1%

Of the places I’ve been to, there’s one entire city that I think would singularly defy explanation to an ancient visitor.  It isn’t one based on manufacturing, like Shenzhen, or trade, like Dubai,  or a port, like Antwerp, or a capital seat of power, like Washington D.C.  It’s not even a city based on mirages, like Los Angeles, or tourism, like Orlando.  Because it wouldn’t be that hard to explain these places.

Buildings are a concentration of energy and resources, and a reflection of our values and culture.  An ancient Egyptian looking up at the skyline, would see the Pyramid of Khufu, the deity-king, and go about his business, knowing that in his world, the link between the afterlife and this life was sound.  An ancient European, looking at the nearest castle or church, would have similarly seen the relationship between herself, the powers that be, and the powers that govern the ever after.

Even in our modern world, you can pretty much look at any building and identify its reason for being.  Office towers – a clustering of service-industry companies.  Malls – our consumerist economy at work, and/or modern town centers.  Residential towers – lack of space in a city where people want to live.

But.  There’s an island in the middle of the South China Sea with some of the largest buildings in the world.  Likely, 99% of the population of the world will never go there, nor have a reason to.  And I’m not so sure an ancient visitor would have any idea what they were for, nor understand how they were built.  They aren’t residences, marketplaces, nor granaries, offices buildings, warehouses, or anything that could have existed a few hundred years ago.

Because these buildings?  They’re a type of factory built on a single mathematical probability, and that is the probability that over hundreds of thousands of games played, it will lead to a convergence towards a single number – 1%.  It is an island built on our modern world’s triumph of risk management.

I’m talking about Macau.

Now there are a lot of different directions we can go here, but I want to start with the sheer size of these buildings.

Ancient descriptions of splendor always interest me.  For example, Marco Polo, arriving at the court of Kublai Khan, marveled at the “greatest palace that ever was”, with gilded walls and a main hall so large that it could seat 6,000 dinner guests.  The Khan’s palace, like many other palaces, were built to awe, stupefy, and impress power upon their subjects and vassals.

Now of course, this kind of breathless praise is subjective, and dependent on the eye of the observer.  What if we applied this kind of writing to modern buildings?  How’s this one:

A massive pleasure ground filled with all sorts of marvels and luxuries, boasting 30 restaurants of cuisines from all around the world, accessible to guests by means of a gondola crossing a lake, nearly 6 football fields in size, activated with fountains that explode into the sky in a synchronized dance.  At the end of the voyage, guests are greeted by attendants who show them into a staggering hall accommodating nearly 10,000 pleasure-seekers at once.  Above them, more than 1,000 stately rooms await, bedecked in lavish gold leaf and precious metal furnishings.  Plush carpeting create a serene environment for these guests of honor, who arrive at their rooms passing carousels and ferris wheels arranged throughout the lobby, made entirely of floral arrangements.  Artwork carefully selected from around the world and across the span of history, with priceless Qing Dynasty treasures and more than $120 million worth of contemporary paintings alike, greet these visitors.  Costing a staggering sum of more than $4 billion dollars, constructed over a 2-year period with a city’s worth of laborers, this pleasure palace is…the Wynn Palace in Macau.

Located in Cotai, the Wynn Palace is one of twelve casino resorts built with a similar level of stupefying investment.  At 400,000 square meters (4.5 million square feet), its gross area is larger than most buildings in North America, including the Mall of America (the largest mall in America) and the One World Trade Center (the tallest building on the entire continent), and larger than Disneyland or Disney World Magic Kingdom, including parking lots.  It’s larger than airports.

To build the Palace, Wynn invested more money than went into the One World Trade Center, a building whose reason for being, in Manhattan, is more or less crystal clear.

The Wynn’s neighbor, the Venetian Macau, ranks among the top 5 largest buildings in the world.  At over 1,000,000 square meters (250 acres), the single casino resort is more or less the size of Hudson Yards’ East Yard (home of 4 skyscrapers each over 900 feet tall, a retail mall, hotel, 2 million square feet of residential properties).

And on the Cotai Strip alone, there are ten more like them!

Returning to our ancient visitor.  No doubt he would be astounded to step foot inside one of these palaces, although he would have no idea what people were doing inside of them.  He probably would have been even more astounded by the fact that unlike ancient tombs, palaces, temples, or castles, stepping inside one of these modern palaces is completely free of charge.

