Back in 2018, Amazon opened its first cashier-less grocery store. The technology -- which it later branded as "Just Walk Out" -- was intended to allow customers to do exactly that. All you had to do was put items into your cart and walk out of the store. And then, through the magic of sophisticated computer vision, machine learning, and lots of sensors, you would be billed and sent a receipt.
However, this month the company announced that it will be moving away from this technology, and instead focusing on its Dash Carts (more on this shortly). It turns out that the technology wasn't nearly automated enough.
Last year, The Information reported that "Just Walk Out" was relying on at least 1,000 off-site workers in India to constantly review video footage and figure out who had bought what. This is why it apparently took so long to receive a bill sometimes; humans far away were working to figure out if that was a persimmon in your hand, or a tomato.
I'm not an expert on this space, but I'm guessing it is not (yet) feasible to do what Uniqlo and other retailers now do with their supply chains and checkouts. So this was the workaround. Whatever the case, Amazon has now said that it will be focusing on its Dash Carts, which are kind of like roaming checkout counters. They come with screens and scales for weighing things.
Obviously the ideal solution is to not have to do or scan anything. But being able to avoid check-out lines still feels like meaningful progress. I just wonder if these smart carts will encourage or discourage spending. Because now everyone will have a live receipt in front of them. That might discourage spending unless you can offset it with rewards and/or other incentives.
Yesterday we looked in the rear-view mirror. Today we're looking forward:
The market consensus right now is that this cycle of interest rate increases has come to an end, and that we should see rates start to come down next year. Having confidence that rates won't go any higher in the near future is what markets need in order to start making more decisions. So this is, of course, positive. At the same time, I don't think anyone should expect a return to ultra-low rates. Rates today are still low when viewed historically.
Lower rates are good for levered assets such as real estate, but I don't think that our industry has fully felt and processed the impacts of higher rates. Unfortunately, I think that things will get worse (in 2024) before they get better (maybe toward the end of 2024 or perhaps in 2025). This is when a "risk-on" approach will return in commercial real estate. A year ago today, I thought 2023 would be the year for this, but as I said yesterday, I was overly optimistic in terms of my timing.
On the residential resale side, I think we will see greater optimism sooner, certainly for the most in-demand cities and areas. There is pent up demand waiting on the sidelines and, once we can get past the current bid-ask spreads and deadlock, I believe we'll return to a more balanced market in 2024. To be clear, I'm not expecting bidding wars and the like. And because of our housing affordability crisis, I also think the Bank of Canada will be more resistant to lowering rates compared to other central banks. This will help the Canadian dollar.
If you're a buyer of real estate, I generally believe that 2024 will turn out to be a pivotal year for you. Roughly speaking, you win acquisitions in one of two ways: either (1) you pay the most or (2) you believe in something that most other people in the market don't. This second approach is harder to achieve in bull markets. But in slower markets, the door is open and history has taught us that it can be the foundation in which great fortunes are made.
As I mentioned yesterday, I agree with the prognostications that hard costs will soften further next year (perhaps even more than 5% on average). Obviously every market is different. But here in Toronto, I just don't see us returning to the level of construction starts that we have seen over the last number of years.
Since 2021, I have used my hyper scientific Jimmy the Greek Reopening Index to keep tabs on office utilization and the overall return to office. And based on this, 2023 was a positive year. Initially, souvlaki consumption appeared dramatically lower on days like Monday. But I noticed discernible increases as the year went on. However, if you look at actual data, such as what we have from swipe cards, the great return to office seems to have stalled out at around 50%. I don't think this will hold, though. I continue to believe that of the people who work in offices, most will spend > 50% of each week there. And we will see that in 2024.
2023 was the year of AI. But Fred Wilson makes an excellent point, here. AI is 40+ years in the making. Last year only became the year of AI because a consumer-facing app -- ChatGPT -- was revealed that captured everyone's attention. Crypto will eventually have this moment, but it will likely need to marinate a bit longer. Instead, I think 2024 will be the year of augmented reality (AR) and a further blurring of our offline and online worlds. Think digital art, fashion, and other collectibles (such as NFTs).
Right now, autonomous vehicles feel like they're in the trough of disillusionment (within the hype cycle). There were moments last year where it felt like we were finally moving beyond this phase. But then some very suboptimal things happened. I think AVs are our reality in the next 5+ years, which means that for next year we likely want to be focused on the inputs: vision/LIDAR, battery tech, etc.
Zooming out, we should be thinking about the above two trends in the context of a broader shift toward greater automation. I think it will feel more insidious than immediate (certainly in 2024), but the longer-term impacts are going to be profound for our society. The so-called gig economy is likely to be impacted first. Eventually the overall economy will create new jobs, but we are still going to need to manage this transition toward more automation.
TikTok Shop is where to look for the future of shopping. I think the platform will continue to see strong adoption and ultimately prove to be a dominant e-commerce platform throughout 2024. Amazon, Meta, and others will see this, and try their best to catch up and copy it.
At the time of writing this post, the total crypto market capitalization is about $1.74 trillion. This is down from nearly $3 trillion at the peak of the market in 2021. The recent gains suggest that the so-called "crypto winter" might be over, and so combined with lower interest rates and more real-world use cases, I think that 2024 will be another strong year for crypto. Total crypto market cap at the end of the year will exceed its 2021 peak.
And there you have it. My current thoughts for this upcoming year. I should note that I'm not an economist, analyst, or an expert on souvlaki demand for that matter. But I enjoy writing this post as an annual discipline. It forces me to think critically about the topics that interest me. And in the paraphrased words of Howard Lindzon, it gives me an archive that I can go back to and either cringe at or think to myself, "hey, I could have been a somebody!"
And with that, a big thanks to everyone who has read this daily blog over the last year. This year marked its 10th anniversary. I wish you much success and happiness in 2024. Happy new year!
Drone delivery is one of those things that has always sounded really cool, but has yet to see a lot of adoption. As of May of this year, Amazon Prime Air has only made about 100 drone deliveries in California and Texas (the two states where it operates). This is compared to their initial target of 10,000 deliveries before the end of 2023.
That said, last week, the Federal Aviation Administration (FAA) approved UPS (as well as other companies) to fly drones "beyond visual line of sight." This seems like a pretty important approval, because I don't know how you deliver anything meaningful if somebody needs to keep the drone within their line of sight.
The thing that I can't get over in my mind, though, is how you deal with the noise population associated with lots of drones flying around. It's one thing if you live in a low-density community and a lonely drone comes by once in a blue moon to say hello. But in the city, even just replacing every cubed-shaped Uber Eats backpack would equal a hell of a lot of drones.
Presumably they would fly, at least some of the time, on top of our existing streets, just above the cars. Because the authorization is only for altitudes below 400 feet. So for tall buildings, you wouldn't always be able to do deliveries from the roof. And I guess that would be fine so long as they stop sounding like giant insects.
If that were to be the case, it's interesting to think about what that would do to all the real estate that exists at that same elevation.