In late 2016 I had the honor of speaking at TEDxBeaconStreet in Boston, MA.

View the presentation here:


Full transcript below:

My Love for the Golden Gate Bridge

When I was 10 years old, my parents brought me to America for the very first time. After flying 20 hours from Bangkok, we landed in San Francisco. The very first place we went wasn’t the hotel, even though we were exhausted, and it wasn’t the restaurant, even though we were starving. It was the Golden Gate Bridge.

I had always been mesmerized by the beauty of the bridge from movies and TV. But seeing it in person meant so much more.

A few years later, after I had moved to Seattle for high school, I had the opportunity to plan the senior class trip. You can guess where I took us. San Francisco, to see the Golden Gate Bridge, once again.

The Golden Gate Bridge was Almost Never Built

But did you know, the Golden Gate Bridge was almost never built.

I was surprised myself when I came across the story during my time as a graduate student at the Harvard Kennedy School.

As you know, San Francisco is a peninsula surrounded by water on three sides. So traveling to and from city was mostly done by ferry. By the early 1900s, the terminals would get so packed that the ferries would be backed up for hours.

It was clear; San Francisco needed a bridge.

But it was also during the Great Depression. The city had no money, and so the only solution was to borrow from its residents.

At the time, community members, young and old, rich and poor, small business owners and big business leaders, came together. They agreed to loan the city money by purchasing municipal bonds.

How Bonds Work

Pieces of paper like this made the construction of the Golden Gate Bridge possible. And it become the world’s longest suspension bridge at that time.

But the story didn’t end there for the people who invested.

At the maturity of the bond, investors would receive their original investment back.

Additionally, every year, they would clip a coupon, located at the bottom of their bonds, and go to City Hall to collect their interest payment.

In other words, helping to build the bridge by buying bonds worked just like a savings account for many San Franciscans.

So, people used them to save for home down payments, college funds, and even as rainy day funds.

Bonds = Mutual Benefits

This is just as true today as it was 80 years ago. Bonds are still being sold today by cities across America to fund all kinds of public projects, like your local parks, schools, and transit systems, which, in turn benefit you back.

All of these things were made possible by the people and the government coming together within a community investing in their future.

Tax Exemption

But besides building amazing public infrastructures, there are few financial factors that differentiate municipal bonds from other financial instruments.

First, compared to other fixed income options, most municipals bonds’ returns are tax-free at the federal level, and in most cases at the state level as well! This tax exemption is the government’s way of rewarding the people who invest in their community.

This is important to bear in mind when comparing the interest rates, because factoring in this tax benefit, municipal bonds can be very competitive.

Lower Default Rate

Second, compared to other bonds, such as bonds issued by corporations, municipal bonds have historically been relatively safe. Yes, there have been high profile defaults, but the default rate is very low compared to corporate bonds. Boston, for example, has the highest rating and has had a default rate of effectively 0 overall since 1970.


So, just to review:

  • Municipal bonds are used to fund projects that benefit communities
  • Municipal bonds are tax free at both the Federal and State level in most case
  • It has relatively low default rate
  • So many people use them to invest in their future, for things like college or housing.

OK so that sounds like a pretty awesome product.

How many people?

Out of curiosity, how many people here invested in municipal bonds this year?  Can you please raise your hands?

Oh wow. That’s not many hands at all.

Bonds Market Size

Why is that the case? Are municipal bonds not being issued today?

Well no, that’s not the problem.

Municipal bonds are being issued in very large numbers.

For comparison, last year, about $30 billion of stocks were IPOed. But, over $400B of municipal bonds were issued in the same time. So this is a huge market. More than 10 time the size of new stocks.

So that’s weird. Here we have a huge market that offers financial returns and is aligned with a lot of our values, but we’re not involved in it.

Bond Ownership

This room is not unusual. The good news is, you’re not alone. The bad news is, you’re not alone.

Ownership of municipal bonds has decreased dramatically in recent decades. In 1989, the ownership of Municipal bonds by Americans was 4.6%, and now it’s down by almost half. So, in many ways we are getting further and further away from investing in our own communities. But why?

Limited Marketing

Well, first of you are probably wondering why you haven’t heard of these municipal bonds. The reason is that they aren’t marketed widely. They are mainly marketed via industry magazines and phone calls.


Secondly, municipal bonds are mostly issued in $5,000 denominations. In a country where the average household income is $50,000, investing 10% of your income in one financial asset doesn’t really make sense.

There’s plenty more reasons why municipal bonds are inaccessible to many of us, but the point is, the folks who are able to own municipal bonds are not the common American.

Unsurprisingly, municipal bonds are most heavily concentrated amongst the wealthy 0.5%. Not the 1%. The 0.5%.

As you can see from this chart, while overall ownership of municipal bonds decreased by half, ownership among the wealthiest Americans increased significantly.

Denver Story

Fortunately, there’s at least one city that wants to turn this trend around.

In 2014, The City of Denver needed to improve its libraries and plant more trees and decided to raise $12M. It understood  that bonds in increments of $5,000 wouldn’t be accessible to most folks, so they decided to issue $500 mini bonds.

On the day the sales opened, Denver sold out its mini bonds in 20 minutes. The city raised $12M in half the time we’ve been sitting in this room.

Denver’s Mini-Bonds serve as a testament that if cities give their residents the opportunity to invest, they absolutely will.

Go Buy Bonds

So how can we replicate the story of the city of Denver, how can we replicate the story of the Golden Gate Bridge, and how can we put the public back in Public Finance?

I’m lucky enough today to be working with a team at Neighborly whose mission is exactly that: to make it easier for people to invest in the places they live, work, learn, and play, not only because we want to do so, but because our community as whole does better when we do so.

I think that it is an injustice that the majority of Americans are priced out of what is a relatively safe financial product, one that would allow us to a part of the building of our nation.

It should be easy to invest in the place that you love, in the place that you work, and most importantly, in the place that you build your dreams place where you call home.

For me, it is San Francisco, the home of the Golden Gate Bridge.

What yours?