“It’s really dangerous in the long run for a society to have land and housing- essential stuff- traded as commodities… There’s a limit to how much private property and market fundamentals can be allowed to drive human evolution and evolution of the whole planet.”
Kathryn Lincoln’s grandfather John C. Lincoln, industrialist and philanthropist, founded the Lincoln Institute of Land Policy 75 years ago. The non-profit was created around the ideas of famous 19th/20th century political economist Henry George, author of the hugely popular book Progress and Poverty (1879). Dr. George “Mac” McCarthy explains the dangers of treating land and housing, essential things, as commodities. The free market around land use does not create responsible long-term incentives and has played a major role in creating the climate crisis we see today. Mac notes the Intergovernmental Panel on Climate Change (IPCC) estimates there will be 150 million climate refugees by the year 2050. A land tax is seen as the most effective solution to building equality across society while also addressing climate change.
The Lincoln Institute of Land Policy seeks to improve quality of life through the effective use, taxation, and stewardship of land. A nonprofit private operating foundation whose origins date to 1946, the Lincoln Institute researches and recommends creative approaches to land as a solution to economic, social, and environmental challenges. Through education, training, publications, and events, they integrate theory and practice to inform public policy decisions worldwide.
LISTEN AND SUBSCRIBE
SPEAKERS
Kathryn Lincoln
Board Chair & Chief Investment Officer
Lincoln Institute of Land Policy
George W. McCarthy
President & Chief Executive Officer
Lincoln Institute of Land Policy
TIMESTAMPS
0:00 - Intro
3:17 - History of Lincoln Institute of Land Policy
7:00 - Henry George’s findings around private property and poverty
11:30 - How John C. Lincoln would view current land policy
13:13 - Dangers of treating land and housing as a commodity
17:32 - Land policy changes and advocacy
20:20 - Climate change effects and potential solutions
28:55 - Addressing poverty and inequality through land policy
39:08 - The case for a land tax
43:23 - Relationship between land policy and water policy
49:37 - Lincoln Institute endowment asset allocation
EPISODE TRANSCRIPT
John Darcie: (00:07)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Salt talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these salt talks the same as our goal at our salt conferences, which we're excited to resume here in September of 2021 in our home city of New York for the first time. But that's to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. We're very excited to bring you a conversation around land policy, but a lot more than that issues like climate change, water conservation, uh, with the heads of the Lincoln Institute for land policy, that's Catherine Jo Lincoln and Dr.
John Darcie: (00:57)
George McCarthy, uh, Katie Lincoln currently serves as the board chair and chief investment officer for the Lincoln Institute of land policy, which is an independent global foundation focused on addressing significant policy issues through innovative land use and taxation methods over the course of her 25 year tenure as the Institute's CIO, uh, Ms. Lincoln has led the endowment strategic asset allocation policy development, investment selection process, and draw policies. All of which have contributed meaningfully to achieving the current $700 million asset base. Uh, Ms. Lincoln also serves as a member of several other boards, including Lincoln electric holdings, a publicly traded company. Now she's also a member of the board of directors of the honor health network, uh, and Claremont Lincoln university, Dr. George McCarthy, AKA Mac as president and CEO of the Lincoln Institute of land policy based in Cambridge, Massachusetts, before joining the Lincoln Institute in 2014 Mac directed metropolitan opportunity at the Ford foundation, uh, Mac has also worked as a senior research associate at the center for urban and regional studies at the university of North Carolina, go heels, a professor of economics at Bard college resident scholar at the Jerome levy economics Institute, a visiting scholar and member of the high table at King's college of Cambridge university and visiting scholar at the university of Naples.
John Darcie: (02:23)
And finally research associate at the center for social research in St. Petersburg, Russia, obviously with his deep international experience, George is the perfect person or Mack has, I should say the perfect person to lead the Lincoln Institute for land policy and its global mission hosting. Today's talk is Anthony Scaramucci, who is the founder and managing partner of SkyBridge capital, which is a global alternative investment firm. Anthony is also the chairman of salt. And with that, I'll turn it over to Anthony for the interview.
Anthony Scaramucci: (02:51)
Well, we're thrilled to have you both on John. Thank you. Uh, Katie and Mac, the Lincoln Institute of land policy its 75th anniversary this year. So let's, let's start with Katie. Uh, tell somebody that doesn't know what the Lincoln Institute of land policy is. What is it Katie, and why should we be super happy about its 75th year anniversary? Well,
Kathryn Lincoln: (03:18)
Let me give you a little bit of history, Anthony, cause I think that, um, some framing of it is, is interesting. So 75 years ago, my grandfather, John C Lincoln, decided that he wanted to have people understand a little bit more about land policies, specifically about tax policy and land tax policy and how that policy could really help underserved communities be better if you will. Right? So he wasn't in bedroom. He was a Renaissance person. As, as John said in my intro, I'm a member of the four, the Lincoln electric holdings company, the world's largest welding company. Um, he started that company in, um, 1895 with $200. So based home capital this year, we'll set, we'll probably have 3 billion close to $3 billion worth of sales. Um, so he had the chance to be an entrepreneur, a Renaissance person. And with some of that wealth, he started the Lincoln foundation, which really examined things around land policy and land taxation policy around the work of a gentleman named Henry George, which I'm sure Matt will talk about when you get to questions around tax policy later on in our conversation.
Kathryn Lincoln: (04:29)
But he, but my grandfather really wanted to think about those things. So he started the foundation and then my grandpa, my father took up those rings later on in 1974 and started the Lincoln Institute of land policy. He realized that there was really no place specifically in the seventies that was looking at land as a specific policy goal. And so he started the land pop, Billy get his to land policy because when you think about it, Anthony land is maybe no pun intended, but sort of at the bottom of everything. I mean, when you think about it, it's important and it really matters. I mean, my, my land policy matters to me a lot. Your land policy matters to you a lot. I, you might not care if someone's going to put a nuclear power plant next to my house, but I certainly care. Um, and you would care someone put a nuclear power plant next to you.