Now imagine you’re the ancient visitor, entering a casino in Macau.  The casino floor sprawls out for, literally, acres.  There are people with their eyes glazed over the slot machines, seemingly engaged in some sort of modern-day temple offering.  They insert tokens of monetary value into a metallic, neon offering jar.  Capriciously, it offers some back.  Other times it swallows the tokens, as if appeased.

If you walk a little further, out to the open expanse of the tables, then you might see something that you can relate to.  No machines here.  Just a simple exchange between two humans, and a crowd of people surrounding them.  The two humans seem engaged in some sort of rite.  One of them wildly gesticulating, engaged in all sorts of rituals of extreme concentration: blowing on some pieces of paper, mumbling what seem to be incantations, shouting words as they flip them over, peeking slyly under them, slamming the side of a hand down and pretending to ‘chop’ the paper in half.

This is baccarat in Macau.  

This is a game where the house edge is slight, and the actual decision-making made by players is almost nonexistent.  Add to that the influence of native Chinese superstitions, and you get a game where paradox of the illusion of control looms large.

In baccarat, or punto cano, one plays the game by betting on one of three outcomes: whether the “banker”, usually the dealer, or the “player”, usually another player, will  win.  Or that they will tie.  The two sides are dealt cards, and these two players then flip them, nothing else.  Then they are issued new cards according to strict rules.  Literally, after you bet on one of these three outcomes you have nothing else to decide.  

And for the player herself, she does nothing else but flip the cards or draw them according to preset rules.  There is literally nothing to stop casinos from replacing the “players” and dealers with robot arms.  But perhaps for this simple reason, an elaborate edifice of rationalizations in the form of rituals and superstitions, arises.

Gambling has a rich mythology. From the earliest days of human society, casting lots —often by drawing straws or tossing dice made from the knuckle bones of sheep—was a way to ask the gods for answers. The high priest who wanted influence soon learned to become a “sharper,” positioning the straws just right, shaving the dice, or even devising elaborate rules to ensure that more than random chance would determine the outcome. In many societies, it was a serious crime for anyone but the high priest to touch the instruments used to divine the will of the gods. This imbued the dice with a sacred quality. It also made sure no one could tell if they were loaded.

A screen by the table displays whether the banker or player has won previous rounds, in alternating colors.  What is this screen even for?  The result of a previous hand has literally nothing to do with the next round of play.  

But when a player gets hot, you see the player’s marker blazoned in blue or red, curling back down and around, like an improbable banner, a dragon’s tail.  You see players in states of concentration, chain-smoking, guzzling tea by the gallon, “cutting” their cards with a big fist, pounding it down on the table, then chopping it in half before taking the edge of the card, like it weighs a ton and he’s struggling against the weight of his fight against fate, peeling it back with the force of the spirits unleashed in his hands.  Then you see tables erupting in pandemonium as players go on streaks, crowds gathering around the table four deep, jostling for position to bet, often through reps located closer to the action, chips flying above and through the crowd and landing all over the table, and then ladies of the night creeping up and slipping their phone numbers to the big winners.

The energy is intense, and it makes you start believing it, this thing called luck.

And on second thought, maybe it’s not so far-fetched to believe that an ancient visitor would have related to what goes on there.

*******

Gambling is 90%+ of revenues in Macau.  In Las Vegas, that percentage is closer to 40%.  Baccarat alone accounts for 80% of revenues in Macanese casinos.  And of this 80% of revenues, most of it is from VIP gaming, where the minimum bet size is $5,000 US dollars.  

By some estimates, the actual count of these VIPs is in the thousands or tens of thousands, meaning that it is the population of a small town driving the revenues of a small country’s GDP.

The mechanics of the baccarat game are worth reiterating.  

When you play baccarat, unlike most casino games, where there is no strategy or decision making.  You do not decide to draw or stand, like blackjack.  You do not have dozens of options, like in roulette.  You do not look at the other players’ cards or try to read their faces.  You can try to card count, but the consensus among the best card counters alive, including Ed Thorpe, are that “despite the resemblances between baccarat and blackjack, the favorable situations detected by perfect card counting methods are not sufficient to make the game favorable.”  

A more appropriate analogy might be to think of it as a team-based version of casino war.  There is no winning strategy.  The odds are given.  The “banker” will win 45.9% of the time, and the “player” will have the upper hand 44.6% of the time.  And you can bet on either.  Less than 1% of the time, they will tie.

The net of these three outcomes results in a 1% advantage for the casino.  It’s the slimmest of odds, and it’s the statistical substrate on which nearly billions of dollars in buildings have been built.  

