Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.
Seth Godin wrote on his blog today about what it means to be a lifelong fan — whether it be of a sports team, a car company, a political party, or, in his words, “anything where affiliation drives our sense of self and community.”
There’s a powerful sentence in the middle of his post and it’s this one here:
“People like us do things like this.“
We often make decisions about products, brands, and even where to live based on a narrative that we craft for ourselves. We tell ourselves that I am the kind of person who lives in this neighborhood and drives this car. People like us do things like this.
There’s an innate, emotional, and sometimes nonsensical desire to be part of what Seth calls our chosen “tribe.” And tribe does really feel like the right word. We all want to be a part of something. It helps to create meaning.
I came across this interview with Warren Buffet over the weekend. It’s not new. But he does say some interesting things about how to negotiate. We all have to negotiate things in life. And we all have different approaches. Warren’s approach is both simple and consistent:
“I say what I’ll do.”
“And I don’t do anything else.”
What I love about this approach is that it’s expedient. And I value speed over most other things. But for it to work, you need to be consistent at it. People need to know you’re for real. And you also need a counterpart that is motivated to make things happen. That’s not often the case.
Fewer games. More action. That’s what I like about it.
From the outset, people have been predicting that the internet would become a decentralizing force for cities. That is, technology would allow us to spread out and work from anywhere — perhaps from a small mountain town in the BC interior. While working from home (WFH) and working from anywhere (WFA) does appear to be on the rise, it hasn’t made cities irrelevant. (US Census data from 2018 estimates that only about 5.2% of Americans work entirely from home.) In fact, the “new economy” seems to have made superstar cities, such as London, seemingly even more important. It has concentrated economic activity; so much so that we’re searching for ways to spread out income and wealth more evenly.
But could it be that the technology simply wasn’t there yet? Fred Wilson posited on his blog today that right now might be video conferencing’s moment. Between not wanting to travel (coronavirus, carbon footprint, time, etc…) and advancements in the actual technology, companies such as Zoom are changing the way people and companies engage over long distances. It is happening in our offices. And come to think of it, there are probably a bunch of meetings that I could and should switch over to Zoom. I’m not yet convinced that it will become a decentralizing force for cities. But it does seem to be empowering less travel and more flexibility.
After I landed in Vancouver yesterday, I opened up my inbox and found a cease and desist letter on behalf of the Ontario Association of Architects. The OAA had an issue with me using the following text description on my blog: “I’m an architect-trained and tech-obsessed real estate developer based in Toronto.” More specifically, they had a problem with “architect-trained.” They were of the opinion that I was “holding myself out as an architect.”
When I wrote that text description many years ago, I was actually trying to be sensitive to the fact that, because I’m not licensed, I’m not allowed to refer to myself as an architect. I hold a professional master’s degree in architecture, but I do not hold a certificate of practice in Ontario. The text description I chose was actually meant to communicate that I’m a real estate developer who cares deeply about and sees the value in great design.
The OAA and their lawyers clearly read it differently. So I have removed the derivative “architect” language from this blog. Frankly, it’s not a big deal to me. And in the almost 6 years that I have been writing this blog, I don’t think anyone has ever reached out to me thinking that I was a practicing architect. To be clear: I am not an architect. In case any of you are curious, here is a copy of the letter that I received.
Witold Rybczynski’s recent blog post about architecture’s “curious business model” gets at one of the core challenges of new construction: “Every project is, in effect, a custom job; there are no real economies of scale.” There are also no reoccurring cash flows for the architect, Witold explains, unlike a writer who might earn ongoing royalties or a business owner whose wealth will grow as the business grows.
There are two items to discuss here: (1) The “curious business model” used in the practice of architecture and (2) the inefficiencies of construction.
The first one is not unique to architecture. You could say the same thing about the planning and real estate lawyers who also work on new buildings. But I take Witold’s point in that even a painter’s work could appreciate in value after it’s done, whereas there’s typically no mechanism for any of this to accrue (to the architect) in the world of architecture.
When I was young, I was told that there are two ways to make money. You can either trade your time for money or you can own assets that make you money. An example of the latter might be a farm where the tenant farmer pays you rent every month. You’re not trading your time by actually doing the farming, you just own the asset.
This may seem obvious, but it’s fundamental. And it’s one of the reasons why, when I was in architecture school, I admired the practices of people like Jonathan Segal out of San Diego. Jonathan is one of the pioneers of the “architect as developer” approach. He simply became his own client and started building his own projects.
Moving on to topic number two.
Everyone in the business of building new buildings is looking for repeatable methodologies. Many have thought: How do we make the construction of buildings more like the assembly of cars? How do we create a standardized kit of parts? And that has lead to longstanding efforts around prefabrication. Today, as you know, we are also looking at how 3D printing might make this easier/cheaper.
In some ways, that is happening. There are examples of prefabrication and panelization, and there are developers who are using this approach. (See H+ME Technology.) But for the most part, we still build on site and it’s still a messy process with lots of waste and inefficiencies. If there was a cheaper and more effective way to do it, the industry would certainly move in that direction. Eventually that will happen.
In the meantime, we will continue building our prototypes.
One of the most important rules in personal finance is that you should live within your means. Sure you might be stretching to invest or start a business but, generally speaking, people who specialize in this sort of thing (which is not me) will tell you that it’s probably a good idea to spend less than you make.
The same is, of course, true in business. Businesses generally try to make more money than they spend. Similar to what might happen in personal finance, there are instances where a company might decide to forgo current cash flow for future cash flow. i.e. Invest in future growth. But at some point, not making any money needs to stop and the company will need to post a profit.
