CEO of the Year: Christine Day of lululemon

Man, did I get pilloried for this article online. Lululemon fans thought it was insulting (and I didn't even get into the whole Who is John Galt business). Worse, someone on Facebook called it a puff piece, because I didn't get into the real psychology of the CEO in question. Who is Christine Day and why have the ROB editorial staff picked her as CEO of the year?

Well it won't make any difference to those who hate the piece, but for what it's worth, Day's scarcity strategy - described below - is my best answer to the question "why is she the CEO of the year?". It's my answer, because it's the way that Day is approaching the very difficult problem of transitioning a niche brand with a very special aura, over into the big bad world of mass market brands. It's her canny strategy for preserving something special in a brand that is about to become ubiquitous and ordinary. That takes skill. So credit where due.

A final note. The scarcity model is something that lululemon extends from inventory management to public and media relations. We had no response to interview requests for this piece until the day before my filing deadline. On that day, we were offered one hour. Regrettably, I was on a plane that day, heading off to my next assignment. (The quotes below are from a series of questions she finally answered by email.) So, all that said, psychological insights into the person of Christine Day were circumstantially limited.
CEO OF THE YEAR: CHRISTINE DAY
The success of Lululemon Athletica Inc. (LLL-T45.32-1.00-2.16%) has been one of the biggest and arguably most mysterious stories in retail over the past year: a premium-priced product, sold with extensive reliance on feel-good intangibles, flourishing while so many other retailers have flagged. But on a sunny Saturday afternoon in Vancouver, you could pop into any store—the flagship Kitsilano location, for example—and, by doing nothing more than people-watching, easily get a sense of what underscores its success.
What you’ll see: mostly women, the staff youthful, the customers (called “guests” in Lululand) ranging from teenagers up to senior citizens. But it’s not so much how customers and staff look (although it has to be said, there is a common rosy glow about them). It’s more to do with how they sound. All of them are engrossed in avid conversation. Lululemon on Saturdays is a seriously chatty place. Women comparing notes on fabrics or special-edition collars. Staff modelling wraps and toques, detailing product features. Light shimmers of giddy laughter rippling through the lineup to the change rooms.
What’s notable here is that it’s not just shopping that you’re hearing. It’s community building. And if you have any doubt that Lululemon is deliberate in encouraging this sensibility, you need only read the slogans that adorn their shopping bags, advertisements and websites. Communitarian sentiments such as “That which matters the most should never give way to that which matters the least” and “Jealousy works the opposite way you want it to.” “Friends are more important than money” and “What we do to the earth we do to ourselves.” Plus, my personal favourite: “Dance, sing, floss and travel.”
Christine Day, CEO since 2008, tends to reinforce this sensibility. She says that she considers Lululemon to be “part of, and contributing to, a bigger macro-trend that affects consumers from their early teens to their 70s. Investing in your health will pay big dividends for individuals and society...elevating the world from mediocrity to greatness.”
But then, what’s interesting about the chosen quote is that it layers an interest in community over a reference to Atlas Shrugged, Ayn Rand’s treatise on the essential shamefulness of being merely like everyone else and the necessity that truly great people strive through all obstacles toward individual dominance. Rand’s 1957 novel is one of the core documents of libertarianism, bear in mind. Yet Day makes no bones about acknowledging the inspiration of the book and the life of its author. “I believe in a culture of personal accountability and not compromising your values,” Day tells me. “Atlas Shrugged is both about not accepting mediocrity and being personally accountable for the life you are creating.”
 
