Peter Hirshberg
The Opportunity Zone Expo Podcast
Let's Treat Our Cities as Development Platforms
Transcription
Jack Heald: Welcome back everyone to the OZExpo Podcast. I'm your host Jack Heald and I am joined today by Peter Hirshberg who is the co-founder and chairman of Maker City. Peter, welcome to the OZ Expo podcast.
Peter Hirshberg: Jack, a pleasure to be with you and excited to kind of explore this new opportunity for America.
Jack Heald: Absolutely. So, tell us first of first a little bit about Maker City and then we'll dig into to how all that applies to our audience in the Opportunity Zone industry.
Peter Hirshberg: Great. Jack, are you at all familiar with the maker movement or the maker fair or any of those kind of ideas that came out of the Silicon Valley world in the last 10 15 years?
Jack Heald: I am, but I am not going to make the assumption that my audience is. I'll ask you to talk about that.
Peter Hirshberg: So, when we came up with the word Maker City, we really have to some two things. So we began noticing in the last 10 or 15 years that people in cities were really beginning to develop new economic solutions as, as the economy is changing and as manufacturing was leaving, it was exciting to see cities like a Louisville say, here's what we need to focus on. We need local manufacturing around appliances because we're really good at that and we can actually prototype and speed up the process there because we had a GE appliance plant there and our people who they go to that we can spin up industries around the logistics because we're good at that.
And it was the process of city's beginning to learn what they were good at so they could have unique 21st century economies that were picking up on tech but just didn't copy say with Silicon Valley was doing.
Peter Hirshberg: So that was the concept of, of city. The maker movement really comes out of this whole notion that we kinda grow up in a world where we don't know how things are made. And we don't generally make things. So the maker movement was all about tinkering, discovering, exploring. If you've ever been to a maker fair, you see kids are learning all forms of coding and making drones and making wearables. And it's really kind of how do you integrate science, art and technology into education, which then leads new forms of manufacturing. And there's a maker fair, there's a maker magazine. And that whole movement very much was about connoting agency or the sense of being able to accomplish things among students and young people and people in industry. And then about 10 years ago as city started opening up their data, I started noticing that people were actually solving problems and making things within cities.
Peter Hirshberg: When San Francisco opened its data software and hardware people, urbanist, people came in and they started creating solutions in cities. It was an invitation of it's just like, well, now we can build things to keep the buses operating on time. We can build apps that monitor how the police are doing. Uh stuff like this led to Uber and Lyft. So it was this process that drew people into solving problems in cities and gave a sense of agency and capacity to kids. And to me in the 21st century, that's a form engagement and democracy that goes a lot more than just voting or complaining. It says you can be a maker in your city and you can learn a whole new set of skills. We ultimately decided that the role of a Maker City is to prepare its people for times of technological and economic change because we both were very big change in the economy. That's kind of what leads to populism and a certain amount of fear. If cities can help lead that kind of change they're going to attract more talent and they're going to do better. So that's what a Maker City is.
Jack Heald: This is suddenly a much bigger conversation than I'd anticipated. You're looking at addressing the needs that have come about through fundamental shifts in how we operate, as a people, as a culture.
Peter Hirshberg:And you can see why if you're doing that kind of work right. Then when the Opportunity Zone program comes up, you realize, oh, this could be a canvas for an awful lot of good ideas and experimentation and you immediately start thinking, well, sure it's going to be real estate and we're going to redevelop you know, properties downtown and we're going to have a tax advantage way of working on a parcel, but then you start to think of various operating businesses and almost a full stack of things you'd like to see in cities. Wouldn't it be great if we created workforce development businesses that sped up the Skilling and was less expensive than the mess we'd gotten to an in colleges and the Opportunity Zone mechanism created demand for those in lots of cities and then we could create companies to populate those.
Peter Hirshberg: This could be a mechanism to bring fundamental change, but that's only going to happen as you point out, Jack, if you have kind of a broader vision of this and then you start pulling together capital and entrepreneurs with a broader vision and then you might start doing something cool. Yeah, and you know, in my story I went from being, I mean this, we can get into this in the call, but I went from doing ad supported web stuff and early social media companies. And then one day I got enthralled with the city as a platform. This had to do with a lot of the early IoT and how data about cities. And that's how I ended up here, right? So I found the city of platform, but I have a tech approach.
Jack Heald: Well, so let's talk, let's pursue that line of thinking real quick because you know, typically I'm very tactically focused in this conversation. What is the specific thing you are doing in, in Opportunity Zones? How does that specifically apply to the goals of the Opportunity Zone and blah, blah, blah, blah, blah. And I want to take a bigger approach, more of a strategic approach from that phrase that you just used cities as a platform for those in my audience who are not software developers who aren't used to thinking in what a platform means. Expand on that phrase "city as a platform." And then let's go from there. Cause that's not really an idea.
Peter Hirshberg: Sure. The concept of the platform really comes from you know, largely the early personal computer era. And then with Web 2.0. When Apple II or the Mac or the IBM PC came out, it was a platform. IBM didn't have to do all the work. There were dozens and dozens of software developers who built services that lived on top of it. By the way, we stole that concept from real estate because if you have a city, the city doesn't build all of it. It sells off parcels and people go build stuff. However, when it comes to government, everybody just assumes that the school system or the transportation or how you pay your taxes. All of that stuff is done by the government. The concept of a platform is these could all be open services and people could contribute all sorts of capacity to cities because it would share data and you could build on top of it.
Peter Hirshberg: So that's really the concept of the city as a platform. What that does is it invites in all sorts of people with good ideas who are entrepreneurs or NGOs or whatever to start coming up with solutions that could lead to a better world. So internationally you'll see all sorts of cashless forms of money largely taking place in areas like Africa to meet the need. In other parts of Africa, you see people engineering, toilets that don't need to have sewers. So you're doing infrastructure lists, infrastructure. You're not relying on the city to do it. You have all sorts of entrepreneurs or MIT coming with that here in San Francisco. The very fact that they, it was opened up, it led to Uber and Lyft into all sorts of transportation companies that popped up that had nothing to do with the government. And it also leads to the use of all sorts of open data that lets us monitor the police, understand conditions and such.
Peter Hirshberg: So we, we think this, this concept of sitting as a platform goes back 10 years, largely to the web 2.0 world. The thing that I noticed when we started having hackathons and working with Code for America and doing work in San Francisco is it brought lots and lots of people in who were interested in solving and deploying problems of cities down to the fact that we live in San Francisco on Market Street, which is our kind of main drag and it goes on for a couple of miles. So when we wanted to redevelop it rather than just have a plan presented in a room to the community, we invited architectural students, artists, designers, community people to build prototypes. So we actually changed the city planning laws. We had a hundred prototypes up for several days. Everything from art projects, community libraries to bicycle repair things to kind of fun stuff that you would sit on and move around.
Peter Hirshberg: It was very colorful, almost looked like Burning Man. But the idea was we wanted the whole city to start creating what a downtown might look like. And that gave us enough data on how people dwelled and interacted. When we went off and built permanent structures, we knew a lot more. We had gotten the community involved. We've run lots of experiments. Classically in the tech world, you want to fail fast, try something. If it doesn't work, try something else. Well, you don't want to do that in the city government because you're not supposed to fail. And if you're a developer and you're building a building, it's up for 75 years. But if you allow people to prototype and experiment and do stuff over successive weekends and physical space, you'll learn a lot. So there are all of these things that kind of both engaged people and taught us stuff, and let us work things out.
Peter Hirshberg: So that's broadly what city as a platform has meant. And it came out of the Web 2.0 world where particularly there were services like the Google maps API. Now you can build an app that just knows where it is.
Jack Heald:So, follow that line of thinking, that philosophy into the Opportunity Zone. So, we're talking about specific census tracts within a region. We're city focused in this conversation. Talk about the urban development, follow that, that philosophy, that kind of reasoning into the Opportunity Zone. And let's just brainstorm and visualize. How did you see that working?
Peter Hirshberg: Well, so one interesting to think through would be, in the tech world we talk about a stack. It could be the network stack, which is you've got the physical stuff like that cable and then all the various protocols that go through and you know, ultimately get the data going back and forth and you've got the screen or you've got a bunch of development tools. In a city, think of a stack of things that you might want to invest in with Opportunity Zones that you could invest in and make money at. You probably have on the bottom, obviously real estate and placemaking.
But then there's another layer you could invest in which is perhaps infrastructure like broadband or like local energy, renewable energy, local grid. these are things that if you invest in them in 10 years, the community can own them, right? So, you're the people who invest in them as a 10-year fixed asset, at the end of 10 years they might be getting dividends, but at the end of 10 years they sell it, they don't pay a capital gain. It can be structured as a little... The community owns it and now the community is left with infrastructure that it owns.
Peter Hirshberg: So it doesn't have to pay as much for that kind of stuff.
Jack Heald: There's a different idea. I haven't run into a private investment in infrastructure with an exit plan specifically targeted at the community itself.
Peter Hirshberg: Now, this is a very big idea. This is essentially a version of cooperative ownership, right? So, you have co-ops that are out there, but the reason this is a particularly big idea now, and by the way, this can happen for real estate assets. It can happen for what I've been describing, our fixed assets that can be part of infrastructure, but I'll come back to that. But as we go through a stack here there are other things. For example, urban agriculture, um basically farming without soil and we spent a lot of... It's very inefficient process to like have a cow eat beef and then eventually there's a piece of meat.
