I am sure that a lot of you know where the title of this post comes from. It’s a riff on one of the most important and influential books in the world of city planning: The Death and Life of Great American Cities by Jane Jacobs (1961).

But when Jane Jacobs first wrote this book, there was no such thing as smartphones and nobody was “checking-in” to hipster dive bars on Foursquare. 

So instead of leveraging big data, her analyses and arguments were based on observation. She walked the streets of New York and Toronto and figured out what made cities thrive and what made cities die. That was her brilliance.

Today, however, we have data – lots of it. And so recently, a group of researchers set out to test Jane Jacob’s theories using mobile phone data. The study was called, The Death and Life of Great Italian Cities: A Mobile Phone Data Perspective.

More specifically, they set out to test the following 4 essential conditions:

“She [Jane Jacobs] argued that, to promote urban life in large cities, the physical environment should be characterized by diversity at both the district and street level. Diversity, in turn, requires four essential conditions: (i) mixed land uses, that is, districts should serve more than two primary functions, and that would attract people who have different purposes; (ii) small blocks, which promote contact opportunities among people; (iii) buildings diverse in terms of age and form, which make it possible to mix high-rent and low-rent tenants; and (iv) sufficient dense concentration of people and buildings.”

To accomplish this, the team assembled and studied data from the following sources:

• Mobile phone activity (specifically internet activity)
  

• OpenStreetsMap Data
  

• Census Data
  

• Land Use Information
  

• Infrastructure Data
  

• Foursquare Data (Venues API)
  

Ultimately, they determined that Jane Jacobs knew what she was talking about. The above conditions are essential to urban vibrancy and they apply to Italian cities, just as they did and do to American cities. But this test was valuable, because the more that we can measure and quantify cities, the better I think we’ll get at creating and promoting urban vitality. 

Now imagine if you overlaid the findings of their report with residential and commercial rents. I bet you’d also find that there’s a strong business case for urban vitality.

I’ve heard a number of people say that, eventually, every company will be a software/technology company. And I don’t think we’re far off from that reality. To me, this study feels like an early example of what that might look like for city building.

On a side note, the picture at the top of this post is of the Spanish Steps in Rome. I took it on a weekend trip in 2007. I was living in Dublin at the time.

This morning I woke up to a fascinating post by designer Tobias van Schneider called: The agency is dead. Long live the agency.

What he’s talking about is the phenomenon of design agencies being gobbled up or “acqui-hired” by product firms such as Facebook and Google. The latest of which is (or was) Toronto-based design agency Teehan+Lax. The partners have closed up shop and are in the process of moving to San Francisco to join Facebook Design.

But what he’s really talking about is the pull from services to products.

When you’re a services firm, you do work for outside clients and they pay you for that work. But there are only so many hours in the day, which is why the marginal cost of taking on new clients is relatively high – to scale up you generally need lots more people.

On the other hand, when you’re a software company creating products, the marginal cost of serving additional customers is almost nothing. Sure, there are some variable costs, but the impact to your cost structure is not nearly as significant as when you’re a services firm. That’s how a company like Instagram can be bought for $1 billion with 30 million users and only 13 employees.

So products are a bit of a holy grail in some circles. You can achieve greater scale. You can focus on fewer projects as opposed to jumping around from client to client. And you can make a lot of money.

But it’s often easier said than done. Back in 2012, Teehan+Lax wrote a great post where they talked about the allure of products and the challenges they faced in trying to build their own:

37Signals* was the worst thing to happen to services businesses trying to make products. They fucked it up for all of us, because they made it. For those of us old enough to remember, 37Signals was a services company like Teehan+Lax. They had clients and did work for hire. Of course, 37signals isn’t a services company anymore. They make amazing digital products and their success is enviable. (*37Signals became Basecamp)

So why is it so hard to transition from services to products?

Clayton Christensen, the father of disruptive innovation, says, “you can’t start a disruptive business from inside an incumbent one.” The incumbent business will always take the resources from the disruptive one. He argues that if you want to create a disruptive business you need to isolate it from the incumbent business. The disruptive business needs its own values, processes and resources to be successful.

Regardless of whether you’re trying to build something disruptive or not, amazing products are hard to build. They take focus.

But what’s also interesting about services and products is that there’s a parallel in the world of architecture and real estate development. As an architect, you’re basically a service provider. You have clients and they pay you for the work that you do. However, as a real estate developer, you offer a product: physical space. The cost structures are not nearly as beneficial as with software, but it’s a product nonetheless.

And similarly, we’re already starting to see some developers bring architecture in-house. Will we see more of this in the future? Will there be a similar pull from services, to products?

Image: Flickr

Yesterday Opendoor.com finally launched their product in Phoenix. If you’re a regular reader of Architect This City, you might remember that back in July of this year I wrote about how they had just raised $10M of funding to make selling your home as easy as a few clicks.

Well, since then, I’ve been following them like a hawk. I had all the founders on Twitter notification (so I got notified every time they tweeted) and I was eagerly anticipating their launch.

Now that they’ve launched, we have a much better idea of how their business model is going to work. I say “better idea” only because there’s still portions of it that are a question mark for me.

In any event, Opendoor basically provides instant liquidity to homeowners. You go on, tell them about your home, and they then make you an offer to buy, which looks like this and lasts for 3 days. The offer they make you is calculated using comparable sales and adjustments based on your home’s unique characteristics.

Upon accepting their offer, they then schedule a home inspection (at their cost) to confirm your home’s condition. Once this is done, you just select your move out date and Opendoor handles the rest. The fee for all this is 5.5%, which the company claims is less than the 6% that realtors typically charge (this would be high for Toronto).

After buying your home, Opendoor plans to turn around and resell it.

What this reminds me of is a “bought deal.” In the world of investment banking, a bought deal is when the bank itself agrees to buy the entire offering of a particular security, as opposed to going out to the market and trying to raise the money. The advantage to the company (offering the securities) is that there’s no financing risk. They know they’re going to get their money. But it usually means the company gets a lower price.

So what I wonder, is if this is what’s going to happen here. Since Opendoor is effectively taking on the selling risk, does that mean their offers will be lower? Or are all their costs built into that 5.5% and that’s truly their core business model? I’m sure some of this will surface in the coming weeks.

I do, however, think they are smart to be focusing on the supply-side of the marketplace and offering virtually perfect liquidity to homeowners. Real estate is a unique asset in that it’s difficult to bring supply to the market. And so if control the supply-side, I think you have a pretty good shot at controlling the market as a whole.