Kathryn Lincoln: (05:18)
The policymakers in your community really are the people who are making your life the way, the way it is. Right? And so not only getting student land policy works globally to think about how land policy can be part of a suite of solutions around global macro policy issues. We're going to talk about these today. I hope, you know, climate change, fiscal health, all those sorts of things, but it has its deep bruise and the visions of my grandfather who really wanted people to have better lives. Really, really he and my father there, their mantras, where the golden rule, you really wanted people to have better lives and better lives to thinking about how better.
Anthony Scaramucci: (06:02)
So professor, um, Mack, we're going to all your professor Mac for the sake of this. I feel like when I call you Mac after, uh, John Dorsey, read your bio, it doesn't do you justice. So you're going to want to go with professor Mack if you're okay with it. That's fine. A couple of couple of years ago, I read a book called the Nobelist triumph and it was called property and prosperity through the ages. And basically the, the author was making the case in the book that private property, uh, was the elixir for growth and the elixir for prosperity. Once people recognize that they could own a plot of land that they could call their own, they took care of it better. They built upon it. They, there was a blessing, uh, to property. What is your thought or reaction to that professor Mack?
George McCarthy: (06:56)
Well, certainly lots of volume Mac after this next question. Yeah. So the thing about, uh, property is that, um, there's, um, a lot of benefits that accrue to people for, um, owning and controlling a property. And, um, more often than not, those benefits are unearned and that's kind of the thesis of the work of Henry George that like Katie's grandfather decided it needed to be, uh, told more broadly now, uh, the fact that, uh, you know, people have been able to leverage, uh, ownership of property into other, uh, you know, economic growth, um, personal assets, um, you know, the transformation of places and countries and, and landscapes it's it's, it's undeniable, um, whether or not it could be done without, um, you know, the institution of private property and the private ownership of land is probably arguable. I mean, the, the greatest economic growth of the last 20 years has been in China where, uh, there's no private ownership of land.
George McCarthy: (07:59)
And, uh, you know, the back country has been able to actually surpass the United States and economic growth for the last 20 years, um, through a different kind of sets of policies and approaches to investment and, um, and you know, industrial and trade policy. So I don't know the, um, you know, just to go back to the, the issue of, of how land gets its value, because that's really kind of at the core of what the Lincoln Institute does. Um, Katie's grandfather was struck by the idea that, um, you know, Henry George said during the, uh, the industrial revolution, incredible amounts of wealth created through the, um, through invention, through investment, through hard work of lots and lots of people. Um, and, uh, he was kind of struck by the fact that in spite of the fact that economic growth was running a pace, uh, there was, uh, seem to be this distressing, um, endurance of poverty and in particular urban poverty that just didn't seem to go away.
George McCarthy: (09:00)
And he's trying to figure out why it was that poverty persisted in the face of all those opulence. And he concluded that the, um, uh, the benefits of economic growth are being distributed, um, in, uh, in a bad way. Um, and that distribution problem was that the people who are generating the wealth, um, capital and labor were getting taxed to fund the public sector. And meanwhile, uh, landowners were getting all the benefits of economic growth, uh, and doing nothing to earn them. And essentially what he argued was the value of land is almost always created by, um, actions that go beyond the actions of the landowner, whether it's public investment in infrastructure, whether it's the, uh, you know, the collision of people in cities that just raise the level of, uh, uh, value of land, having nothing to do with the people who are sitting on the land when they get there and having everything to do with all the public interest in owning land.
George McCarthy: (09:57)
Now that there's a glomeration of population. So what Henry George said was if we taxed away the under an increment of land value from landowners, we could actually eradicate poverty and fund the entire, uh, public sector. And, uh, that was the, the thesis of the book that he wrote called progress and poverty, which was, um, uh, at least in theory, or at least claimed to be the second, most popular book in the world. In the 19th century, after the Bible, it was translated to 30 or more languages and published all over the world. And, um, Henry George was, uh, was, you know, a barnstorming, uh, you know, political economists running around giving speeches. And he ended up in Cleveland one day and he met, uh, John C Lincoln, and the rest is history.
Anthony Scaramucci: (10:49)
So, so Katie, I mean, it's a brilliant exposition. Thank you, Mac, uh, Katie, if your grandfather was here today and he saw our society today, and he looked at land policy today, uh, what do you think he would say? And what would he, what would you think he would want changed?
Kathryn Lincoln: (11:11)
Wow, that's a good question. Anthony Johnson.
Anthony Scaramucci: (11:14)
I finally got a good question. You see that? Okay. You're not the only person that asks good questions.
John Darcie: (11:20)
I was hoping to save that one for myself. Let me, let me, let me repeat
Anthony Scaramucci: (11:23)
The question. Cause it was no, I'm kidding. Katie. Tell me, tell me what he would say.
Kathryn Lincoln: (11:30)
Um, I, I think that he would still think that there, there is, there's an equity there's unfairness in the way that people live and that way people are marginalized. Um, you know, there's, there's still, my partner is a real estate professional. And so he tells me that there's still in some places in this country, there are still laws that say, or, um, in NHL ways that say you can't sell to certain types of people. And, you know, you, you hear about neighborhoods that have been decimated because certain types of people can't live there. I think my grandfather would be appalled by that. I think that he would think that, that you should think should be open and that, and that everyone should have an equal opportunity to live someplace, to work someplace, to put an or in the water and pull equally with the person next to them, just, you know, whether they were whatever their skin tone, whatever their religious preference. Right. So I think you would be appalled at the way that we have segregated our society and marginalized, huge swaths of people. It not only in this country, but globally.
