The End of Fun

Could Covid-19 spell the end of the modern urban way of life?

some level, you’ve probably come to terms with the idea that the world we return to will not be the one we left. Many of us will Zoom to work. Many of us will wear masks every year. Seeing sick people in public will make us enormously uncomfortable. Standards of sanitation and hygiene will hopefully be far higher. These changes seem benign, or perhaps even useful. Hopefully, a disease of similar infectiousness and lethality to SARS-COV-2 will be far less disruptive in 2025.

But these improvements belie how markets are fundamentally changing society: As investors scramble toward resiliency and away from risk, the economics of much of the fun of modern urban life will stop making sense. In future years we may see Covid-19 as the end of a millennial Belle Epoque. We will awaken to a darker, more tired world. We will have grown up.

Restaurants will be one of the first casualties of the pandemic. Back in April Gabrielle Hamilton wrote a haunting piece in the New York Times Magazine explaining the precarity of the modern restaurateur:

“[My restaurant] just barely banks about exactly what it needs each week to cover its expenses…in spite of having four James Beard Awards on the wall, an Emmy on the shelf from our PBS program and a best-selling book that has been translated into six languages…“

The unfortunate reality is that restaurants, despite anecdotal evidence to the contrary, will not be profitable or even breaking even anytime soon. As data from states which have ended restrictions shows, lifting restrictions doesn’t fully reopen the economy, though it does seem to spread the virus. Many people, very reasonably, do not much enjoy spending time in places they find dangerous. Some analysts have estimated that up to 75% of independent restaurants could close by the end of the pandemic, devastating American gastronomic culture for years to come.

But what about the long run? What about when the pandemic is finally, mercifully over? Won’t restaurants spring back up? Eventually, the market will correct itself, and good old-fashioned American entrepreneurship will rebuild what was lost.

Unfortunately, this might be a pipe dream.

Hamilton at her restaurant. Image from the NYT.

odern restaurants, as Hamilton notes, have razor-thin margins. They have an extremely high failure rate — conventional wisdom holds that only about 30% of restaurants survive the first five years. Generally, they are a terrible investment. Will investors, terrified of risk after the worst economic contraction in a century, really be willing to plow money into them? Hamilton again:

The restaurant as we know it is no longer viable on its own…You can’t buy a $3 can of cheap beer at a dive bar…if the “dive bar” is actually paying $18,000 a month in rent, $30,000 a month in payroll…

Extremely high volume papered over these issues for a time, but no longer. While restaurants might have survived through proprietors’ sheer force of will and inertia during the Long Boom, their future is not so rosy. It is much harder to rebuild something than merely keep it alive. Buoyed by the longest bull market in American history, we have been blessed by a virtually subsidized restaurant scene, one that offers really good food at meager margins.

It will not return.

The same logic goes for most “fun” things. Clubs across America will shutter — it will be years before anyone can dance. When the pandemic ends, there will be few investors eager for such a risky bet. The same goes for operas, theaters, bars, etc.. In the short run, the losses associated with holding onto them will be unsustainable. In the long term, investors will have little appetite to resurrect these businesses.

A future of urban decay may await American cities.

efore, our lives revolved around these institutions. The ritual of Saturday morning brunch, the Friday night out, the spontaneous meal with a friend — these are all predicated on the assumption that there is an affordable, accessible restaurant, bar, or club.

And like it or not, we’ve changed. We’ve become accustomed to the absurdity of Zoom happy hours. We’ve come to appreciate the convenience of taking our 10 AM calls in bed. The slow, agonizing deaths of hundreds of thousands of our friends, grandparents, and neighbors has conditioned us to fear disease as never before. We are not the same people who went to quarantine.

Just as we have moved on and adapted to Zoom life, businesses are changing too. They are not pining after us, waiting for a chance to resume life as it was in December. They can’t. It won’t ever be like that again. The restaurants that survive will do so by making tough choices: They will cut costs and raise prices. They will move to smaller, cheaper premises. They will flee the plague-ridden cities for the more relaxed climes of the suburbs. The restaurants that survive, in short, will be ill-suited to the millennial lifestyle. They will be too expensive & too far.

doesn’t have to be this way. For generations, explicitly racist public policy has stifled economic activity, polluted the environment, raised rents, and restricted migration. Today, these same disastrous policies are salting the earth of the American restaurant scene.