Day, who came to Lululemon after 20 years at Starbucks, where she was president of the Asia Pacific Group of Starbucks Coffee International, lives in Vancouver with her husband and the youngest of her three children. Befitting a Lululemonite, she does yoga and lives the Vancouver lifestyle: hiking and biking and walking the seawall. Yet it is her performance as CEO that has mesmerized analysts and the markets. With 122 stores in Canada and the United States, and 100 more now under consideration, this is a company well on its way to mass popularity. Lululemon saw its stock climb to almost $60 this fall, up over 280% from when Day joined the company, and a whopping 250% gain year over year.
If you want to know how Lulu has done it, however, don’t bother reading the financial statements. They reflect good numbers, of course: net revenue up 39% in the second quarter to $212.3 million year over year; comparable store sales 18% higher on a constant dollar basis and income from operations up 74% to $59.5 million (both over the same period). But no matter what the numbers say, when a stock is trading at 48 times earnings in the retail sector, something other than arithmetic is involved. This would be yet another contradiction that Lululemon artfully manages to maintain: in this case, a company seemingly devoted to its “guests” that nevertheless refuses to give them exactly what they want.
Need a Scuba Hoodie? You’re in luck if you like Heathered Rose Petal, but there’s no more in the Blackswan Creekside Camo. Got your eye on an Integrity Hot Tank? No problem, so long as you’re not size 8, 10 or 12. And don’t even ask about the Gratitude Wrap originally released in 2009, which sold out almost immediately and started selling on eBay for $250, because while Lululemon did re-release that item in October, 2011, it did so only in a single store, in Coquitlam, B.C., which then promptly sold out in most sizes.
Frustrating? Über-Lululemon fan and dedicated brand blogger Christina Chalmers certainly thinks so (lulumum.blogspot.com—“a place where fans can drink the lemonade together”). But then, she’s not surprised either. Because, having followed the brand as closely as virtually anyone on the planet over the past few years—Chalmers posts almost daily about company and product developments, including information on products in the pipeline that the retailer has asked her to remove in the past—she also knows that active discouragement is a key part of Lululemon’s very savvy plan. It even has a name.
“It’s called the ‘scarcity model,’” says Chalmers. “And it’s about frustrating the customer.”
Which might sound scandalous, but Christine Day isn’t shy about using the term herself. In a 2010 conference call, when the topic of inventory strategy came up, she said that while Lululemon didn’t want to be running out of core items in stores, “frustrating [customers] on that special jacket in terms of scarcity, I’m willing to do.”
Why would a company treat its guests this way? What seems highly counterintuitive (potentially fatal if publicized) is not necessarily so after considering how this rather unique brand was built and the growth challenges it now faces. According to Vancouver-based retail strategist and Lululemon-watcher David Ian Gray of DIG360 Consulting Ltd., this is a brand that has been built very deliberately. And from the beginning, Lululemon founder Chip Wilson was “very clever about guerrilla-style marketing.” What Gray is referring to is the way that Lululemon promotes itself not merely as a product—with objective features that might be compared to similar premium-priced products—but as a set of ideals expressed in those slogans of well-being and self-worth that adorn its bags, most of which obliquely reference yoga’s spiritual roots.
Which is not to say that the identification with yoga requires you actually to do any yoga. “Lots of people don’t care about the yoga and just buy the product because it makes their bum look good,” Gray says. “But Lululemon has done a great job of wrapping the brand up in a lifestyle.” That is, Lululemon is very skilled at making a healthy-seeming, one-for-all shell around what is essentially an egocentric stab at looking great.
The result is that, compared to more price-driven products, Lululemon apparel gives its customers the feeling that they’re purchasing a lot more than mere “value.” Buy a Cabin Long Sleeve T-shirt and you’re involved in bettering yourself. Pick up one of those cute Lucky Luon headbands and you’re joining a community of like-minded people. Those ideas combine powerfully, creating a sensation quite unlike that which accompanies the purchase of other premium-priced products. Lululemon isn’t an indulgence, like Bordelle lingerie or Dolce & Gabbana pumps. It’s a thing of virtue. Budget in other spending categories if you must, the brand seems to whisper, but don’t stop taking care of your body and building a better society.
With the stores full of shoppers and the stock price rising, it would appear investors believe Lululemon is pulling this off handsomely, creating real-world social networks that support the brand and insulate it from yoga-wear competitors (which now include the likes of Nike, Adidas and Under Armour). The challenges facing Day, however, stem precisely from the fact that investors are the ones making this appraisal. Publicly traded retail operations, Gray reminds me, need to show growth. That can come from same-store sales increases, but, at some point, those top out and the retailer has to expand.
The bigger problem is that Lululemon’s canny branding—which creates that aura of virtue—is fundamentally at odds with the mass popularity that will ensue if Day delivers to investors the growth they’re demanding. The “specialness” of a brand is hard to sustain when you see it on every street corner or, in this case, on every other woman in your yoga class or in the elementary school playground when you pick up your kids. That sense of being part of a haloed community starts to dissipate when the group has grown so big that it encompasses almost everybody—which is exactly what happened mid-’90s to the Gap, or mid-2000s to Starbucks. “Starbucks still has a halo compared to, say, McDonald’s,” says Gray. “But, yes, success does tend to make you ordinary.”
When I ask Day whether expansion represents a threat to brand “specialness,” her answer is unambiguous: “Yes, which is why you see us focus on scarcity of certain product styles. It is our goal not to have women wearing the same thing in their fitness classes.”
The question going forward is whether the balance can be maintained; stripped of their virtuous aura, those Groove Pants are just $98 sweats, after all. According to blogger Christina Chalmers, there are already signs that the brand is in transition from niche to mass, and that the special aura is indeed being dispelled by its ubiquity. “I’m getting a lot of comments from people saying, ‘I went to the gym today and there was another girl wearing my top!’” Chalmers tells me. “And that’s not good.” Meanwhile, in the process of growing more ordinary, Lululemon will also further open itself to comparisons with other ordinary brands, and the inevitable price side-by-sides that will follow. Case in point: a $69 Zellers jacket, released this year, modelled on the $228 Lululemon Audrey Jacket. Zellers reportedly sold out of them within a week in several Vancouver stores.
In the end, the growth-driven transition from special to ordinary may not be one that Day can avoid. But it may not be something investors want her to avoid either. There’s a lot of money to be made in being a massively popular item, even if not a virtuous one. Gray considers this to be part of a natural evolution that brands must follow.
“The management challenge is to have this brand sustain itself,” he says, “but also to reinvent at the appropriate moments. The Gap, Starbucks, Apple—these are all brands that have had their moments of reinvention.”
Lululemon’s expansion, meanwhile, should remain Day’s central concern, Gray argues. “I’m not saying [existing brand features] aren’t important to her, but in terms of day-to-day activities, she has tremendous experience in rolling out a lifestyle brand, and that’s what she was brought in to do.”
Certainly that’s what the analysts seem to think. Although with Day’s remarkable success so far, Edward Yruma of KeyBanc Capital Markets, who follows Lululemon, does not see much upside potential in the stock price; he rates it an underweight. “Lululemon Athletica is one of the best growth concepts in our coverage,” he wrote in a September, 2011, release, “but valuation remains full.” Yruma goes on to say that investors might like to hold off for a better price point before they purchase. In other words: Wait for the inevitable fall.
One gets the feeling that even moderating interest in the stock markets will not deter Day, however. Asked to comment on personal philosophy, she quotes Ayn Rand again: “The question isn’t who is going to let me, it’s who is going to stop me!” I’d say: probably nobody.
 
