Rock-n-Roll portfolio
Holidays. Do they disrupt production, or increase resilience?
Our somewhat Daily disruptions are back, after a break. ;)
Still reflecting on architecture, and designing resilience.
I first learned of this as a child while chasing my sister through the house. She ran into a room and closed the door. I pushed on the door and saw that it flexed, absorbing and dissipating the force. It didn’t break. And I couldn’t get in. Silly things. Vivid memory.
Years later I learned architects designed skyscrapers to flex in the wind. As I stood on the upper floor of a skyscraper in Manhattan, I felt the building sway. Not sure I appreciated that memory as much. Trust.
Seeing the wings of an airplane flex during takeoff and during turbulence, the aluminum expanding and contracting time and again during the extreme swings in temperature. Trust.
What happens when trust is shaken?
In 2009 the 60-story Millennium Tower in San Francisco opened. It was the tallest residential building in the city, with views of the bay and bridges. From the WSJ article, “Reports emerged that the building had sunk more than a foot and was tilting.”
“More than $100M was spent on an infrastructure project that engineers say has resolved the problem and stabilized the foundation as of 2023. However, values at the building haven’t rebounded.”
The article describes a San Francisco tech entrepreneur who bought a penthouse apartment there for $13M in 2016, thinking he was getting a deal. The penthouse cost $20M to build.
Unfortunately he sold it in January 2025 for $9M. A loss of $4M.
From the WSJ article, the owner’s quote: “I lost a a couple million dollars. So what?”
Perhaps timing isn’t everything. Perhaps it’s timing and a portfolio.
Banks are returning and again willing to fund mortgages in the Millennium Tower. Property insurance rates were once 5 times the going rate. Makes me think about securitization and resale of risk.
Who actually owns the risk, and how much fine print is involved?
How much would you pay for the penthouse, or the bundled mortgage-backed security, or the re-insurance security?
Portfolio strategy anyone? San Francisco, Japan and hmm… Memphis?
Regarding Memphis and the New Madrid Seismic Zone, from the conclusion of a 2015 report by TransRe insurance company:
“While prone to a frequency of small earthquakes, the infrequent nature of sizable events within NMSZ (sic New Madrid Seismic Zone) makes it difficult for many individuals to grasp the full damage potential of larger events.”
It continues.
“We know that the financial burden of a serious event would be enormous, with the potential to drive the tail exposures of many insurance companies present in the region.
“Losses might be inflated by a phenomenon known as ‘red zoning’ which was seen after the recent Christchurch earthquake in 2011.
“Following earthquake shaking and liquefaction, red zoning arises when the government declares land as ‘unsound’ even though the buildings themselves might be undamaged and still fit for use.
“Regardless of whether red zoning would follow a large NMSZ event, uninsured economic loss in New Madrid would be substantial.
Such burden would fall upon the shoulders of government and taxpayers.”
Which taxpayers and which government? Local, State, or Federal?
From the WSJ last week: Millennium Tower Stopped Sinking, but Apartment Values Did Not
From the BBC: How Japan’s skyscrapers are built to survive earthquakes
https://www.bbc.com/future/article/20190114-how-japans-skyscrapers-are-built-to-survive-earthquakes
The Government of Japan describes a company’s product that reinforces buildings to make them more earthquake resistant. The use a fiber-reinforced plastic coating, applied like paint to existing concrete buildings. Researchers found that 80% of earthquake fatalities in the past century were from building collapses. In the Pacific Rim of Fire, the Philippines have over 800,000 masonry-built classrooms, in need of seismic retrofitting. Cited from a 2024 article.
https://www.japan.go.jp/kizuna/2024/10/new_earthquake_resistant_coating.html
TransRe report:
https://www.transre.com/wp-content/uploads/2017/12/new-madrid-earthquake.pdf