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St. Louis is a Positive-Sum City
On the difference between cities playing positive-sum and zero-sum games
Since moving to St. Louis, I’ve noticed that my experience interacting with the ecosystem has been a lot different than when I lived in my previous metropolitan area. The people are different. The culture of the city is different. Everyone I meet seems to want to help me or my business in some way.
At some point since then, I was introduced to the dichotomy of positive-sum and zero-sum games from game theory. Having marinated on this concept for some time now, it occurred to me recently that the difference in this pair is also emblematic of the dichotomy between the last 2 cities where I’ve lived.
In short, a zero-sum game is one where everyone playing is competing for a piece of the same pie. That means, that if I or anyone else cuts a big slice, that others’ slices will inevitably have to be smaller. A positive-sum game on the other hand is one where all water can rise so to speak. Players are more incentivized to cooperate because they aren’t competing for a finite resource pool.
Here’s how I think about this concept in the context of cities —
What makes a Positive-Sum City?
Rather than explicitly criticize Denver, the city where I used to live, I’ll take the opportunity to build up St. Louis through a bit of story-telling and some contrasting to what I’ve witnessed elsewhere.
From my perspective as a development committee chairman in one of St. Louis’s urban neighborhoods, the real estate space comes to mind as one key example of how to build out this point.
Supply makes all the difference
In my neighborhood and many others like it, vacancy of standing structures rests in the double digits, sometimes as high as 50% or more. In St. Louis as a whole, the percentage of unoccupied structures seems to be ~30%. What does this mean for real estate developers? Plenty of supply to go around.
Take this opposite to Denver, where it wasn’t uncommon for a home to sell above asking price in less than 24 hours from listing; It’s amid an extreme seller’s market, and while this could be a fantastic scenario to take advantage of as a seller, as a buyer it was extremely competitive to find something that might be considered an opportunity. Someone looking to invest in this market has to aggressively compete with others for deal flow.
Now that’s not to say that it’s a free for all, walking into anything you’d like in St. Louis, but the optionality and ease of entry is certainly higher. Going back to the idea of how this makes real estate in St. Louis a positive-sum game, this lower level of competition for supply leads to more cooperation amongst those who are investing in this area.
Competitors become players on the same team
Say I’m developer A who’s just bought a row of dilapidated structures on block Z. Then, developer B comes along and does the same, just one block over on Y street. If I or the other developer in this example was to renovate their structures independently of the other, we will likely net enough of a return to justify the endeavor; but there’s another scenario where the floor can rise higher for all players. That scenario requires either cooperation or serendipity. If both developers run through their projects at the same time, this would increase the floor for the value of assets in the area as a whole. This is because street Y becomes more attractive as its neighboring streets become more attractive.
My hypothesis is that players in St. Louis have been observing this effect for some time, to the degree that it’s become more common culturally for groups that would otherwise be competitors to help a brother—or sister—out.
I’ve seen this take form in many ways. I’ve seen neighboring developers bring in the same contractors to run through each other’s projects, getting a better deal for giving a contractor more work. I’ve seen neighboring projects purchase materials together, host events together and even pool resources to invest in community improvements together.
The effects are the same across the board
Despite my specific focus on real estate above, I think that there are many verticals where this is the case. Looking at the start-up ecosystem as another example, I am 100% convinced that my experience between Denver and St. Louis has been night and day.
In a large metropolitan area, the resource of customers may scale with the number of start-ups available to address a pain point of that market, but there’s another resource that I think doesn’t scale at the same rate: mentors. When I came to St. Louis and began getting WAND involved in this ecosystem, I was shocked by the higher rate of willingness for folks in the upper echelons of the community to elevate my business or even take me under their wing. Despite frequenting the same circles, and in some cases even the same events, our company never received the same attention from individuals that could take us to the next level in Denver over St. Louis.
My common sense rationale for why this is the case again goes back to competition vs supply. There’s no question that Denver is a booming start-up ecosystem, in the same way that there’s no question as to whether or not there is a booming real estate market there. But in both cases, it’s a seller’s market and like their housing stock, the attention of a mentor is expensive to acquire and under extreme competition. An alternative theory is that mentors in more dense ecosystems are experiencing some variation of full fridge syndrome. It’s probably a blend of the 2.
You could run through similar stories in other verticals. These are just 2 that I’m most familiar with. Maybe I’m just bullish on St. Louis. The city has been fantastic to me. Does this analogy relate to you? Are you in a zero-sum or a positive sum community? Can answer in the comments below or shoot me an answer on Twitter.
Next week, I’m going to talk about the importance of rituals.