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Housing: Part 300 - The Global Bubble Hypnosis is a Larger Problem than NIMBYs

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Here is a recent article at the Financial Times.  The headline:
New York property jitters herald declines elsewhere
 The first line:
Clouds are hovering over New York’s housing market.

This is a great example of the mass hypnosis that has infected the public consensus on housing.

There is a broadening realization that the lack of access to urban labor markets and the lack of access to affordable urban housing are the prime challenge of early 21st century economics.  The problem is, solving that problem requires economic dislocation and upheaval of urban housing markets.  If you see falling real estate prices in urban centers should your reaction be to worry about "clouds hovering" over urban real estate markets?  I say, celebrate.

If our primary economic problem is that a lack of housing in urban centers causes it to be overpriced by a factor of 2 or more, then the DIRECT solution to that problem is that urban real estate needs to lose 50% or more of its value.  This article begins by noting that the median price per square foot in New York City has declined by 18% from last year.  Your reaction to that should be, "That's a great start!"  Full stop.  If that's not your reaction, then what are you doing?  What's your purpose?

Further, the article argues that global capital markets are leading to a new synchronization of urban real estate markets, so that additional supply is such a strong factor in bringing down urban housing costs that new units in New York City can bring down prices in London.  Your reaction to that should be, "Wonderful news!  Supply is a much more powerful factor than we thought."  Full stop.  If that's not your reaction, then what are you doing?  What's your purpose?

Reasons given in the article for this drop in New York prices include: (1) removal of tax benefits, (2) "glut" of luxury supply, (3) globalization, (4) "financialization", (5) "ultra-loose" money.  Your reaction to that should be, "Oh.  OK.  Those must all be good things.  Let's do more of those things."   Full stop.  If that's not your reaction, then what are you doing?  What's your purpose?

But, that's not the direction the article takes.  The article notes that sales volume is also down, and, as is the convention, it treats this downturn as the inevitable end of a boom bust cycle.  So, instead of seeing the drop in sales as a sign that all these good things might come to an end - as something we should counter - the article treats the boom that preceded it as the problem, and the solutions proposed are all policies aimed at stopping the real estate expansion before it develops!

This is an explicit defense of a monetary and credit regime that is specified to ensure rising urban real estate costs.

Now, admittedly the problem of solving urban costs is difficult, because normalized, unconstrained urban housing markets would require building with few unnecessary obstructions and low costs.  And, part of what happens in these regimes is that the bridge between basic costs and market value gets filled with all sorts of "limited access" rent seeking.  Developer fees, concessions to advocacy and neighborhood groups and municipal powers, queuing, etc.  These added costs emerged.  They didn't develop as some sort of plan.  So, if supply actually starts to increase enough to bring rents down to a reasonable level, these extra costs will have to be reduced in order to allow new development to come online profitably. Since the cost of queuing is pure waste, the first step here is "easy".  Just keep pushing through more projects for approval that are bringing in those "clouds".  There are a few trillion reasons why local planning boards aren't going to do that to existing owners and developers.

But, for activists and researchers who want to solve the urban housing problem and for global financial journalists who cover these markets, the reaction to that political problem should not be to kill any booms in their infancy.  The reaction should be, "How do we entice these urban planning departments to keep pushing through new supply when it looks like a downturn is coming?"  Because, to refer to any supply in these cities as anywhere close to a "glut" is a laugh.  A horrible, dark, depressing laugh.  There will be a glut of supply when rent in New York City is similar to rent in Atlanta, or even Chicago.  Until then, any use of the word "glut" to describe New York City housing should be met with laughter.

The reason we are engaged in this odd public rhetorical house of mirrors is because we all have a virus in our brain.  It's a cultural meme.  And it's a received canonical premise that there was a housing bubble, and that bubble was caused by loose money and loose credit.

The housing bubble, such that it was, was caused by an extreme shortage of urban supply.  Because of that shortage of supply, the process of meeting the public need for housing requires a "bubble" and the availability of credit that is flexible enough to allow for ownership where rents regularly take 50% or more of a household's budget.  Since supply in those cities barely responds to price, prices in those cities have to be bid up to high enough levels to induce outmigration so that new housing can be built in the rest of the country where supply can react to high prices and high demand.  At the peak of the US housing "bubble", credit markets were just beginning to push market prices to a level that induced that new supply.