Painfully oversimplified, the cost of housing is a function of two variables: The amount of housing and the number of people who want it. In much of America, it is functionally illegal to build apartment buildings, since absurd zoning requirements ensure that historical laundromats are preserved at the expense of new construction. In fact, fully 75% of the land in American cities is zoned exclusively for single-family suburban-style housing.

The negative externalities associated with “NIMBYism” (Not In My Backyard) are hard to overstate. Less dense cities sprawl out farther, forcing people to spend more time commuting (and polluting), disproportionately harming poor and minority citizens. They raise the cost of housing by constricting supply. They decrease the quality of housing, too: Rich people just take up more down-market housing rather than leaving cities. There’s even compelling evidence they reduce innovation since people are less likely to spontaneously bump into one another. And, of course, they’re killing restaurants. Why do you think Hamilton’s restaurant’s rent is $18,000 a month? Why are operating costs often prohibitive in superstar cities like New York or San Francisco?

If we want to save America’s restaurants and cities we need to take radical measures. A great example is California’s SB50 which proposed upzoning most of the state to combat skyrocketing rents. While the bill failed, largely because of opposition from progressive homeowners, the bill has helped to shine a spotlight on an issue that was once the exclusive preserve of urban planning nerds. Even President Trump has weighed in, arguing that upzoning American suburbs would be disastrous because too many poor people will get affordable housing, depressing real estate prices.

The propertied upper middle class has extracted vast sums from society by constricting construction.

afe on the Ave is one of those peculiarly UW institutions: Everything that happens there seems to be a microcosm of the broader school. Every morning at 8 AM sharp, the dull roar of the jackhammering commences, as the Link station next door edges every so slowly toward completion. At lunch, the workers, clad in hi-vis vests and concrete dust, amble past the front door on their way to the 7/11. While they are always around, facilitating the University’s endless expansion, they do not tend to mix with students — a reflection of the inherent, if embarrassed, élitism of higher education.

One of my favorite games to play at Cafe on the Ave is “Homeless or Professor.” A handful of grubby, hirsute men are always huddled in the various corners of the restaurant, and I’m never quite sure which is which. My rule of thumb is to wait and see who starts muttering to themselves: That’s usually a dead giveaway that they’ve got a Ph.D.

Cafe on the Ave is a somewhat segregated place. That’s not to say that the clientele is homogenous. You’ll see a broadly representative cross-section of the U District across a given day. But, like a WWII battlefield, control of the space is continually shifting. In the morning, the grumbling, bearded men predominate. At lunch, the ABCs and ABCDs pack in, desperate to grab one of the restaurant’s famous Kimchi Fried Rices before their 1:30 lectures. At night, Cafe on the Ave is the undisputed preserve of the Koreans who throng every table and pound shots of sake like frat stars. Things are especially raucous on Friday nights, when, for some inexplicable reason, the restaurant transforms into a Korean karaoke bar.

Cafe on the Ave is where I went on my first date in college. It’s where I went to nurse my ego after losing my first case competition. I once sat there until 2 A.M., waiting for Kanye to drop Jesus is King. When my friends from other colleges come, I take them to Cafe on the Ave: It’s the distilled essence of the U District. In some ways, my whole college story tracks my experiences at Cafe on the Ave.

I wonder if it will still be there if and when I return to UW.

hen I think about my happiest memories, they are all in restaurants. I fondly cringe at my 16-year-old-self gloating at a steakhouse in Vancouver B.C after I won first place at a Model UN conference. I remember spending all week looking forward to the nachos at the Cheesecake Factory when I was in elementary school (I was a chubby kid). I long for the kimchi fried rice at Cafe on the Ave, where I spent so many late nights. I adore city life.

But I fear for its future.

Political Science and Business at UW. Class of 2022. Writing into the void.

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