Take some time to think about whether you would build a business on a 1% margin.  Does that sound appealing?

You might be saying that if it’s a sure thing, then of course!  

But the problem is that probabilities are not sure things.  In fact, because the house edge is so slim, in short games, small volumes, and large hands, baccarat players can go on inexplicable streaks that wreck holes in casino vaults.

Bill Zender, former Nevada Gaming Control Agent, sums it up: “your risk is 100 times your average bet.  So if a guy is betting $10,000 a hand, he could conceivably win $1 million from you.  That’s within two standard deviations, so it can happen.”

And in a game where VIP regularly wager half a million dollars a hand, the casino can lose tens of millions of dollars in minutes.  If this sounds theoretical, let’s take a trip back to 1990.

This was the era of one of the greatest bubble eras in human history, with its epicenter in Japan.  Residential land in Tokyo was worth $6,000/sqm.  That’s more than $60,000 a square foot!!!  The Nikkei stock index had quadrupled in less than 10 years.  The appraised value of the Imperial Palace was reportedly higher than the land value in California.  Reeling from the heights of their stock market, Japanese banks, companies, and businessmen were on a shopping spree, snapping up properties in Manhattan and London and “priceless” artworks the world over.  It was, for many Japanese companies and businessmen, the height of their arrogance.   

It was in this milieu that two real estate tycoons met.  One was a shadowy Japanese businessman named Akio Kashiwagi.  Rumored to have ties to the yakuza, Kashiwagi was known among casino owners to be a whale, one who would wager hundreds of thousands of dollars a hand.  And for this reason, he was widely courted.

His game of choice was baccarat, and he was the type of player to play big hands and have the ability to walk away with profits.  Exactly the type of player that casinos both love and fear.  In effect, because of the even nature of the game, a casino owner inviting a whale to play is himself making a gamble – that the combination of circumstances, custom rules, and setting will induce the player to stay as long as possible to let the slim 1% odds play out.

The second tycoon?

None other than our current president, Donald Trump.

This was their second meeting.  In their first meeting, Kashiwagi walked away with $6 million of the Trump Plaza’s money.  Earlier in the year, he had blown a $20 million hole in the vaults of the Diamond Beach casino in Australia, almost bankrupting it.  In other words, he was a fearless and skilled(?) gambler.

Now in their second encounter, Kashiwagi wagered $18 million an hour, playing a hand every 50 seconds.  At one point he had looted Trump’s vaults of that amount, $18 million.  The RAND consultant/mathematician that Trump had hired, along with Trump himself, watched in confoundment and extreme anxiety as the pile of $5,000 chips overflowed off the felt onto the carpet.

It was more money than the entire rest of the casino had lost or even wagered that weekend, meaning that this single chain-smoking businessman was single-handedly wrecking the hotel’s profits for the year.

As the marathon gambling session went on, the grindstone of the ever-present 1% odds began to work in Trump’s favor.  Kashiwagi started giving back his winnings, millions at a time.  He was down $10 million with every intent to continue playing when Trump decided to call it quits, reportedly against the terms of the $12 million freeze-out agreement that had been negotiated.

The point is not what happened.

It’s that the house edge of 1% is not assured.  A casino’s very fortunes can swing on the volatility of one player.  It takes time for probabilities to play out.  The probabilities also play out over multiple players.  Getting as many people to play, and staying as long as possible, is the only way to ensure that the probabilities work out in the long run.

Returning to our ancient visitor again.  By this time, having explained the workings of the casinos to him or her, perhaps explaining the game as a battle of spirits or gods, what would the game look like?

Macau, as a machine that crunches half a trillion dollars in rolling chips, the clay tokens thrown or carefully slid across the felt tables by players, making countless glances into the edges of their cards.  Millions of cards folded beyond recognition, thrown across the table, billions of dollars exchanged into chips, and as the probabilities roll on across millions of plays spanning thousands of hours, a residue.  A layer at the top, the 1% that is the house take, resulting in the gross revenues that drive the entire place.  A place where the vagaries of superstition, fortune-telling meet the caprices of probabilities and fortune, and have largely been…controlled.  

Essentially, a factory where thousands of hands transform money into revenues for the casino.  And that, is the reason for Macau’s very existence.  

Living in a Ghost Town

Taipei, Taiwan

The pictures looked great online.  And having no knowledge of the terrain, we judged it not so far from the subway station.

Only 20 minutes away by bus, they said.

