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.
So Soho House went public this week. It is now trading on the NYSE under the ticker $MCG. It renamed itself the Membership Collective Group Inc. for the IPO given the myriad of brands that the company now operates. The company went public at $14 a share and with a $2.8 billion valuation. It raised $420 million through the offering.
My first reaction when I heard the news was that going public is maybe at odds with being a cool, urban, and exclusive membership club. We’re all about creatives; also, buy our stock. But maybe I’m wrong. This is just the company maturing. At 26 years old, the company now has some 119,000 members and has 30 Soho Houses around the world in 12 different countries.
Full disclosure: I am a member and a big fan of Soho House.
But now that the company is public, we also know that it has never turneda profit. And it hopes to do that by next year, as well as open some five to seven new Soho Houses each year while trying to remain “asset light”. As the company does this and pushes toward profitability, there is, of course, a very natural question about what that does to the experience and the overall brand.
Does it get diluted at all?
I don’t think that necessarily needs to be the case. But of course the company will end up evolving. On a related note, if anyone from Soho House / MCG is reading this post (unlikely), I would love to connect about an opportunity here in the Toronto area. I think it has the potential to become something truly remarkable — not to mention, much needed. I can be reached, here.
@OceanJangda shared a great article with me today about “the psychological benefits of commuting to work.” It is excellent, it cites a lot of psychological research, and I would encourage all of you to give it a read. While it is never fun getting on a packed subway in the morning, the argument is that there are psychological and other positive benefits to commuting. It turns out, we need breaks in our day.
Here’s an excerpt from the article:
But here’s the strange part. Many people liberated from the commute have experienced a void they can’t quite name. In it, all theaters of life collapse into one. There are no beginnings or endings. The hero’s journey never happens. The threshold goes uncrossed. The sack of Troy blurs with Telemachus’s math homework. And employers—even the ones that have provided the tools for remote work—see cause for alarm. “No commute may be hurting, not helping, remote worker productivity,” a Microsoft report warned last fall. After-hours chats were up 69 percent among users of the company’s messaging platform, and workers were less engaged and more exhausted.
It also turns out that there’s kind of a magic commute number. In the mid 1990s, Italian physicist Cesare Marchetti remarked that, all throughout history, humans have tended to cap their commute times at about 60 minutes per day. So a half hour each way. This was the case in ancient cities and it appears to be the case today (ignoring COVID).
What this mean is that as new technologies became available — such as the automobile — we were able to further decentralize and still only consume about 60 minutes of our day. Apparently the average one-way commute time in America is indeed about 27 minutes. Some people, of course, have much longer commutes, but this is the average. Currently mine is about 12-15 minutes with a coffee stop. Yes, it’s luxurious.
This 60-minute rule of thumb has become known as Marchetti’s Constant. And there are a number of possible explanations for why this has remained the case. Again, the obvious one is that it helps us detach from work, which is why so many of us have felt burnt out while working from home. We haven’t been shutting off and we need to.
Last month a digital-only version of a Gucci bag sold on gaming platform Roblox for about US$4,115. Again, digital-only. No physical bag that can be brought to brunch. At the time, this was about US$800 more than the real life version of the same Gucci bag. So why not go and buy that one instead?
I am sure that most of you are scratching your head at this and wondering: who the hell is valuing the digital more than the physical? Could it be that status and signaling — perhaps the real purposes of a designer bag — are even more important online in the world of Roblox than in real life? In this case, it wasn’t even an NFT and so presumably there aren’t any value claims around scarcity and authenticity. (Full disclosure: I don’t know how Roblox works.)
It’s important to keep in mind that meaningful innovation often starts out looking pretty silly to some/most. And to me, this feels like one of those times. What we are clearly seeing is a blurring between our digital and physical worlds. In fact, just today I was reading about a slew of digital-only clothing companies that sell, you know, contactless cyber fashion. One of those companies is Tribute (embedded post above).
The way it works is that you first buy a piece of digital clothing (which can sell out just like regular clothing). You then send them a picture of yourself and the company goes and renders that piece of digital clothing onto your photo. The result is what you see above, which to me looks fairly realistic (though at the same time fantastical, which I think is part of the point).
As out-there as this may seem, this strikes me as something that could become a very big deal. What is real on Instagram anyways? I can also see this being applied to other industries, including real estate. Maybe that is already happening.
Google just opened up its first ever retail store. It’s in Chelsea in New York City at the base of its offices in a building that the company owns. The space is about 5,000 square feet and it occupies a full city block.
A collaboration with New York-architect, Suchi Reddy, the retail space is deliberately different from what you’ll find at an Apple store (though the broad intentions are arguably similar). Instead of sleek, metallic and futuristic, the focus here was on creating a warm and inviting space that feels more like a home. (Note the pale woods.)
The approach is intended to make a statement about the role that technology, or at least Google’s technology, should play in our lives. It is about tech servicing humanity and not the other way around.