All of this probably sounds dreadfully obvious, but I often think of this very simple principle whenever I hear someone talking about something that should be done, but isn’t being done. Developers should be using triple glazed windows in all of their projects. The government needs to build a new subway line from here to over here. And the list goes on.
There’s no question that triple glazed windows will perform better than double glazed windows. And there’s no question that a subway right outside of my single family home would be pretty darn convenient for my personal needs. But all of these things, unfortunately, cost money. They are expenses. And unless the revenues are there to support them, they, funny enough, tend not to happen.
The same is true in personal finance. I should have a yacht in the Mediterranean. Why? Because having a yacht in the Mediterranean is typically better than not having a yacht in the Mediterranean. Sadly, the top line of my income statement tells me to, instead, focus my attention on the Toronto Island Ferry Docks.
Update: One of our engineers has advised me that triple glazing is not always better from a noise control standpoint. Laminated and heavier glass typically performs better from this perspective.
Analytics firm, App Annie, has just published its annual The State of Mobile report. As you might expect, our phones continue to consume more of our time, attention, and money. Last year, there were over 204 billion app downloads across the world. Global mobile advertising hit $190 billion and, by the end of this year, it is forecasted to reach $240 billion. By 2023, the mobile industry is expected to contribute some $4.8 trillion to global GDP.
Compared to 2 years ago, the world is spending, on average, 35% more time on their phones. See above chart. Mobile-first countries such as Indonesia and Brazil spend even more time on mobile as they skipped over the PC era that was seen in more mature markets. But globally, all of us are doing more on our phones — everything from managing our investments to consuming media (TikTok had an explosive 2019).
Financial app usage increased significantly last year. Above are the top “breakout finance apps” of the year. PC Financial (the financial services brand of Loblaw) saw the greatest year-over-year growth in downloads but, since it only launched last year, it was starting from a base of 0. Fintech apps, which grew even faster than traditional banking apps, demonstrate that the big banks probably need to step up their mobile game.
Young people do, of course, spend more time on mobile. Generation Z (those born between 1997 to 2012) had 60% more sessions per user in top apps than older demographics. But as of the end of last year, Generation Z is believed to have surpassed Millennials as the largest generational cohort in the world at about 32% of the population. So this wave is going to continue to come.
If you’d like to download a fully copy of App Annie’s mobile report, click here. You’ll need to enter your email address. But there’s a lot of interesting data in the report. You can almost ignore that it’s specifically about mobile and think of it as an overview of where the world is heading.
BlackRock CEO, Larry Fink, published his annual letter to CEOs this week and the title — which I am reusing here — should give you an indication of the tone. The focus is squarely on climate change. Larry argues that, sooner than perhaps most people think, climate change is going to cause a “significant reallocation of capital.”
Below are a few excerpts from his letter. If you remember the first post that I published this year, you may remember that Larry is not alone in this prediction. Already 2020 is shaping up to be a year where more of us seem to be turning our attention to climate change. I would encourage you to read the full letter over here.
Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?
These questions are driving a profound reassessment of risk and asset values. And because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself. In the near future – and sooner than most anticipate – there will be a significant reallocation of capital.
Over the 40 years of my career in finance, I have witnessed a number of financial crises and challenges – the inflation spikes of the 1970s and early 1980s, the Asian currency crisis in 1997, the dot-com bubble, and the global financial crisis. Even when these episodes lasted for many years, they were all, in the broad scheme of things, short-term in nature. Climate change is different. Even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis. Companies, investors, and governments must prepare for a significant reallocation of capital.
I read the first few sentences of this article and immediately thought to myself, “Yup, this is the world we now live in. Attention spans are dwindling.” And since Monday was back to work for many of us, I figured it was timely.
The piece is about Mark Manson’s new book called, Everything is Fucked: A Book About Hope. In it, he talks about anxiety, depression, intolerance, and the attentional challenges that are, arguably, a result of today’s modern economy.
His proposed solution is something he calls the Attention Diet. Similar to how it’s important not to eat bad things, it’s important, in today’s information economy, not to consume bad things. And like junk food, there’s a lot of junk information fighting for our attention. I like the parallel.
Here are the 3 steps to the Attention Diet:
Correctly identify nutritious information and relationships.
Cut out the junk information and relationships.
Cultivate habits of deeper focus and a longer attention span.
Put even more succinctly, it’s about filtering for quality in a world of endless information. Here’s an interesting line from Mark: “Because in a world with infinite information and opportunity, you don’t grow by knowing or doing more, you grow by the ability to correctly focus on less.“
Stephen A. Schwarzman (of Blackstone) was at the Canadian Club of Toronto today, talking about life, finance and his new book, What It Takes: Lessons in the Pursuit of Excellence. I haven’t read it yet. But thanks to today, I now have a copy and I am confident it will probably be excellent.
One thing that I really appreciated were his comments around teachers. Education is paramount. And yet US schools (K-12) are falling behind the rest of the world. (China has supposedly integrated computer science education across the board.) His recommendation: Pay teachers more and don’t charge them income tax.
Why no tax? Because it would signal to the rest of society just how important teachers are. Maybe that’s exactly the right solution or maybe it’s not. Either way, it feels directionally right, and there’s no question that teachers are some of the most important people on the planet.
If you’re interested in this topic, you may also be interested in this startup. They offer down payment assistance to “essential professionals,” such as teachers.
