The Five Ways to Evaluate a City

This is going to be a bit of a mixed post. Essentially, when you choose a city to live in, it is going to depend entirely on where you are in life. If you’re at the younger age of the spectrum (target audience here) you’re likely going to focus much more on economic opportunities since you prefer access to cash flow. While it would be awesome to simply move to the Bahamas and live a relaxing life forever, it doesn’t make a lot of sense economically. As you get older, your priorities change similar to this blog where we’re significantly less interested in chasing a few bucks at the expense of valuable time. So lets begin.

#1 Economics: For young people, this is the first thing to look. Take a look at the industries in the city, both where is it today and where will it be in about 3-5 years. For the most part, cities don’t change much in a few short years and there is no point in evaluating a city for 10+ years. This is because you’ll be able to move if things don’t work out. The key is making sure you choose the city that’ll generate the highest income. While we are near certain that every smart reader will end up generating online income as outlined in Efficiency, we have to be realistic. A lot of smart people begin by taking a career position.

After a decade … This should no longer be the top criteria. It likely falls to the bottom (or near bottom). In a decade you should be focused on improving your quality of life. As we’ve said many times, money is just a tool. If you’re stuck in a city you dislike with friends you loathe and a dating life that is boring… that is not considered successful to us. In a decade or so you’ll be financially set to take more geographic risk (living in cities with less robust economies) while offsetting this with quality of life and lower stress (high net worth generating passive income).

Now we get into a more interesting territory “later life”. This is where a big fork occurs. If you’re interested in having kids then your cities will change for a third time. If you’re uninterested in having kids, you’ll remain in the second paragraph. At this point, economic activity becomes more important since economic growth is typically associated with higher IQ individuals. In any case, a city that is fun for a bachelor is not going to line up well with raising a family (Las Vegas comes to mind as an example).

Putting this together we’d say your evaluation of a city based on the economy should look something like this: 1) it should take up 80-90% of the value if you’re worth under $1M, 2) it should take less than 20% of the value if you’re a millionaire and 3) it should take up about 33% of the value if you’re having a family.

#2 Demographics: A good rule of thumb is to avoid cities that have male dominated industries. This would be technology, finance and construction. While New York is a rare exception given that media, fashion and many other industries are prevalent there, this basic filter will help you. The downside? You’re only going to be able to take advantage of this later in life if you’re going to work in Technology/Finance/construction for your first position.

For young people, when you decide on the demographics… Do not rely on people your own age. This doesn’t add much value to you since your peer group will unlikely succeed. People can complain and say if they “change the way they think they’ll make it!” But. It just isn’t true. Talent is real and the reality is that the majority of people are not going to make it. Under 1% of the population under 35 is worth over $1,000,000 (numbers don’t lie). Solution: go and find people in your field and find out what they suggest in terms of a starting place. Take their opinion seriously since cost of living adjustments will impact the city you choose in a dramatic way.

After a decade passes, demographics matter quite a bit. Figure out the type of people you want to be around and get ready to make a few trips. Being rich and forced to hang out with boring people is not on the” to-do-list”. Demographics determine your future rolodex. When you have made it financially you’ll have contacts in the major cities so continuing to build a book isn’t as necessary as it was before (unless you have a bigger number to hit). As an example of demographics, you want to search for 1) average age, 2) male/female ratio, 3) race/ethnicity mix, 4) number of universities in the region , 4) percentage of city that is married and 6) political affiliation. All of these will paint a good picture of the type of people you’ll meet. A good resource for information on the population is worldpopulationreview. This is not good enough but it gives you an idea for your beginning research. If the numbers are largely the same as a city you like it’s probably worth a visit. If it is similar to cities you dislike… cross them off the research list.

Moving to the next decade, demographics will be more important than economic activity if you’re having a family. Why? Well you’re essentially choosing the peer group for your kids. If you’re not going to go down this route, this is typically why successful people live in two cities! If you remain single, you can live in two cities that address two different demographics you enjoy. This could also be driven by weather and outdoor activities as outlined in the next section.

#3 Weather and Outdoor Activities: This is essentially worth nothing for the younger people. If you have no money, fun shouldn’t be prioritized. Every major city has enough to do for a couple of days a week since you’ll be working the rest of the time anyway! Weather won’t be an important quality in the beginning. But. Fast forward and that changes quickly.

