.
I think the time has arrived where Greg should become the chief executive officer of the company at year-end. I want to spring that on the directors effectively and then give that as my recommendation. Let them have the time to think about what questions or what structures or anything that they want, and then the meeting following that, which will come in a few months, we’ll take action on whatever the view is of the 11 directors. I think they’ll be unanimously in favor of it.
That would mean that at year-end Greg would be the chief executive officer of Berkshire. I would still hang around and could conceivably be useful in a few cases. But the final word would be what Greg said, in operations, in capital deployment, whatever it might be.
I could be helpful, I believe, in certain respects if we ran into periods of great opportunity or anything. I think that Berkshire has a special reputation that when there are times of trouble for the government, we are an asset and not a liability, which is very hard to have because usually the public and government get very negative on business if there’s a time like that.
But Greg would have the tickets. Whether it’s acquisitions – I think the board would be more welcome to giving him more authority on large acquisitions probably if they knew I was around. But Greg would be the chief executive, period.
The plan is – and Greg doesn’t know anything about this until what he’s hearing right now – that the board will be able to ask me questions tomorrow about more of the specifics of what they should be thinking about. They’ll digest it, and then at the next board meeting after that, if they act, then obviously we have something to announce to the world as a material change and we’ll go forward with that operation.
I will play with the ouija board or whatever comes out in terms of doing things. But I have no intention, zero, of selling one share of Berkshire Hathaway – it will get given away.
I would add this – the decision to keep every share is an economic decision because I think the prospects of Berkshire will be better under Greg’s management than mine. There may come a time when we get a chance to invest a lot of money, and if that time comes, I think it may be helpful with the Board that they know I’ve got all my money in the company and I think it’s smart. And I’ve seen what Greg has done. So that’s the news hook for the day. And thanks for coming.
(standing ovation)
The enthusiasm shown by the audience’s response can be interpreted in two ways. But I’ll take it as positive. Thank you.
There was a standing ovation for Buffett, and people clapped for a long time. The quick witted Buffett finished the Annual Meeting with a joke, saying that applause could mean two things: that he had done well, or that it was time for him to go. He still has it.
I just witnessed history. What a legend.
After the event, in the same arena, there’s a huge hall. Many of Berkshire’s subsidiaries display and sell their products to shareholders there. This happens on Friday and Saturday. It was packed—you could barely move. There were See’s chocolates, prefab houses, boats, RVs, stuffed animals, sneakers, pilot simulators, and much more.
I bought several boxes of See’s Candies. I also purchased a pair of Brooks sneakers that say “Berkshire Hathaway.” Additionally, I got the book on Berkshire’s 60-year history. After that, we walked around downtown Omaha, had lunch, and dropped our things at the hotel.
Buying See’s chocolate at the hall with Berkshires subsidiaries.
That night, a big group of Panamanians went to dinner at Gorat’s Steakhouse, famous because it was Warren’s most-visited restaurant. There I ate Buffett’s favorite meal: a T-bone with hash browns.
At Gorat with my friend Fernando Lewis and Mr. Buffett.
Panamanian group at Gorat.
The next day, Sunday morning, we got up early for a 5 K run. The event was organized by Brooks. I ran almost the whole race and finished in 34 minutes. That isn’t bad given that I never run and the whiskey/wine/steak combo of the night before.
Finishing Brooks 5k race.
After the race, I changed at the hotel and walked to the Omaha Brunch hosted by Markel Group. Markel is considered a “mini-Berkshire.” It runs an event like its annual shareholder meeting. They discuss strategy, numbers, operations and they finish with a Q&A.
The event is led by CEO Tom Gayner. It’s clear they model everything on Berkshire and mention Buffett and Munger a lot. One thing that stuck with me was how often they said things like: “We are open to feedback, we are learning, I want to teach you how we think about allocating capital.” About 2,000 people attended.
What I learned about the Markel meeting was how much they worked on their communications. It is odd for me to see a company focus and repeat so much on the word «compounding». It is strictly about making the most money possible.
The show was mainly about the business model, their best companies and capital allocation. I say «show» because they mentioned everything was rehearsed. The animated video was professionally produced. Everybody dressed the same way. Everything was written down. I think even the jokes were scripted. It was very well produced.
Tom Gayner at Markel’s event.
After the Markel meeting I walked around Omaha. The town of Omaha is charming, small, and fairly wealthy. I assume some of Berkshire’s tax money has been invested in the city. To give you a sense of scale, during the annual meeting, Berkshire’s market cap exceeds one trillion dollars. It holds $345 billion in cash and cash equivalents—which represents 5% of all U.S. Treasury bills.
Street art of Charlie Munger in Omaha.
Monday morning at 4 a.m. I departed to Panama.
Reflections of the Annual Meeting
The Berkshire meeting felt like a rock show—Warren Buffett was treated as a rockstar in front of 40,000 fans. Markel’s brunch, though smaller in scale, followed a similar script, with Tom Gayner in the spotlight and plenty of applause. Both stood in stark contrast to Panamanian annual meetings, where the crowd is minimal, the atmosphere strictly business, and questions rarely come up.
I went in expecting deep dives into financial statements—slide decks filled with operating metrics, acquisition details, and footnotes that only made sense in person. Instead, the Berkshire session boiled down to five hours of Q&A. The “numbers” segment appeared in just three plain black-and-white slides that Buffett nearly forget until Greg Abel reminded him just before the end of Part 1.
Everyone was speaking the same value-investing language, trading book recommendations, and comparing notes on companies. I loved chatting with people from all over—and especially bonding with the unexpectedly large group of Panamanians.
With Buffett set to step back, I asked veterans if they’ll return next year. Many hesitated but ultimately agreed it’s still worth returning. Even if Buffett isn’t on center stage, he’ll attend if he’s healthy, and Greg Abel will surely put on a good show. Plus, the surrounding ecosystem—side events like Markel’s brunch, hedge-fund dinners, and best-practice roundtables—offers networking you can’t replicate anywhere else. I’m in the camp that says: see you in Omaha 2026.
In a conversation I had, we talked about how it was amazing to witness such a historic moment. Warren Buffett is a prodigy who lived an exceptional life. We also concluded that value investing has two fathers: Benjamin Graham and Warren Buffett.
Benjamin Graham, Warren Buffett’s mentor and author of The Intelligent Investor, organized the core ideas of value investing. Buffett personalized these ideas and achieved one of history’s largest fortunes. Both investors made quantum leaps in professional investing, with Buffett notably grabbing Graham’s baton and advancing it further.
People call the Berkshire meeting “Woodstock for Capitalists” because, just as Woodstock 1969 was the biggest music festival of its era, thousands fly to Omaha each May, pack an arena, and listen to Buffett talk for hours. It’s not just a shareholder assembly—it’s a gathering of people who believe that Buffett’s way of thinking can change how you view money and life.
My advice for anyone who wants to go is to book a hotel at least six months in advance. It might be better to plan from Thursday to Sunday. I don’t think I’ll fly in on a Friday again because there’s not enough cushion for a delayed flight.
To go, you have to be a shareholder. The Annual Meeting is for owners of Class A and B shares. A single Class A share costs above $700,000. A Class B share is around $500. So, the lowest buy-in to attend is $500, which is a bargain. With proof of stock you will gain the badge for admission we have around our necks:
The team with the Berkshire Hathaway Annual Meeting Badge.
In this spirit, I wish to enlighten you with a quote by Charlie Munger:
I think you learn economics better if you make Adam Smith your friend. That sounds funny, making friends among the “eminent dead,” but if you go through life making friends with the eminent dead who had the right ideas, I think it will work better for you in life and work better in education. It’s way better than just giving the basic concepts.
Wishing you the best of luck on your treasure hunt for great companies at fair prices.
Casi muero el 5 de mayo de 2024. Era el día de las elecciones de Panamá. Esa mañana fui a votar alrededor de las 10:00 am. Luego fui a un café para comer con mis suegros, que estaban de visita en Panamá, mis padres, mi esposa y mi hijo. El restaurante estaba lleno ya que los camareros estaban votando y la gente no se había ido para el interior. No pude comer ni tomar café — tenía hambre.
Este era el último día de mis suegros en Panamá, así que el plan era llevarlos al aeropuerto como al mediodía y luego ir a casa de mis padres, donde estaría mi familia para almorzar y supuestamente bañarnos en la piscina. Dejamos a mis suegros en el aeropuerto e íbamos de camino a la casa de mis padres cuando Gloria me recalca que no llevábamos vestido de baño para el día de piscina. Le dije que de seguro la gente no se metía en la piscina ya que se meten muy poco. Estaba equivocado.
Llegué a la casa de mis padres y estaban todos en la piscina. Literalmente no había nadie afuera. La piscina tiene una mesa central donde justo habían colocado una enorme y suculenta pata de cordero recién sacada del horno. Mi mamá me ofreció y me sirvió un plato de cordero. Estaba comiendo parado, incómodo. Me senté en el piso a comer, incómodo. Entonces pensé, mejor me voy adentro a comer rapidito, cómodo en una silla y regreso para estar con todos. Me fui a comer solo a la sala sin decirle a nadie. Me senté en un sofá individual con el plato encima de mis muslos. Estaba apurado porque quería regresar rápido.
Comencé a comer. Como en el tercer bocado me serví un pedazo que en efecto era muy grande y con mucho pellejo. Me acuerdo haber pensado que estaba muy grande. No sé por qué, pero no mastiqué lo suficiente y fue bajando hacia la garganta. Mientras bajaba el pedazo pensé: uy, eso está grande.
Me comencé a atorar y como primera instancia metí mi mano para sacar el pedazo. Para mi sorpresa el pedazo se encajó casi perfecto en mi garganta. Pensé, bueno, no pasa nada, con una buena tos lo saco. Respiro profundo, toso, y ahora sí el pedazo encaja a la perfección en mi garganta. Comienzo a hiperventilar solo que sin flujo de aire.
Traté de seguir tosiendo, pero no podía. No había intercambio de oxígeno. Me estaba asfixiando. Me paro solo en la sala, trato de pujar un par de veces — nada. Comienzo a paniquear horrible. Me doy cuenta de que no puedo solo y enseguida decido salir a buscar ayuda, así que me fui corriendo afuera a la piscina.
Llego corriendo al borde de la piscina y trato de gritar para pedir ayuda. No sale ningún sonido. Comencé como a tratar de vomitar y solo caían babas a la piscina. Una hermana me decía que no fuera tan cochino y que vomitara afuera de la piscina. La gente estaba confundida, se comenzaron a poner inquietos y otra hermana después de unos segundos se dio cuenta de que me estaba ahogando, salió corriendo de la piscina y comenzó a hacerme la maniobra Heimlich inmediatamente. Trató un par de veces con toda su fuerza. Nada.
Mi cuñado, que tiene más fuerza, le dice que él lo hace e intercambia posiciones rápido con ella. En ese momento probablemente tenía como dos minutos y medio sin oxígeno. En los primeros apretones lo hace como en mis costillas y como a la tercera yo le acomodé las manos para que estuviera empujando justo debajo de las costillas. Fue instinto.
En todo este proceso estaban adultos gritando diferentes soluciones, mis sobrinos gritando, los perros ladrando, los adultos cuidando niños y tratando de ver cómo ayudaban. Unos decían que me montaran al carro, otros que llamaran al seguridad de los vecinos, otros que llamaran a la ambulancia.
Como al intento número 10 de la Heimlich de mi cuñado estaba perdiendo consciencia — me estaba desmayando. Mis pujes se volvieron débiles. Se me estaban cerrando los ojos cuando pensé: Henry, te estás muriendo, DALE.
Me entró un rush de adrenalina y me prendí. Comencé a pujar fuerte nuevamente. Mi cuñado siguió haciendo la Heimlich ahora sí con toda su fuerza. Yo también estaba empujando con absolutamente toda mi fuerza. No salía. Pensaba que no iba a salir pero al fin salió como a veinteavo intento y me desplomé al piso. Genuinamente pienso que no me quedaban más de dos pujes para perder consciencia y luego…
Mi otro cuñado vio el pedazo de carne salir y gritó que había salido. Salió con un poco de vómito. El ambiente estaba lleno de gritos y lágrimas. La gente me daba espacio para respirar. Yo no estaba seguro si había salido el pedazo de carne. Asumo que no estaba pensando bien por la falta de oxígeno y estrés. Luego de unos segundos en el piso respirando alcé una mano señalando que ya todo había pasado y que ya podía respirar. Me quedé acostado en el piso un buen rato recuperando consciencia.
Mi mamá fue la primera que se acercó. Iba con el dedo en forma de gancho a tratar de sacarme el pedazo de cordero pero se dio cuenta de que ya todo estaba bien. Lo primero que dije fue que apagara el iWatch que me estaba volviendo loco porque había detectado la caída y estaba pitando desaforadamente. Lo apagó, me limpió el vómito de la boca, me dio un beso en la frente y me quedé descansando en el suelo.
Después de un rato me paré y me fui a sentar al sofá del patio de la casa. Allá estaba con mi esposa, mi hijo, mamá, hermanas y sobrinos. Poco a poco todos me vinieron a visitar. No paraba de llorar.
Luego de como media hora de contemplación y recuperación me paré, me quité la camisa y me metí a la piscina en pantalón largo para estar con todos. Mi papá estaba justo al lado y me decía que llorara todo lo que quisiera.