Speaker 5: (12:44)
So, so Mac,
Anthony Scaramucci: (12:45)
And I think that's brilliantly well stated, and it's an obvious problem. And I think we would probably all agree and correct me if I'm wrong, the problem is getting worse. It seems like there's been more separation and more disequilibrium in wealth. So, so Matt, what would you do? Let's say you were the grand czar and you could figure out a way to create better land resource allocation, uh, here in the United States and around the world. What would you do?
George McCarthy: (13:14)
Well, Anthony, I think the, one of the first things I would do is, um, recognize that, uh, it's really, um, it's really dangerous in the long run for a society to, to have, um, land and, uh, and, and the things on it, like housing, um, you know, essential stuff traded as commodities. And so, um, I would, one of the things I would do is I would preserve, um, a significant share of those resources, those assets for, um, for the, for, for the public, for the public use. Right. And so I would, um, I would pull a large share of our housing stock out of, um, the tradable market. And so that it couldn't so that, you know, um, the quiddity, that's piling up in any number of places around the world. Couldn't bid shelter away from low-income people because they see it as a good investment opportunity.
George McCarthy: (14:07)
Um, similarly land, uh, shouldn't be traded as freely. And, um, we would find ways to, um, uh, keep a certain share of the land available for, as the infrastructure for the society to, to run. Um, part of that, if you, um, if you then impose kind of more and fairer and better enforced kind of land policies, you could also make sure that the right things get built in the right places that the right, um, um, uh, you know, the right use of the police powers of planning are actually, uh, you know, designing places that actually worked for us better, uh, not just designed to kind of, uh, follow the, and let the market decide kind of what gets built, where and why. Right. Um, and I know that kind of runs counter to the idea of, um, of, uh, private property. But, um, I think that, you know, there's a, there's a limit to how much, uh, private property and, uh, kind of, um, market fundamentals, uh, can be, uh, can be allowed to kind of drive human evolution and not just human evolution, the evolution of the whole planet and, and, you know, in some ways, uh, an untrammeled, uh, you know, uh, freedom to kind of, uh, whatever trade and, and bargain in, uh, in nece necessities like land and housing and food, um, lead us into kind of a, a bad place.
George McCarthy: (15:39)
And that's one of the reasons why we have some of these really unassailable challenges, like a climate crisis to deal with, because we haven't been willing to kind of, you know, exercise restraint on ourselves and prevent ourselves from doing really, really damaging things in the longterm, in, uh, in exchange for short-term benefits and profits. Right. So I don't know, I, you know, there's a, I could probably write a thesis on it. So it's a, it's a pretty broad question, but I would say that if we just find ways to kind of, uh, impose a different sense of fairness into the way we make decisions about the use, uh, the taxation and the, um, and the, the transfer of land we could get, um, a lot further than we're able to get. If we just allow all those decisions to be made kind of in a, in isolated markets,
Anthony Scaramucci: (16:29)
You know, and again, this is just, I'm going to test this theory on you, Katie. You tell me if I'm right or wrong. Um, I find that, uh, and forgive me for saying this, we're going to leave John out of this. Okay. I find it's our generation, the baby boomer generation, that for whatever reason has been neglectful from a policy point of view, related to the climate, if I'm wrong about that, you guys correct me. Um, but I do feel like we're having a frat party with the environment. And then we want our kids and our grandkids to live in the frat house on Sunday morning with the bong water on the floor and the broken windows and so forth. And I'm wondering, is it possible to shake our generation, which let's face it is still more or less in power politically. And if not politically, also commercially around the world to shake our generation to do more Katy, am I wrong about that? And if I'm not, what can we do to shake these people to do more?
Kathryn Lincoln: (17:33)
Yeah, I think that you're, you are right. I think that we're slowly us old people are slowly seeing a light. I think it's, um, I think we're slowly seeing the light and I think it's people John's age. Thank you, John. And my children's age who are, you know, shake taking us by the collar and shaking us and saying, Hey, you know, this is why are you drinking out of a plastic bottle? Why aren't you using the recyclable one that I gave you for Christmas? I mean, just little things, right. Everything, every little step helps. So, um, but I think what it's gonna take, Anthony, I mean, I think it's going to take leadership from the top, right? I think that it's going to take, um, science doesn't lie. Right? And I think that people need to have to, there, there needs to be leadership to say science doesn't lie, and you have to beat our heads up with it, but science doesn't lie
Anthony Scaramucci: (18:31)
Not to interrupt, but we have a good 40% of the population that does no longer accept science. So we have two battles going on. Right. We have the science anti-science community now, uh, in addition to the climate change issue, right? I mean, I don't know. I mean, it's not just not just the client is with vaccinations or public health and safety.
Kathryn Lincoln: (18:56)
Right. But I think what we need is more leaders who are willing to stand up and say, science isn't lying and help people educate, you know, we need to, we need to continue to educate Lincoln Institute is, is by and large, well, uh, an educational organization, right? I mean, we really strive to provide good education around issues of land policy, right? I mean, around climate change around municipal fiscal health, around land policy taxation, but we really work at helping to educate policymakers so that they can make better policies. And then in that way, we are hopefully moving the needle on some of these issues that you referenced it.
Anthony Scaramucci: (19:39)
So I want to, I want to bend that needle. I don't just want to move it. I want to like totally bend it. You know, like, uh, like they did in those old silent movies, what do we do, Mac, how do we, how do we really force a major sea change? Because we know when we know even the climate deniers, I say to them, well, what about the AR you know, if you're in Beijing, New York and you've got small concentration, the asthma rates for these kids is going through the roof. So, I mean, maybe you don't believe that the climate is changing, but the pollution is affecting your shoulder. What do we do? Mac what's? Is there a bazooka that we get pull out a policy bazooka?