After living in small apartments for the past three and a half years, we were ready for an upgrade.  It was an unimaginable size for us, over 1,500 square feet, which in most Asian cities is a mansion.

Little did we know, after settling in, that we were living in a typical Chinese ghost town, developed one of those mainland developers starting with the letter ‘V’.

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In our building of 22 floors, we’ve counted about five families.  We see the same faces in the lobby.  A twin building next door to us, reserved only for owners, has one actual tenant, judging by the lights at night.

Inexplicably, about five of the lights come from homes with no curtains, whose owners just decide to keep their lights on for some reason.  Maybe to ward off ghosts, maybe to give the impression to prospective buyers that the community is not so deserted.

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I’ve wandered a lot of ghost towns and shopping centers in China over the past few years, and the thing that sticks out to me the most, is how quickly a development can be overtaken by nature.

Make no mistake, we are all here by the grace of the planet and not long after we’re gone, there will be no trace.  For an unmaintained building, the process might take less than a year, if that.

Next to us a set of villas have a plastered wall around them, literally whitewashing over the fact that they lie in a decrepit, dilapidated state, although you can glimpse the broken windows, missing walls, above them.

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But our twin buildings are pristine.  The staff who work here, outnumber the residents, and it results in an echo chamber of a residence where you are never really out of surveillance range.

Four children under the age of 10 live across forty-four floors of residences, and two of them walk to a school down the street.  And the whole way, from their exit out of our buildings, to the corner of the development, and finally to the converted villa that is their school, vigilant guards with walkie-talkies announce their progress.

Of course, it’s nice living here.  It’s serene.  When the weather is right, you can see almost the entire expanse of Taipei.  And sometimes when it’s cloudy below, it’s sunny up here.  Other times, the clouds envelop us, making it seem as if we’re literally floating.  And there are no problems with our building.  In fact, it’s like a 22-story hotel being maintained for just the ~20 of us.

All of it is maintained, but at what cost?

It’s difficult to imagine a scenario where all this is being maintained profitably.

Especially since next door lays a work-in-progress, triplet of a tower that has been under construction for the past few years, where a single worker shows up several days of the week to operate a drill that reverberates loudly throughout the entire neighborhood, but is otherwise ineffectual.

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I can’t help but note that if this building were located anywhere else in China, where there was an actual market for this stuff, the whole building would be taken to completion from its present state, in a matter of weeks, if not days.

I have a problem with the way the media portrays China’s “ghost towns”, because a lot of the developments are in a state of waiting, built in advance of the demand.  Sometimes they actually do fill in over time, while sometimes they don’t.

But I’ve always had an underlying anxiety with isolation.  And this lays bare why.

Something so far from an urban center has great costs to maintain.  The cleaners and clerks commute here by scooter or bus.  The landscaping.  The maintenance of two minibuses an hour that service the residences.  It all seems fragile.  Because if for some reason the owner of the development decided one day to stop financing it, it would no doubt within a few years, look as if no one had ever lived here.

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Elements: Osmanthus

Cherry blossoms get all the attention, while this one is a nondescript, sturdy green bush.  It’s easy to just walk by it.

But stand anywhere in its vicinity with the lightest of breezes, and suddenly you’ll catch a whiff of something that smells like what a plant bearing fruits of Hi-Chew would smell like, unbelievably sweet, almost fantastical.  It smells like what the inside of a cartoon would smell like.  It is hard to describe.  It is hard to believe that a plant would have this scent.

And their scent is agonizingly faint, because even in full bloom its flowers are sparse and tiny.  Walk amidst a grove of them, and its fragrance flits in and out like a nostalgic memory.  Tenuous to the grasp, but evocative of something unbridled – joy?

These trees – osmanthus, sweet olive, being some of its names – are everywhere in Asia, but again, cherry blossoms get all the attention.

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You can barely even see the flowers, can you?

Elements: Jiufen, Taiwan

Jiufen is an old mining town in Taiwan and is famous for a traditional old retail street.  The street is a market that winds down narrow alleys, giving it a souq-like atmosphere.

On the weekends, the amount of people visiting gives it a feel like you’re in Downtown Disney – packed full of people walking in either direction, not exactly leisurely.

But it’s famous for a reason.  The elevation and its placement on the hillside also gives you charming, wonderful vistas like this one.

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So much so, that it was reportedly an inspiration for Miyazaki’s Spirited Away.  You might see the resemblance.

What is the essential element of this place that gives it magic?

1.  The stairways and elevation changes give it a lot of charm.  You don’t know what’s around the corner, and you have a lot of views that are uncommon.