Lloraba y lloraba.
Me acuerdo mucho de mi sobrina mirándome fijamente mientras lloraba. Todos estábamos en shock. Comencé a tratar de normalizar la situación. Sonreía un poco de vez en cuando, me comí un tres leches, me tomé una cerveza, hablamos de las elecciones y de Cerro Azul. Después de como dos horas ya decidimos salir de la piscina e irnos para nuestras casas.
Post-atragantamiento
Luego del evento me comenzaron a decir las cosas que pensaron y pasaron.
Henry David estaba con mi mamá en todo momento. Él comenzó a llorar, probablemente era por los gritos de todos. Dice mi mamá que lo puso de espalda hacia mí para que no quedara traumado de ver a su papá morir.
Mi otra hermana y mi cuñado pensaban que cuando caí al piso, había caído muerto.
Mi papá me dijo que vio el momento en donde me estaba desmayando y dejando de pujar. Me dijo que tenía la cara roja y el contorno de mis ojos morados.
Ese mismo día pensaba mucho en lo que es importante en la vida y en la gran insignificancia de ciertos estreses del día a día. En realidad hay muy pocas cosas en la vida que son genuinamente importantes y por las que vale la pena estresarse. Estamos en tiempo prestado.
Los siguientes 4 días fueron difíciles.
El día siguiente, el lunes, cuando me desperté me di cuenta de que tenía los ojos con mucha sangre ya que los capilares se me explotaron por la asfixia y empuje. Ese día fui a la oficina. Tuve estrés postraumático violento. Me acordaba constantemente del evento. Esa mañana pude haber llorado solo en mi oficina como 10 veces. Para el almuerzo fui en familia al restaurante Mika. En la tarde regresé a la oficina y tuve una llamada con una psicóloga. Me fui a casa temprano. En la noche invité a un par de amigos a mi casa para tener un grupo de soporte. Organizamos un trip a Cerro Azul para ese mismo sábado donde terminamos yendo 6 parejas con nuestros hijos.
El martes seguí llorando esporádicamente. Para el almuerzo fui a bañarme en la piscina de la azotea del edificio donde vivo con mi esposa y pedimos comida del restaurante.
En la noche tuve reunión con amigos de un fondo de inversión que tenemos para mantener la mente ocupada.
El miércoles cuando llegué a la oficina alguien me dijo que no pasaba nada si me iba a la playa o la montaña a reflexionar. Que nadie me iba a juzgar. Me puse a llorar. No sé por qué seguía deprimido, pero lo estaba. En la noche estuve en un bote con toda mi familia celebrando el cumpleaños de mi hermana mayor.
El jueves estaba mucho más tranquilo. En la noche venía un amigo a la casa. Tuve mi día laboral normal y cuando llegué a la casa estábamos mi esposa, mi hijo y yo juntos. En eso le digo a Gloria que se hiciera una prueba de embarazo ya que tenía como una semana de retraso y… salió positiva! ¡Qué enorme alegría! Saltamos, gritamos y bailamos los cuatro. Llamamos a nuestra familia extendida y les dimos la gran noticia.
Desde ese momento y después del fin de semana con amigos en la naturaleza de Cerro Azul se esfumó por completo el estrés postraumático y el sentimiento de tristeza. Estaba y sigo super contento y emocionado con mis proyectos de vida.
En retrospectiva iba a ser una muerte poética. Me imagino la descripción de la noticia: Henry James Faarup Humbert, muerto a los 34 años atragantado por un pedazo de cordero (figura religiosa) al frente de su esposa, hijo, padres, hermanas, cuñados y sobrinos. Esposa viuda se entera que está embarazada a pocos días de la muerte de su esposo. Surreal.
Cosas que aprendí o internalicé más
Casi todo es insignificante. Hay muy pocas cosas que vale la pena enojarte o tener estrés. Lo más importante es mi familia, mis amigos, mis intereses y tiempo para disfrutarlos.
La muerte por atragantamiento es mucho más normal de lo que pensaba. Nunca consideré que eso fuese un riesgo. Conversando con gente me enteré de decenas de cuentos de sustos de gente conocida por atragantamiento y de muertes. Al escuchar esto busqué en internet y hay muchas más muertes por atragantamiento que por accidentes de tráfico. La siguiente gráfica me llamó mucho la atención:
Hablé con gente que había estado cerca de la muerte y sus perspectivas de vida luego. Se estresan mucho menos, son más ambiciosos en la vida personal, trabajan menos. O sea que en el balance de vida y trabajo le dedican mucho más a la vida. Son más agradecidos y le dicen que no a las cosas que no quieren hacer.
Aprendí la importancia de los primeros auxilios. Había 10 adultos en esa piscina y a la casualidad que mi hermana, la que se dio cuenta y comenzó con la maniobra de Heimlich, era la única que había tomado el curso de primeros auxilios. A raíz de esto tuvimos una sesión familiar un mes después donde nos la enseñaron a todos. Recomiendo fuertemente agarrarla recurrentemente con las personas con quienes más se rodean.
Mi hermana y mi cuñado me salvaron la vida. Casi muero ahogado a los 34 años.
En fin, escribo y publico esto por múltiples razones. Para estar consciente en un futuro que esto puede pasar y prepararme agarrando junto con mis allegados cursos de primeros auxilios periódicamente. Para transmitir a todos los que lean esto de que esto no es un riesgo tan atípico y que vale la pena prepararse. También para recordar este evento y recordar mi mortalidad — memento mori. Quiero cimentar esta memoria, poder acordarme de lo ocurrido y darme cuenta una vez más de lo frágil que es la vida. Tengo que estar agradecido por un día más de vida. Cualquier día normal nos vamos de aquí.
¡A vivir la vida! Carpe Diem.
P.D. Con profunda tristeza cuento que el embarazo no resultó ser exitoso. Tuvimos un aborto espontáneo a la séptima semana.
Master Developers are real estate developers who build Master Planned Communities. This post expands on the ingredients needed to become a great Master Developer, outlined by Urban & Civic, a Master Developer, in their infographic.
Projects
Target big, complex sites in key growth locations
Study urban growth patterns and predict where new developments will happen. Acquire the most land you can afford to benefit from land appreciation created in the first phases.
Invest in the land for long-dated returns
Master-planned communities are like icebergs — they are massive and move slowly. MPCs require a lot of investments to transform undeveloped land into developed, functional, and aspirational for the first residents to move in. Recruit partners who have long-term investment horizons.
Work with like-minded partners
Attract high-quality shareholders, talent, and clients who share your values and add value to the project. Work hard to maintain and raise the quality bar in every aspect.
Recognize every site demands a customized approach
Every site has unique topography and engineering challenges. The market is always different. Learn to adapt to the context and attempt to understand the market. Highlight and incorporate natural environments into the master plan.
Planning
Ensure senior team engagement with stakeholders and communities
Master-planned communities significantly impact the city. It is human nature to resist change. That is why the NIMBYism movement against development exists. Therefore, excellent relationships with public entities and surrounding stakeholders are paramount to minimize unforeseen setbacks.
Trust is earned by making and delivering on promises
Build what you say you will build and work to exceed stakeholders’ expectations. The job of a Master Developer is selling a vision, securing funding, and making it happen. Rinse and repeat.
Cut through jargon and complexity – explain, illustrate and guide
It is hard to transmit the idea of an unbuilt vision. Make sure to develop clear communication skills and invest in graphic materials, like renders, of what you will achieve. Make sure to align the design and construction with the marketing material.
With a 20-year consent – build in flexibility from the outset as things will change
The needs of the market change with time, and master plans must evolve to capitalize on those changes. That is to say you don’t need to have the last phase designed in detail from the beginning. Create space to incorporate lessons learned into future phases.
Delivery
De-risk issues at the earliest opportunity
Recognize all possible risks and have a strategy to mitigate them. For example:
Lower market risk by attracting anchor tenants like universities, schools, and town centers.
Lower finance risk by conducting feasibility studies, buying land at the right price, having wealthy shareholders, excellent relationships with banks, and having long-term financing.
Lower construction risk by hiring outstanding engineering designers, general contractors, and third-party inspectors.
Lower product risk by conducting market studies and understanding your customer.
Assume responsibility for the delivery of infrastructure to maintain momentum
The project should always be moving forward. Master-planned communities behave like a snowball rolling downhill; they start slow and small, but as you move forward, it moves faster and bigger. To clarify, more infrastructure and residents increase the market size for potential new businesses, thus increasing the value of the project and creating a virtuous cycle.
Work at scale to create efficiency
The headache and management costs of building a 1-kilometer road are almost the same as building 5 kilometers. As a result, you should build the most you can while maintaining a healthy percentage of sales (>40%) and keeping your debt in check.
Establish multiple points of sale to enhance absorption
Experiment with various markets to understand what works and double down on those who do. Make sure to understand which price points can have high absorption and differentiate your product. Experiment with age groups, price points, and interests.
Homes
Keep control by not selling off large parcels
Selling large parcels might make you lose control and put the vision at risk. All pieces of land must follow the code and add value to the project. The job of the Master Developer is to build out the vision from start to finish.
Package land consistently across phases and sites
Master-planned communities must be thought of as an assembly line. When building one phase, you must plan and sell the next one. Designing, financing, and building is a continuous endeavor. Build a constant supply of residences to keep the ball moving forward.
Create a level playing field for all sizes of housebuilders to compete
Help everyone involved in the project make money. This creates a virtuous cycle of repeat customers because they reinvest in the project. Especially help homebuilders. Their success is your success, and their failure is your failure. The Master Developer must orchestrate homebuilders, so they must enact equal rules and allow fair competition.
Be prepared to self-deliver the more difficult plots to maintain quality and values
There are always hard lots or residences to sell in every project. Not all properties can have the best views and locations. Acquire the skills to develop those lots.
Quality
Establish a quality benchmark from the start
The first project in the master-planned community sets the standard for the rest of the project. Make sure to control it and do the best job possible. This is a high leverage move.
Use planning, contracts, and the example of self-delivery to maintain standards
Develop a code to maintain the vision and build the first project according to it. Make sure to include the code in the purchase agreement contract.
Ensure your team cares about the details
The heart of the customer is in the details. Become customer-centric and ensure everything you build is functional, feasible, and beautiful. Architecture must get inspiration from local, vernacular architecture and respond to the climate. Public spaces and street trees must be exceptionally well thought out.
You don’t need to spend more; you need to spend it smarter
Some solutions might cost the same, but one is much more beautiful and aspiring. One example is brick roads vs. concrete roads. A misconception is that brick road are more expensive, but they might be cheaper depending on the market, materials chosen, and labor costs. Another example is to provide spaces early on for basic needs like convenience stores, access to urgent care, and education. These services offer outsized values to residents with marginal investment.
Funding
Patient, experienced capital, is required
Master-planned communities are often intergenerational endeavors. Investment returns might take more time to materialize than usual real estate development projects. Raise funds from investors with know-how who can provide advice and resources.
Investment needs to be aligned with a commitment to quality
Invest in great architects to generate great designs, especially the master plan. Invest in materials that stand the test of time, and that can be easily maintained. One example is investing in street trees; time makes those streets look better.
Actively use public funds to accelerate delivery
Use the financial markets to increase your leverage and build faster the master-planned community. Raising public funds creates more ambassadors and alignment with the community.
Maintain delivery throughout economic cycles
Master-planned communities are multi-decade ventures; therefore, they are bound to experience bearish economic cycles. Plan for them and make sure to keep the momentum strong.
Download the infographic of the DNA of a Master Developer:
Master Planned Communities (MPCs) are urban-scale, mixed-use real estate developments where residents live, work, and play. They are built on undeveloped land, called greenfield development. MPCs are frequently located strategically on the edge of a city with strong projected urban growth. They are self-contained towns with clear boundaries, built for convenience, aiming to satisfy all needs within the community. You can think of them as the real-life version of Sim City.
MPCs usually have more than 1,000 residences and 247 acres (100 hectares); these numbers can be much more significant. Common amenities include cultural centers, golf courses, medical centers, parks, playgrounds, public spaces, restaurants, schools, sports facilities, temples, tennis courts, town centers, universities, walking trails, and more.
Private real estate developers typically develop master planned communities, in this case, called Master Developers. Master Developers must have the skills to craft a vision and coordinate a wide variety of real estate-related professionals that can help the project come to fruition.
Master Developers develop the infrastructure and public spaces. Using industry terms, they build everything “horizontally”; which includes basic infrastructure systems like sewage, stormwater, water, electricity, telecommunications, and roads. Master Developers sometimes decide to construct buildings or develop “vertically.”
The MPC standard business model is that the Master Developer buys a big plot of land, subdivides it; builds infrastructure and amenities; and sells land to anchor tenants like schools or universities. Some Master Developers choose a decentralized model where they sell to homebuilders to develop neighborhoods and commercial developers to build restaurants, shopping centers, etc. Others prefer a centralized model and align vertically to build residential and commercial buildings.
MPCs start by designing a Master Plan. Then it is built in phases throughout a multi-decade time horizon. They usually have a unified architectural vision encoded in the Architecture Code. All lots and buildings must be built according to it.