Posted: Wednesday, Dec. 14, 2011 1:22pm

Do You Trust Your Phone?

The Blue Light Project weirdly presages this extraordinary news story: WikiLeaks founder Julian Assange has told smartphone and email users "You're all screwed", as he unveiled his latest publications.

The 287 documents Wikileaks has released point to 150 agencies around the world that are making use of *existing technology* to monitor people's phones and computers. Software and hardware to perform this "mass surveillance" is being sold by intelligence contractors around the world and allows for data collection targeted at "entire populations".

That news is strange and scary enough. But in The Blue Light Project, the main character Rabbit has a very particular backstory. He used to work for a secretive company developing phone software. Here's the relevant excerpt. Bear in mind that what's being descibed in this passage was SciFi in my mind as I wrote it. But as I was writing about the very near future, it should perhaps be no surprise that the SciFi future was (at least according to Assange) happening already, only in the folds of secrecy that surround our present moment.

Excerpt from The Blue Light Project:

“Nobody was dying as a result of my work, I realize that,” Rabbit told Eve. “There were jobs at Raytheon and Intel where I could have worked on control systems for cluster bombs and joint stand-off weapons. I was working on a phone. I was helping design the newest, latest, hottest version of a device most people use to order pizza, text their friends.”

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But what a phone. What an idea. From a technical standpoint, it had been fun to work on. Naturally it was also an internet device and a video camera and a GPS and a music player. And yes, the prototype was also designed with an integrated biometric fingerprint and retina scanner, so the device was useless if it was stolen, and it could also log user medical information like blood pressure, blood type, pulse rates, et cetera. But the fact that it could do all those things was secondary to the phone’s chief innovation, which was a function that would ultimately be invisible to its users.

“And what was that?”

“It listened to you,” Rabbit said.

Eve thought about that one for a second or two. “Don’t all phones listen to you?”

“Not actively,” Rabbit said. “They just transmit. And even so, they generally don’t transmit unless you’re on a call.”

Eve was trying to work this through. “The phone was designed to eavesdrop?”

