[Continued from yesterday’s Part 1.]
As we saw yesterday, development (of real estate) takes trust, and trust (of another person) takes time to develop, and the swansong duet of retiring New Haven mayor John DeStefano (now a Yale professor) and retiring Yale president Richard C. Levin, reported last summer in the New Haven Register (June 21, 2013), neatly illustrates both stories, for while a good trust-based relationship leads often to agreement, it must also become robust enough to survive disagreement without dissolution:
I don’t like what I’m hearing, so maybe I’m mishearing it – right?
But there have been disagreements, too.
The Yale decision that “infuriated” DeStefano the most was the university’s decision to buy acreage in West Haven and Orange in 2007 for its West Campus.
Mayor DeStefano doesn’t say why he was furious, but it’s easy enough to deduce.
And my faculty is surely logical
By acquiring property in another community, Yale was diversifying its footprint and reducing its dependency on New Haven; in other words, it was a first step in de-risking Yale from New Haven, and possibly (decades hence) moving out of the city altogether.
“I knew it wouldn’t be an easy conversation,” Levin said. And it wasn’t.
Mayor DeStefano, who quite correctly saw Yale not only as a development partner but also as a cash cow, recognized the significance of the action.
“He blew up,” Levin said of DeStefano. “He went ballistic. He stormed out.”
“Tell the rest of the story,” DeStefano said.
That would be twenty minutes later, when DeStefano called Levin from his car.
“He comes back, he extracted a few million dollars from us. It was great,” Levin said.
If it happened as cavalierly as implied there, then President Levin was irresponsible with Yale’s money. But I’ll bet it didn’t happen like that, except on the surface. Instead, it almost certainly went like this:
We’ve both played this game a long time, haven’t we?
1. President Levin and his real estate advisors determined to expand Yale’s presence in West Haven. (A multi-campus strategy is prudent for a major university because it can create sub-concentrations, as Harvard did with the Longwood Medical Area.)
Our Boston colony … getting bigger whenever circumstances are right
They knew this would infuriate Mayor DeStefano because he would perceive it for what it was: deliberate de-risking from New Haven.
2. Yale also knew that Mayor DeStefano couldn’t do anything about its decision, but President Levin would want his goodwill for future projects in New Haven.
3. Meanwhile, Yale maintains a long pipeline of properties it intends to develop, or approvals it expects to need from New Haven, and periodically reshuffles its order to reflect its accumulation of political capital and the expenditure of that political capital for New Haven approvals.
4. Therefore, President Levin and his aides determined a ‘peace offering’ allocation of Yale commitments they could make, out of that pipeline of approvals and resources, as a gesture after the announcement. They internally allocated political/ economic resources for this decision, and knowing that the West Haven campus expansion would be controversial, Yale consciously and discreetly withheld these pledges, banking them in anticipation of the mayor’s response.
Look, we’re going to keep expanding whenever we want, but if it’ll make you feel better, I’ll shave my mustache
5. Mayor DeStefano’s explosion was not unexpected, as presumably he had used this sort of theatrics before. So it was par for the course for President Levin to wait him out.
6. When Mayor DeStefano called back from his car, President Levin knew exactly how much he had budgeted to give, and as long as Mayor DeStefano demand less than that, President Levin knew he could make a deal … and he did. This gave Mayor DeStefano’s ego a boost, thinking he had squeezed several million more out of Yale.
Remember, the mayor and the president had been playing this two-person game many times over the years, and each had become familiar with the other’s motivations, playing style, typical maneuvers, and posturing. So it had the well-worn comfortability of contra-dancing or a mating ritual.
Quite a bromance, wasn’t it?