Peter Hirshberg: Um, as you know, the world is moving very quickly towards more efficient forms of agriculture. We use hydroponics. So you manufacturer things locally. When you add machine learning to that you can create a very dense, rich, very nutritious set of stuff in small space. And then you don't have the big supply chain of having driving into the city. I think a lot of us believe that there will be a lot of urban agriculture. And so these are factories in cities that make people healthier. Well, that's a cool thing to put an Opportunity Zone because often the OZs need businesses. They can be in food deserts. If you're going to site a factory in a city, you're probably going to go to an OZ because it's less expensive. And if you're building an urban agriculture operation, you're not moving. It's gonna stick there for 10 years.
Peter Hirshberg: And an entity like that probably has a pretty good cash flow. So your investors are getting dividends. And then over 10 years there's the longer-term capital gains. So, there's a range of these kinds of things that we think can be operating companies that are incredibly synergistic with Opportunity Zones. And as you go up that stack it's pretty clear that things like training and workforce development Opportunity Zones tend to be in places where you need to train people in what's next. And you need to ride down the experience curve of doing that. And so you're going to be creating demand for those businesses. And a lot of those businesses are being created today. You'll see them as coding academies. There's just so much experiments going on in education. We'll get back to the question you were asking about cooperative ownership.
Peter Hirshberg: I think there's a lot of work to be done here in financial innovation. So, for example we have a housing crisis because housing is really expensive. we also have housing crisis because, well not only is it expensive because of the price of housing in a mortgage, it and the fact that if you rent something then you're always owing someone money. So it's tough to get out. But also the cost of developing housing is expensive. So how do you attack that? There are companies and Opportunity Zones that are doing factory built apartment building. So, there's a place up in Mara Island here in California called Factory OS. They knock out - for about 60 grand - a full floor of an apartment building, can be stacked five floors high. That means they can 40% less time, 20% less costs, create a building.
Peter Hirshberg: There's a number of companies that are working at how can you put up a development in the community in just a couple of weeks, radically whacking down the cost. And these can be very useful in places where you have workers where they need housing or schools, but also an Opportunity Zones. Once you put these things up today we have rental, then you don't own anything and keep owing the man money. Or ownership. But then you need down payment. Can we do something where you have the rights to live there, but you're selling off some of the ownership capacity. So that might be a co-op kind of model, but you would be paying less. You get to live there, but someone else might be getting the appreciation. So, there are all forms of financial innovation that are being driven by the fact that the economy's changing.
Peter Hirshberg: But by the fact that we've had all this runaway wealth concentration simply because big companies like Google get bigger and big cities get successful. So you reverse that, not with socialism, which is just giving everything away or populism by closing the gates. You reverse it by creating richer, more vibrant local economies where you can keep more of the wealth in the economy. That's why I say financial innovation and in an Opportunity Zone you're going to pretty immediately invest in the real estate and workforce development, the operating businesses. But as you start looking at this, you start thinking of an overlay of can we have local economies? Can we create greater rewards for people who buy locally or grow food locally? Economists talk about this as being able to understand externalities and price them and keep them in the system. Technically we might do that with a local currency or barter or beginning to use blockchain. There's a lot of experiments that are out there in it. But ultimately at the community level, the idea is to build a community that is stronger and keeps more of the wealth of the community and is less extracted.
Jack Heald: Man, this is really, really stimulating my thinking here. After the we stop recording, I want to pursue some things philosophically because this is just brilliant.
Peter Hirshberg: And by the way, a thing I should add here is when you think about the Opportunity Zone conversation, you hit it a moment ago. On some level, this is a deeply operational conversation, right? It's in the weeds with the taxes and the treasury rulings and exactly what did they mean by this and is it what happens on the 180th day and do I only have 33 months, right? So, on some level, you're sitting in your eyes are rolling with this, with all this compliance stuff. And then on another level, because of the way it got started, most of what we talk about looks like some form of real estate deal. And when that happens, you get a real estate investor who tends to be relatively risk averse. So don't forget, I'm kind of a Silicon Valley innovation guy.
Peter Hirshberg: I like trying lots of new things. Real estate developers like things that don't go wrong because that's a lot could go wrong. And you know, you've got time and money and it's a project. You show up with a real estate developer and say "I have something new, I've got a new piece of software and how to build your building." That might be okay. But the minute you show up and you say, "I'm going to have a new construction technique and we're going to 3-D print this and were gonna reduce the time of that, we're gonna have co-op." I mean you've put three new ideas on the developer and their head explode. There's a form of this and it's very conforming real estate kind of deals. And then there's a form of this where you get to start to experiment with what's new and what's different.
Peter Hirshberg: And that's the reason that we're interested in having part of this operating companies in Silicon Valley capital. And frankly people with a bigger risk preference who want to try significant new things and communities that want that. And then if there're good ideas from that, they can jump and start seeding other new ideas.
The other point here is a lot of people are thinking about this. If you go to the Beck Center, they're thinking about this, the Rockefeller Foundation is thinking about this. Sometimes part of the problem is we have very distinct communities in this bucket called Opportunity Zones. You have think tanking people but they don't really know what it's like to get up every day and be a real estate developer and having to manage something. And you have cities, mayors that never heard of a capital stack. And you've got developers that wouldn't understand your investors, that wouldn't understand community development if it came after them with the protest sign. How do you work through a lot of that?
Jack Heald: I love being able to, to step back one or two layers of abstraction and see the shape and the outline of a problem rather than just dive down into the weeds like you said. And this sounds to me like a philosophical approach to a cultural problem that has frankly stymied the best and the brightest amongst our public thinkers for a long, long time.
I was gonna ask you to connect the dots for us between maker cities in the Opportunity Zone, but I think you just did that.
Peter Hirshberg: Yeah. Part of where part of where Maker City came from was, during the Obama administration, I was working with the president and his office of Science and Technology Policy team. And we convene a hundred cities. We were convening cities on economic development. We were convening cities on things like, can you develop STEM, can you use mass manufacturing, create jobs? And so we had all of these cities show up. And what was interesting was, and this is 2014, they were all developing or showing community development strategies that were dealing with changes in the economy, right? Because if you were in the rust belt, you kind of realized that your manufacturing businesses were going away and you needed to retrain. Or if you were in Louisville you had to figure out what you were uniquely good at.
Peter Hirshberg: And then I did a book on this. We did a book on this because it was really interesting, all these things that were going on. And I wanted to write a book to the various innovators that trying new things. Basically saying, you're not alone. Here's what other people are doing, here's a playbook. And so out of that came, here's this whole community of people trying new things. And then the question is always, who's going to pay for it? Like how would you actually make this go forward? When Opportunity Zones came along, it's like, oh, money is going to show up here. This is actually a thing in which capital will try to work itself out. There were particular locations identified and then in each of those locations there's a little game called, we're a census tract. What could we do about this?
Peter Hirshberg: So then it became very interesting to take kind of that similar group of people and they showed up in this Opportunity Zone conversation. And then it became okay here of the things our community would like to do, which pencil out, where does the capital stack need help? What kind of capital could come in? What kind of entrepreneurs will be willing to try things in this community to get that tax benefit? What other benefits could we stack up to maybe make something work out? And the fact that this program, which you know, everybody agrees is it's good program, but it's not the be all and end all. It's kind of like, classically people say, if it's not a good deal, the Opportunity Zone won't make it a great deal. But if it seems to make sense, you will lubricate it and reduce the cost of capital in that Opportunity Zone.
Peter Hirshberg: But because it pulled so many things into this conversation, it sped things up. And if we can use it as a mechanism to accomplish what we were talking about, but now hopefully at scale.
And the other point is it starts to give a complexion of direction to the program that has a bigger vision. As you know, this is a program without a lot of federal guidelines. It was basically like here's five rules. And you could read them as, okay, now I was going to develop this building downtown. But I can shield my investor's money going in. And if I wait long enough I want to take gains on it. Or it could be how might I try a bunch of these new things because I've got all these people around the table. So, part of what we're trying to do is push that frontier.
Jack Heald: I liked that idea. Rather than taking the hyper conservative, long patient capital approach to the Opportunity Zone, - which it seems to be designed for in some ways - take the Silicon Valley, try a lot of things, fail fast, iterate approach wrapped inside the Opportunity Zone. And that of course is the kind of thing that points to operating companies rather than to real estate.
So how do we go about how do you go about finding these high potential operating companies, these high potential ideas? I guess to a certain extent, this is venture capital kind of work. But there's more to it than that. We're talking about operating companies.
Peter Hirshberg: One question is, what are the kind of operating companies are we talking about? Some could be local businesses that are simply overlooked by national capital. So most venture capital in this country flows into four or five cities. It's in San Francisco, San Jose, Austin, New York Seattle. the venture capitalists just famously overlooked much of the country. Steve Case is an exception to that. But Opportunity Zones give us an opportunity to go look for interesting businesses. At the Catalyst Opportunity Zone fund that I'm part of, we have software that they called Paragon software. And we've ingested all sorts of variables and data to try to take a look at where are their operating companies? Where are there innovation centers, where are the locations where companies have exited and have particularly good numbers? Where are they surrounded by universities.
So, if you start sorting through all of this, you start surfacing interesting opportunities. One thing is to basically look through the data and look for companies that have been overlooked or look for places with talent to create really good conditions. Another is to start thinking through what are the kinds of companies that might be a good match to an Opportunity Zone? Well, for a company to be in an Opportunity Zone, half their people have to be in the Opportunity Zone. So you kind of would like a company that doesn't want to get up and move one day, two a not-Opportunity Zone, because that would mess up the benefit.