Now, it would be better to build ample units in the urban centers.  But, since that doesn't appear to be close to happening, this was a second-best solution.  And, in terms of rent - which is the appropriate measure for considering housing affordability - 2005, briefly, was the one point since 1995 where supply at the national level was abundant enough to moderate rising rents.

Unfortunately, the Closed Access cities in the US are such a problem that in order to create enough housing at the national level, we had to induce a mass migration event out of those cities, and that mass migration event was the source of the dislocations in places like Phoenix that drove the country to demand a credit and monetary contraction.

This is the first step to fixing the problem.  We need to get that virus out of our heads.  The problem, all along, was supply.  Trying to pop the bubble before it inflates is the opposite of what we need to do.  I think the first rhetorical step to beat this virus is to stop thinking about housing affordability and housing markets in terms of price.  Price is a secondary function.  Affordability is about rent.  And, in the end, price is also about rent.  And, in the past 25 years, there have been two successful means for moderating rents.  (1) build like it's 2005, or (2) pull back on the money supply and credit so severely that a good portion of the country is foreclosed upon.

If we had committed to (1), today rents would be lower, prices would be higher, homeownership would be strong, and American balance sheets would be healthy.  It would be nice if a lot more of those American households could also live in the coastal cities.  I don't know if that can happen, but it sure as heck isn't going to happen if there is a consensus reaction to protect those precious urban real estate values every time the solution actually starts to play out by worrying about a "glut" of supply, and then by accepting pro-cyclical credit and monetary policies in order to "pop" the "bubble".

In that counterfactual, where the urban supply problem isn't solved and the rest of us commit to abundant supply, there would be gnashing of teeth about how the Federal Reserve is feeding bubbles and they are at fault for making home prices too high.  We have indulged that intuition for a decade now.  Now we know how wrong that is.  This was the darkest timeline.  Let's roll the dice again and proceed with the knowledge that doing it wrong has provided us.

New York real estate is getting cheaper and is pulling housing costs down in other cities, says the Financial Times, because (1) removal of tax benefits, (2) "glut" of luxury supply, (3) globalization, (4) "financialization", (5) "ultra-loose" money.  OK.  Those must all be good things.  Let's do more of those things.  What's your purpose?
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duerig
11 days ago
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This article really does show the inconsistency in our thinking. Everybody wants housing prices to stay low. But everybody wants houses to appreciate in value because they are 'investments'. And that is why the reporting on it is muddled.

There are so many similar confusions when it comes to economics. People want a 'strong' dollar, but get outraged at other countries manipulating their currency to make them artificially cheap. People want to reduce deficits by lowering taxes and keeping their benefits.
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Fake reviews now generally necessary to do business online

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"The temptation to pose as an impartial reviewer of one’s own work will be familiar to many authors across history, writes Simon Parkin. "But the Internet has, as with all vices, smoothed the transition from temptation to action."

Such self-fluffing is at least supposed to be secret. But the review systems are so crude and easily-gamed that it enables nakedly public manipulation. When The Gamers want to waltz around Amazon's useless "verified purchase" wall to punish a developer for offending them, it's easy...

“People would buy our game, not play it, leave the terrible review, and instantly request a refund,” Sean Vanaman, Campo Santo’s co-founder, told me. “It’s a well-worn tactic.” In his estimation, user-review systems such as those used by Valve, Steam’s developer, are so vulnerable to exploitation that they require as much moderation as social-media platforms.

Worse, without fake positive reviews, your thing -- your book, your restaurant, your startup -- is at a disadvantage in the apps and platforms that potential customers use to scan for new stuff. Once the medium is corrupt, everyone has to follow suit to survive. Get a load of this wonderful nonsense at TripAdvisor:

For the recent test, he created his own fake business, which he called the Shed at Dulwich. (It was named for his garden shed, in Dulwich, London.) He photographed plates of carefully arranged food (created using household products such as shaving cream and dishwasher tablets), bought a burner phone, and added the Shed to the site. Within four weeks, he had posted enough fake reviews to move the spectral establishment into the top two thousand restaurants in London. Eventually, it became the highest-rated restaurant in the city, and Butler was fielding scores of calls from people hoping to book a table. Such was the nonexistent restaurant’s success that it even attracted a one-star review, from what Butler assumes was a rival. “TripAdvisor removed the review on the grounds that it was fake,” he said.