FastCompany has a good article, here, that explains all of this.
It is interesting to watch these spaces evolve into what we are now calling experiential retail or commerce. If you read the FastCompany article you’ll read about the work that Johns Hopkins University is doing on neuroaesthetics, which is the study of how spaces and aesthetics affect our bodies. That is how finely tuned these spaces have become.
And it’s kind of what you need to do today. Consider the example of Microsoft’s retail stores, which launched in a clear attempt to mimic the successes that Apple has seen with its stores. They even looked somewhat similar. But then last year Microsoft announced that the company would be closing all of its stores.
Why? Part of the problem is that they were too focused on just selling Microsoft products. And that, it would seem, can’t really be the main objective anymore. You also need to consider the experience. What story are we telling about our brand with our space, and is it compelling enough to standout?
P.S. The first image at the top of this post is of their Google Translate booth. You walk in. Say something. And Google translates the hell out of it for you.
I setup a new cryptocurrency wallet (offline hardware storage) this evening and then used it to buy brandondonnelly.eth using ENS (Ethereum Name Service). I don’t know what the hell I’m going to use it for, yet, but I own brandondonnelly.com. So I figured I should grab the decentralized blockchain version of my name as well. Perhaps at some point in the future I’ll be glad I did.
I plan to buy a bunch of other .eth domains in the near future as well. The costs are similar to registering a traditional domain.
Part of the reason why I’m doing all of this because I’ve decided that it’s time to do a deep dive and better understand the possibilities of the blockchain (a decentralized vs. centralized internet). I’ve been following for a number of years, but it has been pretty surface level. It’s time to get serious. And I must say that it felt pretty cool to use my new hardware wallet to buy something with ETH.
Overall, things started to really click for me when I saw the digital economy that was emerging with Ethereum (applications, NFTs, DeFi, etc.). Instead of just digital money, I could now see clear use cases and demand drivers for the cryptocurrency. Again, I used ETH to buy brandondonnelly.eth, which means I first had to be an owner of ETH.
If you’re looking to better understand the possibilities of a decentralized internet — specifically why non fungible tokens are bad ass — check out this blog post by Albert Wenger. He uses the example of the Mona Lisa sitting in the Louvre to explain why NFTs are not a fad and, instead, a “fundamental and profound innovation.”
I was reading about a proposed development earlier today (it doesn’t really matter which one for this story) and I immediately thought to myself, “wow, this is a beautiful development. I like what they’ve done here.” The project happens to be by one of my favorite architects in the city. Sadly though, we have yet to work with them on any of our projects.
I then decided to read the comment section of the article. There were dozens and dozens of comments and virtually all of them were negative and against the development. What is, of course, clear is that we all have different beliefs. We all see things differently. And that’s part of the reason why creating any sort of change is usually so difficult.
But if you think about it, so much of our world resolves around change. If we want to address climate change, we are going to need to make changes. If we want to improve housing affordability, we are going to need to make changes. If we want to build more inclusive and economically prosperous cities, we are going to need to make changes.
The challenge with all of this change is that we have inertia working against us. Case in point: I’m sure that most of us have been in a meeting at one point or another when a decision was made purely based on what was done the last time around. We did X. So let’s do X again. Why change? Probably a safe bet.
Seth Godin once said that, “if you do anything that matters, it means you’re trying to change something.” He was talking about the world of marketing. But I believe that there’s a universal truth to this. Change unlocks potential.
When I was in my early 20s, I spent a summer living and working in Taipei and Hong Kong. It was a wonderful experience. I’ll never forget my apartment in Hong Kong’s Causeway Bay. It was a small single room with a small bed and an even smaller bathroom. The bed didn’t fit me — at all — and my legs would hang over the bottom of it. I couldn’t stop hitting my shins on the bottom of the frame at night. The bathroom didn’t have a dedicated shower, just a hose coming out of the wall. So everything would get wet. It also took me 15 minutes the first morning I showered to figure out how to make the water hot. Eventually I got it.
Despite all this, I remember being enchanted with Hong Kong. Here was this tiny little place with very little developable land that had managed to become, through trade, finance, real estate and other things, one of the wealthiest places in the world. Capitalism! I could also feel the connection to Toronto. Hong Kong has one of the largest Canadian expat communities in the world. In fact, I ran into one of my high school math teachers in a bar in LKF. That was wild. He had moved there with his wife to teach. I suppose because of all of this, I have tended to follow the region a bit more closely.
Last July, the British government promised a path to citizenship for the 3 million or so Hong Kong residents who hold or are eligible for a British National Overseas passport. This passport, as I understand it, was given to citizens at the time of the 1997 handover. Though I don’t know how utility was actually derived from it over the years. Before last year’s announcement, this document didn’t include the right to stay in the UK. However, now it does. And the UK government expects that some 300,000 Hong Kong residents are going to take advantage of this in the first five years of the program. And indeed, according to the Financial Times, 2020 was the first year since SARS back in 2003 that the region lost people — it had a net outflow of about 39,800 people.