So, there are companies that have fixed assets, right? Factories. So this company called Factory OS that builds housing. They actually have a big factory on Mara Island, which happens to be an Opportunity Zone and they turn out floors of housing. And company's probably going to expand because they're going to have to build housing in other parts of the country. So that's a company with factories. That makes sense.
We're looking at companies that are doing next generation clothing manufacturing. Typically clothing is outsourced to overseas. It doesn't have a lot of automation component. One of the companies we're talking to wants to set up in Los Angeles and bring a lot of robotics to the preparing of the clothes. You'd still need humans to sell them.
But the point is you could have customized, on-demand clothes so you don't have inventory holding costs. There's a lot of waste in clothes because half of it gets thrown out because it's not bought. If you can eliminate that, automate it, and then hire people and stick something in an Opportunity Zone, there is a factory, there's a business going to be good for the community.
We've talked about renewable energy. not of people talked about the fact that you can put in say a hundred kilowatts of generation. 50 kilowatts of battery. Put that into an Opportunity Zone. And essentially in that community, you're reducing your reliance on the grid. That should pay off pretty quickly because you're not paying peaking money.
And there's all sorts of ways of, there's all sorts of issues about how you do that. Are you doing that in the individual property as a co-op within a community with a group. But you know, there are enough developments and projects that if we can have several buildings, it starts to work.
So those are some of the kinds of businesses. Urban Agriculture is one that we mentioned. You're also gonna need mainstream businesses. In order to have a thriving community, in addition to all these businesses, you're gonna need your barber shops and your corner stores and your fresh fruit and your cafes and third places for people to go. So ultimately you're going to want to see a mix of operating businesses that are main street businesses that serve other workers and make it vibrant kind of traditional startup businesses. And then some of these other, I think of them as infrastructural or businesses that are gonna make cities great in the 21st century. Urban Agriculture, energy, housing production, that kind of stuff. and these are all possibilities that I think economically work out and make communities more vibrant.
Jack Heald: I love this. I'm thinking about a different way of approaching it, not just investing in Opportunity Zones, but thinking about how to create the types of communities that we want in our Opportunity Zones. Thinking of it as a platform changes it into thinking of all the layers of the stack. And that tends to open, at least for me, that tends to open up the thinking about the types of possibilities that are available to a maker or an investor or developer.
Peter Hirshberg: And one of the lovely things about this I think is that you know, cities grow organically. So sometimes people have ideas of whole new cities, right? China builds a whole brand new city as a whole idea. Or, you'll see developers that they want to pop up a whole city. It's difficult in time. You've got a lot of approvals to pop up a whole city.
One of the interesting things about this Opportunity Zone program is it's almost like Wiki city development because you're going to have one form of capital that's coming in and doing commercial and others is going to be doing residential at the same time. Someone else is going to be coming in and doing these operating businesses. it doesn't really come from a master plan, but it does come from possibly a community planner in the Opportunity Zone orchestrating this. Or for multiple types of capital kind of getting together and attempting to do things all at once.
Peter Hirshberg: And so, Bruce Katz talks about this as a new model of community development that's more bottom up than top down. But one of the important things to point out is there are real advantages to doing several of these stages all at once. this is famously what Ross Baird calls his "street corner thesis." He has company called Village Capital. And his approach to Opportunity Zone investment to create a small regional fund, say a $25 million fund, go into, I think he's going to work in Texas. And I think his pioneering work was in Louisville. Go into a kind of a depressed part of town that has a street corner. So you know, you can afford to buy it because it's a street corner that is not performing particularly well. There's not that much industry there or even housing if you just bought up a street corner and improve the housing stock.
Peter Hirshberg: Well with the local community to be able to afford it. And if you actually did improve it a lot in the local community couldn't afford it, maybe you just gentrified it and other people moved in. So you have to remove the housing stock at the same time that you invest in local businesses. Well, he's a venture capitalist, so he actually bought a space and he put his startup businesses there, moved them there. So now there's customers for the day. They can live there. They're part of the community and they can be customers for the food stores, the barber shops, the coffee shops, whatever. So he's putting in the local businesses and he's creating some capital for the local businesses, the high growth businesses, the commercial industrial space. And if we dig up the facts about him when he did this, I think this was his original test was in Louisville, Kentucky.
Peter Hirshberg: But when he did his original work on this, when 20% of the population had been gone, I think within two years he had spent about $4 million. This led to eight residential properties. It was renovated. He hired formerly incarcerated or homeless people. They built four commercial buildings with local businesses. And then he had five venture funded startups. And this was in a community. one of these communities that the highway had come through and hollowed out and it was there was like a quarter of the people were unemployed, they were half below the poverty line.
And the question was, what do you do about this? And his answer was to come and do all of this all at once, right? You did all four of those things all at once. And that's kind of this new approach to bottom up or Wiki community development.
Peter Hirshberg: Some of us call this a template for Opportunity Zones. It's a template in the sense that this is a particular type of investment behavior that should work. Because if you do these four factors all at once and you've made the community wealthier, you're more likely to have a success on your hands and that that's something that ought to be scalable and packageable.
Another example of this in Fresno. So, if you know, Fresno, California it was kind of a big agricultural center town. But then in the fifties, sixties, and seventies, as the freeway came through and as developers... You had white flight, right? People just moved to suburban tracks and then the interior city kind of collapsed. And then the city developed this view of itself that it was a failure, I think thought of itself as America's least functional city or something.
Peter Hirshberg: And you had city leaders who were like, nothing will work. And then you kind of had a, a generation of millennials who came in and didn't buy that story. So Jake Soberal and Irma Olguin came in and they're like, why can't we create a thriving economy here? And they bought a giant auto dealership and then within a year or so they were training 2,500 sons and daughters of agricultural workers.
So, these were Hispanic kids, agricultural or migrant workers, people who never expected to go in the tech industry and wouldn't even have known anyone in it. But they were training them. But then in his same space, he also had 200 local Fresno startups. So now you had these kids hanging out with the startup people. So those cultures were merging and out of this started to come a community development and that became the core of the revitalizing of Fresno.
Peter Hirshberg: But at its core, the story was changing. They were coming up with a new story and all at once concentrating in a small area, they were doing education companies, starting the new commercial real estate so everybody could have a great place to work.
And then that led to investment in downtown real estate. And that's bringing a place back.
One of the reasons I'm bullish on kind of a number of these Opportunity Zones is America has a lot of good secondary cities that have been hollowed out. But our primary cities are getting so damn expensive that if you're up the road from Silicon Valley, you're in Fresno, you're in Reno, Sacramento, even Salt Lake. I mean, all of these people are benefiting from the fact that tech companies just need to expand to someplace where it's cheaper and it isn't that difficult to train people up. And we're learning a lot about building a good, a good quality of life.
Jack Heald: You're talking about a way of thinking about community building in order to make this work. It requires people with a vision for a particular locale. So, this couple that you referred to in Fresno walked in and had a vision. There's certainly plenty of capital. There is no shortage of capital.
It seems like there's an awful lot of money chasing very few deals, but ultimately deals really are the product of a creative, fertile imagination. Which means people who are able to think about what do I want my future to look like? And then say, we're here now and this is where I want to go and here's how we're going to get there. Talk about the types of people that need to be thinking about Opportunity Zone. Does that make sense?
Peter Hirshberg: Yeah. Really, what we're talking about here is, notice how this almost immediately gets us into having, wanting to have kind of a diverse group of people around the table who might not be talking to each other normally, right? Like Jake and Irma.
So, first of all, some people just show up as innovators with great ideas. And this is in any organization. Like I just worked with Best Buy on innovation and the most innovative people who were doing really transformational things. There was like one who was doing stuff in kind of channel development in their stores and there was another person who was a developer. They happen to be the two people with the best ideas. Their title was not innovation, then they would just start popping out of their head. So if you put those two in a group and had the look at it, you had innovation leadership and you infected other folks.
And you see this in government also someone just pops up is innovative. Okay. In the case of Fresno, these two people were great and then they were able to sit around the table with a community development organization with probably a foundation with a developer that had a building. They had their own thoughts about education and they kind of put a team together and that's what, what led to that.
I think in a lot of these cases it's a combination of a developer, patient capital and other team members that are kind of clever coming up with these things. And this is one of the reasons that if you have a national fund, you clearly need to be working with a local partner that has vision about this.
And part of the problem here is typically a lot of developers get money from a private equity source. And the private equity source says, here's this narrow range of things you can do. And that narrow range of things you could do could be a medical dental center or it could be a small mall or whatever, is not necessarily the kind of community development thing that these other folks have in mind, and I think is coming next. Right?
So, part of what we want to do in the opportunity zone space is find really good examples of this and promote it. a lot of the people who did early work, like I think up Vallejo, I know developers up in Vallejo, who kind of came up with the first Opportunity Zones. And they're now promoting really interesting mixed use community developments there. If you look at the work that Ross Baird is doing with Village Capital in Texas, I'm sure what he's doing is attracting people around the table so you end up with these very thoughtful kind of developments.
And work that we're doing in San Francisco, and San Francisco is a big wealthy city. But we have a couple of Opportunity Zones on one of the largest plots here is largest pieces of undeveloped land is India basin. And the thinking in that is, I mean they have a very thoughtful developer who's working with a lot of partners. And the thinking there is, how can we in San Francisco build a thriving mixed use community but with community space and with arts? And how can that community itself be home to a lot of Opportunity Zone companies?
So, we're imagining that there will be startups in the Bay Area tech startup kind of places that want to be in an Opportunity Zone, so they get the 10-year tax benefits. And wouldn't it be cool if a bunch of those sitting in the same development are, part of town as a new, rich, mixed use development that was also training people?