A decade later… weather and outdoor activities will become the second most important item on the city living test. If the city has the demographics (people you want to be around) the only other big swing factor is the weather and activities. While it would be interesting to *visit* a city that is freezing all the time with beautiful people… it won’t be enjoyable to stay there long-term. For fun our personal preference is a beach city and an active city. This is a preference as there are some people who enjoy skiing more than the beach and others who simply enjoy living in the country with vast amount of acres (we couldn’t do this). A simple example of a dual city set up here would be Miami and New York. Alternatively it could be Los Angeles and Chicago. We are sure there are millions of other examples but this is a good way to think about a dual city living situation.

Moving again to the later years or next decade or so, the activities are actually quite important if you’re going to have kids. Again, not for us but for many people. This will determine the number of “attempts” they get at finding a talent. If you’re in a city with limited activities, you’re going to be limited in your guesses as well. The ideal city in that situation would be any major city that has a driving culture. Why? Well in a driving culture city you likely have more space which typically means more quality facilities. There is a reason why Texas and Southern California product quality athletes across multiple sports while congested cities produce athletes in more indoor activities. Activities determine the number of talent tests. To cap it off, if you’re going to remain single this is still important as it gives you more options for fun. But. It isn’t a deal breaker because you can always hop on a plane.

#4 Taxes: Similar to weather and outdoor activities, taxes will unlikely be relevant. People will say that “the 8% saved makes a difference”. But. This isn’t really true. The goal for young people is to scale up responsibility as fast as possible since a $10-20K difference in year 1, 2 and 3 isn’t going mean anything. It barely gets you a single Bitcoin these days anyway. Unless there is an equal amount of upward mobility (the Company is headquartered in a tax free state for example) this shouldn’t be taken as a big part of your decision making.

Once you reach the next stage, taxes become unbearably important. A change in tax rate makes a huge dent into investment income (bonds, REITs, Real Estate, boring savings accounts etc.). That said, the city you live in determines a lot of the tax consequences creating an opportunity for you. From our experience, this is a big factor for the first 5-6 years of “new living” where you value your time over making a few extra bucks. After that it fades and you may find yourself changing cities for a third time.  Side note: A high quality signal that someone is well off? Their level of hatred for the amount of taxes they pay. Unquestionably the worst day of the year.

As you move forward, taxes become less important in theory. If you’re interested in maximizing *net worth* they matter. But. If you’ve played your cards right you have more than enough money. We realize this may sound like a contradiction to the side note, but it isn’t. If you’re just over financial independence, a 10% difference is a big change. If you’re 3-5x over financial independence it is much less relevant (you’ll hate paying them even more though!).

#5 Infrastructure and Laws: This is a big one for the younger generation. When you move to a new city, doing everything “right” offers a large return on a percentage basis. Look into: 1) rental laws, 2) public transportation and 3) the services of the city. Rental laws allow you to decide if there are ways to game the city, from rent control to elongating leases for lower monthly payments. Public transportation is self-explanatory as a major city should allow you to move without a car (won’t be using uber black daily like you will in the future). Services determine nightlife and culture, with shorter nightlife you’re looking at day time activities and with a *low-cost* services industry you’re looking at a lower stress city.

In the future, this changes from rental laws to property tax/rental laws in the eyes of the owner. Public transportation drops off the list as it won’t make a change to your budget and you’ll rarely use it (only to save time). Services become more important as you ramp up the quality of your life and you look to free up valuable time. After all, if services can save you 5-6 hours a week and you can’t make more money to offset the cost… something isn’t working properly (it implies you’re making less than the cost of services!).

Capping it off, in the later years, your focus then shifts to public education and safety for your kids if you go down that route. If you’re more likely to remain a bachelor you’re sticking with the same items in the second paragraph with a heavy emphasis on services since you’re looking to maximize your free time. Keeping a pulse on the demographics and laws are constant (every month or so try to see if there are any big changes).

Fun Recommendations (Assumes second stage): Can’t really have this post without recommendations. Remember, this is for people who enjoy cities (and want to remain single). Good cities for this type of person include: Miami, Las Vegas, Dallas/Austin Texas (although Austin is seeing a demographic shift), Los Angeles for those that want to live in California, New York City and Chicago. There is a relatively wide range here since we assume you’ll be less money hungry after succeeding over the first decade. While money motivation used to be high, it dies quite a bit once you make it (assuming your personality is wired for freedom and not materialism). That said everyone has a different lifestyle and those cities offer a wide range. Miami is better for lower stress offset by lower economic opportunities. Vegas is essentially a city similar to LA without the weather (desert version of LA) and lower taxes. Chicago/NYC are good for economics and bad for taxes. To cap it off Texas is essentially Miami with much lower costs and no beach/worse weather.