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2.  Red lanterns: lighting is huge, and by stringing these everywhere, basically it gives the night market a special glow.  Warm, inviting, a little magical.  Lighting can be a huge signature, and you can really see the difference here when you compare the market during the day versus the evening.  So simple.

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3.  Vibrant tenant mix.  I’ve consulted on a lot of projects where clients try to artificially create this kind of retail entertainment.  There’s nothing wrong with that, but usually where projects like this fail, is that everyone spends time on creating an incredibly fantastic, magical environment and less time on the actual substance of the place – it’s great to have spectacular surroundings, but what will people actually end up doing?

Shopping, eating, being entertained – and that is delivered by the individual tenants themselves.  Ensuring a vibrant, authentic, sometimes irreverent tenant mix is the absolute key.

If you really think about it, and decompose Jiufen into its elements, that last one is really the secret to its success.  There’s nothing so crazy about stringing up red lanterns, or narrow alleys.  But the reason it’s like Disneyland on a summer weekend, with a crush of people walking in either direction, is because of the combination of all three of those elements.

The other place I’ve seen this is in Hongyadong, in Chongqing, which is arguably more fantastic and magical looking than Jiufen.  You can take the whole sight of Hongyadong in, at a glance, but you can’t put the architecture or structures of it into any category.  You can’t even tell where it starts or stops, or what anything even is.  It’s hands down the craziest piece of real estate I’ve ever seen.  Below:

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Do yourself a favor and Google ‘hongyadong’.  It’s really one of the most insane structures I’ve ever seen.

And inside, it’s much of the same.  Chongqing is a hilly city, and you need to climb narrow winding stairs to get anywhere.  Once inside, you’re greeted by a crush of people, restaurants, shops, like you’ve arrived at a magical floating island.

Back to Jiufen.  Teahouses are one of the essential places to visit in Jiufen.  And there’s a lot to be said about Chinese teahouses.

This is the one we visited in Jiufen.

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The apothecary-like counter and cabinets holding a variety of teas, accessories, paraphernalia imbues the place with a special, bespoke touch.  You get the feeling they’re sifting through all these pots and bottles for the tea that you and you alone ordered, mixing it in the exact proportions right for you.  They possess an arcane knowledge of teas, the depths of which are mysterious and a world to be explored.

The teapots on the counter look industrious.  You get the feeling that something is always brewing 🙂

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The individual seat compartments are divided by dark woods and stone, and spaced at perfect intervals.  Solid, subdued materials surround you and invite quiet contemplation.

One day I’d like to develop such a place, but it’ll be one dedicated to chocolate.

What I’ve Seen in China

Spending time in China is enough to convince you that you know nothing about it.

