Harvard Business Review recently published a conversation between Roger Martin – who is the former dean of the Rotman School – and Tim Brown – who is CEO of the global design firm IDEO. The title of the talk is “Capitalism Needs Design Thinking.” But I decided to call this post something else after reading Roger say this:

My friend Dan Pink argued in an HBR piece in 2004 that the MFA is the new MBA. I wrote to Dan to say that if that’s the case we have a problem because America pumps out a mere 1,500 MFAs a year versus 150,000 MBAs. Thirty MFAs per state per year is just a rounding error. This is one of the reasons I was so keen on transforming business education. It’s a huge infrastructure: 27% of all graduate students in America are in an MBA program. If they’re all being taught how to analyze things to death, that’s going to affect how they’ll shape the future of business.

But what this conversation is really about is the future of democratic capitalism, which is why I think it’s a nice tie-in to yesterday’s Architect This City post about startups and inequality.

I’m very worried about the fact that in America we’ve now gone 24 years without the median household income rising — it was the same in 2013 as it was in 1989. That’s unprecedented in American history. The longest that’s ever happened before is when it took just under 20 years to recover, after the Great Depression. This long period of stagnation has coincided with the top 1% of the economy doing spectacularly.

And so while it’s easy to point fingers at the tech community and say that it’s to blame for rising income inequality, the reality, I think, is that there are other more fundamental issues that need addressing. Roger and Tim believe that design thinking can help. Here’s another great snippet from the former:

I think the way that government generally works is to think, think, think, think, and then finally create legislation that brings about some change, and then they ignore their legislation and say okay, we’re finished with that. Then people go and figure out how to game that legislation, and the government doesn’t do anything about it. Whereas if they had a design view of it, they’d say when they passed a bill, that’s just the best idea we’ve got now, we have to go see how it works in practice, and then fix it. That’s just not the mentality.

Technology is having a profound impact on the world. And it’s something that is very visible. But part of the challenge is that governments aren’t keeping up. They are almost never out in front.

So when something new comes along, like Airbnb or Uber, the reaction is to just stop it. It doesn’t conform to the rules and regulations currently in place, and so it shouldn’t exist.

But as Roger and Tim point out, maybe we need to look at our rules and regulations as simply part of an iterative process (like designers do). Because if we did that, maybe we’d be better equipped to transfer the benefits of innovation over to society as a whole.

Image: HBR

This post originally appeared on the Rotman Morning & Evening MBA blog. 

As a recent graduate of Rotman’s Morning MBA program (and presumably because somebody over there reads Architect This City), I was asked to write a guest post for their MBA blog. More specifically, I was asked to share my thoughts on the real estate industry and on my time at Rotman. And since I haven’t really done a post like this before, I thought it would be worthwhile to do.

But before I begin, I think it’s important to explain a bit about my background and my motivations for doing an MBA in the first place. Before going to Rotman, my first master’s degree was in architecture and real estate from the University of Pennsylvania. Basically it was a Master of Architecture combined with their MBA real estate concentration. So it included everything from real estate finance to real estate development.

Having already done this 3-year program, there were a couple of things I wanted out of an MBA program. First of all, I wasn’t prepared to go full-time. Five years out of the workforce was simply too high of an opportunity cost for me and so part-time was all I considered. I also only applied to Rotman because I didn’t want to waste any time traveling outside of the city (or to other parts of the city). I also saw Rotman as a rising star and one of, if not the, best option in Canada.

At the same time, I didn’t give much thought to the real estate curriculum being offered even though I fully planned to stay working in the real estate industry. I felt like I already had that sort of formal training and so, unlike some of my classmates who were looking to switch into real estate, I was after something else. I ended up majoring in Innovation & Entrepreneurship.

What I was trying to do was really round out my skillset and fill in some of the missing holes: accounting, marketing, and so on. But even more importantly, I had drunk the kool-aid around Rotman’s focus on integrative thinking (renamed “business problem solving”) and “design thinking”. And since there will always be a part of me that thinks of itself as a designer, it seemed like the perfect program for me. 

Because at the end of the day, it’s not that hard to learn how to create a real estate development pro forma or calculate your expected exit cap rate on some piece of real estate. That stuff is all fairly mechanical. It might seem quite mythical when you don’t know how to do it, but once you do, you quickly realize that a financial model is only as good as the assumptions you put in. As we’re told in school, garbage in = garbage out.