MPCs include a wide diversity of land uses, lot sizes, housing, and prices designed to attract multiple market segments. MPCs typically have private governance, such as a Homeowners Association, to regulate the relationship between owners, maintain public spaces, and enforce the vision.
Common marketing characteristics include great infrastructure, planned urbanism, housing for all age groups, a sense of community, a connection to nature, an active lifestyle, a healthy way of living, and convenience.
More often than not, urban development patterns are suburban and exclusively car-oriented. However, the New Urbanism movement has influenced MPCs making them more urban and walkable.
MPCs can grow very big and complex. Their evolution usually starts with a few residences, then to neighborhoods, then to a town, and then to a city. Company towns are prime examples of master planned communities.
Entrepreneurs who want to build ambitious Startup Cities can learn a lot from studying patterns of master planned communities and their Master Developers.
Peter Thiel’s book Zero to One deals with startup strategies to build a better future. Peter is one of the most recognized entrepreneurs in Silicon Valley, a co-founder of PayPal, Palantir, and Founders Fund, and was the first external investor in Facebook.
The book details the philosophy and strategies necessary to create startups with exponential growth: creating monopolies, avoiding competition, betting on new technology, creating cults, the importance of founders, and more. The title, Zero to One, refers to two types of companies:
0 to 1: Use technology to invent new products or services. Ex: Google, Apple, etc.
1 to n: Copy or expand existing products or services. Ex: restaurants, gas stations, etc.
This post focuses on chapter 6, You Are Not a Lottery Ticket, which develops different visions of societies. A society can have two types of visions:
Definite: the future is clear, allowing you to craft a plan and try to build it.
Indefinite: the future is unclear, preventing you from crafting a vision.
Building an ambitious vision makes sense if the future is definite. But if you think it is indefinite, you cannot visualize the future; you will give up trying to modify it, attribute changes to luck, and watch others make history.
Society also has two other perspectives:
Optimistic: which looks forward to a bright future.
Pessimistic: which is afraid of a worse future.
Combining these four definitions in a 2×2 matrix generates four quadrants of society’s visions.
Now I will explain each quadrant using the examples from the book. Then I will explain Panama’s past, the present, and the road to an optimistic and definite future.
Pessimistic and Indefinite
All cultures have a myth of a decline from a golden age. A society with a pessimistic and indefinite vision foresees a worse future and does not know what it looks like or what to do about it. Historically this is the most common quadrant.
This is Europe’s quadrant since 1970, when the continent was subjected to a visionless bureaucracy, increased socialist policies, and enacted too many laws creating a straitjacket to innovation. From the inside, they know that they have unsustainable policies that will lead to hard times.
Pessimistic and Definite
A society with a pessimistic and definite vision foresees a worse future, has a clear idea of what it looks like, and is prepared to face it.
China is pessimistic and definite. Its growth strategy is to copy what has worked in the West without regard for innovation. In China, the middle and upper classes, which consume far more resources than the lower class, have expanded dramatically. China has 1.44 billion people (at the end of 2020) consuming natural resources. They are in trouble because demand is increasing, and natural resources are becoming scarcer, resulting in a higher cost of living.
From the outside, everyone thinks that China has a great future, but internally they are terrified of the brain drain and desperate to invest in other countries to get their money out of China.
Optimistic and Indefinite
A society with an optimistic and indefinite vision foresees a better future but only builds more of the same, so it does not make ambitious plans. Instead of working for years to invent something, optimistic and indefinite people like bankers, lawyers and consultants improve the processes of existing companies. In this quadrant, a few new startups are founded.
An indefinite person exclusively values money per se. In contrast, a definite person perceives money as a means to build ambitious goals.
Indefinite Finance: The financial industry represents indefinite thinking because it is one of the most significant ways to make money when you don’t have a concrete plan.
Indefinite Politics: Voters are more interested in how a politician reacts to an event or if he says something controversial than in their 20-year vision.
The US government used to coordinate solutions to big problems like nuclear technology and space exploration. Today, it focuses primarily on insurance and money distribution.
In politics and business, debating marginal processes or improvements has become the way to avoid working on ambitious master plans.
Indefinite Companies: Entrepreneurs are told to listen to the customer, make a minimum viable product, and iterate on that product until success. But, the lean methodology process has to be accompanied by a daring vision to get from 0 to 1.
Let’s take Apple as an example of an ambitious plan. Everyone has experienced good Apple product design. However, the most important thing that Steve Jobs designed was his company. He devised a multi-decade master plan to create products and distribute them. Steve Jobs changed the world by planning and understanding human needs from first principles.
A company with a definite master plan will consistently be underestimated by companies with an indefinite master plan — which are the majority.
Optimistic and Definite
A society with an optimistic and definite vision can imagine a better future, plan to achieve it, and work together towards a clear north.
From the 1800s to the 1960s, the optimistic and definite led the West. Scientists, engineers, doctors, and merchants built richer, healthier, and more productive societies. Each generation had more inventors and visionaries than the previous one.
Examples of feats they executed:
1843: A tunnel was built under the River Thames in London.
1869: The Suez Canal was built.
1889: The Eiffel Tower, the tallest building in the world for 40 years, was built in 793 days.
1914: The Panama Canal was built.
1931: The Empire State Building was built in 410 days.
1937: The Golden Gate Bridge was built in 4 years.
1945: The Manhattan Project produced the first nuclear bomb.
1942: The Alaska Highway, consisting of 2,700 kilometers, was built in 234 days.
1965: The United States Interstate Highway, consisting of 32,200 kilometers, was built in 9 years.
1972: NASA put 12 people on the moon. The Apollo program started in 1961.
You can study more examples of optimistic, definite, and fast projects on Patrick Collison’s website, co-founder of Stripe.
In that era, the government did not only propose daring plans. Around 1940, John Reber, a school teacher who taught himself engineering, designed and promoted the Reber Plan — which consisted of constructing two giant dams in San Francisco, California. Building this would result in gaining 20,000 acres of land. Newspapers promoted this plan, and it went all the way to the United States Congress to discuss its feasibility. The army even built a 1.5-acre model. Unfortunately, they concluded the plan was not viable, so it was not built.
Nowadays, if a teacher designed and proposed such a vision, no one would take it seriously. If the vision came from someone powerful, they would tell him that his arrogance had clouded his sight. Until the 1950s, society welcomed big visions. Bold and grand visions of the future have become curiosities of the past.
You Are Not a Lottery Ticket
We must return to an optimistic, definite world, and startups are the most powerful tools to achieve that change. It starts with rejecting luck and daring to invest many years of effort into a clear and ambitious master plan.
Societies have shifted quadrants over the years. We must strive to move and stay in the optimistic and definite quadrant. Therefore, as a Panamanian citizen, the question I ponder is:
What quadrant is Panama in?
Before 1990, during the military repression of the dictatorship, the vision was pessimistic and definite. During this time, corruption was widespread, businesses could not operate freely, and there was a lot of oppression. It was clear Panama would become a shithole if it continued in the direction it was heading.
From 1990 to 2014, it was optimistic and definite. During that time, Panama expanded the Canal, built the first metro line, founded Panama Pacifico, increased immigration greatly, facilitated the creation of many new companies, and enacted a special regime for the establishment of multinational headquarters (Law SEM), which resulted in intense economic growth.
An important caveat is that at any given moment, some countries, like Panama, can fall in any quadrant, depending on the state of mind of the person giving the opinion. I’ll make a brief argument of opposite quadrants.
From 2014 to 2022, Panama had a pessimistic and indefinite vision. A big concern is that Panama might catch the «left-wing virus» and demagogues seize power, leading to a «second Venezuela.» I know many friends and business leaders investing internationally or taking out passports abroad «just in case.» Panama also has too many bankers, lawyers, or consultants and too few computer engineers or scientists.
From 2014 to 2022, Panama had an optimistic and definite vision. Panama can execute big plans. Let’s think about the organization and collaboration that took place to receive the Pope in 2019. Churches were renovated, thousands of new temporary homes were created, the biggest event ever in the country was executed, the subway expansion was accelerated, and much more.
In addition, Panama has a lot of entrepreneurs per capita; it is one of the fastest growing economies in Latin America; it is building out a multi-decade master plan of metro lines and roads; it just built a cruise terminal in Panama City, expanded the airport, immigration is increasing, and every year we have more startups accepted to Y-Combinator.
Sometimes the quadrant depends on the eye of the beholder.
How can Panama become more optimistic and definite?
Building new companies and startups, growing tech, engineering, and scientists workforce, and betting on government leaders with bold master plans. The first step is to recognize that change is in our hands. We must create and work on concrete, ambitious, and aspirational master plans for our lives.
Those with the ability and desire to take business risks should dare to undertake them. Those of us who graduated from good universities should avoid the comfort of optimizing processes of the companies of yesteryear and help improve education for the rest.
My first job after college was within the old guard — a process consultant. I knew that path was not for me. So, inspired by some friends who founded a company, I ended up working in a Venture Capital fund in Panama. I learned about Silicon Valley from Paul Graham’s Essays and founder mentality during that time.
Founders are contemporary philosophers dedicated to changing the world with their companies. I tell recent graduates that getting a job at a big company or getting an MBA aren’t the only alternatives — you can start a startup or work for one. In his essay A Student’s Guide to Startups, Paul Graham explains this in-depth.
After meeting many entrepreneurs and learning about them, I decided to undertake a new venture myself. In 2014 I co-founded Porta Norte, a new-urbanist solarpunk master-planned community of 650 acres (262 has.) with a multi-decade master plan. The mission is to expand Panama City so that the residents of Panama can live in walkable neighborhoods connected with nature and with public spaces full of culture. It is a definite and optimistic vision.
We should applaud, support, and invest in startups like Cuanto and Panadata, the first two startups to go to Y-Combinator in Panama — which is harder than getting accepted to Harvard. I am honored to be an angel investor in both startups in their first round.
Let’s encourage entrepreneurs and governments to think big. Let’s brainstorm, support, and bet together on daring, definite, and optimistic plans such as:
Producing local energy to achieve energy independence.
Building energetic self-sufficient buildings and neighborhoods.
Connecting America with a highway between Panama and Colombia.
Connecting Panama, Colombia, Central America, and America through a high-speed train.
Increasing immigration of scientists, engineers, doctors, artists, entrepreneurs, and builders.
What other plans can you think of? Which startups, companies, or existing plans are worth supporting? How can we help build a definite and optimistic society?
If you have an ambitious, definite, and optimistic plan for Panama or the world, please share it in the comments, talk about it among friends, help it become a reality and ideally execute it. Let’s become optimistic and definite to build a better future together.
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Real estate development is a cross-disciplinary field where you need to orchestrate various professionals to build infrastructure and buildings. This book provides strategic advice for becoming an effective real estate developer.
The author, John McNellis, founded and led a commercial development firm focused on retail and shopping centers since the 1980s.
This book has two parts. The first has 40 chapters and focuses on lessons learned in real estate development. The second, chapters 41 to 46, are about philosophy and life decisions. The second part was nice, but it seems out of context. I rather read Alain de Botton or Seneca instead if I want life advice.
The following is John’s advice I liked most:
Starting Out
New developers typically need to pull off their first deal playing every instrument in the orchestra: investment broker, contractor, day laborer, property manager, janitor, lawyer, accountant, leasing, mortgage broker, etc. There is a benefit to this extra effort: just as a conductor of an orchestra must know how all his musicians should sound, a developer should understand what your service providers do, and doing it yourself is a quick way to get it.
New developers should ask themselves where they want to be in 20 years. Would you want to be a media darling running a big company and doing the splashiest deals in town? Or would you prefer smaller projects that help you slowly build assets and increase free cash flow?
You’re better off deciding the big picture question before your first deal because you might be unable to make the right decisions without a defined strategy to guide you. In other words, unless you plan ahead, the sell or hold decision may be a luxury you cannot afford. The fastest projects take at least two years before you can cash in and more likely three to five years from when you saw a property to the day you sell.
If we oversimplify, there are two types of real estate developers: investment builders and merchant builders. Investment builders build to hold assets for the long term as a portfolio investment, while merchant builders build to sell; they do more deals and profit much sooner.
If you want to run a giant development firm, become a merchant builder. If you want the luxury of deciding which deals to keep and slowly building your cash flow, consider investment building. If you go the investor route, choose the properties you keep carefully: many have their finest hour when inaugurated.
The best, but uninspiring strategy, might be the build to hold approach.
Choosing a Focus
If you don’t specialize, your specialty will be failure.
«We started in apartments like almost all new developers, but they didn’t work for us. Richer in experience but little else, we decided we had no wish to own buildings where anyone slept. Since, we have developed neighborhood shopping centers in cities that fight new developments, thus limiting supply.»
John’s development projects are «necessity retail» (supermarkets, drugstores, and discount department stores); they range from 25,000 ft² (2,300 m²) to 150,000 ft² (14,000 m²), located within a two-hour drive of San Francisco.
John’s firm’s strategy: accumulate fewer but higher-quality properties with lower debt rather than amassing a portfolio that requires a big overhead.
Growth
Grow your deal size slowly.
The big-picture risk management for developers is the classic tactic of using other people’s money, taking fees upfront, and never signing recourse (personal guarantees).
The long-term investment approach is investing enough equity to survive any recession and avoid building speculative projects. Spec buildings are those with a build it, and they will come mentality—without having sold to a customer.