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duerig
16 days ago
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Yes. People who don't cheat are at a disadvantage. Which is the reason why people cheat. That doesn't mean cheating is 'now generally necessary'. The people who claim that it is generally necessary are simply engaging in self-justification of bad behavior.

Overall rating of this article: 1 star. :-)
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The Are No Magic Words That Can Dispel The Idea That Liberals Are Smug Elitists

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Paul observed yesterday that “[t]elling people that voting for an openly racist and sexist candidate means they’re OK with voting for an openly racist and sexist candidate makes those people angry, and therefore less likely to vote for somebody else” is s”omewhat true but in a complex way that robs the claim of pragmatic value.” I think this is exactly right. One really obvious problem with the Democrats-Lose-Because-Liberals-Are-Smug-Coastal-Elitists-Hot-Take-Industrial Complex is that smug liberals are a constant while election outcomes are cyclical. A second obvious problems is that there are smug elitists of every political persuasion and this also explains nothing. In this excellent post, Paul Waldman adds another critical piece of the puzzle: the conservative media has a major vested interest in presenting liberals as smug elitists who look down on white working class people, and liberals have no meaningful access to these voters that would allow them to change this perception:

If you doubt this, I’d encourage you to tune in to Fox News or listen to conservative talk radio for a week. When you do, you’ll find that again and again you’re told stories of some excess of campus political correctness, some obscure liberal professor who said something offensive, some liberal celebrity who said something crude about rednecks or some Democratic politician who displayed a lack of knowledge of a conservative cultural marker. The message is pounded home over and over: They hate you and everything you stand for.

[…]

The same is true of Hillary Clinton. At a town-hall meeting in March 2016, she was talking about how to revitalize communities that had been dependent on coal but had been devastated by a loss of jobs driven mostly by automation and the fracking boom that made natural gas cheaper than coal. Here’s what she said:

And we’re going to make it clear that we don’t want to forget those people. Those people labored in those mines for generations, losing their health, often losing their lives to turn on our lights and power our factories. Now we’ve got to move away from coal and all the other fossil fuels, but I don’t want to move away from the people who did the best they could to produce energy that we relied on.

Wow, that’s pretty respectful! It acknowledges the people’s hard work, their sacrifices, their contribution to the rest of the country. And yet because she also acknowledged that all those millions of coal jobs aren’t coming back, but said it in a way she would surely have liked to rephrase — “we’re going to put a lot of coal miners and coal companies out of business” — the only thing anyone remembers is that one half-sentence, which was immediately turned into “Hillary hates coal miners! She wants to destroy their lives!” All the respect-offering she tried to do was meaningless once it was chewed through the gears of the conservative outrage machine.

[…]

In the world Republicans have constructed, a Democrat who wants to give you health care and a higher wage is disrespectful, while a Republican who opposes those things but engages in a vigorous round of campaign race-baiting is respectful. The person who’s holding you back isn’t the politician who just voted to give a trillion-dollar tax break to the wealthy and corporations, it’s an East Coast college professor who said something condescending on Twitter.

So what are Democrats to do? The answer is simple: This is a game they cannot win, so they have to stop playing. Know at the outset that no matter what you say or do, Republicans will cry that you’re disrespecting good heartland voters. There is no bit of PR razzle-dazzle that will stop them. Remember that white Republicans are not going to vote for you anyway, and their votes are no more valuable or virtuous than the votes of any other American. Don’t try to come up with photo ops showing you genuflecting before the totems of the white working class, because that won’t work. Advocate for what you believe in, and explain why it actually helps people.

And, as David Roberts notes in this thread, the mainstream media is also strongly committed to the narrative that liberals are coffee-drinking, mustard-using urban elitists. It’s baked in.