The real value gets created in the assumptions. It’s created in the way you think about the market, your product, and your customers. And a lot of the time, the most value is created when you know or believe something that nobody else believes to be true. If you’re a lemming, you’re going to get lemming like returns and outcomes. So in a lot of ways, I went to Rotman to help me think better and think differently.

In some industries, resting on your laurels can kill you in a relatively short period of time. See Blackberry. Real estate, on the other hand, is generally a bit slower moving. But that doesn’t mean that change doesn’t happen and that there isn’t room for loads of innovation.

Just look at the Toronto of today versus the Toronto of 10-15 years ago. We’ve transformed ourselves into a city of high-rises where more and more people now want to live in the core of the city. This has brought commercial landlords back to the city center so that employers have downtown office space to attract the best human capital (see South Core) and it’s brought suburban retailers into the core to sell to these same urbanites. We’re seeing a complete reversal of the trends experienced with the last generation.

Amidst all of this, I’ve been noticing a growing awareness and passion around cities. My blog Architect This City started as a forum for architects, planners, and developers, but it has grown into a community of thousands of people who simply love cities. They’re passionate about everything from architecture to grade-separated bike lanes (as geeky as that probably sounds).

So I think that it’s not only the real estate market that’s changing, but also the professions involved with it. I’ve written a lot about the future of the architecture profession because I think we’re starting to see the emergence of new business models. Architects are becoming developers and developers are starting to become much more heavily involved in the shaping of the communities in which they build. Which is why in many ways, I think of my self as a city builder more than anything else.

Finally, to make matters even more complicated, technology is starting to have a huge impact on the business. Zillow.com just bought Trulia.com for $3.5 billion to form a portal that will now serve around ¼ of the online US residential market. And Opendoor.com is getting ready to launch a product that seems entirely poised to disrupt the way homes are bought and sold in America.

So what I’m getting at is that there’s absolutely no guarantee that the way we used to do something, is the way we’re going to continue doing it. In fact, I operate under the assumption that everything can and will be changed by somebody at some point. And if this is the way you approach things, then it should become abundantly clear to you that being able think critically is going to be one of your most important assets.

When I was just starting at Rotman, I met for lunch with an upper year classmate who told me that one of the best things he’s taken away from the program is the ability to think about the way he thinks. That may sound silly to some, but in our uncertain world, it’s actually a great skill to have.

Harvard Business Review recently published a conversation between Roger Martin – who is the former dean of the Rotman School – and Tim Brown – who is CEO of the global design firm IDEO. The title of the talk is “Capitalism Needs Design Thinking.” But I decided to call this post something else after reading Roger say this:

My friend Dan Pink argued in an HBR piece in 2004 that the MFA is the new MBA. I wrote to Dan to say that if that’s the case we have a problem because America pumps out a mere 1,500 MFAs a year versus 150,000 MBAs. Thirty MFAs per state per year is just a rounding error. This is one of the reasons I was so keen on transforming business education. It’s a huge infrastructure: 27% of all graduate students in America are in an MBA program. If they’re all being taught how to analyze things to death, that’s going to affect how they’ll shape the future of business.

But what this conversation is really about is the future of democratic capitalism, which is why I think it’s a nice tie-in to yesterday’s Architect This City post about startups and inequality.

I’m very worried about the fact that in America we’ve now gone 24 years without the median household income rising — it was the same in 2013 as it was in 1989. That’s unprecedented in American history. The longest that’s ever happened before is when it took just under 20 years to recover, after the Great Depression. This long period of stagnation has coincided with the top 1% of the economy doing spectacularly.

And so while it’s easy to point fingers at the tech community and say that it’s to blame for rising income inequality, the reality, I think, is that there are other more fundamental issues that need addressing. Roger and Tim believe that design thinking can help. Here’s another great snippet from the former:

I think the way that government generally works is to think, think, think, think, and then finally create legislation that brings about some change, and then they ignore their legislation and say okay, we’re finished with that. Then people go and figure out how to game that legislation, and the government doesn’t do anything about it. Whereas if they had a design view of it, they’d say when they passed a bill, that’s just the best idea we’ve got now, we have to go see how it works in practice, and then fix it. That’s just not the mentality.

Technology is having a profound impact on the world. And it’s something that is very visible. But part of the challenge is that governments aren’t keeping up. They are almost never out in front.

So when something new comes along, like Airbnb or Uber, the reaction is to just stop it. It doesn’t conform to the rules and regulations currently in place, and so it shouldn’t exist.