It’s hard to hit a home run paying all cash, but it’s also impossible to strike out, and since even the best in our business lose money, you might seriously consider being conservative. Slow and steady wins the race.
Market
What you do doesn’t matter as much as where you do it.
As Warren Buffett said, «I’d rather be a mediocre developer in a high-growth city than a brilliant developer in a mediocre city.»
Market timing is a scarce talent. Buying in a down market requires a cast-iron stomach and a prophet’s certainty of the future, and the ability to raise patient money when few others can. It might be easier to buy and sell on an established pattern, say, two to three deals a year, and then stick with it like a farmer with his annual plantings.
Challenges of Retail
Overbuilding
According to Forbes, the United States have roughly 50 ft² (4.6 m²) of retail space per capita, while Europe has just 2.5 ft² (0.23 m²).
Inexperienced developers often talk themselves out of acknowledging market conditions.
E-commerce
The internet has driven some merchants and retail categories out of business. Its most significant effect has been to reduce retailers’ overall profitability and shrink their store sizes. They’re doing so to pursue a combination of physical and online strategies. This is a major concern for commercial developers because their clients need less space.
Until e-commerce and bricks&mortar finally merge, retail will be suffering from a debilitating, but not deadly, internet-spawned flu.
Private Equity
«Since the end of the Great Recession, retailer after retailer has been similarly killed. Payless Shoes, Toys’ R’ Us, PetSmart, Gymboree, Sears, Mattress Firm, and Radio Shack—all companies owned by private equity—have gone bankrupt since 2012. Debtwire, a financial news service, calculates that about 40% of all U.S. retail bankruptcies in recent years were private-equity backed.»
How do private equity firms do it? Simple: the Leveraged Buyout (LBO). An LBO is the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the acquiring company’s assets.
The LBO is a highly effective play that is difficult to counter. In short, the private equity firm pays top dollar for a given retailer, often even overpaying, but using little equity and a lot of debt using the retailer’s assets as collateral. The private equity then improves the company’s profitability through excessive cost-cutting and rewards itself with a significant dividend, often recovering their entire initial investment and a substantial profit. Then they let the companies drown in debt.
Private equity has a toxic effect on retail. An episode of The Sopranos is a perfect illustration of how private equity destroys retailers.
«Bust Out» (season 2, episode 10)
Mobster Tony’s boyhood friend, Davey, borrows money from him to pay gambling losses. He didn’t repay Tony. In retaliation, Tony takes over Davey’s sporting goods store. Knowing he will never pay a single bill, Tony orders ten times the store’s inventory and then sells it all at a discount for cash–which he keeps. Consequently destroying Davey’s credit and forcing him into bankruptcy.
The Retailers
Wall street force retailers to grow or die. When a company has slow growth, private equity goes for the jugular. The company will be bought and chopped up for parts, the CEO and his management team will lose their jobs, and the new real estate managers will receive big bonuses.
You can do everything right in retail and still lose because of conditions beyond your control. How do you mitigate the risk of a tenant’s bankruptcy or being killed by private equity? You diversify: develop multitenant properties in which the loss of a single-tenant is merely painful, not lethal.
Retail is a tricky business. The threats from e-commerce, changing tastes, and ever-more-nimble competitors are real.
Retail’s safe harbor against those headwinds is what we now call essential retail—goods and services people cannot do without, even during a societal shutdown.
Should you consider retail development? Only if you start with an established company that knows the business and devote yourself full time to it. It is a highly specialized area of development that punishes those who merely wet their feet.
Finding Deals
Finding great deals among existing buildings is much more complicated than starting with undeveloped land.
«The bad deals came early in our career, the good deals came late. Why? Because great deals usually start with a great purchase. And how do you pull that off? You pay cash and use an escrow account—a tactic beyond a beginner’s reach.»
Veteran developers advise you to build in good times because you can’t find decently priced existing buildings and buy in bad when projects sell for less than replacement cost.
There’s no such thing as bad real estate, only bad pricing. Maybe it works for you at some number.
Deal Structure
Manage risk by investing a lot of equity and little debt, growing your portfolio slowly, and using the classic structure for developments: use other people’s money, take fees upfront and never give a personal guarantee to a bank (non-recourse loans).
Suppose your partner invests 90% of the equity (the usual arrangement) into a partnership in which you have no personal liability and that partnership’s external borrowing is also non-recourse. In that case, you can make real money while having minimal risk.
For example, you will develop a project that costs $10 million and will be worth $13 million on completion. It requires $4 million in equity. A bank will lend your partnership the remaining $6 million on a non-recourse basis. Your partner puts up $3.6 million, and you write a check for $400,000, a mere 4% of the total project cost. If the project tanks—some do—your loss is only $400,000, but truth be told, you probably charged that much in development fees during construction. Even as a loser, you’re home free.
Why would you develop with your own money? Because with no outside partners, you control your decisions. You can personally decide to keep a property as long as you like or sell it overnight on a hunch. You also avoid quarterly reports and explanations to investors.
«No Partners, fewer problems, more control.»
It is reasonable to forgo the glamour of owning a little equity in a high-rise and instead buy a corner store of your own. Having control over your life might outweigh the benefits of financial partners.
«We left the financial partner world in the early 1990s, moving from large deals in joint ventures to projects one-10th the size without financial partners, using our limited capital. That decision has worked out.»
«Over time, we have averaged a couple of projects a year. We have typically sold two out of three completed properties to generate capital for our next project. To our surprise, we found we had netted as much from these small, 100% owned projects as from joint ventures. But with much fewer headaches.»
Always calculate every deal’s «Net To Me» (NTM). An entrepreneur, someone who risks what little capital they have and years of their life on a project, should know what they earn if the deal works out.
In considering your NTM, solve for your hourly rate. How long is this going to take? How much of my life must I devote to this project? In doing so, ponder the advice a sage contractor gave a homeowner about her idea to remodel: «It will cost twice as much and take three times as long as you initially believe.»
We have heard many times easily anticipated disappointments in career-launching projects. The typical problem is that the profit share was not well structured from the beginning. You can mitigate this risk by calculating the NTM before making the deal. Make sure the prize is worth the effort.
Team Building
If you desire to tackle big projects, you will need help with the skills you lack. The question is, should your help come from consultants, employees, or partners?
As long as you can rent any profession—legal, architectural, engineering, etc.—and still get first-rate work on the day you need it, you will be better off renting rather than buying. Outsource everything you can. Nothing runs up a tab like employees.
To get the highest-quality output from consultants, hire the most experienced person you can afford who will do the work themselves. Remember, you are always hiring an individual, not their company or firm. Hiring the fanciest firm in town does you no good if a junior associate is assigned your work. A fantastic hack is to hire well-seasoned solo practitioners.
You need two at least two providers for each service—two contractors, two architects, two engineers, etc. And they should know about one another. Why? Because you want them to compete, and it is healthy to have a backup plan. Eventually, your favorite consultant will be unavailable to you.
We hire an independent consultant to act as our owner’s representative for our construction. But here’s the point: he’s paid by the hour, and should we ever cease building, we would have no ongoing financial obligation to him.
The partnership of a skilled developer and a top architect may prove wonderful, often producing glorious offspring: a building, an entire neighborhood that fits well with its surroundings, is embraced by its community, and is profitable from the beginning.
Construction
You can handle construction in three different ways:
Bid to three contractors: If you decide to bid out your project to multiple general contractors, be careful of low outlier bids. Dishonest contractors will bid low intending to make it up in change orders (especially if you are perceived as inexperienced). If three bids are close to one another at $10 million while a fourth is $8 million, and you accept the lower bid, you will likely be buying yourself more than $2 million’s worth of trouble.
Build yourself: Once developers reach a certain size, they are tempted to align vertically and take construction in-house. Fee-driven merchant builders have a higher incentive to control the entire construction process to keep the contractor’s fees. Developers ignore a thousand ways a contractor can go broke and ask themselves, «How hard can it be?» And jump into the construction business. Developers that do everything in-house—from entitlements to architecture to construction—are often successful in bull markets. In a recession, they can’t keep up with overhead, consequently forced to lay off workers or go broke.
Work from the start with one contractor: This means choosing a contractor from the moment a deal seems real and sticking with them to the end. Having a practical contractor early helps prevent your architect from designing a monument for themselves. The contractor is the yin to the architect’s yang: they will point to what part of your architect’s vision can be optimized. For example, that curved lines in buildings are more expensive than right angles or that there can be such a thing as too much glass in a building. In short, the value engineering—the reality check—a contractor provides to your design early on can be invaluable, especially if you’re new to the game. The downside to this approach is losing the ability to bid out the project. If this is a concern, you can still select your preferred contractor at the outset but agree that you will pay him a fair «walk away» fee if they don’t win.
Thick contracts won’t help with a crooked or inept general contractor. A handshake suffices 90% of the time with an honest, competent one. The contract is just a reminder of everyone’s responsibilities.
We stopped bidding out our projects nearly 20 years ago, relying on a couple of top contractors with whom we do business almost every year, making them part of our team.
Our general contractors work with us from day one—before anyone knows if a project will be built. They provide us with value engineering and cost estimating on one plan iteration after another, all without charge, because they know that if the project proceeds, the work is theirs. This is the right way to relate with general contractors.
Consider not issuing insurance construction bonds. They are expensive, and you will learn that insurance companies pay off infrequently if you ever do claim them. It is better just to verify that your contractor is “bondable.”
Buying
Whenever someone pitches you a deal, an excellent question is: «Why are they selling?» Be extra skeptical if the answer doesn’t involve a compelling need to sell (e.g., death, disaster, dissolution, or divorce).
The best time to find a motivated and realistic seller is when no one else is buying. «Buy when there’s blood in the streets.»
When confronted with an unrealistic seller, we usually advise the broker that teaching market values to a seller is not our business. Thus, we lose deals.
Try to meet the seller and become their new best friend. You will learn a lot only by visiting them at their office.
Vast land and easy approvals lead to overbuilding. The doom formula is:
easy zoning + easy money + many developers = death spiral of overbuilding
Smart money loves core properties because developers are more likely to generate cash in central locations where all the land is already built out. The best defense is to own properties where the zoning and approval process is challenging.
Sellers tend to be smart enough, and when they are dumb, their stupidity more often lies in overvaluing their holdings than in wanting to give them away.
Never buy unzoned property.
Actual off-market property may be a worthy prize, but brokers are seldom involved because principals deal directly with other principals.
A great deal is rarely great on the first day it is offered to you; no one consciously gives anything away in business.
If a property stays on the market for a long time, a frustrated seller may become reasonable. You don’t want a building at a $10 million asking price, but at $6 million, the property might work. And then you wait…and wait. The seller will pull his property off the market, or someone will outbid you. But if you bait enough hooks, a fish will come along.
Financing
If you develop or invest in property, you’re in the business of borrowing money.
The Family & Friends (F&F) profit-sharing formula: The equity gets a preferred return a few percentage points higher than Treasury bills from the project’s free cash flow. Once that’s paid, any remaining cash is split 50/50 between equity holders and the developer.
Two basic loans predominate in real estate:
Permanent loans: They are for stabilized assets like a leased office building. They have a lower risk and usually have a long-term duration (> 10 years).
Construction loans: They are for constructions like building a new high-rise. They have a higher risk and usually have a low-term duration (~ 2 years).
It is impossible to predict real estate prices ten years from now. Be careful with those long-term proformas.
High-end sales brochures and investment committee reports routinely contain impressive Argus (commercial real estate software) spreadsheets that magically produce the IRR the buyer or investment committee desires. The magic is easy; keep raising the anticipated 10th-year sales price until you hit the desired IRR. Who will be around in 10 years to tell the analyst they were wrong?
Alternative interpretations of the Internal Rate of Return (IRR) are «Inflated Rate of Return» or «I Rationalize Risk» should come to the mind of anyone confronted with spreadsheets predicting rising rents, falling expenses, and zero vacancies.
There are two kinds of lenders: those who’ll admit they’re not lending a dime and those who pretend they are.
A banker is a successful developer’s best friend. But beware because your banker will want a committed, monogamous relationship.
Despite the best intentions, your banker is only as good as the last loan she committed to you. She may even become a friend. Eventually, she will be on vacation, quit, retires, or be in the hospital the week you need a loan commitment. Or, her bank will be merged out of existence (this has happened to us three times), be taken over by the feds, or stop making real estate loans.
The solution? You need an open relationship with three bankers at three different banks. That way, the lights are always on somewhere.
Appraisals
Valuing property is subjective. Think about it: appraisers use three different approaches to evaluate a commercial property:
Replacement cost.
Comparable sales.
Income capitalization.
Appraising is still as much art as science.
Selling
We sell if:
Our return on cost is too low either because our construction costs went over budget or we failed to achieve anticipated rents.
The barriers to entry for our project’s future competitors are low.
We have concerns about our tenants’ longevity or the quality of our location.
We keep our high-yielding properties in competition-constrained environments.
Brokers
Wise principals spend quality time with their favorite brokers. Why? Because they are genuinely friends, and it doesn’t hurt when it comes to getting the «first call, last look» on deals.
Beyond treating agents with respect, choosing the right one matters because the best agents are as specialized as the best principals.