User intelligence, they called it. Or sometimes: behavioral fingerprinting. The phone was designed to sample the life of its user: ambient noises, television shows on in the background, music choices. The system then synched that data up with all the other information collected—downloads, GPS logs, voice traffic, medical data—and built a user profile that allowed the device to assemble phone books or web links, push ads and suggestions at you through the browser, even dial 911 and transmit medical data in the case of certain medical emergencies.

“Which was maybe a little more phone than some people would want,” Rabbit said. But what was a lot stranger, what really got into Rabbit’s head and wouldn’t come out, was the client-side request late in the project timetable for silent dial-out functions.

“Silent what?” Eve asked.

Dial-out. These capabilities enabled the phone to upload user profile data to pre-set third-party locations.

“As in, without people knowing,” Eve said.

Rabbit shrugged. Conceivably without them knowing, yes. The phone could have been designed to do that. He, personally, never got that far with it.

“Because you realized all this would be completely illegal?” Eve asked.

“It wasn’t illegal to test it,” Rabbit told her. “We were designing a prototype. A feasibility study.”

MADDAM, the client called it. Massively Distributable Data Acquisitions Module. Rabbit didn’t remember thinking once about what the device might represent if half the country or half the world owned one until that late client request that upload features be developed. And if there was any chance Rabbit was going to get his head around that part, there was much less of a chance the following morning when a whole raft of new nondisclosure agreements were shipped over by the client’s lawyer to be signed immediately and returned. Rabbit signed. But why the paranoia? What exactly had they been working on?

“Maybe we really were just tossing around ideas for a super-smart phone,” Rabbit said. “But that morning I realized I just didn’t know. Maybe I was developing the most sophisticated low-maintenance wiretap the world had ever seen. Selling people stuff and surveillance have a big overlap, if you’re seeing my point here.”

“I am. And I’m scared to ask the next part,” Eve said.

Rabbit nodded. He knew where this all led if you thought about it.

“Who was the client?” Eve asked.

“Short answer?” Rabbit said. “Nobody I worked with had any idea. We used a code name in house. Blue 52.”

“Blue 52,” Eve said. “And who did you think that might be?”

 *****

Please consider buying the book.

Amazon print

Amazon eBook

 

Posted: Friday, Dec. 2, 2011 11:31am

The Solution to Inequality is Spelled: V-A-T

Early in the Canadian Occupy protests in October, Bank of Canada Governor Mark Carney described the movement as "constructive" - the understandable product of worsening income inequality. He was partly right. He should have said the protests were potentially constructive, but only if parties on both sides of the barricades open their minds about taxes, specifically the superior redistributive potential of consumption and value-added taxes (VAT) over income taxes. If you're interested in closing the gap between rich and poor and you believe that only higher income taxes on corporations and the rich will do it, you're defeating your own cause.

Let’s start with the complaint: income disparity. Both Carney and Finance Minister Jim Flaherty agree it’s getting worse in Canada. In an op-ed article published in several newspapers the day after the protests began, Mike Moffatt, an economist with the Richard Ivey School of Business, noted that Canada has fallen far down the ranks of developed countries by measures of income equality and that the gap between rich and poor here is widening faster than it is in the United States.

Serious problems require serious solutions, of course. That would exclude flaky ideas like “Smash Capitalism” and “End Ownership” (both suggested on protestors’ signs in Vancouver). Instead, Moffatt pointed out that countries with the least disparity of income tend to have moderate corporate taxes and high VATs. In Denmark, Sweden and Finland, where income disparity is low, the VAT rate averages 25%.

VATs such as Canada’s GST and the combined federal-provincial HST (in the provinces where it applies) are charged on the difference between the cost of inputs and the selling price at each stage in the manufacture and distribution of a product or service. VATs and sales taxes tend to be more efficient and harder to avoid than income taxes. Moffatt cited research by Stephen Gordon of Université Laval, which projects that a hefty increase in income taxes on the rich—say, 10 percentage points more on incomes higher than $500,000—would generate far less revenue than even a one-percentage-point HST increase. Despite the advantages of the HST touted by economists and governments, British Columbians voted to abolish their 12% HST in a referendum in August, although this will simply mean bringing back the province’s old sales tax and the federal GST.

