Here is the full transcript of real estate developer Kevin Cavenaugh’s talk titled “How Much Is Enough?” at TEDxPortland 2018 conference.
Listen to the audio version here:
TRANSCRIPT:
Good morning. You guys seem super lively. This is going to be awesome. This is going to be super fun.
My son Jack made the pants, and they were before this a sofa, which makes me really happy and slightly uncomfortable. So eight years ago, I lived in this house. It’s on Northeast 45th Street in the Beaumont neighborhood. On a random Tuesday after work, I pulled into the driveway and I hollered to my wife and our three kids.
They’re playing on the front lawn. “Hey, hop in the car. We’re going to go on a little field trip.” The kids are in middle school and elementary school, so they’re like, “Yay, field trip!” They jump in.
We roll down the Alameda Ridge, turn right on Sandy Boulevard. Twenty blocks later, we pull into this random parking lot. “Okay, guys, get out. There’s a building on the right there. Door’s unlocked. I’ll meet you inside.”
A Surprising Revelation
Walked in. Surprise. This is our new home. Let me explain. So we’re in the middle of a recession. I’ve lost everything. I have to sell everything, including our house. This crappy building is all we have left. We have to live here. I’m so sorry. It’s going to be an adventure.
The kids are at that amazing age where all they hear is the word adventure. So they’re running around on the greasy floor just screaming, “Awesome!” My wife, meanwhile, she stands perfectly still and she screams a different word.
Finding Enough
But it’s okay, there’s a happy ending. We had four walls and a roof. We had heat, electricity, running water. We had enough. It wasn’t the home of our dreams. It wasn’t the home that we just were forced to leave. But it was home enough. And ever since then, I’ve been obsessed with this word.
Milton Friedman and Capitalism
In 1958, an economist named Milton Friedman burst onto the scene in America. He ultimately wins the Nobel Prize in economics. He is the father of modern day American capitalism. He’s the “greed is good” guy.
Here’s one of his quotes: “The social responsibility of business is to increase its profits.” Not the fiscal responsibility, but the social responsibility of business is to increase its profits. For the past six decades, young men and young women have been drinking from the chalice of Milton Friedman, graduating from college, learning that greed is indeed good.
A Different Perspective
I’m not a fan of the word greed. I have my new favorite word, enough. I found a different quote. It’s from the Indonesian poet, Toba Beta: “Greed is a little bit more than enough.”
So I found myself wondering what a parallel universe would look like. A universe where Toba Beta wins the Nobel Prize in economics instead of Milton Friedman. What would happen if for the past six decades, we all just said enough a little more?
The American Dream and Wealth Inequality
For example, how much is enough wealth? We invented the American dream. Today as I stand before you, 16 countries do it better than us. Today, if you’re born rich, you could be a fool, you’ll likely die rich. If you’re born poor, sadly, you could be a genius and still die poor.
In 1958, when Milton Friedman was first bursting onto the scene, the average CEO made eight times his or her average employee. The next slide shows you today’s number. Any guesses? It’s going to be a gross number. It’s going to be a disgusting number.
CEO Pay Ratios
Big ass number. And that’s pre-tax reform, so I don’t even know what it is. That’s an embarrassing number. I’m not okay with that number. When someone justifies that number, they say, “Well, it’s okay to pay obscene salaries to CEOs because they can make obscene profits for the company.” I kind of say, really? Is that really okay?
I showed them this slide. Why is it that every country that we respect in the world, why are they closer to our 1958 selves? Canada’s at 20 to 1. England’s at 22 to 1. Germany’s at 12 to 1. No one’s near us at 400, well, actually, there are a couple countries near us at 475 to 1.
A Developer’s Perspective
We don’t want to be standing next to those countries. So this is what I do for a living. I am a commercial real estate developer. I’m the bad guy in the movies, but I was trained as an architect, and I make buildings like this, and like this, and like this. I was not expecting that. Thank you very much.
I can’t do this alone, though. These are big endeavors for me. I have a small company.