  • There is no architecture quite like the public architecture of the Communist Party.  Roads and sidewalks are massive, supposedly wide enough to drive tanks through.  The railroad stations are simply just the largest buildings I’ve ever seen or been in, looking like you could fly an A380 through them.  Government buildings are fronted by sidewalks that are like stadiums.  It communicates authority.  The scale is hard to comprehend if you’ve never been there.
  • The power of the state, in terms of it being manifested, is intermittent but ubiquitous.  After 950 AQI readings (~20 is healthy) on the air quality scale in Beijing, you can count on the next day being completely crystal blue.  How does this happen, is there a natural way?  It’s as if the air itself was reprimanded by the inner sanctum of the CCCP and told about the errors of its ways.
  • Blue skies are not taken for granted.  I once had a taxi driver take me from the airport in Chongqing to my hotel, and for the entire thirty minutes he was exclaiming loudly about how clear and blue the skies were, sticking his head out of the window, looking up, and yes – all while driving.  The air is indeed noxious, and during days when the readings are, say, above 300, visibility on the streets are as if you’re driving through fog.  Above 500, heavy fog.  Above 700, like you’re in a cloud.  The romantic side of me, on these days, can’t help but imagine myself back in London during the Industrial Revolution, or Chicago during the age of the railroads.  It must be what those cities were like: swarming seas of people, raucous roads, barely contained chaos, buildings rising impossibly fast, out of nowhere.
  • Is there another economy that has so many feverish booms and busts, in so compressed a timeframe?  Bubbles roil through the property market, then stock market, then private wealth products market, not necessarily in that order, but predictably every few years.  Technology companies are the same.  Two years ago, I started noticing a lot of green, orange, and yellow bikes on the road, with bike-sharing becoming huge there, way before it did anywhere else in the world.  A few months later, I saw entire sidewalks become parking lots for these bikes.  They were everywhere, the streets were filled with them.  A few months later still, I saw empty lots full of these bikes, rusting and old, unattended.  A few months later, I came back and saw nearly all of the bikes gone, and read that a lot of the companies had gone bankrupt.
  • Parts of the large cities – Shanghai, Shenzhen, Beijing – are more expensive, posh, and futuristic than equivalent places in London, Hong Kong, or New York.  And I will assume that they will only get even more so.
  • The line cutting is maddening and annoying.
  • But I can emphathize with some of it, as it is less a personal act of discourtesy, and more a symptom of an everyone-for-themselves, distrust of rules and the state that leads people to have this interesting mentality that there are rules and laws, there are taboos, and there are absolutely forbidden things that you must never do, and the intersection of those three things are like a Venn diagram – they are not one and the same.  I.e., everyone seems to use a VPN to access all the ‘forbidden’ websites, even at work, no one actually uses the metal detector machines in the subways, queues are optional, and most confoundingly to foreigners – contracts really don’t mean anything.
  • People are honest and straightforward.  They will tell you to your face that you look tired or if you’re fat, or if you need to eat.  In restaurants, you can regularly ask for things not on the menu.  You can ask and talk about anything, and people will tell you, as long as you avoid the subjects of Tibet and Taiwan.  Sometimes when we do market research, we literally go to our competitors and ask their frontline staff about stuff.  For a North/East Asian country, refreshingly informal and with a language devoid of hierarchy and formality.
  • When I first went to China, back in the winter of 2010, there was barely even a smartphone market.  I remember buying a used Nokia with a monochrome screen and using that.  Now just 7 years later, almost the entire population is on WeChat, which is a portal for everything from taxis, medical services, banking, and other payments.  Merchants in the middle of rural villages in China will prefer taking your cash over your credit card, but WeChat payments trump all.  In 2010, I remember my classmates telling me there was a huge difference between kids born in the late 80s and kids born in the 90s.  It was a seven-year difference we were talking about.  Now, you could probably feasibly move those endpoints to the 90s and aughts, and there would be even more of a generation gap still – think about it, two degrees of a generation gap in 20 years.
  • The resultant optimism, though, is refreshing.  This is a country that hasn’t had a major recession in twenty years – economic growth has always rounded to 10%.  Can you imagine that?  It means that everyone is down to try new things.  They’re figuring it out.  There’s no established tradition that needs to be followed, but nor are there established best practices.  In my field, it means that clients sometimes ask for – and expect – insane things that have never worked in the history of the world.  I’ve driven through 2nd and 3rd tier cities to the edge of the city, through rural villages, and then come face to face with resorts on the scale of Dubai.  I’ve driven deep into the mountains and seen waterslides and retail malls that wouldn’t be out of place in Orlando.  I’ve spelunked through entire cities where they built something, and no one showed up – yet.  To be clear, many of these insane projects and endeavors are destined for the dust-bin of history, but the risk-taking and dice-rolling is something to marvel at.
  • There seems to be no established dress code at most of the offices I visit.  Women wear skirts that are shorter than sexy nurse Halloween costumes, and tops that look like bright foliage.  Men wear business casual, loosely interpreted, like rocker boots and hawaiian shirts and whatever it is, it’s untucked.  Everyone is on their own phone during meetings.  Sometimes people answer their own phone during meetings and whisper into it without any repercussions from others.  Business cards were a thing for a few years, but it’s gone straight to WeChat.  Government officials will add you as contacts on WeChat and then send you funny memes.
  • It’s changing rapidly.  And on this note, a lot of the criticisms leveled against Chinese tourists abroad – rude, dismissive of lines, loud and obnoxious, pushy – I recall as things I thought about Koreans about 20 years ago.  Koreans of a certain age, say 50s, will fit this stereotype.  Social norms change and I can see them changing in China too.  Younger people have been abroad, studied abroad, and bring mores and expectations back home.

Basically, it’s growing at an exponential pace and everything you know about it now, will be wrong tomorrow.

If you are interested in the evolution of cultures, the study of cities, if you’re interested in seeing an economy and society change, if you’re interested in history or curious about what the future might look like, visit China.  Don’t miss it.

Elements: Hakone, Japan

Before Hakone, we were in Ginza.  Ginza is the quietest retail high street you’ll ever encounter in the world.  This is the 5th Ave/Rodeo Drive of Tokyo but you can carry on conversations at a whisper.  And the lights, all muted.  True class.