Because this would be kind of like just as Y Combinator was a whole bunch of startups getting together, doing innovative stuff, this would be like all the OZ people in San Francisco, in an OZ, with people living in an OZ, that would be a cool community. So this kind of thinking I think is beginning to pop, and as you can see it's of a kind different than just a particular project.
Jack Heald: Yeah, it really is.
So, let's talk about Maker City, the organization itself. What do you bring to the Opportunity Zone space? How can folks take advantage of what Maker City provides?
Peter Hirshberg: First of all, if you want to learn about the community development work and the smart city work that we've done, we had collaborations with both the MIT media labs, city science group and the MIT sensible cities lab.
I'm a senior fellow at USC. We've written a lot. You can see there's kind of a very rich set of conversations that we've had and work that we've done in community about the work that we get in San Francisco with urban prototyping. And it's at makercity.com.
In the Opportunity Zone arena, it makes sense to hook up with investors and go do projects. So this is where the Catalyst Opportunity Zone Fund comes in because I'm part of that team. This is a fund out of San Francisco and our team has on it myself and my business partner, Marsha. So we're kind of people that think through platforms and urbanisms.
There's another guy on the team who's leading the software effort. That software that's helping us identify opportunities and Opportunity Zones. And then we have a bunch of investment professionals. And this fund our thesis is we think we're going to end up with about 60% real estate, 40% opportunity companies. And the reason is we think there's a synergy at the Catalyst Opportunity Zone Impact Fund between creating opportunities, creating operating companies, for which then Opportunity Zones will create a market, right?
So, whether it's of coworking or urban agriculture energy, training. There are number of these businesses that we think will need to be replicating themselves in multiple Opportunity Zone.
So, one way to engage us is to take a look at the fund, the Catalyst Opportunity Zone Impact Fund, and you can take a look at what we're doing and that's the fund that is actively looking for good projects and communities. And we're also actively investing in operating companies. And we're trying develop the software that we want to make available more broadly to help people efficiently find opportunities. Because capital for startups tends to aggregate in too few places. We're trying to smooth that out. So that's one key way you can engage with us.
Jack Heald: I want to talk about how you got to where you are because I think the more we know about the people that we're working with the more ideas that sparks about ourselves. What are the key events in your life and the key people in your life that brought you to where you are today?
Peter Hirshberg: Very early in my life, as I was growing up in New York, I had internships with the city of New York Economic Development Department. I think I had two different ones. I was working for the New York City Office of Motion Picture and Television that was trying to bring movies to New York and I was in high school at the time. And even younger than that, I had an internship with the human resources, which is basically the welfare department working in a TV show in New York.
So, I kind of grew up in New York kind of largely in the late seventies at a time that wasn't so great for cities of being in the middle of watching them go broke. And just seeing...
I was a political science major at Dartmouth. And when I went off to Washington after having studied political science, my experience of working in the government was a little bit like playing a video game where no matter what you did with a controller, it didn't seem to affect what was on the screen.
Peter Hirshberg: Now, if you know anything about tech, this is called bad user experience. And basically you stop playing that game because it's not very rewarding. So, I stopped playing that game and I went to work for Apple. and I was at Apple for nine years. And I was pioneering a lot of stuff that we were doing early on in networking communications and our business marketing and our enterprise work. And then what led to the Internet stuff.
I was staying in the kind of private industry world until about 10, 12 years ago. All of a sudden, cities started opening up their data and cities started becoming a platform. So very particularly San Francisco, I think literally 10 years ago this week, opened its data. That is to say the crime, the transportation, the health data opened up. And I have an arts organization here called Gray Area Foundation for the Arts. And we sit at the confluence of art and data and technology and code. And we had a hackathon for people who work in the city. And all these people came in to start looking at city data and could they build an app that could help people in poor parts of town find where fresh food was. So they weren't in a food desert. And could we help people get services faster?
Jack Heald: Hold on. Art and data. And people just come in, here's the data. Hey community, come look at the data, tell us what you can do with it. Is that what we're saying?
Peter Hirshberg: Yes. When San Francisco opened up its data, you then had the possibility of, you could get data about say where the buses were. And then you could build an app that we could predict when the bus would come or if the buses were... We had one problem where the people who worked on the buses had no idea where the buses were that they were supposed to go work on when they're broken. But we intercepted the public data for where the buses were, turned that into an app for bus people.
This is a long way of saying that we opened this up and we said to people in the community, you can come in and make stuff to make our community better this weekend. So people literally... the way a hackathon works, it starts Friday night. It goes till Sunday. People sit around and have pizza and they self-organize the group. And three people are interested in health or they're like, we want to build an app that can help people route around food deserts. And somebody else wants to build an app to help people find public service, someone else's interested in, using the data to help people find the bus faster, whatever it is. And by Sunday night they have a working small version of something.
But the point that astounded me was that like 150 people showed up from very different communities, software developers, hardware developers. You know, people who wrote about urbanism, community activists, all this talent formed into teams and they started messing with the city. To me that was an invitation. So that got me very interested in cities, because it was a city was a thing you could do. It was a verb.
In the 1960s people protest to the establishment. I noticed that 10 years ago they wrote to its API. There was a problem. You were maker, you just started working on it. Now there's unintended consequences to this. You make Uber and suddenly you mess with an entire towns, traffic. You make Airbnb and you suddenly messed with everything having to do with rental policy in a town. Right? So I mean at some point you need to put guard rails on these things. But the point is it's pretty powerful because the city gets opened up.
So, my own path was that became interesting to me. I was doing work with MIT sensible cities lab on, on all of this work with data. You can look up a talk that I gave to the UN General Assembly. I worked with the United Nations and how all of this data around the world to help them map slow moving prices.
Peter Hirshberg: So we know that an advertising, I can watch where you click and I can make my ads much more efficient by seeing how you behave in the Internet, a lot. We know Cambridge Analytica, we know that we can do that too much. It turns out if you look at cell phone data - assuming you're allowed to - you can tell is a population getting sick or are they getting poor? Well, what's a disease vector? You know, if population's getting sick, cell phones in a building stay in the building. They don't go outside because they're getting sick. You know that two weeks before public health physicians. In parts of towns in say India where you're topping up your phones, you don't have a monthly plan, you have to keep contributing money to your phone. The rate at which people do that will predict a financial collapse.
So, we worked with the United Nations on these signals will give you a pre-warning to a crisis in your town. And to me this was fascinating. This was predictive stuff about how to build a better community. And that's what got my head into this community stuff.
And then kind of all of this stuff around urbanism, which is just a fascinating system. And then that led to Opportunity Zones and you can follow all those, right? There was the book Maker City goes into a lot of this, right? We took a whole deep dive. We spent a bunch of time at the apps layer. At some point, we're right after this, that and the other thing. And then we decided that the battle of the APPS was over. What happens if you actually deal with real physical space? What happens when you get a block in San Francisco and you're asking the SRO community in one side of the screen and the Hispanic kids on the other side of the street, the tech bros down the street to collaborate on what would you like the street corner to be? Right?
And now you have a very vibrant conversation and they have to actually build a prototype of an experience on the street in a month. And so that was another form of this style. this is in the book, the Maker City.
There's another book I did call From Bitcoin to Burning Man and Beyond that takes a look at Burning Man as an experimental pop-up city, and that gave us a lot of experience here.
Jack Heald: Just amazing, fabulous, totally thought-provoking conversation. I think we've got tons that people can take away from this and do some exploration.
Peter Hirshberg: I want to add one thought to this. So, one of the things that impresses me about the Opportunity Zone space is I think the more diverse types of capital we bring in, the richer the work we can do. It's a truism in building an enterprise, you want diverse people around the table. We've talked about the fact that if you're doing community development, you have all sorts of perspectives of people you want. Real estate capital thinks in one particular way with one kind of return with one kind of risk preference.
Here in Silicon Valley, people with capital gains aren't as interested in a medical dental center. They're interested in doing change. That could be a platform that could make significant difference for years, right? They're interested in building companies that make housing that is ultimately less expensive. They're interested in building systems that might bring renewable energy to communities.
I think we want as part of the Opportunity Zone, stack people with that kind of risk preference together with people with traditional real estate risk preferences together with people who might have philanthropic capital. And when you have all of that, you can attempt more.
One of the interesting things about running a fund in San Francisco is you have around the table very traditional real estate developers from across America. And then you have disruptive people who were part of creating Uber or Slack or Airbnb. And these are people who have kind of big ideas in ways they'd like to transform America and they're willing to put capital to work. But you want them to sit around the table with the community development person from Atlanta or the developer from Sacramento who's grounded in that community's needs. I think in that tension, that creativity, you're going to get something new when American needs something new.
Jack Heald: The ingredients that go into making that particular stew taste delicious are things that individually don't seem to get along. And you know, learning how to have these conversations with the people that we don't normally talk with will make a huge, huge difference.
Peter Hirshberg: We've touched on a number of things and any one of these could be a deeper conversation with any of these projects or how the operating companies are going or the different types of capital. I think exposing to your audience these different actors and how we think is what's going to build a better community. And we'll take this program, which is only going to be what we all make of it. Something that'll help bring a frontier to America again.
Jack Heald:Well, Peter, any last words for us before I let you go?
Peter Hirshberg: Jack, join us in the journey. Take a look at some of the work we've done at Maker City and at the Catalyst Fund. And I think the next step is how we all collaborate on great projects. So the next time we talk we can start seeing some of the contours of what we didn't expect to see come out of this program.