All this happened against the backdrop of global competition among universities for primacy of reputation; for Yale to remain a first-rank global university, it has to expand physically, and each time Yale seeks to do that, a town-gown backlash is inevitably triggered, even without Mayor DeStefano whipping it up. So President Levin knew, and Mayor DeStefano knew that he knew, that there would always be another parcel to buy, another zoning variance to secure, another PILOT agreement to negotiate, and hence another round in this ongoing game. That knowledge stayed President Levin’s instinctive desire to do what he wanted without regard to Mayor DeStefano’s feeling. Quoting Roger Zelazny’s Lord of Light:
One does not generally achieve your age, my age, without being somewhat reasonable. I knew you would at least listen before striking me. I know too that since what I have to say is good, no harm will come to me. – page 248, said by fat Kubera
Come, let us reason together
In the game-theory classic Prisoner’s Dilemma, to which I’ve alluded from time to time, a player wins the meta-game (the game of games) not by trying to win each game in isolation, but rather to maximize the paths by which his ‘opponent’ can be induced to cooperate for mutual advantage.
There were other quibbles – DeStefano [Levin? – Ed.] didn’t like Barnes and Noble horning in on the Yale Co-op’s turf; Levin [DeStefano? – Ed.] didn’t care for the decision to build a new school in the East Rock neighborhood – but the partnership always held.
“If you’re going to make every deal the deal, you’re not going to have a relationship,” DeStefano said.
The more experienced transactors become – say, bond buyers and sellers, real estate brokers and closing attorneys – and the more multiple-encounter transactional histories each develops with other individual transactors, the more they come to see the relationship – that is, the track record of trust accumulated through many iterations of the simple game – as an asset in itself, one to be protected and not risked.
Further, because trust is personal, not institutional, the accretion of trustworthiness strengthens the position of each individual vis-a-vis his own institution and his own recalcitrants, so Messrs. DeStefano and Levin gradually internalized that by helping each other, they were also helping themselves.
Among their successful collaborations, Levin and DeStefano cited the New Haven Promise scholarship program, their work on immigration issues in the city, their revitalization of downtown retail areas and their commitment to biotech growth.
Good program, great optics: both of us can be prominent in the picture
While Messrs. DeStefano and Levin can justly credit themselves for foresight, they happened to be presiding during the best two decades for America’s cities ever. America is urbanizing, de-industrializing, and technologizing, and all these things helped New Haven rebound. Try the same tactics in the mid-1970s, as Yale and New Haven did, and there was no progress.
Can you tell me how to get to Yale?
Not for nothing is being lucky among the prime virtues of a developer.
“I think you can tell, this did become a genuine partnership,” Levin said. “A genuine friendship.”
Through their choices ye know them, and over the course of many encounters, negotiations, decisions, and actions, Messrs. DeStefano and Levin came to understand each other well – and to discover that their modes of thinking and deciding were similar.
“It’s been real,” DeStefano said. “It hasn’t been transactional. Well, it’s been a little transactional. But it hasn’t been excessively transactional.”
Each participant also came to appreciate the other’s organizational imperatives and limitations, and that can breed a curious we-two-against-everybody mindset.
Amid the other topics of discussion, from the need for better public transportation statewide, to the failure to get support for a more regional tax structure, to support for New Haven Police Chief Dean Esserman, they also offered advice to incoming Yale President Peter Salovey and the next mayor [Who proved to be Toni Harp – Ed.].
“Keep the partnership going,” Levin said, “because it’s been good for the city.”
Newly elected mayor Harp on election night, 2013
It’s also been good for Yale. The more Yale expands its footprint, the more students it can enroll, which means more tuition (and more alumni who can be importuned to make large donations with a flourish).
Meanwhile, a city always benefits when its economy grows, because the city owns most of the ancillary revenues of economic expansion – sales taxes, employment taxes, and most importantly, knock-on economic activity as those new workers (or students) eat, make merry, and sleep (in housing). In the same way, a growing city benefits when it formalizes previously informal areas, because it can now license, regulate, and tax what it was formerly trying to overlook, outlaw, and squelch.
“To Peter, I would say, the best thing you can do for New Haven is to make this the best university in the world,” DeStefano said.
There speaks a man who understands his city’s economic engine, and how to keep New Haven from becoming (say) New London.
I’m leaving, and I’m taking my economic development with me