What will this mean for Hong Kong? Well, Bank of America estimated earlier this year that capital outflows from Hong Kong could reach £25 billion in the first year of the program. But maybe this is being too conservative. Here in Canada, capital outflows from Hong Kong hit a record last year at C$43.6 billion. But this too could be an underestimation, as it doesn’t include transfers below C$10,000 and probably a bunch of other transfer methods. How much money is actually flowing outward?
This weekend the Financial Times published the above survey results showing sentiment around leaving Hong Kong. Surveys are, of course, a funny thing. Saying you might probably potentially do something is a lot different than actually doing something. But for what it’s worth, about a quarter of pro-democracy supporters (which is maybe half of the population?) responded by saying that, yes, they would be prepared to leave. If you include those who responded no, but that they would reconsider and leave if things got worse, the number increases to about 70%.
I don’t know how meaningful all of this becomes for Hong Kong. Time will tell. But it has me thinking about my tiny bed and tiny shower in Causeway Bay.
“Very little remarkable comes out of bureaucracies for a simple reason. The members of the bureaucracy seek to be beyond reproach. Reproach is their nightmare, their enemy, the thing to avoid at all costs. And the remarkable feels like a risk.” —Seth Godin
I went into the office yesterday to sign some documents (they had to be originals) that I have been working on finalizing for the last 6-7 months. I’m not going to share what the documents were or who was involved, but I will say that it took the entire 6-7 months to get two lines added to the agreement. No other changes. Just the addition of two lines — okay, it was more like a line and a half. On the one hand, I am horrified that such simple things can take so long in the hands of bureaucracy. On the other hand, this is not an outlying situation.
I say this not to bitch, but to instead make a case for the remarkable. As I was signing the documents yesterday, I couldn’t help but think of the writing of Seth Godin and quotes like the one at the top of this post (which is from a post called “Bureaucracy = death”). Because one of the professional goals that I have set for myself is to always strive to create things that are remarkable. I want people to look at whatever the thing might be and think to themselves, “yeah, this is extraordinary.”
But here’s the thing about remarkability. It lives on the edges. It’s by definition not ordinary. It is extra-ordinary. And so there’s risk. Maybe it won’t work. But you know, that’s okay. It also thrives on novelty. You have to be the first and you have to be the best. Because when it does work, it’ll very quickly become the ordinary. But this too is okay because it’s how the world moves forward. Remarkability is not a one time event, it is something that is continuous.
That we have organizations with cultures and processes that systematically eschew the remarkable makes me sad.
Fred Wilson wrote a great post last month about leadership. In it, he compares what he calls visionary leadership to operational leadership. Here’s a snippet:
I like to keep things simple and in my simple mind, leadership comes in two flavors, visionary leadership and operational leadership. Founders are almost always visionaries (if they aren’t, run in the opposite direction) and hired CEOs are almost always operators.
The post goes on to explain the dynamics between these two types of leadership. Vision, he argues, needs to come from the top. You need someone setting direction at a high level. Operational leadership doesn’t have to be this way, and often isn’t. You can hire for it.
In some special cases, you have leaders who are both. Another snippet:
Leaders who can provide both operational and visionary leadership are a rare but special breed. When you find one, get on their bus and stay on it for as long as you can. It will be an incredible trip.
I have seen all of this play out in the real estate development space.
There are people who are great at identifying new sites (land) and coming up with fresh and innovative ideas, but it is clear that they need an operator or two around them. There’s nothing wrong with this pairing.
Development is also a very long and slow game and you need people who can operate — deeply in the weeds — over extended periods of time. Persistence and tenacity are crucial. Patience I guess, too.
Adam Grant’s recent NY Times article about languishing — the psychological middle state that exists somewhere in between depressed and flourishing — has been making the rounds online. Perhaps it is because COVID sucks and many of us can relate.
Either way, three points in the article really stood out to me (at least one of which, in my mind, directly ties back to real estate).
Firstly, I found it helpful to hear him describe what flourishing is. In his words, “flourishing is the peak of well-being: You have a strong sense of meaning, mastery and mattering to others.” This resonates with me. I know that I am at my best when I’m accomplishing things and making progress.
Secondly, he puts forward a possible solution to languishing — it’s the concept of “flow.” Flow is when we are absorbed in meaningful and challenging work and where, again in his words, “your sense of time, place and self melts away.” This also resonates with me. I am a big fan of a flow (even if I didn’t know what it was called).
Thirdly — and this one is important as we all think about the future of work/office space — focus is paramount to doing exceptional things! Here’s an excerpt that I immediately paused on as I was reading the article:
Fragmented attention is an enemy of engagement and excellence. In a group of 100 people, only two or three will even be capable of driving and memorizing information at the same time without their performance suffering on one or both tasks. Computers may be made for parallel processing, but humans are better off serial processing.