Why are VATs and sales taxes so unpopular? One common critique is that they are regressive. On average, poor families spend a higher proportion of their income on consumption than rich families, who generally have surplus earnings to save. But if you measure a VAT or sales tax relative to total spending by individuals—the rich generally spend a lot more than the poor—those taxes actually look progressive.

VATs can also be tailored to soften or reverse any regressive impact. You can exempt or charge low rates on products such as groceries, and tax luxury goods more heavily. Political leaders can also direct VAT revenues to programs targeted at low-income groups.

In the end, however, it will probably be a lack of options that drives us to embrace VATs. This might happen if the fiscal crisis deepens. As Bruce Bartlett wrote in an article in Forbes late last year: “A VAT is never going to be seriously considered unless the need is overwhelming.” Perhaps it’s that sense of need that underscores the so-called 9-9-9 plan touted by Republican U.S. presidential candidate Herman Cain, in which he proposes to slash federal personal and corporate income tax rates to 9%, and make up for lost revenue with a 9% national sales tax.

Whatever we think of Cain’s plan, we probably won’t seize the VAT solution until deficits start driving inflation and interest rates higher, and income disparities get worse. It would be better to act now, rather than later. But that would take movement on both sides of the barricade.

Posted: Monday, Nov. 28, 2011 11:56am

Chaos and Planning

This article ran first in Vancouver Review. Sadly, I have to report that the Red Gate did finally lose its battle with the city and has been evicted.
CHAOS AND PLANNING: A tour of Vancouver's public art
ONE: THE RED GATE
By the time you read this article, an interesting but little-known Vancouver public-art institution will either have dodged a bullet or bit the dust. I’m talking about the Red Gate. And because of the timing here, I don’t know if I’m talking about it in celebratory or funereal tones.
Sometimes referred to as the “Rainbow Art Institute,” the Red Gate is (was?) a non-profit art and music space run by Jim Carrico in the 100 block of West Hastings Street in a rapidly developing part of Vancouver’s Downtown Eastside (DTES). In the spring of 2011, Carrico—who describes the ramshackle space as a “cultural wildlife refuge”—received eviction papers from the city. And with that, a drama of survival that had played out over the Red Gate’s entire history reached its pivot point.
Why was the City acting, all at once? The 30-day notice to vacate cited building-code violations and fire-risk issues, deficiencies that might not surprise a casual visitor to the building. It’s old and obviously in need of some repair. Still, many people were outraged at the eviction notice, since the building has been in that condition for many years. The decision to evict seemed unfair, and worse, it seemed counter to the city’s insistence that DTES development would follow a “mixed-use” as opposed to “gentrification” model.
Posted: Tuesday, Oct. 18, 2011 9:53am
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Man Standing

This profile of Inuit film-making legend Zacharias Kunuk was originally published in Canadian Art
Edited by Richard Rhodes
***
Final descent into Igloolik and I’m feeling the cold already. It’s seeping into the plane, into the soles of my feet, stiffening my knuckles and knees. It seems to be reaching out toward me, and I find myself thinking about the story a man told me an hour ago in Iqaluit, just prior to departure. Joseph Palluq was sitting beside me on the shuttle from the terminal to the plane. He turned to me, spotting a first-time visitor to the Arctic, and decided I needed to hear his story about hypothermia.
Perfect timing. I’d just been telling him I was up there with the photographer Donald Weber to visit the Inuit filmmaker Zacharias Kunuk. “You guys know Zach?” Palluq asked. I said no, but that we were interviewing him about his new film, Qapirangajuq: Inuit Knowledge and Climate Change.
“Huh,” Palluq said, impressed. It meant something that two “southerners” would travel all that way to talk to a man he’s known since grade school, a man who may now be Nunavut’s most famous citizen. Then, apropos of climate change, along came the story about hypothermia.
Palluq had been a teenager when it happened. The weather had been mild that day, so he’d dressed only in a light jacket when he went out with the dog team. A few hours later, far off on the land, the weather radically worsened. The wind picked up. The snow started. The dogs lay down in the mounting drifts and refused to move. He was stranded. And by the time 12 hours had gone by, he knew what was happening to him. He knew the symptoms: first you shiver, then you start stumbling. Pretty soon you can’t walk.
Palluq scratched late-day silver stubble, reaching this point in the story. He lives in Ottawa now, he‘d told me. He was going back to Igloolik for his father’s funeral. I wondered if this sad journey had reminded him that the man he was about to bury once saved his life.
“Then, they found me,” Palluq said.
“Where?” I asked. “How far from Igloolik had you wandered?”
Palluq tried to explain. He said, “You know the ridge above town? You know the rock outcropping past that? You know…” He stopped, looking at me again. “But you’ve never been to Igloolik before.”
“No. I haven’t.”
He shrugged. He smiled. “Ah, well.” Then he drifted away.
I’m thinking about this last comment as the landing gear drops, as the ground nears in a blur of white and blue, as we thump down to the tarmac, as the Igloolik Airport hurtles by in a rainbow spray of ice crystals. I’m minutes from finding out my luggage is still in Iqaluit—a separate matter. Looking out of the window, I’m thinking about what Joseph Palluq told me, and I think I know what he meant. He wasn’t being dismissive. He was only saying: if you’ve never been to Igloolik, if you don’t know the ridges and the outcroppings, the line of the shore and the way the tongue drifts form in the winter season, how could I possibly explain where exactly I was when my father found me, half-dead and about to slip permanently into the very heart of this cold?
 