But as Roger and Tim point out, maybe we need to look at our rules and regulations as simply part of an iterative process (like designers do). Because if we did that, maybe we’d be better equipped to transfer the benefits of innovation over to society as a whole.

Image: HBR

This post originally appeared on the Rotman Morning & Evening MBA blog. 

As a recent graduate of Rotman’s Morning MBA program (and presumably because somebody over there reads Architect This City), I was asked to write a guest post for their MBA blog. More specifically, I was asked to share my thoughts on the real estate industry and on my time at Rotman. And since I haven’t really done a post like this before, I thought it would be worthwhile to do.

But before I begin, I think it’s important to explain a bit about my background and my motivations for doing an MBA in the first place. Before going to Rotman, my first master’s degree was in architecture and real estate from the University of Pennsylvania. Basically it was a Master of Architecture combined with their MBA real estate concentration. So it included everything from real estate finance to real estate development.

Having already done this 3-year program, there were a couple of things I wanted out of an MBA program. First of all, I wasn’t prepared to go full-time. Five years out of the workforce was simply too high of an opportunity cost for me and so part-time was all I considered. I also only applied to Rotman because I didn’t want to waste any time traveling outside of the city (or to other parts of the city). I also saw Rotman as a rising star and one of, if not the, best option in Canada.

At the same time, I didn’t give much thought to the real estate curriculum being offered even though I fully planned to stay working in the real estate industry. I felt like I already had that sort of formal training and so, unlike some of my classmates who were looking to switch into real estate, I was after something else. I ended up majoring in Innovation & Entrepreneurship.

What I was trying to do was really round out my skillset and fill in some of the missing holes: accounting, marketing, and so on. But even more importantly, I had drunk the kool-aid around Rotman’s focus on integrative thinking (renamed “business problem solving”) and “design thinking”. And since there will always be a part of me that thinks of itself as a designer, it seemed like the perfect program for me. 

Because at the end of the day, it’s not that hard to learn how to create a real estate development pro forma or calculate your expected exit cap rate on some piece of real estate. That stuff is all fairly mechanical. It might seem quite mythical when you don’t know how to do it, but once you do, you quickly realize that a financial model is only as good as the assumptions you put in. As we’re told in school, garbage in = garbage out.

The real value gets created in the assumptions. It’s created in the way you think about the market, your product, and your customers. And a lot of the time, the most value is created when you know or believe something that nobody else believes to be true. If you’re a lemming, you’re going to get lemming like returns and outcomes. So in a lot of ways, I went to Rotman to help me think better and think differently.

In some industries, resting on your laurels can kill you in a relatively short period of time. See Blackberry. Real estate, on the other hand, is generally a bit slower moving. But that doesn’t mean that change doesn’t happen and that there isn’t room for loads of innovation.

Just look at the Toronto of today versus the Toronto of 10-15 years ago. We’ve transformed ourselves into a city of high-rises where more and more people now want to live in the core of the city. This has brought commercial landlords back to the city center so that employers have downtown office space to attract the best human capital (see South Core) and it’s brought suburban retailers into the core to sell to these same urbanites. We’re seeing a complete reversal of the trends experienced with the last generation.

Amidst all of this, I’ve been noticing a growing awareness and passion around cities. My blog Architect This City started as a forum for architects, planners, and developers, but it has grown into a community of thousands of people who simply love cities. They’re passionate about everything from architecture to grade-separated bike lanes (as geeky as that probably sounds).

So I think that it’s not only the real estate market that’s changing, but also the professions involved with it. I’ve written a lot about the future of the architecture profession because I think we’re starting to see the emergence of new business models. Architects are becoming developers and developers are starting to become much more heavily involved in the shaping of the communities in which they build. Which is why in many ways, I think of my self as a city builder more than anything else.

Finally, to make matters even more complicated, technology is starting to have a huge impact on the business. Zillow.com just bought Trulia.com for $3.5 billion to form a portal that will now serve around ¼ of the online US residential market. And Opendoor.com is getting ready to launch a product that seems entirely poised to disrupt the way homes are bought and sold in America.

So what I’m getting at is that there’s absolutely no guarantee that the way we used to do something, is the way we’re going to continue doing it. In fact, I operate under the assumption that everything can and will be changed by somebody at some point. And if this is the way you approach things, then it should become abundantly clear to you that being able think critically is going to be one of your most important assets.

When I was just starting at Rotman, I met for lunch with an upper year classmate who told me that one of the best things he’s taken away from the program is the ability to think about the way he thinks. That may sound silly to some, but in our uncertain world, it’s actually a great skill to have.