Jack Heald: All right, well I will remind our listeners that this contact information will also be available in printed form on the website. Peter, thank you so much for taking some time with us today. This has been for me just a fascinating and intensely thought-provoking conversation.
Peter Hirshberg: Jack, a pleasure to be with you and excited to kind of explore this new opportunity for America.
Jack Heald: Absolutely. So, tell us first of first a little bit about Maker City and then we'll dig into to how all that applies to our audience in the Opportunity Zone industry.
Peter Hirshberg: Great. Jack, are you at all familiar with the maker movement or the maker fair or any of those kind of ideas that came out of the Silicon Valley world in the last 10 15 years?
Jack Heald: I am, but I am not going to make the assumption that my audience is. I'll ask you to talk about that.
Peter Hirshberg: So, when we came up with the word Maker City, we really have to some two things. So we began noticing in the last 10 or 15 years that people in cities were really beginning to develop new economic solutions as, as the economy is changing and as manufacturing was leaving, it was exciting to see cities like a Louisville say, here's what we need to focus on. We need local manufacturing around appliances because we're really good at that and we can actually prototype and speed up the process there because we had a GE appliance plant there and our people who they go to that we can spin up industries around the logistics because we're good at that.
And it was the process of city's beginning to learn what they were good at so they could have unique 21st century economies that were picking up on tech but just didn't copy say with Silicon Valley was doing.
Peter Hirshberg: So that was the concept of, of city. The maker movement really comes out of this whole notion that we kinda grow up in a world where we don't know how things are made. And we don't generally make things. So the maker movement was all about tinkering, discovering, exploring. If you've ever been to a maker fair, you see kids are learning all forms of coding and making drones and making wearables. And it's really kind of how do you integrate science, art and technology into education, which then leads new forms of manufacturing. And there's a maker fair, there's a maker magazine. And that whole movement very much was about connoting agency or the sense of being able to accomplish things among students and young people and people in industry. And then about 10 years ago as city started opening up their data, I started noticing that people were actually solving problems and making things within cities.
Peter Hirshberg: When San Francisco opened its data software and hardware people, urbanist, people came in and they started creating solutions in cities. It was an invitation of it's just like, well, now we can build things to keep the buses operating on time. We can build apps that monitor how the police are doing. Uh stuff like this led to Uber and Lyft. So it was this process that drew people into solving problems in cities and gave a sense of agency and capacity to kids. And to me in the 21st century, that's a form engagement and democracy that goes a lot more than just voting or complaining. It says you can be a maker in your city and you can learn a whole new set of skills. We ultimately decided that the role of a Maker City is to prepare its people for times of technological and economic change because we both were very big change in the economy. That's kind of what leads to populism and a certain amount of fear. If cities can help lead that kind of change they're going to attract more talent and they're going to do better. So that's what a Maker City is.
Jack Heald: This is suddenly a much bigger conversation than I'd anticipated. You're looking at addressing the needs that have come about through fundamental shifts in how we operate, as a people, as a culture.
Peter Hirshberg:And you can see why if you're doing that kind of work right. Then when the Opportunity Zone program comes up, you realize, oh, this could be a canvas for an awful lot of good ideas and experimentation and you immediately start thinking, well, sure it's going to be real estate and we're going to redevelop you know, properties downtown and we're going to have a tax advantage way of working on a parcel, but then you start to think of various operating businesses and almost a full stack of things you'd like to see in cities. Wouldn't it be great if we created workforce development businesses that sped up the Skilling and was less expensive than the mess we'd gotten to an in colleges and the Opportunity Zone mechanism created demand for those in lots of cities and then we could create companies to populate those.
Peter Hirshberg: This could be a mechanism to bring fundamental change, but that's only going to happen as you point out, Jack, if you have kind of a broader vision of this and then you start pulling together capital and entrepreneurs with a broader vision and then you might start doing something cool. Yeah, and you know, in my story I went from being, I mean this, we can get into this in the call, but I went from doing ad supported web stuff and early social media companies. And then one day I got enthralled with the city as a platform. This had to do with a lot of the early IoT and how data about cities. And that's how I ended up here, right? So I found the city of platform, but I have a tech approach.
Jack Heald: Well, so let's talk, let's pursue that line of thinking real quick because you know, typically I'm very tactically focused in this conversation. What is the specific thing you are doing in, in Opportunity Zones? How does that specifically apply to the goals of the Opportunity Zone and blah, blah, blah, blah, blah. And I want to take a bigger approach, more of a strategic approach from that phrase that you just used cities as a platform for those in my audience who are not software developers who aren't used to thinking in what a platform means. Expand on that phrase "city as a platform." And then let's go from there. Cause that's not really an idea.
Peter Hirshberg: Sure. The concept of the platform really comes from you know, largely the early personal computer era. And then with Web 2.0. When Apple II or the Mac or the IBM PC came out, it was a platform. IBM didn't have to do all the work. There were dozens and dozens of software developers who built services that lived on top of it. By the way, we stole that concept from real estate because if you have a city, the city doesn't build all of it. It sells off parcels and people go build stuff. However, when it comes to government, everybody just assumes that the school system or the transportation or how you pay your taxes. All of that stuff is done by the government. The concept of a platform is these could all be open services and people could contribute all sorts of capacity to cities because it would share data and you could build on top of it.
Peter Hirshberg: So that's really the concept of the city as a platform. What that does is it invites in all sorts of people with good ideas who are entrepreneurs or NGOs or whatever to start coming up with solutions that could lead to a better world. So internationally you'll see all sorts of cashless forms of money largely taking place in areas like Africa to meet the need. In other parts of Africa, you see people engineering, toilets that don't need to have sewers. So you're doing infrastructure lists, infrastructure. You're not relying on the city to do it. You have all sorts of entrepreneurs or MIT coming with that here in San Francisco. The very fact that they, it was opened up, it led to Uber and Lyft into all sorts of transportation companies that popped up that had nothing to do with the government. And it also leads to the use of all sorts of open data that lets us monitor the police, understand conditions and such.
Peter Hirshberg: So we, we think this, this concept of sitting as a platform goes back 10 years, largely to the web 2.0 world. The thing that I noticed when we started having hackathons and working with Code for America and doing work in San Francisco is it brought lots and lots of people in who were interested in solving and deploying problems of cities down to the fact that we live in San Francisco on Market Street, which is our kind of main drag and it goes on for a couple of miles. So when we wanted to redevelop it rather than just have a plan presented in a room to the community, we invited architectural students, artists, designers, community people to build prototypes. So we actually changed the city planning laws. We had a hundred prototypes up for several days. Everything from art projects, community libraries to bicycle repair things to kind of fun stuff that you would sit on and move around.
Peter Hirshberg: It was very colorful, almost looked like Burning Man. But the idea was we wanted the whole city to start creating what a downtown might look like. And that gave us enough data on how people dwelled and interacted. When we went off and built permanent structures, we knew a lot more. We had gotten the community involved. We've run lots of experiments. Classically in the tech world, you want to fail fast, try something. If it doesn't work, try something else. Well, you don't want to do that in the city government because you're not supposed to fail. And if you're a developer and you're building a building, it's up for 75 years. But if you allow people to prototype and experiment and do stuff over successive weekends and physical space, you'll learn a lot. So there are all of these things that kind of both engaged people and taught us stuff, and let us work things out.
Peter Hirshberg: So that's broadly what city as a platform has meant. And it came out of the Web 2.0 world where particularly there were services like the Google maps API. Now you can build an app that just knows where it is.
Jack Heald:So, follow that line of thinking, that philosophy into the Opportunity Zone. So, we're talking about specific census tracts within a region. We're city focused in this conversation. Talk about the urban development, follow that, that philosophy, that kind of reasoning into the Opportunity Zone. And let's just brainstorm and visualize. How did you see that working?
Peter Hirshberg: Well, so one interesting to think through would be, in the tech world we talk about a stack. It could be the network stack, which is you've got the physical stuff like that cable and then all the various protocols that go through and you know, ultimately get the data going back and forth and you've got the screen or you've got a bunch of development tools. In a city, think of a stack of things that you might want to invest in with Opportunity Zones that you could invest in and make money at. You probably have on the bottom, obviously real estate and placemaking.
But then there's another layer you could invest in which is perhaps infrastructure like broadband or like local energy, renewable energy, local grid. these are things that if you invest in them in 10 years, the community can own them, right? So, you're the people who invest in them as a 10-year fixed asset, at the end of 10 years they might be getting dividends, but at the end of 10 years they sell it, they don't pay a capital gain. It can be structured as a little... The community owns it and now the community is left with infrastructure that it owns.
Peter Hirshberg: So it doesn't have to pay as much for that kind of stuff.
Jack Heald: There's a different idea. I haven't run into a private investment in infrastructure with an exit plan specifically targeted at the community itself.
Peter Hirshberg: Now, this is a very big idea. This is essentially a version of cooperative ownership, right? So, you have co-ops that are out there, but the reason this is a particularly big idea now, and by the way, this can happen for real estate assets. It can happen for what I've been describing, our fixed assets that can be part of infrastructure, but I'll come back to that. But as we go through a stack here there are other things. For example, urban agriculture, um basically farming without soil and we spent a lot of... It's very inefficient process to like have a cow eat beef and then eventually there's a piece of meat.