Posted: Thursday, Oct. 13, 2011 12:06pm
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CBC "cultural secrets": Byron Cameraman

 I've written several times in these pages about my friend Byron Dauncey, who is also the street artist known as Cameraman. I'm happy to do so again, as Byron was included in the CBC show "Cultural Secrets", for which the CBC asked a whole range of people for suggestions. When they approached me, I took it to mean they wanted my idea of something/person/place that was culturally significant but not well known. Byron was my very first thought, although I hope that he does indeed become more widely known. He's a secret that shouldn't be secret.

The link to the CBC show is above. Here's the clip of Cameraman by itself:

Posted: Monday, Oct. 3, 2011 10:03am
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Are student loans the next financial bubble?

My regular Big Ideas column for the Globe and Mail Report on Business Magazine is this month about a looming potential problem that everybody seems to know about already. It was interesting to learn, researching this piece, just how widely the problem is already being discussed while nothing is really happening at higher levels to forestall a disaster. You have to wonder whether President Obama calling for every American to pursue a year or more of college education is, in fact, ramping up demand for an asset class that is not providing a return on the investment people are making. If that analysis is valid, then Americans could be in a very similar position in education to where they were in real estate circa 2007.
***
Seems like everyone can agree what the next big economic bubble will be. For those who haven’t seen the alarming study released by Moody’s Analytics last month, that would be student loans. There are 1 trillion dollars now outstanding in American student loans and Canadians aren’t in much better shape with a total of 22 billion and counting outstanding in August.
Posted: Monday, Oct. 3, 2011 9:26am

Save the Red Gate

I’m mid-way through a piece for Vancouver Review on the topic of public art. As a result, I wouldn’t normally write and post anything on the topic because it might end up stealing from work to-be-published. But, with apologies to my kind and forbearing editors at VR, I’m going to make an exception here because we have an unusual and troubling art situation going down here in Vancouver: the City has threatened to shut down the Red Gate.

If you’re not familiar with it, the Red Gate is a non-profit space at 152 West Hastings Street opposite the Woodwards redevelopment. Run by Jim Carrico, it’s a kind of pure creative space (he calls it a Cultural Wildlife Refuge) where musicians and artists (street artists and others) hang out, create, and showcase their work. About three weeks ago the City gave Carrico 30 days to vacate. After a flood of protest, the City granted a 60 day extension. But the axe still hangs meaning the time has arrived for people to make themselves heard on the topic of why this closure should not happen and why Vancouverites should really care about the preservation of the Red Gate and institutions like it.

What’s driving this situation is development in the Downtown Eastside (DTES). As most Vancouverites know, the 100 block of West Hastings Street has already transformed with the completion of the new Woodward’s complex. And speaking as a 15 year tenant of the Dominion Building, at the corner of Hastings and Cambie half a block from the Red Gate, I feel qualified advancing the opinion that the Woodward’s development was sorely needed. 100 block West Hastings was never the worst block in the DTES, but when I moved my office into the area it was getting steadily worse. I saw crack use and drug sales almost every day, all the way up Hastings and into Victory Square. I remember bringing my kid to the office one weekend and having to jump in and stop him from picking up a hypodermic needle lying next to the cenotaph.

Having said that improvement was needed, it’s important to note that DTES “gentrification” was never the plan. I wrote an article last year about Army&Navy owner Jacqui Cohen and interviewed numerous prominent people about development of the DTES. Every one of them - including Larry Beezley, Jim Green, Bob Rennie and Cohen herself - stressed that "gentrification" was not the right approach. For the downtown, these powerful people seemed to agree, the "mixed use" model was better.