This book is written under the Urban Land Institute (ULI) umbrella in the U.S. The ULI comprises real estate developers and related professionals who share best practices.
Personal finance is taboo. People avoid talking about finance, making it tough to learn. That’s why I decided to read this book. After finishing it, I realized there were still many financial decisions I had not optimized for. I hope it can help you optimize your finances too.
Would you rather be sexy or rich?
Being fat is similar to having debt. How do you lose weight? By eating less and exercising. How do you lose debt? Cutting costs and earning more.
Not counting calories is akin to not tracking spending.
Invest early to take advantage of the power of compounding interest. The best time to start investing was 20 years ago. Today is the second-best time.
Start by automating your payments and opening investment accounts.
Buy-and-hold investing wins over the long term, every time.
Optimize your credit cards
The majority of people haven’t formally learned about personal finance before. Many don’t even look at their finances for whatever reason. Therefore, most people are playing the financial game wrong.
Being in debt is normal, but do not accept the status quo; pay it off as fast as possible. More people than you imagine don’t even know how much they owe.
Debt is almost always manageable if you have a plan and take disciplined steps to reduce it.
An advantage of using credit cards instead of cash is that you automatically create your transaction history to track, organize and analyze your spending later.
Credit cards are great if you consistently pay them on time.
They can have great perks. Make sure to know what they are.
Keep track of the rewards you earn and use them.
Set up automatic payments for your credit card.
Beat the banks
The critical difference between checking and savings accounts is that savings accounts technically pay more interest, but the difference is too little to matter.
People lose money when their money is sitting idle in their savings accounts. Inflation erodes the real purchasing power of your cash.
Banks are allowed to gift you money if you complain. Fees can be negotiated. Call your bank to negotiate terms.
Get ready to invest
Albert Einstein said, «Compounding is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.»
You should invest your cash to fight inflation.
Open an investment account to access the most significant money-making vehicle in the history of the world: the stock market.
Full-service brokerages are usually traditional banks that advise and manage your portfolio and offer other services like estate planning, retirement advice, tax optimization, etc. They charge high fees for transactions.
Discount brokerages are nearly synonymous with online brokerages. They don’t advise. The only service they tend to offer is trading through them, but they don’t advise you. It is built for the masses. They charge low fees.
Open an account with discount brokerages (I opened mine with Interactive Brokers) because you can invest in the same stocks but with lower fees. To learn, open an account and invest a low amount, maybe $1,000, and invest it in the Vanguard Total Stock Market ETF (Ticker: VTI). Open it even if you cannot invest high amounts right now.
Set up automatic monthly contributions to your investment account.
Dollar-cost averaging is investing regular amounts over time (let’s say monthly) rather than investing all your money at once. This is a hedge against any drops in the price. If the fund drops, you’ll pick up shares at a discount price. By investing over time, you avoid trying to time the market.
If you live in the US, invest through a 401(k) or an Individual Retirement Account (IRA) for tax advantages.
Beware of the added fees of robo advisors.
If you want a financial adviser, pay them by the hour, not as a percentage of assets under management.
Conscious spending
Plan your expenses ahead of time.
Make conscious decisions on what you want to spend money on. For example, I like spending money on low leverage tasks that save me time, like cleaning and cooking.
Cancel your subscriptions and pay «á la carte.» For example, don’t pay for a gym subscription if you can pay for one-time use. When you do the math, you end up paying less. Beware of monthly subscriptions.
Make a spreadsheet with all your income and expenses.
Start adding your income.
Then add the monthly costs (annual costs divided by 12).
Categorize them. Include rent/mortgage, groceries, restaurants, vacations, utilities, medical insurance, car payment, transportation, debt payments, subscriptions, entertainment, clothes, internet, gifts, taxes, etc. Make sure to review your historical expenses to cover all categories. Have a line item with 15% of all expenditures for unexpected, unforeseen expenses.
Analyze your expenses and write the next steps to reduce expenses, especially the biggest items.
Organize them in order of magnitude.
Income – Expenses = Free Cash Flow (FCF). FCF is the most important metric to follow. Use it to save and invest.
Track your spending weekly.
There’s a limit on how much you can cut, but no limit on how much you can earn.
When you gain more income, try not to increase your standard of living and bank the rest.
Increase your income by adding value to your company and asking for adjustments in your compensation.
Save while sleeping
If you invest a little now, you don’t have to invest a lot later.
Make all your expenses decisions, and stick to the plan every month.
Your transactions should occur automatically.
Try to get all your bills on the same schedule to easily track them.
Build up a buffer of 3 to 6 months of expenses in your savings account.
The myth of financial expertise
It is easy to get overwhelmed by all types of investments you could make in an investment account. Don’t frown.
Most people can earn more than «experts» by investing on their own in low-cost funds.
Over the long run, the stock market has consistently returned about 8% after inflation.
The best long-term solution is to invest regularly in low-cost, diversified funds.
“Focus on time in the market, not market timing.”
Financial consultants, paid on commission, usually direct you to expensive funds to earn their commission.
Higher fees and lower returns are correlated.
Over 30 years, a 1% fee can reduce your returns by 28% and a 2% fee by 63%. You should be paying 0.1% to 0.3%.
A safe assumption is that actively managed funds will often fail to beat or match the market.
Investors would be better served by investing in passively managed funds than more expensive active funds. You could do better, for cheaper, on your own.
Investing isn’t only for rich people
Invest automatically the most you can monthly.
Do not sell when the market goes down. Keep your regular monthly investments.
Financial Independence (FI) is the crossover point when your investments earn enough to fund your expenses automatically.
Retiring Early (RE) is when you achieve FI and choose not to work anymore.
Together, they form the FIRE movement. Financial Independence + Retiring Early = FIRE.
LeanFire is for people who have decided they can live on a «lean» amount of money, often $30,000 to $50,000 a year. They reject materialism and embrace simple living.
FatFireis for people who want to spend a lot, but they can because their assets generate so many cash dividends to finance their lifestyle.
When you achieve Financial Independence, you’re being paid because of decisions made years ago.
Don’t associate investing only with picking individual stocks of a company.
Overall, stocks provide excellent returns of around 8% per year. Stocks as a whole generally give excellent returns over time. Individual stocks are less clear.
Try not to invest in individual stocks; it’s tough to choose winning stocks.
Bonds are safer than stocks, thus with lower returns.
Rich and older people like bonds because they want to know exactly how much money they will get next month.
If you are wealthy, you’ll accept lower investment returns in exchange for security and safety.
The Rule of 72: Divide your 72 / return rate by = the number of years to double your money.
Make sure to create a pie chart of your portfolio in a spreadsheet.
Have cash in your savings account for emergencies or have very liquid stocks.
Cash is the safest part of your portfolio, but it offers the lowest reward. You lose money by having idle cash when you factor inflation in.
Use a small part, up to 10% of your portfolio, for «high risk» investing—but treat it as fun money, not as money you need.
What about crypto? It is a very high risk. First, get out of debt, then build a solid portfolio and six months of emergency funds. After having all of the above covered, venture into high-risk assets like crypto.
Asset allocation
It is important to diversify within stocks, but it’s even more important to allocate across the different asset classes — like stocks and bonds.
Your portfolio should move gradually from riskier to safer as you age.
It is reasonable to have a portfolio made up of primarily stock-based funds in your twenties. It is reasonable to have a sizable portion of your portfolio in stable bonds in your sixties.
Types of stocks
Small-Cap: companies with a market capitalization («market cap») < $1 billion.
Mid-Cap: market cap between $1 billion and $10 billion.
Large-Cap: > $10 billion.
Value: stocks that are cheaper than they should be.
Growth: stocks that may grow more than the market.
International: companies outside the US.
Types of bonds
Government: backed by the government. Ultra-safe investments.
Corporate: issued by a corporation. Riskier than governments but safer than stocks.
Short-Term: less than 3 years.
Long-Term: mature in 10 years or more. They offer higher yields than shorter-term bonds.
REITs: Real Estate Investment Trusts are public stocks that let you invest in real estate through a single ticker symbol, just like a stock.
Mutual funds
They are primarily great for investment bankers, not for the buyer of the funds, since they have high expense ratios (management fees).
They have the advantage of a hands-off approach because you are diversified within the fund.
75% of mutual funds do not beat the market.
Actively managed mutual funds are, by definition, expensive. You have to pay for the salaries of all the operations. Active management can’t compete with the passive management of index funds — the more attractive cousin of mutual funds.
Index funds
In 1975, John Bogle, the founder of Vanguard, introduced the world’s first index fund. These simple funds buy stocks and match the market. Specifically, they try to match an «index» of the market, such as the S&P 500. In contrast, traditional mutual funds employ an expensive staff of «experts» who try to predict which stocks will perform well, trade frequently, incur taxes, and charge you high fees.
Bogle argued that index funds would offer better performance than active mutual funds since mutual funds haven’t beat the market.
When you invest in index funds, you typically have to invest in multiple funds to create a comprehensive asset allocation. If you buy numerous of them, you should rebalance your investments to maintain your target asset allocation — usually every 12 to 18 months.
With their low fees, index funds are far superior to buying individual stocks, bonds, or mutual funds.
They are simple funds that automatically diversify between stock and bonds. They also rebalance your investments based on your target retirement date.
Target date funds are different from index funds, which are also low cost but require you to own multiple funds if you want a comprehensive asset allocation.
These funds have mainly stocks in your twenties and gradually add bonds as you age.
Another model that may be interesting to imitate is the Swensen model of asset allocation. David Swensen has managed to get a 13.5% annualized return with his asset allocation.
If you choose to create your custom asset allocation instead of target-date funds, you will need to rebalance your portfolio periodically.
It’s great that one of your investment areas is performing well. Still, you want to keep your allocation in check to diminish your risk that one sector isn’t disproportionately larger or smaller than you intended.
Rebalancing your portfolio protects you from being vulnerable to a specific sector’s ups and downs.
The best way to rebalance is to put more money into the other underperforming assets areas until your allocation is back on track. Another way is by selling the outperforming equities and investing that money in other areas.
Pay your taxes, but make sure to use every legal tax advantage you can.
Annual financial checklist
Review insurance needs.
What is your net worth?
Revisit your debt payoff plan.
Reassess current subscriptions.
How much are your fixed costs?
Are you revising your expenses?
Find ways to create more income.
If you have dependents, create a will.
Make a plan to use your credit card rewards.
Are you investing at least 10% of your income?
Negotiate bills and fees: phone, car, internet, bank.
A rich life
«For me, a Rich Life is about freedom—it’s about not having to think about money all the time and being able to travel and work on things that interest me.»
Investing shouldn’t be dramatic or even fun—it should be methodical, calm, and as fun as watching grass grow.
Log in to your investment account no more than once a month.
Try not to talk to others about your successes in finances. It creates tensions.
Talking money with your significant other
Moving together and getting married are key moments where a financial conversation might come in handy.
You and your partner should agree that financial health is important and agree to help each other improve your finances.
Should we sign a prenup? Most people don’t need a prenup unless one of you has a disproportionate amount of assets or liabilities relative to the other — or there are complications like one of you owning a business or having an inheritance.
The Big Meeting: it is the meeting when you and your partner are transparent about all your finances. Both of you should prepare:
A list of your accounts and their balance.
A list of debts and their interest rates.
Monthly income and expenses.
Money people owe you.
Your short and long-term financial goals.
Ask questions.
Are we saving for our wedding?
What lifestyles do you expect?
Do you need to support your parents?
Look at your monthly expenses and ask: what could I be doing better?
What is your philosophy on money?
How did your parents behave with money?
How will we divide expenses?
Are we saving for kids?
Cars
Calculate the total cost of ownership (including maintenance, insurance, etc.).
Buy a car that will last you at least 10 years.
Study the resale value.
Don’t stretch your budget.
House
Do a spreadsheet and analyze everything about the deal: competition, closing fees, insurance, maintenance, taxes, renovations, etc.
Buying a home might not be an excellent investment when you factor in costs like maintenance and property taxes — which renters don’t pay for, but homeowners do.
Begin with a starter house, which are houses that require you to make trade-offs but allow you to get started.
Buy only if you are planning to live there for ten years.
Usually, renting makes sense when you add all the random fees to own a home.
This book details a comprehensive step-by-step guide to improving your personal finances. Read it to move further along the path of Financial Independence.
Be aware of your numbers.
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Henry: Hi, Devon! Welcome to the podcast. How are you?
Devon: I’m great. Thank you for having me on.
Henry: Thank you. This podcast explores the intersection between personal growth, urbanism, technology, and real estate development. I have a giant Venn diagram with your interests. Could you talk about your history, past, and interests?
Devon: Sure. I’m a little bit all over the map, but some threads tie it all together.
I studied computer science in college, and at the same time, I was the editor in chief of the Stanford Review, an economics-focused paper on campus. And then, after that, I became a software engineer. And after that, I became very involved in housing policy in San Francisco.
San Francisco doesn’t build enough housing, and I tried to fix that. I’ve also done some work in some crypto companies. And my most recent job was as a product manager at GitHub, where I built financial systems for open source developers to make money. I recently quit my job at GitHub, and I’ve been exploring the space of charter cities and startup cities.