Johnny Unbeatable fantasies aside, there is no Democratic presidential nominee who will be able to go through an entire campaign without saying something that can be yanked out of context or ordering a salad with anything in it but iceberg lettuce or something else that can be used repeatedly to show that he or she despises white working class voters. Emperor Perez cannot impose message discipline that prevents any college sophomore from heckling a professional conservative race-baiter or calling the poke special at the cafeteria cultural appropriation. The only winning move is not to play.

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duerig
31 days ago
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There is a lot of cruft in this article (and the broader discussion that it is part of). But I think that it provides the key insight that unravels all these arguments:

Electoral outcomes in a democracy are cyclical. One party loses and one party wins. The party that just lost didn't lose because it was 'broken'. The party that just won didn't win because they found the secret formula for permanent success.

After 2008 and 2012 elections, there was a lot of ink spilled about how the Republican party needed to fix itself. And it was just as misguided.

Today we have two political parties and one of them is broken. Not because of which party won in which election. But because of who the parties chose. One party chose a conventional candidate with long experience and moderate views. The other party chose a loser with a Napoleon complex and a congress full of lickspittles to bolster up his fragile ego.

So by all means, lets talk about strategy and how to change the message so the wannabe authoritarian is kicked to the curb before his dreams come true. But if we want to fix a party, we should be clear that it is the party that selected the shithole candidate that we need to fix. Because our republic is in grave danger right now. And even if we eject President Comrade from power, our republic won't be safe until the Republican party is fixed.
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Famous

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wreichard
31 days ago
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Well, this pretty much sums me up.
Earth
duerig
32 days ago
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I'd be tempted by an 'I'm famous, but I'm pretty low-key about it.' shirt.
norb
31 days ago
I used to have a shirt that just said "Local Celebrity" on it. I got lots of comments. Most of them were "I don't know who you are." to which I replied "Well, I'm only a celebrity within the confines of the t-shirt. Hyper local, if you will." Mostly it was a lot of blank stares after that.
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Google Assistant Sounds Like a Human on the Phone

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James Vincent, writing for The Verge:

It came as a total surprise: the most impressive demonstration at Google’s I/O conference yesterday was a phone call to book a haircut. Of course, this was a phone call with a difference. It wasn’t made by a human, but by the Google Assistant, which did an uncannily good job of asking the right questions, pausing in the right places, and even throwing in the odd “mmhmm” for realism.

The crowd was shocked, but the most impressive thing was that the person on the receiving end of the call didn’t seem to suspect they were talking to an AI. It’s a huge technological achievement for Google, but it also opens up a Pandora’s box of ethical and social challenges.

For example, does Google have an obligation to tell people they’re talking to a machine? Does technology that mimics humans erode our trust in what we see and hear?

It’s uncanny how realistic this sounds, but I genuinely wonder if it’s disingenuous to program an AI that hems and haws like a human. There’s a genuine humanity to this voice, but is that dishonest?

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duerig
39 days ago
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I am waiting with breathless anticipation for the flood of spammer calls using this technology. Right now you can usually tell within a few seconds that the spam is a pre-recorded spiel. But in the future, we might have to have short awkward conversations with AIs where they umm and err. And they ask for you by name. And it takes a minute or two before they get into their scam pitch or you realize that their repeated 'What was that?' indicates a non-human who can't parse your answer.

I am starting to think that the act of publishing itself is morally ambiguous. That whenever a small effort by one person is leveraged into massive engagement by thousands or millions of others, the attention imbalance becomes an area ripe for abuse. Earlier publishing was institutional. It required a large organization to deal with the logistics. So institutional oversight and control were baked into the cake. Some institutions were honorable while others weren't. But the ethics of publishing was often in the hands of professional associations and statutes.

Now we see more and more individuals with the power to publish but no guidance on what the ethical rules or ramifications are. Even setting aside the spammers/scammers who are clearly evil, millions of people are engaged with these social platforms on one level or another. The odds of any particular message reaching a large crowd are small. But just like the lottery, random messages are picked up and spread everywhere each day.

I suppose that is one good reason to stick with someplace with a small community like Newsblur. You don't need to worry about whether Kanye West will retreat the snarky thing you said and suddenly turn that random thing you said into the next big thing or controversy. So many people want to be part of something larger. But maybe the world would be a better place if we were part of something smaller instead.