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A centuries-old ryokan.  It practically looks like the building has grown out of the same soil as the trees around it, the way it’s blended in so well.

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The ryokan where we stayed.  Simple wood, polished by decades (centuries?) of guests walking over it.  The wood creaked and bent – almost bounced – under your step.  I’d never had that feeling of walking on wood before, with so much give.

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The warm lighting in the hallway across this garden really makes this scene.  This was in the dead of winter, and it looks like the building promises warm hearths and fresh, hot tea for a traveler that’s come a long way.

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It’s hard to describe why the below scene affected me so much.  To the right of here is a shrine, and that red torii gate is the threshold to the sacred space.

As you stand here, the sun bursts through the crack in the trees in just the right way to light the moss verdantly.  The wind rustles the leaves gently and they sound like palms rubbing together, some sort of reverential gesture.  You have the sense that this space, which if you were in a hurry and passed by it looks completely ordinary – what with the street signs and electric wires – was hallowed.

And why was it hallowed?  Because of the torii gate?  The way the sun hit the trees?

Or maybe because the combination of all these things made you just stop.  Stop, and recognize the sacred or hallowed in the ordinary, which is the whole point of shinto and a core part of the Japanese aesthetic.

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There were very few things in the courtyard/garden of this temple.  But for some reason they looked artfully arranged.  I don’t know why the whole scene was so beautiful.  It just is.  The fact that the grounds were completely silent helped.

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But maybe the point of the space, with very few things in it, is precisely that there is space.

The space brings into greater relief the objects that are in the courtyard, like the bell and the beautiful trees.

Also, the space seems meaningful.  The space allows for things to grow, like the moss.  It provides space for the steps to the shrine.  It provides space for you to move through it.  The space is deliberately there, without space things cannot grow or develop or move.

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Elsewhere in Hakone, this was a restaurant.  And after eating there, you pass through this portal on your way out to the real world again.  The way this dark entryway framed the winter scene outside was astounding.  It wouldn’t have worked, I think, if the distance of this passage were any longer or shorter.

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I just love how these trees are gnarled with character.  Although the branches ended up growing in one general direction, they twisted and took corkscrew paths to get there.  It’s about the journey.

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A Real Estate Career: Lessons Learned (2012-2015)

It’s weird the things that stick with you.  For the next few years, I worked three full-time jobs at a time.  I was in full execution mode as a property tax agent, international theme park consultant, and commercial property agent – and I don’t remember much about the period.

When I look back, I think it’s because I wasn’t growing.

There was little new to the jobs.  I was just executing on processes I had put in place years earlier.  I had become proficient, an ‘expert’.  And so the result was that financially, they were some of my peak earning years, but overall I’m not sure it was that fulfilling.

If you can find jobs where you get paid handsomely for personal growth, now that’s the holy grail.

But there were a few things that stuck with me.

I had a client who was an ex-Drexel Burnham Lambert banker.  He predated Michael Milken give/take by a decade, and had apparently made so much money that there was nothing else to do with it but plow it into real estate.

He worked out of one of his apartment properties in Brentwood, in a ground floor office strewn with papers and newspaper clippings.  He was in his 70s and his main tactic in any negotiation or even discussion was to immediately pretend he was slow.

Whenever you began speaking, he would tilt his head and look at you curiously before responding with a set of ‘is that right’s and ‘you don’t say’s.  He didn’t say much, but you could tell he was processing everything.  With so much office space all around LA, he offered free space to young brokers as a way of being plugged into deal flow.  Essentially, to listen.  He was always listening.  Sometimes his ‘you don’t say’s were sarcastic, as if he couldn’t keep listening to our stupidity anymore, but he was always listening.

We had another client who was a movie mogul.  Over a few decades, he had opened a regional chain of movie theaters and plowed the proceeds into real estate.  And about a mile down from our office, he owned 25 condos in the heart of Redondo Beach.  We brought him multiple offers on the property.  $18 million.  $20.  $22.  But he wouldn’t budge for less than his number, which was a million dollars per unit.

And although we had clients who probably would have bit at $22, he didn’t.  Something about his patience struck me, sitting in his office modeled after a miniature theater, cracking a grin at each new offer we brought him, and sitting back, a picture of consummate contentment, and telling us, if we could please try to get a higher number.

Years later, he was proved right.  Actually, the value of his condos probably exceeded a million dollars a unit.