Employee Compensation
I have five employees, and I pay them a wage. I, in theory, am the CEO. I get paid, too. But I get to own chunks of these buildings for the long haul. A friend of mine reminded me that no one gets wealthy in America on a wage or on a salary. We say, how much do you make more than your employees? Well, not much. In any given year, not a whole hell of a lot more.
He said, “No, no, no. You make money. You create wealth through long-term passive investments, just like your buildings, Kevin, just like this.” Look it out 15, 20 years.
Sharing the Wealth
What does that look like? I did the math. Holy crap. It’s about 475. Disgusted with that information, now, every year, any one of my employees works for me, they get a little sliver of all of my buildings. Well, all of our buildings. It’s not life-changing money.
In the case of the Fairhead Dumbbell, you work for me for one year, you get one quarter of 1% of that building. If you’re sitting in that desk, though, for 10 years, that’s worth over a half a million dollars.
And this is one of 18 buildings that we made together.
Reassessing the Numbers
And if you’re sitting in that desk for a decade, we’ll make 18 more. As I’m sitting here, feeling really proud, feeling all generous, feeling boastful, feeling self-congratulatory, my friend then asked me to rerun the numbers. I’m like, I’m doing fine.
I’m a socialist. Which is awesome. Turns out, I’m about 12 to 1. Like the socialist in me today is still 50% greedier than the 1958 capitalist. Who knew?
Housing Crisis and Rent
Second experiment in my laboratory, how much is enough rent? We have a housing crisis in Portland, Oregon. Most cities in the nation have similar problems around the globe as well.
This is the scariest number I’ll show you. Rents have increased 20 times faster than wages over the past couple of years in Portland. Not 20%, not 20% fast, 20 times. That’s a deeply unsustainable number. That number is why we have 4,000 homeless, hundreds of them, because of this number, have their wits about them, have jobs, yet still tonight will sleep in their cars. That’s not okay.
A New Housing Solution
So I make buildings for a living. Maybe I can fix this. I bought a piece of land over on southeast Gladstone Street, not far from Reed College. And last month, I broke ground on this. It’s a modern-day version of an SRO, which stands for Single Residence Occupancy. It’s bare-bones housing.
It’s a room with a twin bed, a wash basin in the corner, down the hall to the left of the toilet, down the hall to the right of the showers, downstairs a communal kitchen area. It’s monastic housing, and it’s so much better than a tent in the park.
I haven’t gotten to the good part yet. Stop clapping. I’m all shushing you. The good part’s yet to come. So the building will look like this. At the end of the year, it’ll be completed, and my renters are current Street Roots vendors. I know.
It’s still not the good part. That’s pretty good. That’s the pretty good part.
Investors and Profit
So what I do with my normal buildings is I have investors, and I sat my investors on this building down, and I said, “OK, normally, we add up all the rent, and then I tell you what profit could be. My question to you was, what should profit be? You decide that. I don’t care. But let’s figure out. Let’s inject enough into this equation.”
I then ran the math backwards. Turns out rent’s $290 a month. That’s the cool part. And there’s not $1 of public subsidy in that. That is just private citizens gathering around the table, injecting—I didn’t even let you clap on that one—gathering around the table, injecting the word enough into an everyday business transaction.
Gender Wage Gap
Why can’t we do more of that? My third and final experiment in my laboratory of enough is how much is enough of quality? You tell me. We have a gender wage gap in America.
Can anybody in the audience explain to me why the image on one side of this slide is worth 80 cents and the image on the other is worth a dollar? Anybody? You can put your hand—it’s a trick question. There’s literally no answer to that question.
Company Structure and Pay
So this is my company. It’s a small company. At least it was a year ago. It looked like this. Like a traditional American company. It’s a pyramid. I’m at the top. I make the most. Middle management. The folk in the trenches that make the least. Yes, these are driver’s license photos. It’s on our website. That’s what we chose.