George McCarthy: (20:20)
Well, I think that the bazookas that are being pulled out are the, um, the climate bazookas that we've been experiencing, or just over the last few years. I mean, the, uh, you know, the, the, the shutdown of the entire power grid in Texas is just an example of, um, one of those events that happens it's supposed to happen every a hundred years or so. And it happened twice in the last 30, right. Um, the, uh, the flooding of, of, uh, of Houston, I don't know how many times of the last three or four years from these superintendents, tropical storms, wildfires, and all through California in the U S west wildfires in Australia that decimated that continent. I mean, the, um, we're seeing it over and over again. And, and, you know, there's, there's some things that you just can't deny like the, um, you know, uh, clear day flooding on the streets of Miami, because now sea level rise is actually starting to kind of show up because the, the, the water level is rising underneath the city.
George McCarthy: (21:21)
Right. And, and so, um, pretty soon you're just not gonna be able to deny it. And by then, um, luckily for us, the innovation that's been taking place, um, all around the globe in terms of finding new ways to substitute out kind of, you know, carbon intense, um, energy generation or carbon intense transportation, it's already there. I mean, we know what we need to do, and we know how to do it. It's just a matter of really committing the political will to do it. And I think that, um, more and more, you know, especially as people of our generation die off, the others are just committing themselves to really making, you know, the right kinds of things happen. So I'm actually pretty optimistic. I think that, um, carbon neutrality is something that people are actually talking about now. And we, weren't talking about carbon neutrality even five years ago, finding ways to make entire kind of corporations, carbon neutral, whole states are trying to commit the carbon neutrality countries, right.
George McCarthy: (22:19)
Um, and finding ways to really, really aggressively substitute out all sorts of, um, different, um, you know, carbon producing measures for carbon reducing measures, and now even finding new technologies to, to trap carbon in soil and in the, in the, in the ocean. And, and, uh, anyway, I think that, uh, that once we were actually on that path, and once we actually even create the market to kind of drive it where we're getting much more active carbon trading markets, other kinds of markets that are, that are, are just waiting to kind of get unleashed. I think that we're going to find that the incentives are going to align and things are going to happen really, really fast because the automobile has only been around for just over a hundred years. Right. They're really not commonly in use for about, you know, maybe 75 or 80 years. Um, so, you know, uh, things happen very quickly and, you know, we look at things in terms of quarters or years, or even lifetimes. Um, everything can change in a, in a matter of, you know, uh, one generation and it will be stunning and not probably won't be around to see it, but I think we're going to see an entirely different world, uh, in, in the next generation
John Darcie: (23:33)
Mack, I have a followup question about, about climate. So I know that the Institute focuses on six goals, and it's a global mandate that you guys have over there. And the first regarding climate related issues in what geographies that you guys work is this climate crisis most urgent, there's a place like Jakarta. That's close to being underwater. If we further sea level rise, they're engaged in a 30 plus billion dollar effort to move their capital to Borneo. Uh, there's other cities around the world that that potentially potentially are in the cross hairs. If we get greater warming and sea level rise, what areas do you guys work are most, uh, most in danger and what can be done in those areas to, to help them withstand the impacts of a warmer climate and is, is how much is climate migration part of that?
George McCarthy: (24:25)
Well, it's, there's a, about three or four questions. Let me see if I can kind of, I
John Darcie: (24:29)
Got to get my licks and while I can back. Yeah. So,
George McCarthy: (24:31)
Well, number one, I mean, the thing is that almost every geography we work in is affected by the climate crisis in one form or another. And that the problem is that it's not just one thing, it's everything it's, whether it's wildfires in Australia or California, or whether it's sea level rise in Bangladesh and Indonesia, or the entire Pacific rim, all the coastal cities are in trouble, right? The, um, uh, the entire Gulf coast, right. Is, is in trouble, uh, from sea level rise, Miami, I don't know how Miami survives this because there, there's no way that you can actually protect the city because the water comes in underneath. Right. So it's going to be really hard to kind of seal it off from a water that's going to be rising from below. Right. So, um, it just depends on what your, what you know of what you think is the real crisis.
George McCarthy: (25:19)
I mean, right now, in terms of climate migration, the, the, the, you know, the, what's it called the IFCC the, um, the intergovernmental panel on climate change that the, the IPC, um, they they've, they're estimating that we're going to have 150 million climate migrants, uh, by 2050, right. People who are going to have to move, uh, voluntarily or involuntarily as a result of climate change. And right now there's not that many of them, but right now it's really the disadvantaged folks that are going to be, or that are getting pushed out. And a lot of indigenous folks in the United States, in places, as far as long as Alaska, along the bearing, or the Chuck CISI or down in Louisiana, in the Gulf coast, they're already getting displaced by rising sea levels, and they don't have any place to go. And they're now testing all of our kind of jurisprudence and other kinds of, um, uh, uh, legal frameworks to figure out how we're going to adequately kind of accommodate them when they have to go someplace else.
George McCarthy: (26:23)
And, um, uh, and that's just going to be, that's a tip of the iceberg because we're going to see tens of millions of people having to move, um, from places, even look at the Southern end of, uh, of New York and what happened to Manhattan all the way up. I was in 42nd street, uh, with Superstorm Sandy, and we were displaced at the Ford foundation for a couple of weeks while they're actually just trying to restore power because of the flooding and the subways are out for weeks, right. Um, some of them, you know, indelibly harmed the office.