Why did they express this view? Because while "mixed use" plans try to preserve what's best about a neighborhood through diversity, “gentrification” is what happens when you do development wrong. It means allowing lower income groups and artists to be displaced and, in the process, chasing out the established culture of a given area.

And make no mistake: there has been a distinct DTES culture. It’s about affordability, certainly. But it’s also about the sheer presence in numbers of artists, gallerists, filmmakers, writers, publishers, theater troupes, as well as a whole range of independent business people in technology, architecture, the law. What I’m describing is the kind of neighborhood on which every city vitally depends, those urban zones and spaces where small-scale creativity is expected, celebrated, and where it can thrive.

The Red Gate has been a critical part of that scene in the DTES and should be part of the neighborhood's continued "mixed use". I can give a personal example. I wrote a book recently, a novel called The Blue Light Project. Why? In large part due to the inspiration I found myself drawing from the DTES flourishing ecology of street art. I wasn’t a street artist. I was a total outsider. But I started my investigation at the Red Gate, where Jim Carrico arranged for me to meet the legendary Vancouver graff writer and street art historian Take5. Take was my window in, and through various introductions that followed, my own creative process was informed and stimulated. When I follow the causal chain, in other words, it goes back from my finished book through all of the people I met, through Take5 and the Red Gate, to the DTES itself.

And it seems to me that’s exactly how creativity is supposed to work in these most crucial urban zones. People are supposed to be positively infected by what’s going on around them, to be forced into an intellectual and aesthetic jostling together. Because it’s in those cultural mosh pits – at times anarchic, sure, but generating hugely productive creative energies – that new ideas are born.

New ideas. We want those. So we don’t want to stomp all over the places where they are cultivated. And that’s why people who care about this city, like those named above, may support mixed use development of the DTES, but not “gentrification” where you drive everybody out who isn't a upmarket condo owner. That’s why, I’d reason, Gregor Robertson has reportedly said that he wants the Red Gate to stay open. Because people who care about the city recognize that gentrification is not just unfair, it kills a particular kind of urban creativity. And to do that would kill something essential to the entire city.

Let’s not let that happen. I encourage anyone who reads this post and agrees to write a letter of support to redgate@at.org. It's not going to be easy. First thing Jim needs is an agreement from the building's owner regarding long term occupancy, without which the building won't qualify for the City's Cultural Infrastructure Grant. But if enough noise is made, perhaps the pressure can be constructively applied in this case.

Timothy Taylor

 

Posted: Wednesday, Jul. 6, 2011 8:04pm

Igloolik Dubai

My third novel The Blue Light Project was published in March/April and book business, touring etc, consumed most of those two months.

In May I had to get back to work. That means magazine work. And that means travel. I still very much enjoy this aspect of my freelance life. This time around in particular, I had an unusual schedule that took me to Igloolik, in Nunuvut, which is in Canada's arctic...

...and then to Dubai and Abu Dhabi, 9000 kilometers away in one of the hottest desert areas known to man.

The experience generated plenty of stark contrasts, as you might imagine. -40 C versus +40 C is perhaps the most obvious. Ditto the landscapes of frozen snow and hot sand. But there's also the area of wealth and development, where Dubai's skyline seems to grow while you watch it and Igloolik is a clutch of low buildings along a remote stretch of beach in the Canadian high arctic. An international hub in the middle east versus an isolated hamlet in the frozen north. What two places could be more different?

And yet a couple of things struck me powerfully as being shared by these places. Both the Emiratis and the Inuit are ancient people, whose entrance into post-modernity has been relatively sudden. And in both places I was there to interview people whose lives are crucially connected to the project of staying in touch with ancient ways.

In the north, that person was Zacharius Kunuk, the legendary Inuit filmmaker who brought us the films The Fast Runner and The Journals of Knud Rassmussen.

Kunuk is a fascinating individual, whose committment to Inuit tradition comes paired with a fully post-modern engagement with technology and global thinking. I look forward to writing a profile of him and his work for an upcoming issue of Canadian Art.

In the United Arab Emirates, meanwhile, I was there to write several pieces that will run in Spafax Canada publications. But one of those assignments allowed me to meet Peter Bergh, one of the best known falconers in the world.