Peter Hirshberg: Um, as you know, the world is moving very quickly towards more efficient forms of agriculture. We use hydroponics. So you manufacturer things locally. When you add machine learning to that you can create a very dense, rich, very nutritious set of stuff in small space. And then you don't have the big supply chain of having driving into the city. I think a lot of us believe that there will be a lot of urban agriculture. And so these are factories in cities that make people healthier. Well, that's a cool thing to put an Opportunity Zone because often the OZs need businesses. They can be in food deserts. If you're going to site a factory in a city, you're probably going to go to an OZ because it's less expensive. And if you're building an urban agriculture operation, you're not moving. It's gonna stick there for 10 years.
Peter Hirshberg: And an entity like that probably has a pretty good cash flow. So your investors are getting dividends. And then over 10 years there's the longer-term capital gains. So, there's a range of these kinds of things that we think can be operating companies that are incredibly synergistic with Opportunity Zones. And as you go up that stack it's pretty clear that things like training and workforce development Opportunity Zones tend to be in places where you need to train people in what's next. And you need to ride down the experience curve of doing that. And so you're going to be creating demand for those businesses. And a lot of those businesses are being created today. You'll see them as coding academies. There's just so much experiments going on in education. We'll get back to the question you were asking about cooperative ownership.
Peter Hirshberg: I think there's a lot of work to be done here in financial innovation. So, for example we have a housing crisis because housing is really expensive. we also have housing crisis because, well not only is it expensive because of the price of housing in a mortgage, it and the fact that if you rent something then you're always owing someone money. So it's tough to get out. But also the cost of developing housing is expensive. So how do you attack that? There are companies and Opportunity Zones that are doing factory built apartment building. So, there's a place up in Mara Island here in California called Factory OS. They knock out - for about 60 grand - a full floor of an apartment building, can be stacked five floors high. That means they can 40% less time, 20% less costs, create a building.
Peter Hirshberg: There's a number of companies that are working at how can you put up a development in the community in just a couple of weeks, radically whacking down the cost. And these can be very useful in places where you have workers where they need housing or schools, but also an Opportunity Zones. Once you put these things up today we have rental, then you don't own anything and keep owing the man money. Or ownership. But then you need down payment. Can we do something where you have the rights to live there, but you're selling off some of the ownership capacity. So that might be a co-op kind of model, but you would be paying less. You get to live there, but someone else might be getting the appreciation. So, there are all forms of financial innovation that are being driven by the fact that the economy's changing.
Peter Hirshberg: But by the fact that we've had all this runaway wealth concentration simply because big companies like Google get bigger and big cities get successful. So you reverse that, not with socialism, which is just giving everything away or populism by closing the gates. You reverse it by creating richer, more vibrant local economies where you can keep more of the wealth in the economy. That's why I say financial innovation and in an Opportunity Zone you're going to pretty immediately invest in the real estate and workforce development, the operating businesses. But as you start looking at this, you start thinking of an overlay of can we have local economies? Can we create greater rewards for people who buy locally or grow food locally? Economists talk about this as being able to understand externalities and price them and keep them in the system. Technically we might do that with a local currency or barter or beginning to use blockchain. There's a lot of experiments that are out there in it. But ultimately at the community level, the idea is to build a community that is stronger and keeps more of the wealth of the community and is less extracted.
Jack Heald: Man, this is really, really stimulating my thinking here. After the we stop recording, I want to pursue some things philosophically because this is just brilliant.
Peter Hirshberg: And by the way, a thing I should add here is when you think about the Opportunity Zone conversation, you hit it a moment ago. On some level, this is a deeply operational conversation, right? It's in the weeds with the taxes and the treasury rulings and exactly what did they mean by this and is it what happens on the 180th day and do I only have 33 months, right? So, on some level, you're sitting in your eyes are rolling with this, with all this compliance stuff. And then on another level, because of the way it got started, most of what we talk about looks like some form of real estate deal. And when that happens, you get a real estate investor who tends to be relatively risk averse. So don't forget, I'm kind of a Silicon Valley innovation guy.
Peter Hirshberg: I like trying lots of new things. Real estate developers like things that don't go wrong because that's a lot could go wrong. And you know, you've got time and money and it's a project. You show up with a real estate developer and say "I have something new, I've got a new piece of software and how to build your building." That might be okay. But the minute you show up and you say, "I'm going to have a new construction technique and we're going to 3-D print this and were gonna reduce the time of that, we're gonna have co-op." I mean you've put three new ideas on the developer and their head explode. There's a form of this and it's very conforming real estate kind of deals. And then there's a form of this where you get to start to experiment with what's new and what's different.
Peter Hirshberg: And that's the reason that we're interested in having part of this operating companies in Silicon Valley capital. And frankly people with a bigger risk preference who want to try significant new things and communities that want that. And then if there're good ideas from that, they can jump and start seeding other new ideas.
The other point here is a lot of people are thinking about this. If you go to the Beck Center, they're thinking about this, the Rockefeller Foundation is thinking about this. Sometimes part of the problem is we have very distinct communities in this bucket called Opportunity Zones. You have think tanking people but they don't really know what it's like to get up every day and be a real estate developer and having to manage something. And you have cities, mayors that never heard of a capital stack. And you've got developers that wouldn't understand your investors, that wouldn't understand community development if it came after them with the protest sign. How do you work through a lot of that?
Jack Heald: I love being able to, to step back one or two layers of abstraction and see the shape and the outline of a problem rather than just dive down into the weeds like you said. And this sounds to me like a philosophical approach to a cultural problem that has frankly stymied the best and the brightest amongst our public thinkers for a long, long time.
I was gonna ask you to connect the dots for us between maker cities in the Opportunity Zone, but I think you just did that.
Peter Hirshberg: Yeah. Part of where part of where Maker City came from was, during the Obama administration, I was working with the president and his office of Science and Technology Policy team. And we convene a hundred cities. We were convening cities on economic development. We were convening cities on things like, can you develop STEM, can you use mass manufacturing, create jobs? And so we had all of these cities show up. And what was interesting was, and this is 2014, they were all developing or showing community development strategies that were dealing with changes in the economy, right? Because if you were in the rust belt, you kind of realized that your manufacturing businesses were going away and you needed to retrain. Or if you were in Louisville you had to figure out what you were uniquely good at.
Peter Hirshberg: And then I did a book on this. We did a book on this because it was really interesting, all these things that were going on. And I wanted to write a book to the various innovators that trying new things. Basically saying, you're not alone. Here's what other people are doing, here's a playbook. And so out of that came, here's this whole community of people trying new things. And then the question is always, who's going to pay for it? Like how would you actually make this go forward? When Opportunity Zones came along, it's like, oh, money is going to show up here. This is actually a thing in which capital will try to work itself out. There were particular locations identified and then in each of those locations there's a little game called, we're a census tract. What could we do about this?
Peter Hirshberg: So then it became very interesting to take kind of that similar group of people and they showed up in this Opportunity Zone conversation. And then it became okay here of the things our community would like to do, which pencil out, where does the capital stack need help? What kind of capital could come in? What kind of entrepreneurs will be willing to try things in this community to get that tax benefit? What other benefits could we stack up to maybe make something work out? And the fact that this program, which you know, everybody agrees is it's good program, but it's not the be all and end all. It's kind of like, classically people say, if it's not a good deal, the Opportunity Zone won't make it a great deal. But if it seems to make sense, you will lubricate it and reduce the cost of capital in that Opportunity Zone.
Peter Hirshberg: But because it pulled so many things into this conversation, it sped things up. And if we can use it as a mechanism to accomplish what we were talking about, but now hopefully at scale.
And the other point is it starts to give a complexion of direction to the program that has a bigger vision. As you know, this is a program without a lot of federal guidelines. It was basically like here's five rules. And you could read them as, okay, now I was going to develop this building downtown. But I can shield my investor's money going in. And if I wait long enough I want to take gains on it. Or it could be how might I try a bunch of these new things because I've got all these people around the table. So, part of what we're trying to do is push that frontier.
Jack Heald: I liked that idea. Rather than taking the hyper conservative, long patient capital approach to the Opportunity Zone, - which it seems to be designed for in some ways - take the Silicon Valley, try a lot of things, fail fast, iterate approach wrapped inside the Opportunity Zone. And that of course is the kind of thing that points to operating companies rather than to real estate.
So how do we go about how do you go about finding these high potential operating companies, these high potential ideas? I guess to a certain extent, this is venture capital kind of work. But there's more to it than that. We're talking about operating companies.
Peter Hirshberg: One question is, what are the kind of operating companies are we talking about? Some could be local businesses that are simply overlooked by national capital. So most venture capital in this country flows into four or five cities. It's in San Francisco, San Jose, Austin, New York Seattle. the venture capitalists just famously overlooked much of the country. Steve Case is an exception to that. But Opportunity Zones give us an opportunity to go look for interesting businesses. At the Catalyst Opportunity Zone fund that I'm part of, we have software that they called Paragon software. And we've ingested all sorts of variables and data to try to take a look at where are their operating companies? Where are there innovation centers, where are the locations where companies have exited and have particularly good numbers? Where are they surrounded by universities.
So, if you start sorting through all of this, you start surfacing interesting opportunities. One thing is to basically look through the data and look for companies that have been overlooked or look for places with talent to create really good conditions. Another is to start thinking through what are the kinds of companies that might be a good match to an Opportunity Zone? Well, for a company to be in an Opportunity Zone, half their people have to be in the Opportunity Zone. So you kind of would like a company that doesn't want to get up and move one day, two a not-Opportunity Zone, because that would mess up the benefit.
So, there are companies that have fixed assets, right? Factories. So this company called Factory OS that builds housing. They actually have a big factory on Mara Island, which happens to be an Opportunity Zone and they turn out floors of housing. And company's probably going to expand because they're going to have to build housing in other parts of the country. So that's a company with factories. That makes sense.