John Darcie: (26:55)
My office at the time was in lower Manhattan. And we, you know, it destroyed all the, uh, the technology infrastructure in the building and forced us out of the office for multiple months, also knew plenty of people whose houses were destroyed or severely damaged in that storm. So that was definitely a reminder that, you know, people forget a decade goes by, you know, from the most recent storm people forget, but it sort of, and this is not to pick on Miami, but I see this massive migration of, you know, people in the financial industry, people in technology industry, moving down to Miami, uh, knowing that, you know, the entirety of that city is only five feet above sea level right now facing the issues that you mentioned. So it'll be fascinating to see whether all those great tech minds can solve those issues.
Kathryn Lincoln: (27:36)
John, I think it's also important to note that it's not just sea level rise when you're talking about the 150 million migrants. It's when you think about, and we're already seeing this now, when climate change is the heat index. So they're making many of these lands on unmanageable. You can't farm on them anymore, right. Or the rain patterns are changing because of climate change. And so it's not just the sea level rise, that's impacting populations. And again, as max said, it's often the, the poor people or the underserved communities that are affected the most, and that is what that's going to be the global crisis. So
John Darcie: (28:13)
How do we solve those issues? And I'll turn it back over to Anthony after this question, but those issues related to poverty and spatial or geographic inequality, as you mentioned, you know, something like hurricane Katrina, there was a great Atlantic podcast series about the way that new Orleans permanently changed, uh, you know, following hurricane Katrina. Obviously we know that the devastation in terms of loss of human life and property that took place from that storm. Uh, but how do we fix this issue, you know, related to affordable housing related to poverty and just the growing inequality, uh, that's being exacerbated by climate related issues and even public policy issues around land ownership and, and the provision of housing.
George McCarthy: (28:55)
Well, um, just to start with, I mean, the only way that you actually kind of defend the interests of whatever we want to call the underserved, the, the lower income groups that, uh, those that have been experiencing racial discrimination for, for decades is through, um, really active public policy, because the only people out there that are going to be defending the interests or the poor, or the people with some other kind of power political power. And so we're just going to have to be willing to stand in the face of economic power, because the people who are able to are going to be, uh, you know, um, migrating to the high ground and they'd be able to afford to buy the high ground and buy it out from underneath the, um, folks that are living there now. And so, you know, I hate to keep using Miami as an example, but if you go to Overton in Miami, which was the historic, uh, African-American community, it's actually on high ground, right.
George McCarthy: (29:52)
And it was mostly ignored unless you wanted to build a super highway through it, right. Um, uh, for decades and, and kind of left alone. And all of a sudden they're facing all sorts of pressure from a higher income people who want to get away from, uh, the direct exposure to the coastline. Right. And that's going to be happening everywhere. And, and unless we get, um, a little bit kind of, uh, you know, creative and, um, and, um, you know, farsighted, we're going to have to, um, we've got to deal with it when it's really hard to deal with, as opposed to when it's easy to deal with. And so, like for, uh, for one of our, um, one of our projects we're working on is actually looking at where are the most vulnerable communities, uh, it, you know, two climate in the, in the U S and what are the options for them?
George McCarthy: (30:39)
And we're working with a group called the climate migration network, and we're working with, um, some, um, uh, uh, some folks down at Emory university, uh, and other scholars around North Carolina and figuring out, do we have public lands that we can reserve for communities that are going to have to be, um, moved? And how are we going to know, figure out how to transition them from where they are to where they can go. And one of the great things at least about the U S is that we've got a lot of publicly owned land in this country that could be developed for people to move to state trust, lands, uh, national, uh, trust BLM is the largest landowner in the world. And land, it owns, you know, uh, gigantic amounts of land across the west and, uh, and even some in the east, but the idea would be, um, finding a way to actually plan ahead, you know, proper, prior planning, prevents poor performance, right? If we, if we figure it out now and we do it before, we're all kind of running around and trying to figure out where we're going to, where we're going to land, we'll be able to do it kind of in an orderly fashion. But as soon as even you mentioned the words, managed retreat, politicians had the other way, because they think manage your sounds like you've given up. And you're, you're, you're, you're waving
John Darcie: (31:55)
The white flag. Yeah. But you don't want to be plugging holes in the boat. Uh, when the boat's sinking, you want to do it before, before you start taking on water. That's I guess that's an appropriate metaphor in this case. Anthony, go ahead. I
Anthony Scaramucci: (32:09)
Want, I want you to continue gentleman. I have, I have one last question before I let John, uh, read off some of the questions from our audience and stuff. What do you, what do you say to the full on capitalists in our society that, uh, you want to own their land. They want to have low property taxes on their land. They move to low tax states, uh, in order to do that, by the way, I'm a dyed in the wool, new Yorker, you spike Lee asked me, he's doing a documentary on nine 11. Am I going to be one of those rich hedge fund guys that moves down to Miami? I'm like, I'll be shutting the lights off in this great city with you, spike, meaning I'm here for the duration. Um, but what do you say to those people that don't understand what I think you guys are explaining, which I certainly don't want for myself. I don't want to live in a Bob wired, make match in, in a McMansion, in a Bob wire security compound gated community by my fellow neighbors are suffering. And yet we've got a very large group of people that think like that. I'm sorry to say it that way. And I hate to be cynical, but what do you say to those people? Do we need to move those people? Is that not necessary to move those people? What do you guys recommend that we do?
George McCarthy: (33:32)
I'll start with Katie. You can, you can jump in. So Anthony, that I think the, the, the, the, the sound, his argument, and there's, there's a growing body of research to support. This is that inequality actually creates its own deadweight loss of economic growth. No question
Anthony Scaramucci: (33:47)
About it. And lots of lack of diversity does the same thing that
George McCarthy: (33:53)
A diverse portfolio and how a diverse portfolio is, is, uh, you know, a much better kind of option in the long run. Right? Um, we'll also understand that, that, um, the, the countries in the world that have succeeded the most and had the most rapid economic growth are the ones with growing middle classes. They are growing middle class, uh, the, the, uh, whether it's an illusion or a promise of opportunity of, uh, of upward mobility, those are the things that actually draw from people that kind of the energy and the, the inventiveness and the, the hard work that actually builds economies. Right.
