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Friday, September 2, 2016

Detroit Is a Cinderella Story Written By Entrepreneurs

Business has accomplished what no government could


Detroit has one of the worst reputations of any city in the United States. From its peak of prosperity and population (1.8 million) directly following the Second World War, Detroit suffered through the decline and loss of its principal industry, auto manufacturing, some of the deadliest riots in US history, increasing racial segregation brought about by “white flight” to the suburbs, some of the highest crime rates in the country, government corruption on a scale not seen in major cities since the political machines of the late 19th century, and finally bankruptcy in 2013.

This city has truly gone through a death and rebirth unlike any experienced by another major city in the US.This resulted in a city that was a mere shell of its former self. Growing up in the suburbs in the early 2000s, Detroit was something of a dark legend or haunted forest. You talked about in a whisper, avoided it at all costs, and lamented that those who ventured down there may never return.  

From its all-time high of just under two million residents in 1950, the US Census reported just over 700,000 residents in 2010. According to Forbes, manufacturing jobs dropped from a high of 200,000 to less than 20,000 today. With unemployment constantly rising, with more and more buildings being left vacant and abandoned, and a police force stretched thin across the area of a once sprawling urban center with less than half its tax base left, crime rates soared.

The Dramatic Change Today

This is all different today. In the last five years, and especially since bankruptcy, Detroit has returned in a fashion akin to the phoenix rising from its own ashes. Midtown and downtown are surging towards each other creating a continuous vibrant urban scene all the way from Wayne State University to the Detroit River. Though much of the outlying areas and neighbors of the city have a long way to go, in the city center stores, bars, and restaurants now line the streets in what were once empty buildings. The streets bustle with pedestrian activity in a way that is reminiscent of other great American cities.

The vibrant downtown scene that has developed is a testament to Gilbert and his companies’ success. World-class casinos like Greektown, young hip bars like Hopcat and Punch Bowl Social, great restaurants like Granite City and Texas de Brazil, all alongside Detroit classics like The Old Shillelagh, Grand Trunk Pub, and HockeyTown draw large diverse crowds from the city and suburbs alike. The riverfront, once blighted with empty lots and parking lots, is alive in the summer with joggers, dog walkers, festivals, and concerts. This city has truly gone through a death and rebirth unlike any experienced by another major city in the US.

How did this transformation happen? Discarding the conventional belief that things “just get better” with time, it took a concerted effort on the part of certain individuals and businesses to get Detroit as far as it has come.

Amid failed government projects like the People Mover, the rampant corruption of the Kwame Kilpatrick years, and a city council that seemed to reject any change intended to improve the city, people like Mike Ilitch and businesses like General Motors slowly but diligently invested in downtown and kept the candle dimly burning. From drawing workers to the city, to building up sports teams, to building stadiums, to revamping Fox Theater, to helping to build the River Walk, Ilitch and GM kept the city from entering total oblivion.

The true change, however, came with Dan Gilbert. Since he moved the headquarters of his mortgage lending giant, Quicken Loans, downtown Detroit hasn’t looked back. Quicken and its family of companies (including among others Rock Ventures, Jack Entertainment, Bedrock Real Estate, Title Source, Fathead) employs tens of thousands of people in downtown Detroit and have been critical in the city’s renaissance.

Business Is Back

Largely working together, Gilbert’s companies have been instrumental in bringing businesses and people back to the city. Using their different arms they acquire properties, find appropriate businesses to fill them, and then help those businesses set up shop and get their feet on the ground.

Now owning or controlling more than 80 buildings in the city, the vibrant downtown scene that has developed is a testament to Gilbert’s and his companies’ success. Unlike other real estate magnates like Matty Moroun who buy up properties largely just to sit on them, Gilbert, and Rock Ventures in particular, buy properties in order to fill them and improve the city, while making money in the process.

For the past 50+ years Detroit has been caught up in a classic chicken-or-the-egg scenario. Businesses, stores, and restaurants need people to live downtown to be successful, but people don’t want to live downtown unless there are jobs, stores, restaurants, and things to do. What Gilbert, and to a lesser but albeit important extent GM and Mike Ilitch, did was jumpstart the development and shove Detroit out of the pickle it was caught in. They did what successive generations of city planners and failed government policies could not.

This is the beauty of markets.

Business Brings Life

Private entrepreneurs like Gilbert have the incentives, ability, and accountability to make transformations like Detroit’s a reality. Their driving force is profit—and they should wear that as a badge of honor. Because when people like Gilbert profit, everyone in Detroit profits.

Government initiatives often fail and are almost always over budget because they have no true profit motive and no consequences for failed ideas. Entrepreneurs are driven by profit (both monetary and the feeling that you’ve created something great or saved a failing city), and stand to lose their own money. This creates an incentive structure conducive to success.

Gilbert wanted young and innovative employees for Quicken, so he moved it to a city and created an environment where young and innovative people want to work. The Detroit Police Department was over-stretched, so Gilbert employs an extensive private security force to patrol his massive property holdings—which in turn makes the whole of downtown safer.

Gilbert and other Detroit entrepreneurs understand that having a giant jail complex at the main gateway to the city isn’t great for its improved image, so they fight for, and offer up a substantial amount of the cost to build, a huge soccer stadium complex which would tie all of the downtown entertainment district together.

Markets allow entrepreneurs like Gilbert to go as far as their drive and vision will take them. They create the situation—the world—as they want it to be. Absent restrictions, regulations, and impediments, we would see advancement like we have in Detroit in all corners of the world. As the Detroit example shows, the private sphere is one of mutual benefit. The city is a safer, cleaner, more fun, and more vibrant place as a result of private individuals and businesses seeking profit. Entrepreneurs move the world forward—if only we would always let them.


  • Ryan Miller is a University of Michigan graduate, freelance translator, and aspiring blogger. He is also a Praxis participant in the September 2016 cohort.