And so I’m excited about Porta Norte. There’s a lot of potential in Latin America for charter cities. The thread that runs through all the things that I’ve worked on in my career is considerable interest in social organization and innovating on social organization. Many institutions have gotten us far, but we don’t have any reason to believe the institutions we have are the best form they could be.
People talk a lot about conventional technology, electrical engineering, software, airplanes, and medicine. All those things are crucial. Still, social technology is just as important as all other technologies but very understudied. I’ve been exploring that space and thinking about what I want to do next concerning that.
Henry: So the common thread is the designer’s dilemma. When you are a designer, you’re looking to improve everything. Therefore you see problems in everything. Then you get a little bit irritated when things are not right. Unfortunately, some designs of our cities are cringeworthy, and it’s impossible not to pay attention to them.
Many people in the startup community are focused on software engineering and are also interested in urbanism. That’s quite a recent insight for me. You recently tweeted that the urge to do your own home versus programming your language came from the same place.
The urges to build a house from scratch and to design a programming language come from the same place
The Venn diagram of interests is intertwined. What patterns have you seen?
Devon: Yeah, I think you’re spot on. Many people in the software, Silicon Valley, San Francisco, the tech world, and beyond are interested in urbanism because it mirrors many of the types of problems that we run into in our workday today.
So imagine that you work at Twitter or Facebook or any of these social networks. How I like to think of it is you’re building a city that doesn’t have buildings, but a website is like a building. A website has a lot of similarities to architecture. This may sound like a strange concept when you think about it because it’s not three-dimensional. You can’t walk in it, but your avatar can be in it. There is a sense of space and how people relate.
Fundamentally, what these platforms are doing, just like any architect would do, is to design how people interact with each other. But they’re more like cities than buildings because cities are all about the sort of organic interactions that people have.
The mayor of New York City doesn’t know everything that’s happening in New York, just like how Mark Zuckerberg doesn’t know everything that’s happening on Facebook. And, they can’t even imagine what all the things are happening both for good and bad.
Cities are just a rich source of metaphors for the kinds of work that many tech companies are doing. I could go into many other similarities, but I think that’s the major hook that pulls people in.
Henry: These similarities go back a long time. I remember a lecture from Christopher Alexander, the author of a very famous book in architecture and design called A Pattern Language. He is an emeritus professor at Berkeley. He gave a lecture about patterns in architecture in a room full of computer scientists, and he didn’t understand why.
His book became famous in the computer science community because the structure of patterns that he laid out is the same structure or type of thinking for design in computer science. He uncovered this correlation in design patterns between designers of the physical and the digital world.
That book is fantastic, and I recommend it to everybody. It is excellent if you want to build your own home. One of the core concepts is that you don’t need architects; you can design everything yourself.
In the past, people and cities didn’t rely on architects. They did it on their own. If you go to historical towns, they are the ones who have charming streets where everything is romantic, walkable, and everything works in harmony. Everybody built their own home, and it was a community thing. It was built in an open-sourced way.
Devon: So there’s another connection between programmers and architecture that I never really explained before. The types of people who go into software are often pretty impatient people, myself included, who want to build things fast. They don’t want to ask for permission. And software, in a lot of cases, is excellent for that because you can pull up your text editor and start writing code that runs today. You don’t need to have a piece of land to do it or anything like that. You just need to have your laptop.
Many software engineers have fantasies of building things in the physical world but feel it’s more challenging because you deal with atoms instead of bits. You’re fundamentally dealing with real costs and with neighbors who may or may not like what you’re doing. You’re dealing with things that break. Then you have to fix it as opposed to just rerunning the code.
I’ll speak for myself, but this extends to many other programmers. It’s this feeling that we want to build things in the real world, but we don’t have the patience for it.
What you think is very unfortunate because the most important things that can happen in the real world, like your life, are more based on the real world than the connections that happened to you made, which are very important. But software can only go so far in improving your quality of life.
Henry: That will to change things fast permeates the physical world, but it takes much longer. Rearranging atoms is much more complicated than rearranging bits. There are so many people from software engineering who want to do urban experiments.
I’ve talked to many who have wanted to do towns or build a community with their friends. And it is challenging. There are so many experiments digitally, but very few physical experiments get executed in the real world.
I want to do a slight shift.
You wrote a blog post called: What are startup cities for? I found it because Balaji re-tweeted your post. I read your blog post, and Porta Norte fell into one of the categories you defined in your post.
I wanted to connect with you, so I sent you the link to a blog post I wrote on Startup Cities, and then you said you had already read my blog post. Then we started talking about our interest in urbanism and startups, et cetera. But mainly startup cities.
A few weeks later, I sent you a link about other people who had done a compendium of all the startup cities worldwide, and they used your categories. Your categories permeated the internet.
I wanted to go into the framework and categories you listed in your blog post: economic opportunity, competitive governance, lifestyle, community, and technological experimentation. Can you go into detail on each, please?
Devon: Sure. I should have a disclaimer that these are simplifications of motivations. Indeed, other things are probably not covered here. And a lot of detail that it’s not perfect, but they’re like rough groupings of the types of motivations I’ve seen for startup city founders.
The first of the five is economic opportunity, and it’s really about unleashing economic development, reducing poverty, and reducing unemployment.
People here in the U.S. don’t appreciate how screwed up certain primary institutions are in most of the world. And that’s not to say that U.S. institutions are perfect or great either, but we solve specific problems that other places haven’t entirely solved.
So, for example, China in the 1970s was super communist, and they didn’t have any private property whatsoever. You couldn’t leave your job if you wanted to, because you were assigned your job and you’d do it for your whole life.
Many things like that resulted in massive misallocation of capital and labor in the market and land. In the 1980s, China created a special economic zone in Shenzen where they changed a lot of those things, they’re still technically communists, but they made it so that people could lease land for 99 years, which is similar to ownership.
Henry: Also in England, I think.
Devon: Yeah. Several places have done that as well. But, I’m not sure about England. I think Singapore has a similar system. They’re all slightly different, though. China did all these things to bring more market competitive pressures to their economy.
GDP in Shenzhen multiplied like ten times within just a few years. It was swift. There are other places in the world. China is doing a lot better because it adopted many of the same reforms that Shenzhen experimented with in the 1980s.
There are a lot of other countries in the world that have different but backward policies that hold back economic development. They might have people who are incredibly talented and energetic. However, they have labor laws where you can’t fire ineffective employees at all.
So that’s a long way of describing it, but that’s what the economic opportunity perspective is for startup cities. This is also very well aligned with business models because if you create a lot of economic development and increase people’s productivity in your city, there are probably hundreds, thousands, internet ways to capture some of that value back to yourself. And if you own the land where this is happening, you can benefit a lot. So that’s the economic opportunity reason.
Henry: Yes.
Devon: Yes. The second one. These are not in any particular order, by the way. The second one is around competitive governance.
Someone I’m very close to is currently going through their green card process to get permanent residency in the United States. And this process is a complete mess. He had to send this medical paperwork to show that he didn’t have certain diseases.
The first time he sent it in, they got back to him and said, oh, sorry, you filled out the form in blue pen and not a black pen, so you have to send it again. So he did. They got back to him again and said, you sent it in on A4 paper instead of a letter-sized paper, so you have to send it in again. And there’s this back and forth until finally a few days ago they were like, okay, you’ve got the paperwork done correctly. Thank you.
This process is backward. It is a complete waste of time and money. He had to resend these letters many times at a very high cost cause he had to send them in on high-speed shipping. So it was like $50 per letter that he had to send. He had to take time out of his workday to go to the post office and mail it by hand.
By contrast, Dubai, Singapore, and Estonia have a ton of their government services online. You just submit a form in 10 seconds, and you are done. And that’s that. These government agencies are held accountable for the quality of their services.
I mean by competitive governance that there are some governments in the world, very few sadly, but hopefully, a growing number treats governance as a product. They say, how do we make governance as good as possible for our citizens? So we’re not wasting their time and making them spend useless money. We’re not putting them in situations where they live in jeopardy just because they filled out some paper wrong.
Unfortunately, most countries, states, and cities don’t act that way. Instead, they are comfortable knowing that they have a captive audience.
I’m talking about this guy. He’s not going to just leave the United States just because of this one paperwork, but they know that they have a captive audience. And so they don’t have to have good services, just like any monopoly.
One thing that’s exciting to me about startup cities is that once more and more come online, there will be more competitive pressure, and people will leave if they don’t feel like their government is serving them. So that’s number two.
Number three is lifestyle.
Lifestyle sounds like a superficial thing. And maybe in some cases it is, but in other cases, it’s purely about safety.
Some places in Latin America are unsafe to live in, although many different places in the world either, but I’m most familiar with Latin America. If you live in Sao Paulo or Buenos Aires, your kid might get mugged, your house might get broken into, people might carjack you, you might get kidnapped, and stuff like that. Therefore, startup cities have an opportunity to offer safer places.
This is not going to be true in every single place in the world? Luckily not every country is dangerous like Brazil. But in the places where that is the case, startup cities will provide essential options for people to live a life where they’re not worried their children will get kidnapped.
Lifestyle can also include other things that are not as serious as physical safety. It might be that you want to live on a Caribbean island. Maybe that’s important for you and your lifestyle because you’re into scuba diving or something like that. I think that scuba diving communities might pop up, and there might be a startup city that serves them. That’s a random one. I don’t know if that’s a good business idea, but that’s one version.
Henry: New ski towns might also be startup communities.
Devon: I have not looked into the numbers, but I would bet that Aspen in Colorado and many other ski towns have seen a lot more people move there during COVID because now more people can work remotely. Startup cities enable people to live where they can do their hobbies, think it’s beautiful, and have a beautiful house. Yeah, ski towns.
Henry: And to serve them all year round, now they’re adapting the mountains for mountain bikes when they have no snow. With this, they can have an active community all year long. That’s an instance of them improving their product.
Devon: I did not know of that. But that makes a lot of sense, and it’s probably almost as fun as skiing. Probably even more fun for some people.
So the fourth category that I have is the idea of community, where like-minded people can live together.
This has already existed in some shapes and forms, but it usually exists as vacation towns. So one place that I’m familiar with is a town called Chautauqua in upstate New York. They have this nine-week program each summer. So like June through August, where they offer sermons, lectures, ballets, theater, all sorts of things like that. It is primarily geared towards retired people. They invite their children and grandchildren to stay with them.
My grandma goes to this place every summer and hangs out with her friends interested in the same opera. They have a beautiful town where she knows she will be friends with everyone there when she walks outside. She could become friends with almost everyone there because they have similar interests.
Chautauqua has always been a summer place. It’s more of a vacation spot where you take a few weeks off of the year, and you go, but again, now with more remote work, I think there’s more space for this to become more of a year-round sort of thing.
I don’t know if Chautauqua will specifically evolve to become that, but I think a Chautauqua-like place could exist for different types of people who have other interests. People who share values want to live together instead of where they may not share values with their neighbors.
And then the fifth is around technological and social experimentation.
Right now, roughly all of the land on earth is claimed by a nation-state. There are a few exceptions. All the land that you would want is already claimed. And those nation-states tend to have laws in place about what you can and cannot do.
The menu of laws, legal systems, and social structures that exist out there is only a tiny subset of what’s possible. It’s a shame that we don’t have a frontier anymore because we can’t go out and experiment with social structures in the way we used to be able to. You used to be able to go further out.
Henry: Mars is the next frontier, right?
Devon: I think that’s literally far away, but maybe we’ll get there. Hopefully. I would love for us to open a new frontier. Cause frontiers both challenge the older places to reconsider whether what they’re doing is good or not. And they also just create space for «weirdos» to try stuff out.
And so the kinds of things that I would love to see experimentation for are things like life extension or medical tourism. If you are, towards the end of your life, and you want to try a drug that might save your life, you should be able to try it. But like in most countries in the world, you can’t do that.
Instead of trying to reform those countries, we should be able to build an alternative in the frontier. Competition might make those countries reform themselves.
You want to experiment with new technologies like flying cars or space travel. I see creating a new frontier as a valuable social addition because it’ll give us space to experiment and figure out what we’re missing in our existing communities.
Those are the five. Repeating the categories quickly, they were economic opportunity, competitive governance, lifestyle, community, and technological experimentation.
Again, there’s probably some missing. So if anyone thinks of something that doesn’t fit into those categories, I’d be super interested to hear it.
Henry: Let’s talk a bit more about examples of each of these.
So, economic opportunity. Free trade zones have a connotation of import and export, but special economic zones have a better tax structure or immigration laws that make people establish there and facilitate commercial activity.
One of the best examples of this category is Singapore. But what do you expect to see here? Is there something else rather than special economic zones and free trade zones? What do you wish to see in the future? What are the best examples today?
Devon: You’ve touched on how free trade zones and special economic zones usually have import and export connotations. I think that’s right.
I would love to see people experiment in Porta Norte around a free trade zone for knowledge workers. I don’t think that’s been tried before. The closest thing I am aware of is the Dubai International Financial Center (DIFC). But they’re narrowly focused on finance, fintech, and oil for the middle east.
Henry: Can you explain a little bit more
Devon: Dubai is a fascinating city. It’s part of the United Arab Emirates. It is one of the 7 Emirates, which is like a federal system. Each of the 7 Emiratis has a king or a Monarch.