We're looking at companies that are doing next generation clothing manufacturing. Typically clothing is outsourced to overseas. It doesn't have a lot of automation component. One of the companies we're talking to wants to set up in Los Angeles and bring a lot of robotics to the preparing of the clothes. You'd still need humans to sell them.
But the point is you could have customized, on-demand clothes so you don't have inventory holding costs. There's a lot of waste in clothes because half of it gets thrown out because it's not bought. If you can eliminate that, automate it, and then hire people and stick something in an Opportunity Zone, there is a factory, there's a business going to be good for the community.
We've talked about renewable energy. not of people talked about the fact that you can put in say a hundred kilowatts of generation. 50 kilowatts of battery. Put that into an Opportunity Zone. And essentially in that community, you're reducing your reliance on the grid. That should pay off pretty quickly because you're not paying peaking money.
And there's all sorts of ways of, there's all sorts of issues about how you do that. Are you doing that in the individual property as a co-op within a community with a group. But you know, there are enough developments and projects that if we can have several buildings, it starts to work.
So those are some of the kinds of businesses. Urban Agriculture is one that we mentioned. You're also gonna need mainstream businesses. In order to have a thriving community, in addition to all these businesses, you're gonna need your barber shops and your corner stores and your fresh fruit and your cafes and third places for people to go. So ultimately you're going to want to see a mix of operating businesses that are main street businesses that serve other workers and make it vibrant kind of traditional startup businesses. And then some of these other, I think of them as infrastructural or businesses that are gonna make cities great in the 21st century. Urban Agriculture, energy, housing production, that kind of stuff. and these are all possibilities that I think economically work out and make communities more vibrant.
Jack Heald: I love this. I'm thinking about a different way of approaching it, not just investing in Opportunity Zones, but thinking about how to create the types of communities that we want in our Opportunity Zones. Thinking of it as a platform changes it into thinking of all the layers of the stack. And that tends to open, at least for me, that tends to open up the thinking about the types of possibilities that are available to a maker or an investor or developer.
Peter Hirshberg: And one of the lovely things about this I think is that you know, cities grow organically. So sometimes people have ideas of whole new cities, right? China builds a whole brand new city as a whole idea. Or, you'll see developers that they want to pop up a whole city. It's difficult in time. You've got a lot of approvals to pop up a whole city.
One of the interesting things about this Opportunity Zone program is it's almost like Wiki city development because you're going to have one form of capital that's coming in and doing commercial and others is going to be doing residential at the same time. Someone else is going to be coming in and doing these operating businesses. it doesn't really come from a master plan, but it does come from possibly a community planner in the Opportunity Zone orchestrating this. Or for multiple types of capital kind of getting together and attempting to do things all at once.
Peter Hirshberg: And so, Bruce Katz talks about this as a new model of community development that's more bottom up than top down. But one of the important things to point out is there are real advantages to doing several of these stages all at once. this is famously what Ross Baird calls his "street corner thesis." He has company called Village Capital. And his approach to Opportunity Zone investment to create a small regional fund, say a $25 million fund, go into, I think he's going to work in Texas. And I think his pioneering work was in Louisville. Go into a kind of a depressed part of town that has a street corner. So you know, you can afford to buy it because it's a street corner that is not performing particularly well. There's not that much industry there or even housing if you just bought up a street corner and improve the housing stock.
Peter Hirshberg: Well with the local community to be able to afford it. And if you actually did improve it a lot in the local community couldn't afford it, maybe you just gentrified it and other people moved in. So you have to remove the housing stock at the same time that you invest in local businesses. Well, he's a venture capitalist, so he actually bought a space and he put his startup businesses there, moved them there. So now there's customers for the day. They can live there. They're part of the community and they can be customers for the food stores, the barber shops, the coffee shops, whatever. So he's putting in the local businesses and he's creating some capital for the local businesses, the high growth businesses, the commercial industrial space. And if we dig up the facts about him when he did this, I think this was his original test was in Louisville, Kentucky.
Peter Hirshberg: But when he did his original work on this, when 20% of the population had been gone, I think within two years he had spent about $4 million. This led to eight residential properties. It was renovated. He hired formerly incarcerated or homeless people. They built four commercial buildings with local businesses. And then he had five venture funded startups. And this was in a community. one of these communities that the highway had come through and hollowed out and it was there was like a quarter of the people were unemployed, they were half below the poverty line.
And the question was, what do you do about this? And his answer was to come and do all of this all at once, right? You did all four of those things all at once. And that's kind of this new approach to bottom up or Wiki community development.
Peter Hirshberg: Some of us call this a template for Opportunity Zones. It's a template in the sense that this is a particular type of investment behavior that should work. Because if you do these four factors all at once and you've made the community wealthier, you're more likely to have a success on your hands and that that's something that ought to be scalable and packageable.
Another example of this in Fresno. So, if you know, Fresno, California it was kind of a big agricultural center town. But then in the fifties, sixties, and seventies, as the freeway came through and as developers... You had white flight, right? People just moved to suburban tracks and then the interior city kind of collapsed. And then the city developed this view of itself that it was a failure, I think thought of itself as America's least functional city or something.
Peter Hirshberg: And you had city leaders who were like, nothing will work. And then you kind of had a, a generation of millennials who came in and didn't buy that story. So Jake Soberal and Irma Olguin came in and they're like, why can't we create a thriving economy here? And they bought a giant auto dealership and then within a year or so they were training 2,500 sons and daughters of agricultural workers.
So, these were Hispanic kids, agricultural or migrant workers, people who never expected to go in the tech industry and wouldn't even have known anyone in it. But they were training them. But then in his same space, he also had 200 local Fresno startups. So now you had these kids hanging out with the startup people. So those cultures were merging and out of this started to come a community development and that became the core of the revitalizing of Fresno.
Peter Hirshberg: But at its core, the story was changing. They were coming up with a new story and all at once concentrating in a small area, they were doing education companies, starting the new commercial real estate so everybody could have a great place to work.
And then that led to investment in downtown real estate. And that's bringing a place back.
One of the reasons I'm bullish on kind of a number of these Opportunity Zones is America has a lot of good secondary cities that have been hollowed out. But our primary cities are getting so damn expensive that if you're up the road from Silicon Valley, you're in Fresno, you're in Reno, Sacramento, even Salt Lake. I mean, all of these people are benefiting from the fact that tech companies just need to expand to someplace where it's cheaper and it isn't that difficult to train people up. And we're learning a lot about building a good, a good quality of life.
Jack Heald: You're talking about a way of thinking about community building in order to make this work. It requires people with a vision for a particular locale. So, this couple that you referred to in Fresno walked in and had a vision. There's certainly plenty of capital. There is no shortage of capital.
It seems like there's an awful lot of money chasing very few deals, but ultimately deals really are the product of a creative, fertile imagination. Which means people who are able to think about what do I want my future to look like? And then say, we're here now and this is where I want to go and here's how we're going to get there. Talk about the types of people that need to be thinking about Opportunity Zone. Does that make sense?
Peter Hirshberg: Yeah. Really, what we're talking about here is, notice how this almost immediately gets us into having, wanting to have kind of a diverse group of people around the table who might not be talking to each other normally, right? Like Jake and Irma.
So, first of all, some people just show up as innovators with great ideas. And this is in any organization. Like I just worked with Best Buy on innovation and the most innovative people who were doing really transformational things. There was like one who was doing stuff in kind of channel development in their stores and there was another person who was a developer. They happen to be the two people with the best ideas. Their title was not innovation, then they would just start popping out of their head. So if you put those two in a group and had the look at it, you had innovation leadership and you infected other folks.
And you see this in government also someone just pops up is innovative. Okay. In the case of Fresno, these two people were great and then they were able to sit around the table with a community development organization with probably a foundation with a developer that had a building. They had their own thoughts about education and they kind of put a team together and that's what, what led to that.
I think in a lot of these cases it's a combination of a developer, patient capital and other team members that are kind of clever coming up with these things. And this is one of the reasons that if you have a national fund, you clearly need to be working with a local partner that has vision about this.
And part of the problem here is typically a lot of developers get money from a private equity source. And the private equity source says, here's this narrow range of things you can do. And that narrow range of things you could do could be a medical dental center or it could be a small mall or whatever, is not necessarily the kind of community development thing that these other folks have in mind, and I think is coming next. Right?
So, part of what we want to do in the opportunity zone space is find really good examples of this and promote it. a lot of the people who did early work, like I think up Vallejo, I know developers up in Vallejo, who kind of came up with the first Opportunity Zones. And they're now promoting really interesting mixed use community developments there. If you look at the work that Ross Baird is doing with Village Capital in Texas, I'm sure what he's doing is attracting people around the table so you end up with these very thoughtful kind of developments.
And work that we're doing in San Francisco, and San Francisco is a big wealthy city. But we have a couple of Opportunity Zones on one of the largest plots here is largest pieces of undeveloped land is India basin. And the thinking in that is, I mean they have a very thoughtful developer who's working with a lot of partners. And the thinking there is, how can we in San Francisco build a thriving mixed use community but with community space and with arts? And how can that community itself be home to a lot of Opportunity Zone companies?
So, we're imagining that there will be startups in the Bay Area tech startup kind of places that want to be in an Opportunity Zone, so they get the 10-year tax benefits. And wouldn't it be cool if a bunch of those sitting in the same development are, part of town as a new, rich, mixed use development that was also training people?