Anthony Scaramucci: (34:31)
I tend to argue, but I'm a direct beneficiary of that. You know, my dad was a middle-class worker, blue collar, laborer, non-college educated, uh, had a high wage. We went to a very good public school system. You know, I'm just going to emphasize this point. So I've made my money here in New York, and I'm a product of New York. I'm a product of its public school system. I'm a product of that middle-class ecosystem. And so now that I'm paying high taxes, because I'm doing reasonably well to pay back into the system, I'm totally fine with it. A lot of my buddies though, are not, they want to move to low tax places and, you know, they made their fortune here, but now they're going to take it elsewhere. I'm sorry to ventilate. You guys are cheaper than my therapist. And there's two of you. You see what I mean? I probably need a basketball team of therapists, but you guys are cheaper, but what do you say to those people? How do we ring their bell? I
Kathryn Lincoln: (35:26)
Think what other ways you ring their bell is to try. And, I mean, I get back to education and leadership, you know, I think role modeling is so important. I mean, I, I think try and model behavior, and I try to model language when my kids were little, you know, they're 29 and 26 now. So they're still kids. They'll always be kids. We know that, but there are no longer young, but young kids, you know, I, I always said to them, language is important and, and who, and who you, the things you say and who you are is important and who your friends are as important. And, and we're, and the kinds of things you like to do is important. And the things you say are important and diversity is important. And we always, I always made sure that they understood how, what a lucky life they had, but that we, I always made sure that they saw what a lucky life they had, that they, that they participated in, um, volunteering that we participated and not just gratuitously Anthony, it wasn't something that we did, you know, check the box once a year, we did this, right.
Kathryn Lincoln: (36:29)
It was something that we engaged in as a family, as part of our community. Right. I think it's, I think that you have to shake people and say, you have to give grace because that's important. I think that's important.
George McCarthy: (36:45)
Yeah. I don't, I don't know Anthony, what you, what you can say to folks who want to live on their own kind of island of, of luxury and kind of in their own kind of bubbles. I mean, maybe you can see that they can just do that. And, um, and then really just focus on kind of making sure that the, the, the rest of the world works for the rest of the people, because that's a pretty tiny share of the population that's running away and moving to gated communities and trying to sit on their wealth. And, and I do what I, I w w what is the, what, what is the benefit that comes to them of, of living a life in a bubble? I'm not quite sure. Right. And so the, you know, the pursuit of meaning ends up. I think being the thing that drives all of us in the end and understanding what, what brings meaning to life, I think is going to be, uh, the key. And I think that it's just incumbent on us and it's certainly in the way we do our own kind of promote are the right kinds of land policies that we want to make sure that, that things work for the vast majority of people. And if others decide they want to check out and take their chips and leave the table, I guess we've got to let them do it. I mean, you know, what's, what's really,
Anthony Scaramucci: (37:58)
I think it makes sense. You know, I, you know, what, what brings meaning to John Darcie's life Mack is that he asks better questions than me during these salt talks. I'm going to let John now a takeover, because I know he's got a flurry of questions and it would be important for him to outshine me. It gives him great. Meaning, go ahead, John.
John Darcie: (38:20)
He has a fair point, but, um, so, so to dig further into the tax policy question. So Anthony's referring to friends affairs, uh, that are moving to places like Florida and Texas, for example, being the biggest two examples of new Yorkers in the financial fleeing to lower tax jurisdictions. But that's only one element of taxes, income taxes, you know, there's no state income taxes in, in Texas or Florida. Uh, but there are in many cases, higher property taxes. So as you guys look at tax policies and public policies in general, how do you think about best practices as it relates to land use regulations, property tax frameworks, and land value return mechanisms, uh, that just create, you know, a better, better mechanisms for the supply of service land and just general land provision.
George McCarthy: (39:08)
So, you know, in terms of efficiency and, you know, economic fairness, um, and one of the reasons we exist and we still believe this is that the, um, the best tax is the land tax and it's the best tax for a number of reasons. But the, one of the main reasons is it's a, it's a tax you can't move away from, right. Because you can't pick up your land and take it to Florida. Right. Right.
John Darcie: (39:32)
And you can run your land through a shell company in the, in the Seychelles
George McCarthy: (39:36)
Or something. Right. And, and the, and the thing about land is that, um, the, or the land tax is that it doesn't actually distort, um, other kinds of economic markets and incentives as well, having a land tax. Right. And so, um, so we think the, the, the most preferable tax among all different suites of tax is the land tax. And it should be the basic tax to fund, especially local governments because, um, that is going to be, um, the source of, um, uh, value in the actions of the local government will have a direct bearing on the value of land, right? Because how you choose to invest in your own kind of, uh, jurisdiction will have a great bearing on what the, what the, the tax base is. Right. If you have, you build better sidewalks and you build better roads, and you have a better sewer systems, and you can pipe in good, clean, fresh water into the houses. Yeah. Your, your tax base goes up and there, your revenues will go up. It's one of those, you know, um, uh, whatever
John Darcie: (40:36)
Itself you create a line of incentives.
George McCarthy: (40:40)
So, um, yeah. And then, and then after that, then, you know, the property tax is, um, a good second best tax. Uh, the problem with the property tax is that, uh, if you tax equally, um, the land and the improvements you do send the wrong kind of signal in terms of making the right kinds of investments in the improvements on land, and you get, and so you, you might end up having people not using land to its highest and best use. Um, but, uh, the property tax is certainly better than, you know, a sales tax or an income tax it's a as a general revenue source, uh, because, um, it has it's, um, it has stability over time. And once again, the actions of the government and how it invests in how it builds its infrastructure, what it does will have a direct bearing on growing its own tax base, which is a good thing, right?
