More On The Construction Business And Housing Prices

It’s truly a privilege to write for such an elite group of subscribers. After yesterday’s article exploring the possibility of a link between the boom-and-bust nature of the construction business and housing prices, a subscriber who wishes to remain anonymous reached out. We thought his contribution was so interesting we asked to share it. It seems to confirm our basic story.

“I used to work in the wood products business, and so we were heavily tied to construction (although not completely). I’d put a good bit of the focus on the building codes: Building codes are prescriptive, not descriptive. They don’t tell you what physical properties a building must meet, they tell you how the building must be built. And they are heavily prescriptive: Use these exact materials and do it in this specific way. That means that innovation in the building sector is very difficult. We ran into this problem when I worked in that business: We were trying to launch a new product, but had to get the building code organizations to buy off on it, which was a long and expensive process. We were partnered with a big mover that already had a heavy investment in the industry, but even with their heft and influence it was a long, difficult process.

“Another part of it is, I think, the bust-and-boom cycle of the industry. It is really, really hard to build up capital in construction because one bad project can sink your company. So many construction companies run their businesses until they go bankrupt and then just open a new company.

“One final point: M’mother worked for a successful construction contractor for thirty years. She was the bookkeeper/controller for the company. She basically ran the finances. Very successful company, with a low rate of bad projects. The owner died, and they basically closed up shop. Because a great deal of what goes on in construction is based on personal relationships. You build relationships with quality tradesmen and good companies. The death of the principal flushed all of that human capital.”

Policy Links

#Personnel – Obviously the biggest news in our little corner of the world in the past 24 hours is that Mike Needham has joined American Compass as chairman. Apparently he is keeping his role at America 2100, the pressure group he founded. Mike, who of course was previously chief of staff in Marco Rubio’s office and CEO of Heritage Action, is one of the most impressive people we met in DC, someone who combines two all-too-rare qualities in our world: intellectual chops and operating talent. Politico recently did a profile of American Compass, pointing out that its founder Oren Cass is one of the most divisive figures in the right-of-center policy world. That is certainly true! And he enjoys stirring the pot, as it should be. Two things are for certain: first, after so many things have happened, the right-of-center policy world needs more debate on economics, not less; American Compass has punched way, way above its weight in this town, with a budget in the single-digit millions. We are always excited to see what they are up to.

#AI – Sam Altman, the CEO of OpenAI, has penned an op-ed in the Washington Post. Altman has been unique among Silicon Valley CEOs in proclaiming his eagerness to work with government and policymakers. The basic argument he makes is a familiar one: the US can’t afford to put the brakes on AI because Chyna. It’s a good argument! Beff Jezos, a famous influencer in the world of “effective accelerationists,” a group of Silicon Valley wunderkids who believe in accelerating real technology, tweets: “What you don’t understand about OpenAI is that while you’re fighting for users and pennies on API calls, they’re going straight for the big money (Govt funding).”

#Births – The collapse of births around the world is astonishing and terrifying. “With a decline of a whopping 17% in June compared to 2023, the number of births in Hungary is now on a steep decline. The overall decline is now 9.7%. Leading the trend is the capital Budapest, where births are now 17.9% below the 2023 numbers.” (Via) Hungary spends around 4% of GDP on incentives for having children, more than any other country in the world.

#Economics – New working paper on the consequences of legalized online sports gambling. Tl;dr: “these results indicate that the ease of access to sports gambling is harming consumer financial health by increasing their level of debt.”

#Money – Reid Hoffman, the Silicon Valley billionaire, donated several million dollars to Kamala Harris. He wants her to fire Lina Khan. Matt Stoller is not happy.

Friday Essays

From Aporia magazine: “Do elites control public opinion? Three lines of evidence suggest they do.“

Yascha Mounk on luxury beliefs.

RealClearBooks: Book Review: Nathaniel Ellison’s Essential ‘Crypto Confidential’

At Law & Liberty, the great Titus Techera remembers Bob Newhart.

“Christ and Creation’s Longing,” a classic essay by Richard John Neuhaus making the conservative case for environmentalism, still as relevant now as when it was published in 1997.

At RealClearBooks, Paul Franz on James Salter and the plight of the male novelist.

Chart of the Day

Most important chart in the world?

Meme of the Day