In the 1970s, Dubai had only a few 10,000 people there or something like that. And at the time, the king decided that they would invest in import-export infrastructure, simplify the laws, lower taxes, and stuff like that. Now for anyone who knows about Dubai, it’s not that small anymore. It’s millions of people. It has some of the most modern towers in the world.
There are also many very valid critiques of Dubai that I won’t get into, but they exist. And I agree with some of them. But you can’t get around the fact that it’s awe-inspiring that they took it from this little fishing village to a global trade center.
And then in the two-thousands, around 2004, they decided they wanted to attract more financial businesses like banks because they felt that would help the region, especially Africa, access capital. But then they realized that their legal system didn’t work very well with the English common law system, which is how most finance is done around the world.
And so they decided to create this special zone inside of Dubai called the Dubai International Financial Center, governed by a common-law framework distinct from the Emirates legal system, with laws and regulations issued in English.
Henry: They can even have foreigners on their board of directors.
Devon: Exactly. Usually, the Emirates has restrictions for foreign-owned businesses. However, companies in DIFC can be 100% foreign-owned —which is excellent. This policy alone generates hundreds of millions of dollars of GDP annually that didn’t exist before.
Anyway, this is the most similar thing to a free trade zone for knowledge workers that I know of, but it’s still pretty constrained to finance.
It’d be exciting to envision a zone focused on people who build internet businesses or something like that. What would that look like?
Henry: What would that look like for you?
Devon: That’s a good question. I should think about that.
Fast internet is, of course, the number one most important thing. What I touched on earlier around the government having simpler processes would be very important.
I spend more time than I would like dealing with various government interfaces. I had to get my driver’s license renewed recently and wait in line. No one should have to go through that because it’s just, I know it sounds so petty and so small.
If you think about how many people in the world have spent hours waiting in line for a driver’s license, that’s a lot of wasted time. Those humans could be doing anything else with their life and creating value by being with their family, exercising, sleeping, etc.
That’s for driver’s licenses, but that’s not even that important, let alone, I don’t know, Medicare or something life-threatening. Digitize government services and have maybe a concierge service where, if you have questions, you can call a support person, and they’ll help you navigate the bureaucracy.
Those are the first ones off the top of my head. I could probably give you better answers if I thought about it more.
Henry: If you do something for knowledge workers, you need to push the envelope in all the five categories you just mentioned. I’m trying to improve them all.
If you are a technological worker, you want economic opportunity, sound fiscal and labor laws, and an ecosystem of good businesses that generate know-how.
You also want competitive governance. You want the place to work like just to work, that’s it. That they try to attract you and give a smooth onboarding.
You want a good lifestyle for exploring your interests like skiing, mountain biking, nature immersion, etc.
You want a community with like-minded people where you can have deep conversations over coffee in public spaces.
You want technological experimentation where the government doesn’t meddle in your things or inhibit your company’s growth.
Devon: Yeah. And related to that, also just a feeling that the government is responsive to you.
If there’s something deeply wrong in the place where I live, I want to feel confident that things can change. The cities I’ve lived in don’t feel flexible and bendable.
And some of that is good because people shouldn’t be able to just change anything all the time for everyone else and hurt them or whatever. But certain things are just like really terrible inefficiencies that you can see walking around.
If you see a problem on a startup’s website, you can often email the CEO, and if they agree with you, they will send their best team to solve that problem fast. But this is not a guaranteed thing. I’m not saying that always works either. There’s a feeling of responsiveness that you just don’t usually get in an urban landscape.
Henry: Yeah. I wish urbanism were as responsive as Singapore bent to Lee Kuan Yew’s will. He had a vision and built it fast. Of course, it was an authoritarian regime. Paris was also responsive and built the Boulevards designed by Haussmann.
Few people will get trampled upon if we want to get big things done. To make an omelet, you need to break some eggs.
Devon: To clarify my position, I do not favor totalitarian governments or monarchies. But at the same time, democracy, especially consensus-driven democracy, where many people have to agree, now you have to stop the whole thing if anyone gets in your way. That also doesn’t work very well.
So what I think is an exciting alternative is startup cities. You can have tiny baby kingdoms where people can leave if they don’t like what you’re doing. What this means is no one gets trampled because they can exit. If Haussman comes and tries to take away your property, just say no, leave and sell your land.
You can refuse to live in a community like this. But you also get the benefits of some of the top-down coordination that can happen.
It is important to live in a world with many smaller cities and open borders. We don’t have that today.
My ideal world would have lots of little tiny kingdoms run by businesses. Most likely where the CEO gets to decide what happens, but you can choose any of those cities you want to go to. And you go to the one where you agree with how they approach things.
Thus resulting in the best of both worlds, where people choose and are not coerced into anything. All the choices they make or what they think matter. But at the same time, you have someone who can see the bigger picture and have a bigger design.
This could be someone who does things that I disagree with. That’s fine. Cause I can just leave. I don’t have to live there. Now I think the question is how do we get to that future? I don’t know how to do that because I believe we are very far from having anything that resembles open borders.
And culturally, we’re very far from that. So I don’t know how helpful is this image is that I’m painting, but it is the image that I would love to see.
Henry: I would say there are baby steps going that way. Current examples would be Selina. It’s a hybrid between a hotel and a hostel. It’s targeted at millennials, and you can do a lot of yoga, arts, meditation.
They started in Panama, in Casco Viejo, about seven years ago. Now they have over 60 destinations. Their business model includes helping the community and making it part of the development.
Some people go to Costa Rica, then to Panama and Colombia, while staying in Selina. If Selena had more billions of dollars, they could do not only buildings but a series of neighborhoods with public spaces. These might be the initial steps towards that future.
Devon: This looks cool. I’m poking around their website, and I have to check this out more. Yeah, I think we’re going to see more of those. The issue is that the Westphalian nation-state system doesn’t allow for this very quickly.
It’s tough for many people to get visas in different countries and that sort of thing. Luckily the U.S. is a huge country. And so, I was able to recently move from San Francisco to Miami because I disagree with San Francisco’s governance.
So I voted with my feet, but many people don’t live in big countries with diverse cities. For example, my boyfriend is from Argentina, Buenos Aires is the main city. They have other cities, but they’re not that different.
Compare it to Los Angeles, where you can go to LA if you’re a musician. If you’re a software engineer, you can go to San Francisco. You have specialization of cities.
In the next 10 to 20 years, it’ll be interesting to see if the system bends or breaks. More and more people will want to live that way, where they can choose the city they live in based on their profession, values, or whatever they care about with where they live. But right now, it’s not working very well.
Henry: It is not. But the pandemic has opened up a lot of places. Many countries, including Panama, have made new laws for digital nomads. It has happened in Malaga, in the U.S., and some places even pay you to reside there.
The talent competition is rising. That competition will pressure governments to, hopefully, develop more competitive governance. This is much more important now because people have a greater ability to move.
The countries that take advantage of this trend will rise in value. In places like El Salvador, making Bitcoin a legal tender, opening up for digital nomads and technological people will result in major benefits. There are many people who want to do arbitrage where they reside in Latin America while working for a U.S.-based company, earning much higher salaries and spending it where their money is worth more.
These types of experiments will happen more. Panama has an experiment for knowledge workers called Ciudad del Saber or City of Knowledge. It was previously a military base for the U.S. in the Panama Canal Zone. Now it is converted to a Special Economic Zone of 120 hectares that have attracted the United Nations, universities, schools, businesses, and multinational companies. It has been highly successful. It’s all services companies and none of the import/export.
I use it as a model to explain what we want to do in Porta Norte. We will brand it or market it as a Special Economic Zone for services because we’re not going to be in the import/export business. We want people to start companies, have better labor laws, tax structures and bypass some of the red tapes that happen when people want to come to Panama.
Devon: What things did the Ciudad del Saber do to attract people? Why are people, companies, and universities moving there?
Henry: Because they have tax and immigration benefits, great telecommunications infrastructure, great infrastructure overall with redundant power supply, a high-tech ecosystem, amenities like sport and recreation facilities, and other benefits.
Devon: Are these universities coming from abroad, or are they Panamanian?
Henry: Both. Some examples are Louisville, Florida State University, and La Universidad Francisco Marroquín. In total, they have 34 academic programs.
The Government of Panama is betting on indirect benefits of having more educated people over here, more universities, and not from a direct tax they charge Ciudad del Saber. In Porta Norte, we are inspired by the City of Knowledge and try to incorporate some of the lessons learned.
The challenge at the beginning of new projects, if it’s not a company town, is that it usually becomes a place with no life in the days because everybody leaves in a car to go somewhere else to work and come back only to sleep –becoming a dormitory city. Residents almost always arrive before workers, and companies get interested in moving there when there are a lot of residents. So it’s a chicken and egg problem that we are struggling with, and we have many strategies to fight that, but it’s something that you have to fight.
Devon: Right. Yeah. That’s very exciting. I’ve been meaning to check it out. I should go to the City of Knowledge. Can I just drive or walk in?
Henry: Yes.
By the way, I used to work there at a Venture Capital firm in Ciudad del Saber, so it’s all connected. The DNA of Ciudad del Saber has permeated Porta Norte. CDS inspired me to invest in things I enjoyed like public spaces, culture, education, and sustainability. It made me ponder how to create the virtuous cycle I experienced working there.
Ciudad del Saber has been highly successful. The thing is that they cannot build more, it’s full. The strategy we are debating in-house is how to position ourselves to attract the clients that want to go there but can’t. When people grow too big, or «graduate,» from the City of Knowledge, we can attract them to Porta Norte. We have been talking to some business owners established there.
There’s also another chicken and egg problem. Usually, when these companies come from abroad, they want the structure, and they don’t want to invest in capital expenditures for their buildings. They just want to rent.
Ciudad del Saber inherited many buildings from the U.S., thus having that problem solved from the start. We had no inheritance. This is something we have to solve. Rearranging atoms has a lot of complications, and a lot of things have to be aligned, but we’re working on it.
Devon: It’s fantastic to hear that you already have some idea of what the market could be. It’s the people who want to be in Ciudad del Saber but can’t.
Henry: Or that they have grown too big for them. Or businesses that want to buy land. We sell land, but Ciudad del Saber doesn’t.
I talked with Jeff Speck a lot to structure Porta Norte.
Devon: Oh, cool! No, I didn’t know that. How did you meet him?
Henry: When I was starting Porta Norte, I loved watching Ted talks, and I liked his TED talk called The Walkable City. So I contacted him, and we had a chat. It was before the book. He gave me the roadmap of who to hire.
He introduced me to three architecture firms, which I later interviewed when I attended the Congress for the New Urbanism (CNU). He recommended I talk to Andrés Duany, who became the master planner of Porta Norte. Jeff was a significant influence in Porta Norte.
Devon: Exactly. Yeah. I don’t know. I’ve been interested in cities for quite a while. I don’t know if there was one moment when I was immediately interested in it.
How could you not be interested? It’s just so interesting. I don’t have an exciting answer there. It’s just that cities are such an interesting intersection of economics, architecture, engineering, and politics, which are all of these different types of things that I also find fascinating. And you need to understand all of them to build cities.
It’s just an exciting challenge, and it matters. People tend to underestimate the importance of infrastructure in their life vastly. And when I say infrastructure, I am not just talking about highways, sewage, water pipes, and stuff like that. I’m talking about the platform that they’re living their life on.
What does the environment around them make it easy or hard to do? They at least shape the outcomes of people’s lives a lot more than they realize.
This comes even down to tiny details. Like having chocolate in your house makes it a lot more likely that you’re going to eat chocolate. If you have a goal of eating less, just don’t put it in your house. So when you go to the grocery store, don’t buy chocolate. Maybe you can buy it when you’re out at a restaurant or something, but don’t bring it into your house.
That’s like a micro example, but there are also examples like does your street have a lot of trees and nice sidewalks that you can walk on? or does it have huge roads with cars going fast? Are there trees to protect you from the sun? If not, it will not be comfortable, and you’re going to walk less. And it might not even be an active choice, but you’re just going to do it because the environment is pushing you away from walking.
These things are fundamental and underlooked, and we need to design spaces that match how we want to live our lives. And I don’t think that we’re doing that right now.
Henry: We are not doing that right now. And why is that? Why have the incentives changed, and how can we align incentives better to improve designs?
Cities from before had public spaces, and cities nowadays have very few parks and public spaces. I don’t know if that is also what you have seen. I wonder why has that happened? Is it because all real estate development is delegated to the real estate developers? Are municipalities not doing what they have done historically? What is happening?
Almost no new places in Panama have public spaces. In Porta Norte, we’re taking the municipality’s role and building them. But I wonder what has happened? What incentives have changed? Maybe the answer is just cars, and that people don’t use public spaces anymore, but I don’t think that’s true.
Devon: I think there’s a mixture of things. The top one that comes to mind is that we have released a lot of the constraints on ourselves around where we need to live in the last hundred years. It used to be that you had to live within walking distance to your job at a factory or your fields because there was roughly no other way to get around.
And you had to live in certain places because it was safer to protect against bandits. So you had to live in tighter-knit communities with walls that create interesting constraints that create beautiful towns.
Now you can have air conditioning. So you can live in hot places, which have a lot of open lands, like Florida, where I live or Texas or wherever.
