Devon Zuegel: How To Create A New Town - [Invest Like the Best, EP.413]

Episode Summary

Executive Summary: Patrick O'Shaughnessy interviews Devin Zugel about building Esmeralda, a modern California town inspired by Chautauqua. The conversation explores how space shapes behavior, why towns are rare, and how finance, zoning, taxes, and trust affect placemaking and community design.

Main Topics: Why places shape people (Priority: 5/5): Zugel argues environments, proximity, and cost of space strongly influence behavior and habits. Chautauqua as the model (Priority: 5/5): Her childhood summers in Chautauqua inspired a modern, multi-generational town built around learning and creation. Esmeralda's hardware and software (Priority: 5/5): The project pairs permanent infrastructure with Edge Esmeralda, a pop-up village that prototypes community life. Trust and local relationships (Priority: 4/5): She treats development as long-term community organizing to win support from neighbors and officials. Cars, mortgages, and taxes (Priority: 5/5): She explains how transportation, debt structure, and property taxes shape urban form and development incentives. Returns and patient capital (Priority: 4/5): New towns can produce strong long-term returns, but fund timelines and risk make them hard to finance. Purpose and human potential (Priority: 4/5): The broader mission is to create environments and tools that help people expand curiosity, agency, and capability.

Key Arguments: Spaces shape behavior: proximity, floor plans, and even phone placement change daily choices. Cost of space affects social life; expensive places push fast turnover, cheap space enables lingering. Esmeralda aims to blend Chautauqua's learning with more peer-to-peer building and creation. Town building is hard because real estate moves slowly, so feedback loops must be compressed. Edge Esmeralda tests the model before construction by simulating community life for 30 days. Development succeeds when it builds trust first; she starts as an organizer, not just a developer. Cars expanded access but also encouraged sprawl and weakened walkable urban coordination. 30-year mortgages and FHA-era rules locked in conservative housing standards and status quo. Property taxes can deaden price signals, letting valuable land sit underused for decades. Patient capital can earn strong returns from new towns, but 5-7 year funds are too short.

Data Points: AI expense reviews: 85% - Sponsor read for Ramp at the opening of the episode AI accuracy: 99% - Sponsor read for Ramp at the opening of the episode Savings for companies: 5% - Sponsor read for Ramp at the opening of the episode Population of Chautauqua: about 8,000 people - Devin describes the town that inspired Esmeralda Season length at Chautauqua: nine weeks every summer - Annual period when workshops, lectures, performances, orchestra, opera, and theater run Edge Esmeralda attendance last year: 1,300 people - Attendance for the 30-day pop-up village in Healdsburg Edge Esmeralda duration: 30 days each summer - Temporary prototype community used to test the permanent town concept Property size at Las Catalinas: 1,200 acres - Costa Rica development used as a model for car-light, mixed-use placemaking Preserved rainforest at Las Catalinas: 1,000 out of the 1,200 acres - Area intentionally kept natural rather than developed Developed area at Las Catalinas: 200 acres - Area planned for the built town on the coast Homes at Las Catalinas: about 200 homes - Existing development in the first 20 acres Restaurants at Las Catalinas: 10 restaurants - Amenity density in the developed portion of the project Phase developed at Las Catalinas: 20 of the acres - Early completed phase of the Costa Rica project Typical property tax cap under Prop 13: maximum of 2% a year increase - California rule described as freezing assessed-tax growth Typical home value tax rate: on the order of 1% a year - General description of annual property taxes on home value Time horizon of traditional real estate funds: 5 to 7 years - Mismatch with long-horizon town development projects Town development return horizon: 10, 15, maybe 20 years - Time often required to realize capital returns on new towns Policy of land ownership model: fee simple lots - Esmeralda design choice to simplify ownership and financing Housing form choice: zero lot line homes - Chosen to reduce complexity versus shared-wall townhomes

Pivotal Quotes: "I think of cities as a bunch of coordination problems." — Devin Zugel: She explains why urban form is shaped by incentives and tradeoffs "You can think of it like a college campus where we're going to have lecture halls and pavilions and things like that throughout the community." — Devin Zugel: Describing the permanent Esmeralda design "I think of cars the way I think of horses, where they're a really cool hobby and they have some cool applications." — Devin Zugel: Her nuanced view of transportation and city design

Implications: Esmeralda's next test is whether patient capital, local trust, and prototyping can turn a compelling idea into a repeatable town-building model.