Falconry is a 2500 year old tradition in the middle east, and in a culture that isn't easy to penetrate for western outsiders, it offers a fascinating window into the history of the region. I'll be writing about Peter and the experience of working with his birds in an upcoming issue of Fairmont Magazine.

 

Posted: Tuesday, May. 24, 2011 11:10am

Too Big to Fail?

Originally published in The Globe and Mail Report on Business Magazine:

Newt Gingrich is back and doing what he's done so often: igniting controversy. The architect of the Republican congressional revolution of the 1990s has created a firestorm by proposing a U.S. federal law that would allow states to go bankrupt. At present, only cities can do that, and it's been rare. But the debate escalated in January and February, as dozens of states and cities said they would have to make brutal spending cuts to slash massive budget deficits. The crisis is already so advanced that star Wall Street analyst Meredith Whitney told 60 Minutes that she expects 50 cities to declare bankruptcy in 2011.

Gingrich's plan is basically a free-market solution to deficits-the bond market will exercise the discipline that politicians cannot. Manhattan Institute scholar Nicole Gelinas explained the logic in a Boston Globe op-ed piece in January: "If bondholders worry that states won't repay their debt, then they'll jack up interest rates, or just stop lending money." That's how the market punishes underperforming companies. And legal bankruptcy, or even the threat of it, is often a powerful tool used by executives or regulators to force unions, management and other stakeholders to get real-either moderate your demands, or we'll close the doors and sell off everything for whatever we can get.

Not surprisingly, U.S. tax reformers and proponents of limited government like Gingrich's idea. It gives Washington another option for troubled states besides bailouts. The feds could just say "No." The states could then squeeze public-sector unions. Given a choice between taking their lumps at the negotiating table or possibly having their contracts swept away in bankruptcy, sane union leaders would likely take the first one.

Opponents of Gingrich's plan are vitriolic-"stupid," "horrid" and "disaster" are typical responses. You'd expect that from unions under siege. But the proposal could also backfire on Washington by rattling already wobbly markets for municipal and state bonds, and pushing local and state political problems upstream into federal courts.

Then there's the question of what happens after governments hit the wall. Unlike bankrupt companies, states and cities can't simply be shut down and auctioned off. Someone will still have to provide some services. And as Gelinas noted, the spectre of bankruptcy may not result in the deep spending cuts that Gingrich and his crowd would like to see. "If you're a bondholder, you often prefer tax increases to spending cuts," Gelinas said.

Bankruptcy also wouldn't eliminate the states' biggest financial obligations by far: unfunded pension liabilities. Reuters Money & Politics columnist James Pethokoukis says that states face a total unfunded pension shortfall-the value of future obligations already incurred minus the current value of investment assets-of $3.2 trillion (U.S.). That makes the $250 billion in budget deficits forecast for the next two years look like a blip.

Canadians should pay close attention, because fiscal problems are swelling here, too. The federal budget deficit totalled $56 billion in the 2009-'10 fiscal year. The Harper government has vowed to eliminate that by 2015-'16. But Parliamentary Budget Officer Kevin Page says that a $10-billion deficit will likely remain. "We do not have sustainable fiscal structure," he said, ominously. Ottawa also has a shortfall of $208 billion in its pension plans for federal employees, according to a recent C.D. Howe Institute paper.

Entire countries have gone bust and repudiated debts in the past, of course. But the fundamental problem with Gingrich's idea in a democracy is that it's asking the market to do a job the electorate should be doing: punishing politicians who spend too much money.

So why do politicians keep overspending? Often it's a timing issue-spending decisions are made long before bills come due, or by politicians who don't have to implement them. We have a great example of this in Vancouver, where I live. The B.C. Teachers' Federation has a contract with the provincial Ministry of Education that calls for improved wages and benefits for this school year, yet the ministry failed to increase the provincial education budget enough to cover it. The Vancouver School Board had to work with the collective agreement it had been handed. The board's solution: cut programs and school days.

Which politicians, if any, will Vancouver voters choose to punish? The trouble with the electorate, of course, is that our personal finances are as bad as those of governments. A recent Vanier Institute of the Family study noted that the average Canadian family's debt-to-income ratio has soared to 150% over the past 20 years, while the savings rate has plummeted. We've all been borrowing and spending irresponsibly for a long time. No wonder it's so hard to stop politicians from doing the same thing.

Posted: Tuesday, May. 24, 2011 9:57am
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