George McCarthy: (41:30)
So that's what we like, kind of, land-based, uh, we're really big fans of what we call the split rate tax, but you don't see it very often anymore where you actually tax the land at a higher rate than you tax improvements. Um, and that has the right kinds of, um, benefits because it incentivizes people to, um, make the right kind of improvements or maintain the quality of the improvements on land, um, and gets them to be more likely to bring land to its highest and best use. So, you know, um, we think that a diverse set of revenue sources is actually a good thing, but we think that we should rely mostly on the ones that distort the market, the least, and, you know, income tax, distorts, labor markets, um, uh, you know, sales tax, distorts, commodity markets at the store, it's all sorts of other kinds of markets, every other kinds of tax, you can measure the dead weight loss that happens as a result of the imposition of the taxes. But the reason that land has no kind of dead weight loss, because it's in fixed supply. So, um, the, um, uh, tax doesn't affect the supply of it. Right, right. And
John Darcie: (42:36)
You see a lot of the wealthiest people in the country and in the world, frankly go gates being one example of somebody who is hoarded, tremendous amounts of land because of that scarcity factor. Um, and the fact that it's not taxed owners in a way that maybe it should be, uh, but you talked a little bit about water. We've talked a lot about land, but water is a pressing issue, especially in certain parts of the world, in certain parts of the country. I think over the last decade, we've seen several instances of, of significant droughts in places like California, South Africa, facing a water crisis. How big of a crisis is general water shortage, and what can be done to solve those issues
George McCarthy: (43:15)
Is Katie, you should start in this way because this is near and dear to your heart in Phoenix, where water is something they think about
John Darcie: (43:21)
A lot, right. They use all the water on the golf course is there in Scottsdale.
Kathryn Lincoln: (43:25)
We use gray water. Thank you. We do think about that. You use gray water. Um, I don't know if any of the, um, any of YouTube on the, on the bottom of my screen, John or Anthony or golfers, but a lot of times,
John Darcie: (43:36)
Um, so I was saying that, uh, with a great deal of affection,
Kathryn Lincoln: (43:39)
Most of the water on golf courses here is gray water. So, um, but you know, we created the baddest center for on land and water policy about five years ago, to look at that nexus. I think it's important to remember that we learned Lincoln Institute of land policy, but we really wanted to look at that nexus between land policy and water policy, John cause to your point, water policy is really important, right? And it's something that, that a lot of people are looking at water policy. We're looking at Lam policy, but we really weren't looking at the connection between those two. And you think about how important water policy is to the use of land and how important land policy is to the use of water. And that's why we set up this on this center here in Phoenix, actually, where I'm sitting SPC. Um, and it's focusing on the Colorado watershed, Colorado river watershed, and about four days ago, actually something great happened again, first time it's happened again, about three years ago, water actually got to the sea of Cortez again through the Colorado river.
Kathryn Lincoln: (44:37)
Um, there's a nonprofit here who has been buying water and it's been actually able to get past Yuma again and yet through the two states and into the sea of Cortez, um, which is really quite a remarkable thing. When so many of those, um, farmlands down in Mexico have not seen water for decades because it's it stopped at the border. Um, water is an issue. And, um, it's a big issue in the west, especially in, well, where did huge drought, whether people think it's over last year, people that, oh, the drought's over. We had a good snow pack this year. I understand the Sierra Nevadas are at 5% of their normal. Snowpack 5% of their normal snowpack, which means that's a bad thing. Um, I was in Colorado every weekend. The Matt Rockies are still have a lot of snow and they had five inches of snow five days ago.
Kathryn Lincoln: (45:24)
So that's a good thing, but, um, water is a huge issue and, and it gets around, um, the use of it, whether, you know, 80% of the water that's used in our region is for agriculture. Um, and then when you think about it, agriculture is a really flexible use of water because you can let a land lie fallow, and then that water can be used for, um, commercial. Other commercial uses. If you start building houses, you can't really let those houses life out of those people need to, you know, bathe them, drain them and live. So there's always that stressful creativity, if you will, between the ag land use and the commercial and residential use the other issue, at least in Arizona and often in the west is that much of the water is owned by the native American communities. So the rights to that water, um, are often, um, structured so that native Americans own it. And then when then you have to figure out how to buy it, how to rent it, how to lease it. So it's water is a huge issue in the west, generally, not enough, except occasionally we have too much, you know, on the days that we have a monsoon, generally we don't have enough,
George McCarthy: (46:37)
But the bottom line on water is though that it's a market failure because we don't really have an active market for water and market water isn't priced directly. So without being priced correctly, it's not rationed. Right. Right. So, um, the way we have portioned water through these, uh, you know, really arcane water rights that have existed about as long as property rights and oddly enough, you can sever the water rights from land and sell it away. Right. Um, that is a, that's a, a going concern is so until we w we'll never have the right incentives until we actually get the prices, right. And we'll never get the prices right. Until we actually can freely trade water as opposed to control it. And these, uh, you know, Byzantine ways that we do with, um, uh, you know, with, with, uh, water rights, particularly in the west, the us west people, um, they whiskey's for drinking, water's for fighting over.