The thing that both these clients had in common were that both owned and controlled more than $100 million in properties, each, both were well into retirement age, and both arrived at their offices at the crack of dawn.

This is just a sample.  There are people like this all over the country, all over the world.  It was just another lesson about wealth.  In so many ways, wealth is not the goal.

I wanted to be like them.  It would be nice to have the level of wealth they did, but I’m talking about their working for the purpose of their work itself.  And having a purpose that made them work harder than people half their age.

No doubt, it’s what made them great.

Then we had another client.  She had emerged as a buyer for another client’s property in Hermosa.

She made us work.

Among other things we had to do to close the deal, we had to chase down people to get them to sign estoppels.  The existing owner didn’t want to do it, because he preferred to be liked more than he preferred to sell the building.

This meant we had to camp out in front of all 12 units and try to get the tenants to sign a document verifying that they were paying, exactly what the rent rolls said they were paying.

Naturally, a lot of them were suspicious.  Was the new owner going to kick them out?  Was she going to convert the apartment into condos?  They were nervous.

No, no, I answered confidently.  I reassured them there was nothing to worry about, that the new owner had no intention of redeveloping.

But there was something else I had forgotten about.

After dragging the deal across the finish line, I felt a sense of relief as we pulled up to the new owner’s $10 million house in Palos Verdes, with a tennis court in the back.  In the living room, she proudly showed us a rent roll of the $80 million portfolio she managed, from her living room.

And later, she even more triumphantly emailed us to say that she had doubled rents, because the previous owner had been undercharging.

It left me with a bad taste for these kinds of deals and people in general.  All part of the industry, but I couldn’t help but think that while knocking on doors to get those estoppels, I had led some of those people astray.  Some of them, kids younger than I was.

It turned out to be my last deal there.  That, combined with the diminishing fortunes of the property tax appeal business, a countercyclical business if there ever was one, led me to other things.

One last reflection about wealth.  I spent half this time period in Hong Kong.

And in Hong Kong, a summer rite is the boat trip.  On the weekends the waters around Hong Kong and its myriad islands teem with junks and yachts that anchor off a secluded beach, then descend into drunken orgy-level partying.

One of our friends was dating a guy who was as close as you could get to Hong Kong royalty.  He was the scion of a billionaire tycoon, which made him one himself, but you wouldn’t know it to meet him.  Well-educated, low-key, soft-spoken, there is no way you could pick him out in a lineup, as is often the case with billionaires.

Anyway, this weekend we had use of his dad’s yacht.  For seven of us, a uniformed staff perhaps double that number helped us board, navigated, helpfully pointed out the amenities, cooked us a hot lunch, and generally gave us the kind of five-star service you would expect from what was basically a floating villa, way larger than my childhood homes, combined.

After anchoring, there are only a few things you can do.  We rode jet-skis.  We bounced off of inflatables.  Some of us read a book on the upper deck.  Some of us just floated in the water.

Which is what I did.  Bobbing, I could see all the other boats around us.  Some of them were like us.

Splendid, sleek yachts.  Barely any people on them, though.  There were kids on some of the nicer yachts, towards the front, and they looked bored out of their minds.

And, the people on the nice yachts were all looking in the same direction I was, which was towards the bacchanal boats, the ones thumping music that could be heard hundreds of feet away, with the people backflipping off the upper rails, doing keg stands, sliding headfirst and belly up down makeshift slides into the water, floating around the boat suspiciously in pairs.

Of course sometimes it’s nice to be alone.  But also sometimes I think that with great wealth comes great isolation.

I noticed this during my brokerage days in LA.  Sometimes it seemed like our richest clients called…just to talk.  Or when we went out in Hollywood – there is type of person, usually male, who buys drinks for everyone, is exceedingly generous, talks a lot, is best friends with everyone at the bar, is also exceedingly rich, and then at some point during the night…leaves alone in a nice car.

In the summers in LA, you can ride a bike from Venice Beach down to Redondo.  Over the course of 15 miles, the crowd changes.  Rowdy and larger up around Venice and El Segundo, Playa del Rey, huge barbeques with organized beach football games.  Then you reach the $10 million houses (at least) in the South Bay, along the Strand.  Nice organized picnics going on, some beach volleyball games, more individual, more rich, smaller.  Sometimes just a guy on the upper balcony of his home sipping coffee and looking out over the ocean.  Of course in some of the houses in between were always some frat antics going on, but still.  Richer, more individual.  In many ways, more alone, although there’s nothing wrong with alone.

But, now why is that?