Indiana Jones and the Perception of Risk

Last March, DownStreet Art publicized an open call for its fifth summer season. The open call invited artists and would-be gallerists to propose exhibits that would occupy a collection of vacant downtown storefronts during the four months of the year when North Adams, Massachusetts, is at its best.

I was neither an artist nor a gallerist, but I counted some artists — one of whom is a talented gallerist — among my friends. And I'd been thinking about how to take the discussion of placecraft out of the professional realm and bring it closer to the general public. It occurred to me that a downtown storefront was as close to the general public as one could possibly get. So I proposed a festival of exhibits, events and projects that ultimately took this premise:

We have a lot more power than we think to change the fate of our cities.

By the end of April, DownStreet Art accepted the proposal, and I had a festival on my hands.

Looking back on it now, I acknowledge that I was engaging in risky business. The local creative community might attend, as they usually participate in DownStreet Art, but I wasn't sure about the general population. The general population came to street fairs in droves, but would they attend a festival that was based in a storefront? No parades — just ideas and projects about the city?

The question wasn't academic. I was about to put a lot of time into the project, effectively taking a leave of absence from my business and giving myself a pay cut to take on a challenge that I thought was worthwhile.

* * *

However small the risk might be, risk is inherent in any new event, whether you consider it from the point of view of the entrepreneur or the attendee. Yeah, I heard about that, but I wasn't sure if it was for me. Should we make the effort? Will it be fun? Will our friends be there? If you've ever re-watched a movie, you understand the feeling. Sure, you could try a movie you've never seen before, but you know you'll enjoy Raiders of the Lost Ark, so you watch it for the fourth or fifth time.

The same principle holds true for public events — even ones such as Imagining North Adams that would be free and open to all. If you're going to invest time and effort — even if it's just an hour or two — you want some assurance that that investment will pay off.

What's your development lure: lower risk or higher reward?If you extend that principle to larger investments, such as renovating a building or locating a business, you'll understand why struggling places are such a tough sell. The higher an investment's risk appears to be, the greater the expected profit will have to be before an investor is willing to take the plunge. Struggling towns are therefore in double jeopardy:

• When a market appears unstable or unhealthy, it carries a high perceived risk.
• When prices are depressed — as they often are in struggling markets — potential investors might not see their way clear to the level of profit that would make the risky investment worthwhile.

To attract more investment under those circumstances, a community has to move the variables: either increase an investor's profit expectations or lower the perception of risk. The funny thing about the modern era is that we seem to have forgotten the latter strategy — lowering the perceived risk. We focus almost exclusively on financial incentives, such as tax abatement or infrastructure lures. And why not? They work. Our lures increase the investor's profit expectations, which tips their decision in favor of our community. To put it plainly, we buy their investment.

There are several problems with that approach, but this post will concern itself only with the geographical ones:

When your economic development strategy consists of increasing the profit expectations of specific investors, the primary beneficiaries are those investors. The benefits are therefore concentrated and mobile. They can leave the community along with the investors, unless the investment happens to have been in local real estate.

Compare that with a strategy aimed at reducing the perception of risk. The risk-perception strategy works by changing the community. We influence the investor by doing something that benefits all. We impact every potential investor who might come along. (Compared to financial incentives, whose influence is concentrated on the firms who get the deals.) And because the benefits attach to the community, they are firmly anchored in place.

I'm not advocating that we switch whole hog from financial-incentive strategies to risk-oriented strategies; that would just trade one imbalance for another. But I do think risk-oriented strategies deserve greater attention and closer examination. So I will build these ideas out in my upcoming posts.

Meanwhile, for the sake of struggling towns everywhere, I'd like to ask you a question:

If you wanted to change the perception that your neighborhood or city is an unstable or unhealthy market for investment, what would you do?

If you're willing, share your ideas in this post's comments section or on the Strong Towns Network. You know I'll read them.

Jennifer Krouse is the founder of Steepletown Studios, Krouse and Company, and Imagining North Adams, a local festival of ideas with a placemaking mission. She is a longtime student of good placecraft and a 2008 graduate of The Stockholm School of Economics. If you suspect she's watched Indiana Jones more than once, you would be right.