Addressing the Gender Wage Gap
I was wrestling with the gender wage gap in my company, and this is a small company, and I’m not a very bright guy, and I know that whenever I give somebody a raise or I hired a new employee, I was always having to recalibrate, and it just hurt my wee brain, but I knew I wanted to be on the right side of the equation. So on January 1st of this year, this is now my company. I still write the paychecks, but we all get paid the same thing.
I like the oohs and aahs in that one. That’s fun. I have no idea if this is going to work. No idea at all. If it does, if it doesn’t, I’ll fix it.
Three Certainties
I know three things, though. One, I know that companies that figure this out will have access to the best talent in the world. Fact.
Two, I know that as I stand before you today, there’s no gender pay gap in my company. And three, there’s only one wrong answer, and that’s doing nothing. I want you to talk to your bosses on Monday, and I want you to ask your boss to do something. Don’t do this. This is silly. This is a blunt instrument. But do something to close that gap.
Challenging the Status Quo
Your boss… My guess is your boss is going to say something like, “It’s the fiduciary responsibility of this company to increase profits for shareholders and stakeholders, blah, blah, blah.” Your boss will be right and wrong all at the same time. The statement itself is valid.
I understand that. But the assumptions behind the statement and what he or she has to do with payroll and how they treat the employees and dealing with the wage gap is all wrong. You can, in turn, mention that companies that treat their employees better have better long-term stock valuations.
Not companies that treat half their employees better. Not companies that treat their employees with penises better. Companies that treat their employees better have better long-term stock valuations.
The Cost of Equality
The cost of what I just did in my company as a payroll expense, compared to long-term valuation of attracting the best talent, it can’t even compare. Your boss, by saying no to your request on Monday morning, is stepping over dollars to pick up dimes.
Or just mention someone like Johan Lundgren. He’s the CEO of EasyJet. When he found out that his predecessor, a woman, made 5% less than him, he voluntarily took a pay cut. In America, we call Johan Lundgren an outlier.
A Global Perspective
Do you know what they call Johan Lundgren in Iceland? It’s another trick question. They just call him Johan Lundgren. Because he’s not a big deal in Iceland. Iceland has thousands of Johan Lundgrens. Iceland’s the nation on the planet that has the smallest gender wage gap.
They’re also happier than we are and they live longer than us, but that’s just a coincidence. Or you can mention Julia Weiss and Jeff Kaufman. They’re a Massachusetts couple and they found out that someone making a million dollars a year is no happier than someone making $70,000 a year.
The Power of Enough
Flat line. Below $70,000, it starts to tail off and depending on where you live in the nation, that number might go up or down a little bit. So what they do is they give every dollar above $70,000 that they make every year away.
If it’s not going to help me, might as well help somebody else. They’re like the king and queen of enough. You could also mention Portland’s very own Pastor Mary Overstreet Smith. God rest her soul. She ran the Powerhouse Temple Church on North Williams and in 2005, she was watching TV.
A Story of Compassion
She was watching Hurricane Katrina ravage New Orleans and she was frustrated. She wasn’t seeing enough. There wasn’t enough compassion. There wasn’t enough government. There wasn’t enough response. There wasn’t enough FEMA.
There wasn’t enough empathy. So she sold her vacation home, took the proceeds, gathered her friends, rented a bunch of 15 passenger vans and drove to New Orleans, rolled into the most ravaged parts of the city, opened the doors and said, “Who wants to start life afresh in Portland, Oregon?” Forty families took her up on the offer.
Conclusion
Pastor Smith was frustrated into enough. Eight years ago, I was shoved into enough. And I haven’t stopped thinking about the word ever since. I haven’t stopped contemplating a parallel universe where Toba Beta wins the Nobel Prize for Economics instead of Milton Friedman and what that would look like if we all just used the word enough a little bit more.
So today I’ve talked to you about enough and what it means to me. My three topics are wealth, rent, and equality. There are hundreds of topics that you could choose. So my question to you is what will you do with the power of enough? How will you choose to change your life or your family with the power of the word enough?
How will you choose to change your block or your city with the power of the word enough? How will you choose to change, no pressure, with the power of the word enough, the world? Thank you very much.