To bring it back to the article, I have a feeling that people being able to take up other people's time without using up their own will have lots of bad side effects. We already see it with email.
mxm23
39 days ago
Well said. The power imbalance of attention and time is about to get worse.
rmdrimmie
39 days ago
I think this is probable and confusing but if someone calls and doesn’t get to the point immediately, I hang up. Spam calls have already trained us to be suspicious of unknowns. This behaviour is more complicated if you are answering the phone at a business, though.
Cacotopos
37 days ago
Agreed. I thought it was a perfect example of Google's amazing technology, and equally amazing inability to understand basic human social contracts with regards to authenticity and trust. I mean, hell, Google Glass anyone? They just don't seem to understand how human beings interact, which is ironic considering they are good at faking one.
the7roy
35 days ago
We just need to flip the tables. "Siri, answer the phone" and in 20 seconds I get a notification with the name and purpose for calling. I can join the call if I recognize the name or keep those robots talking to each other for hours.
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Billionaire Khosla Is Asking the Supreme Court to Keep People Off His Beach

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Vinod Khosla is used to playing long odds on some of the startups he backs. Now, the billionaire venture capitalist is using a similar approach for another project: a legal battle over public access to his beach south of San Francisco.

Khosla, 63, believes he has the right to cut off the lone road to the waterfront at Martins Beach, a property he paid $32.5 million for a decade ago. State law says the public owns all coastline on the ocean side of the mean high tide line. Khosla says he shouldn't have to open up his private land without compensation to allow passage to the cove, which is buttressed by cliffs and impossible to reach otherwise except by water. 

By the time he shut the gate in late 2009, surfers had been hitting the waves at Martins Beach for decades. When he cut off their access, a stream of lawsuits followed.

Taking a strong and unpopular position is vintage Khosla. His views on public beach access transcend the familiar world of venture capital and have made him the subject of widespread criticism. In coming months, he'll learn if the U.S. Supreme Court plans to take on the case.

Khosla's petition earlier this year to the highest court in the land raises the question as to why, in an era of enormous perceived arrogance by technology companies, Khosla is giving the public yet another reason to rage about industry leaders.

“It's a matter of principle, not whether the timing is right,” Khosla says about the case in an interview. “This is about unfairness, and I don't tolerate unfairness.” In a country based on rule of law, squelching the rights of property owners is just wrong, he adds.

“I've never seen anyone who needs a PR person more than Vinod right now,” says James Markarian, who once advised portfolio companies at Khosla Ventures and thinks highly of Khosla. “You need world class, the Johnny Cochran of PR.” Khosla says that at the advice of a top aide he recently met with a prospective public relations professional but decided against hiring her.

Public relations factor little into his motivation in general, even when the situation concerns a powerful financier seemingly trampling on the enjoyment of regular folk. Instead, Khosla's decision to take the fight to the Supreme Court reflects a man obsessed with winning and what he sees as fair play.

‘I Push Them To The Edge’

Khosla’s determination dates from at least his earliest days in Silicon Valley. Originally from Delhi, Khosla came to the U.S. for a master's degree in biomedical engineering at Carnegie Mellon University. He then applied to Stanford University's Graduate School of Business, which rejected him.

Bent on getting in, Khosla lobbied school officials, first sweet-talking his way onto the waitlist, and then making a series of calls to the head of admissions saying he would take the spot of whichever admitted student didn't show up. He won entry two days before classes began.

Khosla has been in Silicon Valley ever since, working at a design-automation company, Daisy Systems, and then co-founding Sun Microsystems, the computer services company behind the programming language Java. Sun's 1986 initial public offering cemented his fortune, building on a payout from the Daisy IPO earlier.

When he started his eponymous venture firm in 2004, Khosla was winding down a nearly two-decade run at Kleiner Perkins Caufield & Byers, known for early investments in Amazon.com Inc. and Google. Along with his successes there, such as backing Juniper Networks, he built a reputation as a venture capitalist with a very particular style.