George McCarthy: (47:31)
Right. And, uh, and that's where they do. They'll, they'll, you know, there's been bloodshed over, uh, water rights, uh, across the west, but globally, this is a gigantic existential problem. And, and the real answer is, you know, is conservation and really making the right kinds of choices because, you know, water is a cycle. It goes, you know, it goes into the atmosphere, it comes down as rain or snow. It goes into the ground, we pump it out. And it it's the same amount of water on the planet that there was, you know, a hundred million years ago. And we just have to figure out how to kind of manage it better. And part of that is just really being able to think through things like, you know, um, you know, landscape choices or crop choices, or how we choose to irrigate what we choose to irrigator or what, where you choose to grow, where, and those things, we haven't really given it the right thought because the incentives have been wrong all along. Right. I hate to concede it. What are the things that you have to give to the Arizona's is they have made more advancements in water economy than any place in the United States. And they, they actually are one of the most efficient users of water, um, in the world. Right. So, um,
John Darcie: (48:44)
You find in places, I mean, we do some business in places like the middle east, uh, w when you have to be very cognizant of the way you ways in which you use water in the ways in which you farm, uh, it drives innovation in those places. I think Arizona is probably an example of that.
George McCarthy: (48:59)
And Israel boy, Israel is, is real, right? Yeah.
John Darcie: (49:03)
Absolutely. Last question I have for you, Katie is you, you manage the, a sizable endowment there at the Lincoln Institute that allows you guys to engage in all these terrific projects that are helping to protect the planet and help to drive great public policies, policy decisions, uh, around the world, in terms of how you guys manage your asset allocation as part of that endowment, how do you think about portfolio construction in a way that provides that, uh, growth and sustainable, uh, type of returns that you're looking for? So you can sustain the efforts of the Institute? Um,
Kathryn Lincoln: (49:38)
Well, we talked about Mac mentioned it a little earlier about diversity. Um, you know, we really have diversified portfolio, but I'm really, um, I'm a huge, um, equity girl. I just think that, that, you know, equities in a long haul are gonna serve us well, we've done, we've done reasonably well with our equity portfolio. Um, I'm also a huge fan of private equity. And because I think, you know, all companies started small and they all got big and long point or another. We, um, I, I really got us out of substantially out of the debt markets, you know, as much as we have really wonderful, um, debt managers, you know, getting me, you know, beating their benchmarks, they're doing 3%. Wasn't getting me to my eight and a half percent bogey. So we really all of that into, um, unconstrained credit. We really love this manager called SkyBridge. I'm a boomer or heard of them. They they've done really well for us over at, but we've been with them for
Anthony Scaramucci: (50:38)
Salt talk, turned into a marathon, just so everybody
Kathryn Lincoln: (50:43)
Like the old Jerry Lewis marathons for quite some time. And we're really pleased with the work that they do for us. But, um, all things aside, we have been really pleased with our hedge book and, and the work that SkyBridge has done for us. So, um, I have a tendency to, um, we look at our asset allocation, you know, every three to five years, John and we, we're not a tactical player. Um, I have my sort of my mins, my max, and I can lean one way or another, but we really look at managing to a strong financial return versus benchmarks. I will say that I do try and find mission-related investments where I can, I have a private equity manager who, um, creates mitigation banks, which is right up our alley in terms of working towards good land policy. They've done really well for us, but again, we, excuse me, we always look for a strong financial return first cause we all, we, we believe, excuse me, we believe that the mission is first and that's sort of max job, if you will. That it's really important to make sure that we have the funds to support the work and that. So to maximize the funding is what I that's my job.
John Darcie: (51:52)
Well, you guys are a mission-based organization. So the great work you do managing that portfolio gives Mac the, uh, the arrows. He needs to do his job. So, and we just want to, I know Anthony will, uh, reiterate this as well, but you guys are definitely take the right long-term patient approach, um, when it comes to investing, that allows you to achieve those targets. So we're very grateful for your support and, and a very admiration of your long-term thinking when it comes to portfolio management. But thank you guys so much for joining us. Thank you guys so much for joining us
Anthony Scaramucci: (52:25)
Stay much more than what John just said. So, but in all seriousness, uh, um, I want more and more people to know about the Lincoln Institute of land policy. And hopefully we can have you at our live event in New York, uh, which is coming up in September at the Javits center. And I just think it's important that we push these ideas because, you know, what's the end game. The end game is we want to better each other. Uh, and we know, uh, smart economists know it's not a zero sum game. We can improve each other through the process of helping each other. And you guys are doing an amazing job at that. So thank you. And congratulations on 75 years now, John and Darcie thinks I'm 80 years old, but that's a whole other topic. We won't be. Anthony remembers
John Darcie: (53:13)
When he was in high school, when you guys were founded. That was a great, great
Kathryn Lincoln: (53:16)
Moment. It's brutal, Katie. It's brutal over here.
Anthony Scaramucci: (53:19)
If you can help me out me at a year at some point.
Kathryn Lincoln: (53:23)
Thank you again. Thank you for inviting us. It's been a fun morning. We appreciate it.
John Darcie: (53:29)
Likewise, and we'll get on one of those golf courses, Katie, where they use that gray water to irrigate. I'd love to tee it up with you
Kathryn Lincoln: (53:37)
As a partner who will certainly love to host you. So let us know. There you go.
John Darcie: (53:42)
Sounds good. You guys take care guys. Have a great day and thank you everybody for tuning into today's salt. Talk with Katie Lincoln and Dr. George McCarthy of the Lincoln Institute of land policy. Just a reminder, if you missed any part of this episode or any of our previous episodes of salt talks, you can access them on our website@sault.org backslash talks or on our YouTube channel, which is called salt tube. We're also on social media. Twitter is where we're most active at salt conference is our handle, or also on LinkedIn, Instagram and Facebook as well. And please spread the word about these salt talks, especially when we're talking about what we think are really important issues around sustainability. Uh, we love educating people on these topics, so please spread the word, but on behalf of Anthony and the entire salt team, this is John Darcie signing off from salt talks for today. We hope to see you back here again soon.