And a lot of those things are great. Cause in many ways, life has gotten a lot better, but the lack of constraints had caused us to run into a lot more coordination problems. In the past, the constraints forced us to coordinate because we all had to be in the same place simultaneously. So we had to solve these problems, and we were closer together.
Now people like to create their little castle on their property, and they optimize for building the nicest house with the nicest yard for themselves and their families. Nowadays, they don’t think externally so much.
And it’s because they can just get in their car, drive to the edge of the city and buy a piece of land that they can afford and build there. It’s also because it’s more within your control to create a beautiful yard for you and your family.
It’s a lot harder to get your community of thousands or millions of people to coordinate and create a park and agree upon what should be at the park. So long story short, the reduction in constraints has made it so that coordination is more necessary for us to do things together. So people do the easier thing. But people would still value having these public spaces and having a tighter-knit community.
The numbers that you see on Zillow, the real estate buying website in the U.S., show the square footage of the house. But you don’t have an easy way to measure how close you are to friends and how likely you’re going to run into somebody at a coffee shop. Those are much harder to measure, so they don’t end up on the Zillow page.
And as a result, people make decisions based on the square footage of their house and how big their yard is, and they underwrite other things that make life pleasant, essential, and valuable with your friends and community. It’s also a measurement issue.
Henry: What company is starting to incorporate the walk score? Are you familiar with it?
Devon: Yeah, I am familiar. The walk score is a good step forward. However, I don’t think it fully captures everything we want, but I’m happy to see that development.
I think that’s a typical metric now on Zillow, but I am not sure. I think people are just still way more likely to maximize the number of rooms in their house than they are to optimize their walk score.
Which, you could say, is the revealed preference and what they care about. I’m inclined to think it’s a little bit of a short-termist. You’d love to think about what you’re going to do with that new room, but didn’t realize that having one less room in your house is fine so that you can be closer to the people you love.
That’s my bias and the way I make decisions, and I’m probably putting them on other people. And I don’t know if everybody else has the same values.
Henry: That makes sense. I think the walk score is a proxy for having spontaneous encounters while walking in public spaces. Therefore, having more frequent connections with your community.
Something detrimental to walkability is how buildings interact with the sidewalk in new developments. They usually put the house in the middle of the lot, and you have a huge yard encircling your home. Sometimes they even put a massive wall between the home and the sidewalk or even parking.
In traditional urbanism, you always put the house immediately next to the sidewalk. This creates an interesting and secure place to walk next to. That’s how it’s in Porta Norte. It’s imperative to put all of the structures next to the sidewalk.
You might lose a little bit of privacy, but what it does to the public spaces is it creates a lively neighborhood where people can walk, feel safe, and create eyes on the street. It facilitates an active lifestyle.
Devon: I’m personally more laissez-faire. The battle I’m fighting is that most cities require the opposite; they require setbacks. In the U.S., most cities require your building far away from the street. They say you cannot have your house close to the next house. I want is to lift those restrictions, just let people build what they want to build.
Regarding Porta Norte, it’s great that you’re trying out a different set of constraints, but for me, I’m just like, let’s just let people build. If people don’t want to build parking in their house because they plan to bike everywhere, just let them do that.
Most cities now have parking minimums, which I think is a discussion that is very unintuitive for most people. Some people don’t have a car, and requiring them to build a parking space is subsidizing it.
Many times San Francisco developers want to build next to transit in a part of the city where you don’t need a car. Still, they are required to have two parking spaces per unit, subsidizing space for cars.
When we have a housing crisis, and people can’t afford to live, we shouldn’t subsidize cars; we should be making it cheaper to build stuff. So that’s what I’m fighting against. We need to shift towards more laissez-faire.
But I’m also excited to see, as I was saying earlier, little Kings or CEOs running projects. They should be more restrictive in those cases, like what you’re talking about with Porta Norte. So like an experiment. And if it works great, people will want to live there. And if it doesn’t work, people won’t live there, and the market will punish you for it.
And that’s good. That is how it should be. The issue is when it’s upheld at the government level, and it becomes illegal to build what you’re building or build something else. That’s where it becomes a problem for me.
Henry: What I love the most in experiments, which is very uncommon in real estate, is building places with concepts and meaning. Leaders should have a vision and execute. They should try to create a compelling vision to attract residents.
They should develop real concepts like developing a mountain bike town, a university town, or a place for technological progressives. Build places that focus on incorporating nature. Or do Solarpunk visions. I just want more visions and experiments to materialize.
Sometimes I get frustrated that there are so few experiments in real estate development and that usually, the people involved are old and conservative. And I understand the reason why. There is so much money behind infrastructure that you risk a lot if you build something radically different, and you risk absorption. The capital expenditures for making these types of projects are enormous. Failure is a huge deal because you are working with vast quantities of money.
So it’s hard to push the envelope. I wonder how to enable more experiments and how the future will change to enable more startup cities.
So can you tell me a bit about Pronomos? What they’re looking for, and what do they wish to invest in? What is the future of venture capital and startup cities? How would you project the future?
Devon: So I work at a venture capital fund called Pronomos Capital. I am an entrepreneur in residence there, which means I help with investments. And I’m looking at projects that I might be able to start or join. Pronomos is focused on charter cities, startup cities, and companies that exist to serve those types of new projects.
It could also be software-as-a-service for a city potentially. Right now, the biggest bottleneck for Pronomos is the number of founders. Just like what you’re talking about, there’s just a tiny pipeline of people working on this. It’s not zero –that’s a misconception. A lot of people think that it’s zero.
Many great people are working on it, but we need more. This is one of the reasons I was so excited to meet you, Henry, because you are quite far along with one of these projects. The number one thing that the space needs is a success story.
A big challenge is that these projects take a long time. It takes a while before we see real success. Success would be several thousand people living in a town that they are happy to be there and plan to be there long-term. That’s what I would count as an initial success.
I would hope that it would grow even more beyond that, but that would be the first point people would start to look at it and be like, oh, this is legit, this is a thing that can work, that there is traction.
Prospera is a charter city in Honduras, with only about 30 people living there. So it’s still quite small. But Porta Norte, there is no one living there right now. You guys are still doing the infrastructure build-out.
In the next few years, we’re going to start to see a few of these examples pop up. And once we have one sort of poster child success, I think that a lot more people will see that this is possible.
Going back to what we were talking about before with technology people. I think software people, myself included, are a little intimidated by the idea of doing something in the real world like we’ve done everything with bits for our whole career. And so it almost sounds impossible to build a building, which I don’t believe, but there’s some intuition that it just seems complicated. I think it is possible. There’s no reason that you can’t pencil out.
Software-type people just aren’t used to working on that type of problem. So I think that once you start to see a few success stories and people will see that there’s a path there, they will come with their machete and begin to hack away in the jungle and create even more of a track. And it’ll just become more and more trodden.
Henry: But what would seem like a success story, and where do you draw the line between being a real estate development, a master-planned community, a new city, and a startup city? What would be the business model? What would the founder do? Would it be local? Would it be a master-planned community? Would it be like a negotiation with a government doing a charter city? What would not count? Would that be a startup city if you do a new development with a university focused on computer science?
Devon: Pronomos is interested in being able to make your own laws to the extent to which you have increased autonomy compared to the country you’re operating out of.
A Free Trade Zone is one step in that direction. Prospera in Honduras was one of the earliest investments because Honduras has this unique system. You can create a Zone for Employment and Economic Development (ZEDE), which is about economic employment and development. It gives people who run these zones complete carte blanche, like a blank slate.
It allows you to create an entirely new legal structure. You don’t get to rewrite your own criminal laws; you still have to use Honduras criminal law. However, you can write all of the commercial laws, the labor laws, all of that sort of thing from scratch, which contrasts from a free trade zone or a free zone or whatever you want to call them. They have different names in different countries, which usually change one or two things. But are fairly similar to the surrounding countries.
So that’s what Pronomos is interested in. If I speak from my personal interest, I would be interested in seeing that, but I also don’t think it’s the only exciting kind of startup city out there.
If some of these ski communities we’re talking about really become like year-round communities. And I don’t know, maybe a bunch of hedge fund managers moves to Aspen. And now suddenly, there’s a hedge fund manager community and Aspen. That would be an interesting example for me.
I don’t know if I would say it’s like a charter city. Actually, I would not say it’s a charter city, but I might say it’s a startup city or something like that. So I don’t know. It’s a spectrum. I don’t think there’s one crisp definition.
Henry: It is a spectrum, and everybody has a different definition.
Is it on purpose, or is it not on purpose that Pronomos don’t have in their website where they have invested? Is it public? If I ask you, where have they invested? Are you able to say where or not?
Devon: I have always assumed it was public, but now that it’s not on the website, maybe I will hold off. I’ll ask them if I can share it. But it’s public that they’ve invested in Prospera.
Henry: You had the crypto project with a16z –Andreessen Horowitz. There’s this spirit between the people in software engineering and designers who have this native urge to improve the physical and digital world. I wonder if the new technologies arising right now, let’s say crypto or Decentralized Autonomous Organizations (DAO) can solve some problems.
Real estate developers usually don’t focus on public spaces. They want to extract every square meter they can. There are few institutions or structures focused on public goods. What would happen if you had Decentralized Autonomous Organizations where the community invests in a DAO focused on community benefits like maintaining public spaces clean, temples nearby, libraries, or laboratories.
This new way of making decisions with algorithms can improve the incentive structure to have more community-oriented elements.
Devon: An interesting contrast is land ownership, which serves as equity in a city. It’s not a perfect comparison, and there are some significant differences, but on a high level are similar.
I live in Miami beach. I don’t own my house, but let’s say I did. If Miami beach has a new library, now that improves the value of my home because people who love libraries now want to live here. Or if there are a lot of homeless people doing drugs in the park, the value of my house will drop.
So I think land ownership has historically served as equity, but it’s not perfect because people who rent don’t have equity, myself included, I don’t own here. And it also creates NIMBY issues where the land you own is not the same as your neighbor’s.
And if your neighbor starts to do construction to improve their house, they’re helping their equity, but they’re hurting your equity because now it’s like noisy. And so you want to stop them because you don’t want construction next to your house.
I would love to see people experiment with another proxy for equity instead of having land ownership as equity. What would it look like to have equity in the city overall?
So I don’t know what this looks like, but maybe it’s something like they own shares in the company that runs the community. And this gives you something like a right to live somewhere in the neighborhood. It would give you some voting powers or something. And then, because you own equity, it might incentivize you to push for things that might not be good for your short-term interests.
Maybe there will be some construction noise because people are building a library across the street from you, but now that you have equity, you won’t try to stop it. The reason is it is good for your equity in the long-term since the community is more beautiful and has a better education.
So I don’t know exactly how you would structure that. I’m not even totally convinced it would work. I would like to see experiments on alternative forms of equity.
Henry: Yeah. I’m sure it will work. Companies that reward equity tend to do better than the companies that don’t reward equity. It’s a perfect way to align interests. I’m going to ponder about how to make that work.
Devon: And you don’t need that much. However, your local interests would still dominate. I think that’s a pretty valid critique, but I also believe there is something fundamentally different about having a small amount of equity versus no equity at all. A little equity gets you to think about something a little differently. You start to think about it as an owner.
It might still be that you have other interests that dominate. But it gets thinking in an owner’s mindset. You don’t need a ton of equity to start with some of that mind shift. It might be even more effective if you have a lot of equity. But I think just having a small amount gets you thinking.
You can see this with crypto. In 2017, ICO’s were going crazy. People who bought tokens and ICO’s early would market that coin because they had equity. And some of them didn’t even have that much, but they would go out and shill the coin on Reddit and write blog posts about why this coin was going change the global financial system forever or whatever.
And again, maybe it’s not what you want because those people were pretty obnoxious. They made the crypto space look illegitimate, and it had a lot of problems, but you cannot deny that they had a lot of enthusiasm. That happened because they were owners of the network.
Could you take 10% of that enthusiasm and direct it more constructively? There’s a lot of pent-up energy there that could be used for good.
Henry: That’s a great way to think about it. Okay. I’ll think about it much more. I have been studying a lot about what you have done, and it’s impressive. I recommend everybody to read your blog. It’s amazing. You have excellent sources for cities, books, and reviews. Also, the YouTube videos I saw about you were highly eloquent, and your ability to write and communicate is off the charts.
So congratulations, you have unique skills and an exciting way of thinking. Thank you for sharing, and I hope we can do much more in the future. So do you have anything to add to the audience?
Devon: Yes. One thing I’m working on right now. I’m about to publish a long document about Prospera. The charter city I mentioned in Honduras is about 40 pages long and is structured as an FAQ. I had so many questions, and I thought other people would find it interesting, especially those building cities like yourself.
It’s not quite published yet, but you’ll find a link to that on my website, which is www.devonzuegel.com. That’ll be published hopefully this week; although I’ve been saying that for a while, it’s a monster document, but hopefully a useful resource to people.
Henry: Oh, that’s awesome. I didn’t know you were writing that. I’m very excited to read that. And also, they can find you on Twitter.
Devon: It’s just my name, @devonzuegel. And I tweet too much, so I’m sorry.
Henry: You have a great Twitter feed. Well, thank you, Devon. It is always a pleasure talking to you, and I’ll see you very soon. So thank you very much.
Devon: Yes. Sounds good. Looking forward to it. Bye Henry.
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