Because this would be kind of like just as Y Combinator was a whole bunch of startups getting together, doing innovative stuff, this would be like all the OZ people in San Francisco, in an OZ, with people living in an OZ, that would be a cool community. So this kind of thinking I think is beginning to pop, and as you can see it's of a kind different than just a particular project.
Jack Heald: Yeah, it really is.
So, let's talk about Maker City, the organization itself. What do you bring to the Opportunity Zone space? How can folks take advantage of what Maker City provides?
Peter Hirshberg: First of all, if you want to learn about the community development work and the smart city work that we've done, we had collaborations with both the MIT media labs, city science group and the MIT sensible cities lab.
I'm a senior fellow at USC. We've written a lot. You can see there's kind of a very rich set of conversations that we've had and work that we've done in community about the work that we get in San Francisco with urban prototyping. And it's at makercity.com.
In the Opportunity Zone arena, it makes sense to hook up with investors and go do projects. So this is where the Catalyst Opportunity Zone Fund comes in because I'm part of that team. This is a fund out of San Francisco and our team has on it myself and my business partner, Marsha. So we're kind of people that think through platforms and urbanisms.
There's another guy on the team who's leading the software effort. That software that's helping us identify opportunities and Opportunity Zones. And then we have a bunch of investment professionals. And this fund our thesis is we think we're going to end up with about 60% real estate, 40% opportunity companies. And the reason is we think there's a synergy at the Catalyst Opportunity Zone Impact Fund between creating opportunities, creating operating companies, for which then Opportunity Zones will create a market, right?
So, whether it's of coworking or urban agriculture energy, training. There are number of these businesses that we think will need to be replicating themselves in multiple Opportunity Zone.
So, one way to engage us is to take a look at the fund, the Catalyst Opportunity Zone Impact Fund, and you can take a look at what we're doing and that's the fund that is actively looking for good projects and communities. And we're also actively investing in operating companies. And we're trying develop the software that we want to make available more broadly to help people efficiently find opportunities. Because capital for startups tends to aggregate in too few places. We're trying to smooth that out. So that's one key way you can engage with us.
Jack Heald: I want to talk about how you got to where you are because I think the more we know about the people that we're working with the more ideas that sparks about ourselves. What are the key events in your life and the key people in your life that brought you to where you are today?
Peter Hirshberg: Very early in my life, as I was growing up in New York, I had internships with the city of New York Economic Development Department. I think I had two different ones. I was working for the New York City Office of Motion Picture and Television that was trying to bring movies to New York and I was in high school at the time. And even younger than that, I had an internship with the human resources, which is basically the welfare department working in a TV show in New York.
So, I kind of grew up in New York kind of largely in the late seventies at a time that wasn't so great for cities of being in the middle of watching them go broke. And just seeing...
I was a political science major at Dartmouth. And when I went off to Washington after having studied political science, my experience of working in the government was a little bit like playing a video game where no matter what you did with a controller, it didn't seem to affect what was on the screen.
Peter Hirshberg: Now, if you know anything about tech, this is called bad user experience. And basically you stop playing that game because it's not very rewarding. So, I stopped playing that game and I went to work for Apple. and I was at Apple for nine years. And I was pioneering a lot of stuff that we were doing early on in networking communications and our business marketing and our enterprise work. And then what led to the Internet stuff.
I was staying in the kind of private industry world until about 10, 12 years ago. All of a sudden, cities started opening up their data and cities started becoming a platform. So very particularly San Francisco, I think literally 10 years ago this week, opened its data. That is to say the crime, the transportation, the health data opened up. And I have an arts organization here called Gray Area Foundation for the Arts. And we sit at the confluence of art and data and technology and code. And we had a hackathon for people who work in the city. And all these people came in to start looking at city data and could they build an app that could help people in poor parts of town find where fresh food was. So they weren't in a food desert. And could we help people get services faster?
Jack Heald: Hold on. Art and data. And people just come in, here's the data. Hey community, come look at the data, tell us what you can do with it. Is that what we're saying?
Peter Hirshberg: Yes. When San Francisco opened up its data, you then had the possibility of, you could get data about say where the buses were. And then you could build an app that we could predict when the bus would come or if the buses were... We had one problem where the people who worked on the buses had no idea where the buses were that they were supposed to go work on when they're broken. But we intercepted the public data for where the buses were, turned that into an app for bus people.
This is a long way of saying that we opened this up and we said to people in the community, you can come in and make stuff to make our community better this weekend. So people literally... the way a hackathon works, it starts Friday night. It goes till Sunday. People sit around and have pizza and they self-organize the group. And three people are interested in health or they're like, we want to build an app that can help people route around food deserts. And somebody else wants to build an app to help people find public service, someone else's interested in, using the data to help people find the bus faster, whatever it is. And by Sunday night they have a working small version of something.
But the point that astounded me was that like 150 people showed up from very different communities, software developers, hardware developers. You know, people who wrote about urbanism, community activists, all this talent formed into teams and they started messing with the city. To me that was an invitation. So that got me very interested in cities, because it was a city was a thing you could do. It was a verb.
In the 1960s people protest to the establishment. I noticed that 10 years ago they wrote to its API. There was a problem. You were maker, you just started working on it. Now there's unintended consequences to this. You make Uber and suddenly you mess with an entire towns, traffic. You make Airbnb and you suddenly messed with everything having to do with rental policy in a town. Right? So I mean at some point you need to put guard rails on these things. But the point is it's pretty powerful because the city gets opened up.
So, my own path was that became interesting to me. I was doing work with MIT sensible cities lab on, on all of this work with data. You can look up a talk that I gave to the UN General Assembly. I worked with the United Nations and how all of this data around the world to help them map slow moving prices.
Peter Hirshberg: So we know that an advertising, I can watch where you click and I can make my ads much more efficient by seeing how you behave in the Internet, a lot. We know Cambridge Analytica, we know that we can do that too much. It turns out if you look at cell phone data - assuming you're allowed to - you can tell is a population getting sick or are they getting poor? Well, what's a disease vector? You know, if population's getting sick, cell phones in a building stay in the building. They don't go outside because they're getting sick. You know that two weeks before public health physicians. In parts of towns in say India where you're topping up your phones, you don't have a monthly plan, you have to keep contributing money to your phone. The rate at which people do that will predict a financial collapse.
So, we worked with the United Nations on these signals will give you a pre-warning to a crisis in your town. And to me this was fascinating. This was predictive stuff about how to build a better community. And that's what got my head into this community stuff.
And then kind of all of this stuff around urbanism, which is just a fascinating system. And then that led to Opportunity Zones and you can follow all those, right? There was the book Maker City goes into a lot of this, right? We took a whole deep dive. We spent a bunch of time at the apps layer. At some point, we're right after this, that and the other thing. And then we decided that the battle of the APPS was over. What happens if you actually deal with real physical space? What happens when you get a block in San Francisco and you're asking the SRO community in one side of the screen and the Hispanic kids on the other side of the street, the tech bros down the street to collaborate on what would you like the street corner to be? Right?
And now you have a very vibrant conversation and they have to actually build a prototype of an experience on the street in a month. And so that was another form of this style. this is in the book, the Maker City.
There's another book I did call From Bitcoin to Burning Man and Beyond that takes a look at Burning Man as an experimental pop-up city, and that gave us a lot of experience here.
Jack Heald: Just amazing, fabulous, totally thought-provoking conversation. I think we've got tons that people can take away from this and do some exploration.
Peter Hirshberg: I want to add one thought to this. So, one of the things that impresses me about the Opportunity Zone space is I think the more diverse types of capital we bring in, the richer the work we can do. It's a truism in building an enterprise, you want diverse people around the table. We've talked about the fact that if you're doing community development, you have all sorts of perspectives of people you want. Real estate capital thinks in one particular way with one kind of return with one kind of risk preference.
Here in Silicon Valley, people with capital gains aren't as interested in a medical dental center. They're interested in doing change. That could be a platform that could make significant difference for years, right? They're interested in building companies that make housing that is ultimately less expensive. They're interested in building systems that might bring renewable energy to communities.
I think we want as part of the Opportunity Zone, stack people with that kind of risk preference together with people with traditional real estate risk preferences together with people who might have philanthropic capital. And when you have all of that, you can attempt more.
One of the interesting things about running a fund in San Francisco is you have around the table very traditional real estate developers from across America. And then you have disruptive people who were part of creating Uber or Slack or Airbnb. And these are people who have kind of big ideas in ways they'd like to transform America and they're willing to put capital to work. But you want them to sit around the table with the community development person from Atlanta or the developer from Sacramento who's grounded in that community's needs. I think in that tension, that creativity, you're going to get something new when American needs something new.
Jack Heald: The ingredients that go into making that particular stew taste delicious are things that individually don't seem to get along. And you know, learning how to have these conversations with the people that we don't normally talk with will make a huge, huge difference.
Peter Hirshberg: We've touched on a number of things and any one of these could be a deeper conversation with any of these projects or how the operating companies are going or the different types of capital. I think exposing to your audience these different actors and how we think is what's going to build a better community. And we'll take this program, which is only going to be what we all make of it. Something that'll help bring a frontier to America again.
Jack Heald:Well, Peter, any last words for us before I let you go?
Peter Hirshberg: Jack, join us in the journey. Take a look at some of the work we've done at Maker City and at the Catalyst Fund. And I think the next step is how we all collaborate on great projects. So the next time we talk we can start seeing some of the contours of what we didn't expect to see come out of this program.
Jack Heald: All right, well I will remind our listeners that this contact information will also be available in printed form on the website. Peter, thank you so much for taking some time with us today. This has been for me just a fascinating and intensely thought-provoking conversation.
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