Some entrepreneurs complain that Khosla enjoys driving hard deals compared with other venture capitalists over valuations of their companies. Khosla disagrees strongly, saying he just doesn't like bargaining and equating it with playing games. “I decide what's fair,” he says. “They can do it or not. I don't go back and forth six times.” But he can be disarmed. One entrepreneur, aware of Khosla's tough reputation, came in with red boxing gloves to signal his willingness to fight and suggested a number; Khosla accepted it. He says that was because the proposed valuation was reasonable.

Khosla also tosses out suggestions that don't always match the portfolio company's status, for example, suggesting an aggressive entry into a market the company isn't yet big enough to tackle, or an expensive overhaul of a website. He says setting big goals encourages the companies to stay ambitious, adding that those who disagree with his advice are under no obligation to take it or even keep meeting with him. “I push them to the edge of what they're comfortable with,” he says. “I get them to think as big as they can. I view that as my job, not just to be popular with them by saying nice things.”

A voracious reader, Khosla often will push a sometimes relevant, sometimes not, theory he has just boned up on in a new business book, entrepreneurs say, or will cite an old favorite such as “The Black Swan,” a 2007 bestseller on preparing for improbable events.

Many Silicon Valleyites see themselves as operating outside the herd; Khosla actually shuns it. He hasn't become a member of popular organizations such as the Menlo Circus Club or the Battery. He won't join the National Venture Capital Association, the industry’s main trade group. He doesn't play golf. He turns down invitations to dinners with other venture capitalists.

“I’d rather spend the time with entrepreneurs,” he says. That leads to a perception of aloofness that some enjoy taunting; a few years ago, a parody twitter account sprang up for @VinodColeslaw. “Guys, relax,” the last tweet says. “It's MY beach.” 

When not in Silicon Valley, Khosla spends time at one of his vacation homes, including in Deer Valley, Utah, and in Big Sur, California. He hasn't visited Martins Beach in several months. To get around, he travels on a Gulfstream V.

Conversations with people who have worked with Khosla as investors and entrepreneurs reveal a man who relishes engaging in heated debates on strategy. During those debates, he doesn't mince words. “He doesn't suffer fools," says someone who has sat through many such meetings. “He'll look you in the eye and say ‘That's completely stupid,’ not because he's trying to make you feel bad, but because he has no filter,” says the person, who requested anonymity because he wants to preserve a cordial business relationship with Khosla.

Khosla prefers to describe his style as “brutal honesty.”  Still, he acknowledges sometimes going too far. “If I had to do it over again,” he says now, “I'd couch my honesty, I'd say it nicer, but say the same thing.”

Partners in Khosla's firm and entrepreneurs who stand up to him and can rebut his points raise their standing in Khosla’s eyes. Those who can’t are left shaken and angry. He practiced the philosophy long before the current vogue for “radical candor,” mocked recently on the HBO show “Silicon Valley.”

He’s also known for defending portfolio companies publicly in situations where other backers tend to go quiet. After Bloomberg reported that Khosla portfolio company Hampton Creek, a vegan mayonnaise maker, was inflating sales figures by purchasing jars of its own product, Khosla went on Bloomberg TV and said entrepreneurs “push the edges.” He called allegations over revenue projections by another investor “not credible.” The following year, Khosla’s board representative and all other outside directors resigned from the Hampton Creek board.

His defenders counter that the loudest complainers are the worst performers. Truly talented entrepreneurs will know which pieces of advice to take, and when. Good analysis relies on debate. And fostering a sometimes adversarial relationship between two executives can tease out the best performance from each, they say.

With Khosla, “it's the same pro and the same con,” says Jagdeep Singh, founder of battery company Quantumscape, the third he has started where Khosla holds a board seat. “He really doesn't care about what anybody thinks. He's doing what he thinks is right, and he'll stick by it.”

The confrontations are juxtaposed with moments of tenderness, especially when it comes to his family. Khosla's assistant, Ruthie Dionisio, recalls having to enter a 2010 meeting at Khosla Ventures between Khosla and former British Prime Minister Tony Blair, then an adviser to the firm. Khosla had asked her to remind him when the hour was up so he could arrive on time for what he considered a more important appointment: helping his son with college applications.

