How can a small business in a downtown business district protect itself against the rising price of a parking spot?
Cash-strapped cities today see on-street parking spots as vital economic resources. For example, San Francisco's SFpark adjusts the price of on-street parking spots based on real-time usage, intending to increase turnover to the point that there are at least one or two spots open on every block. The result: Higher parking prices when the stores are open.
Retail revenues rise and fall based on the price of parking. If you're a storefront business dependent on customers with cars, you may lose business when it becomes too expensive to park. Or, if you're a business that offers free parking, your briskest business may come just when on-street parking is hardest to find.
Any business that relies upon an upstream commodity faces the same contingencies. Whether it's utilities that need oil, or food producers that need corn or soybeans, or pork-belly-eaters that need pork bellies, the underlying principle remains the same.
Coping with commodity price swings is exactly why the financial markets invented futures, and that's why I'm proposing the creation of a futures, forwards, and options market on parking spaces: Spot-X™.
The Spot-X™ market will allow the following activities:
- Drivers can lock in the price of a parking spot in advance, with that price set by the market's expectations about future traffic flows in a given neighborhood or block.
- Business owners can hedge against lost sales due to high-priced parking by going "long" on Spot-X™ futures. The futures contract itself will increase in value if the price of the parking spot turns out to be higher than expected. The other, "short" side of the contract might be taken by a business that loses out if there aren't enough high-rollers in town, such as a casino or strip club.
- Speculators can make the market by taking either side of the contract.
- Financial services firms can write derivative contracts based on the price of parking, allowing you to build synthetic portfolios to hedge your specific line of business, location, and time horizon.
If all this seems overly complicated, don't worry! Given consolidation and globalization in the financial services sector, you should have no problem finding an out-of-work Wall Street trader or analyst with an MBA to walk you through your customized Spot-X™ trading strategy.
Some other great and wonderful things about Spot-X™:
Spot-X™ increases financial literacy. Thanks to the housing bust and the global financial crisis, more people than ever understand the arcana of collateralized debt obligations and other structured products. Now, the American people can complete an MBA-quality financial education by trading futures and options on a commodity that's well-known to every American with a driver's license.
Spot-X™ keeps drivers from falling asleep at the wheel. Install an in-dashboard trading turret on the heads-up display of your ride, and you'll be able to drive and trade Spot-X™ futures at the exact same time. No more napping during the commute, slackers!
Spot-X™ puts America back to work. As a country, we've invested a fortune in our financial acumen. Let's make sure that our brightest mathematical minds are hard at work, and what better way than by making sure that they're monitoring the price of one of our most valuable commodities - downtown parking spaces -for the benefit of retail commerce. Spot-X™ creates powerful incentives for rocket scientists at quant shops to employ complex mathematical models to make sure that the valuable commodity of parking spots are priced correctly.
Spot-X™ assists policymakers in urban planning decisions. We all know that the aging wave is coming, but exactly how high is that wave going to be, and when will "high tide" arrive? Most importantly for an urban planner, how does the aging wave affect the availability of parking spots? Policy analysts will be able to use the entire curve of Spot-X™ futures prices to assess the demand for new parking spaces - or even, crazy as it may sound, to provide empirical support for the idea of greater infrastructure investment in public transportation.
Spot-X™: Asphalt is the new gold.™
I already have in mind the perfect pitchman for Spot-X™, a voice that can bridge the gap between Wall Street and Main Street: None other than parking Zen master and millionaire inventor of the quintessential urban iPhone app iToilet, the one and only George Costanza.
This is going to be huge.
Takeaways for small business owners:
- Even if the parking rules on your street haven't changed for 30 years, don't assume that they'll stay the same over the next 30 years.
- If you've built a downtown business based on free parking, think again.
- When on-street parking gets more expensive, off-street parking becomes more valuable - which in turn drives higher tax assessments. If you're not monetizing your parking lot, you may have to sell it to someone who will.
- Support public transit. The future of foot traffic to your store may depend upon it.
Takeaway for entrepreneurs:
- Anything that can be turned into a financial instrument will be turned into a financial instrument. Count on it.