He’s a generous donor to many charities and has signed onto the Giving Pledge, an initiative created by Bill Gates and Warren Buffett to encourage people to give away at least half their net worth to philanthropy.

One person who has worked with him compared Khosla to a “Tiger Parent,” the type of highly demanding adult who ultimately has a child's best interests at heart.

Relishing Intellectual Debate

Khosla's approach to California law parallels his treatment of a portfolio company: He relishes the intellectual debate on property issues and the exercise of forcing precision on California law almost as much as the prospect of winning his case.

In his writings on venture capital, Khosla says many potentially transformative investments have a 90 percent chance of failure. To some degree, that's how his efforts over the beach appear: The odds of the Supreme Court taking a case and then ruling in the petitioner's favor are low, but if it does, the payoff is enormous—in this case, potentially the ability to keep a long and exceptionally beautiful beach to oneself.

On Thursday, the court asked the group Khosla's battling, the Surfriders Foundation, to respond to Khosla's petition by June 13. While this is no guarantee the justices will take up the case, the request signals at least initial interest in Khosla's arguments.

Khosla believes that if the state wants public access to the beach, it needs to compensate him for an easement—the road cutting across his property that beachgoers would use. Not doing so amounts to a violation of the U.S. Constitution's takings clause and due process clause, he says. And because lower courts have held that he can't paint over a billboard that previous owners had used to advertise the beach, he argues, they have violated his First Amendment rights.

For their part, the Surfriders, who originally filed their case in 2013, are taking a more technical approach. They argue that Khosla is violating California's Coastal Act by not seeking appropriate permits before halting access to the beach. A lower court ruled that keeping the beach open requires a public-access easement over Khosla's property, but it didn't require compensation because the easement wouldn't necessarily be permanent.

Khosla's lawyers point out that lower courts have differed on the issue of whether a taking of property must be permanent to require compensation and are asking the Supreme Court to resolve the split. For now, the gate to the beach is generally open.

Meanwhile, Khosla won a separate suit filed in 2012 by a group called Friends of Martins Beach. They argued that the prior owners of the beach had created a right of public access by running a business including a paid parking lot, restrooms and a store. In January this year, a state judge agreed with Khosla that the prior owners had not established that right because access wasn't continuous and required a fee. Friends of Martins Beach is appealing. 

A third case in federal court, brought in 2016 by Khosla and alleging harassment and constitutional violations, is on hold while the state cases proceed. Khosla says state and local  bodies are applying laws unfairly, for example, requiring him to obtain permits for planting trees at Martins Beach, but not his neighbors. 

“We have stringent rules protecting public views of the coast, and Mr. Khosla is not the only property owner who has been required to remove trees,” says Steve Monowitz, community development director at the San Mateo County Planning and Building Department. “I disagree with the assertion that our regulations are not being fairly applied.”

Despite the legal maneuvering popping up regularly in local news, the beach case doesn’t seem to have affected Khosla Ventures. For every entrepreneur who decides not to do business with the firm, many more are eager to tap the expertise of Khosla and his partners, who count some big successes in the portfolio. Square, an investment brought to the firm by former partner Gideon Yu, is one. Cloud-storage company Nutanix, valued at $2 billion at its 2016 IPO, is another.  The firm also backs Impossible Foods, maker of a popular meat-alternative burger, and View, which makes windows that automatically darken and lighten, among other investments. Earlier this year, Khosla Ventures filed to raise a $1 billion fund, Khosla VI, plus a $400 million seed-investing fund.

The controversy swirling around Khosla isn’t discussed openly at his firm. A rare exception came in 2014 during a meeting of portfolio companies at a boutique hotel on the San Francisco Bay. At one point, according to a person who attended, Khosla Ventures partner Samir Kaul joked to nervous laughter that one lucky entrepreneur would win a grand prize: a weekend at Martins Beach. No beach invitations materialized.


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    duerig
    53 days ago
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    Did the law require access to the beach when the jerk bought the property? Yes. Therefore, the package of rights the jerk bought did not include the right to prevent the lawful use of the beach. This is a typical case of a moocher wanting to get more than they paid for after the fact. And wasting the time and money of hard-working citizens in his pursuit of a free lunch.
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