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In yesterday's post about bottom-up urban development, I mentioned (in parentheses) that the focus on regenerating local economies is arguably even more important in the context of Japan, where a shrinking population is creating urban decline in many communities. And the reason I said this is because it is widely known that Japan has a demographic problem.
Since 2009, the country has seen its population decline every single year. Currently, it is hovering at just over 120 million people, but by 2050, it is expected to fall to roughly 100 million (or lower), with people aged 65+ accounting for nearly 40% of the population.
When this is your backdrop, you're usually more concerned about urban decline than you are about building enough new housing. As Fred Wilson mentioned in this recent post, "pressing issues like the unaffordability of housing, for example, can quickly change if we are living in a shrinking world, not a growing world."
Of course, it's not just Japan. The global fertility rate (as of 2024) stands at around 2.25 live births per woman. This is not that much higher than the replacement level of 2.1, and it's being largely propped up by only one region: Sub-Saharan Africa (>4 births per woman). Remove this region, and the world is now already shrinking in population.
This will have dramatic consequences not just on our cities and real estate markets, but on the global economy as a whole, which is why some people, like venture capitalists, are already betting that the world will need to move from labor-bound to energy-bound. What this means is that we're going to need a lot more energy-consuming tech to compensate for the fact that we have less of the other stuff.
You know, humans.
The first time I ever used dial-up internet was sometime in the 1990s. Some of you will remember that a company called CompuServe used to mail out floppy disks with "10 free hours." And I still remember the feeling of amazement the first time I tried it. Suddenly, I could chat with people from around the world. Remember a/s/l? It was so enthralling that those 10 free hours certainly didn't last very long.
Fast forward to more recent times, and I got that exact same feeling of amazement when I started diving into crypto. The first time I created a wallet, logged into to a service (using only the wallet), and then transferred funds around, I thought to myself, "Wow, this is a fundamental shift in how the world works." A lightbulb went off. And I still feel this way about crypto, which is why I remain long ETH.
But now I'm also excited about AI (along with the rest of the world). With every new model release, it gets that much more impressive. Last week I wrote about Gemini 3 and, since then, I decided to cancel my ChatGPT subscription and move all my activity over to it. I'm sure that a better model will get released before we know it, but for right now I'm having a lot of fun creating just about everything.
Here's a cartoon isometric of Toronto that I prompted to include "landmarks" and the day's weather.
Fred Wilson chose the perfect quote by William Gibson, here, to describe the current status of self-driving cars: "The future is already here — it's just not very evenly distributed." That's how it feels right now.
Waymo isn't in Toronto yet, but they are expanding rapidly throughout the US and elsewhere. Last week they announced fully autonomous driving in five new cities: Miami, Dallas, Houston, San Antonio, and Orlando. Autonomy is here, as we have talked about many times. There's no longer a question.
But what's interesting is that we're at the point in the hype cycle where expectations are not as inflated as they were a number of years ago (at least that's the way it appears to me). Years ago, everyone in real estate was talking about how it would disrupt parking requirements and reshape the landscape of our cities.
So when does this happen?
Fred ended his post by saying that "the downstream effects of this technology and behavior change are going to be profound." But he doesn't get into what these changes might be. Let's do a reminder of that now. Some of the most commonly believed consequences are as follows:
Cars consume a vast amount of real estate and also spend the vast majority of their lives just sitting around idle. Switching to a "mobility-as-a-service" model will require dramatically less parking. This is going to force landlords to repurpose the parking they already have and it's going to encourage developers to build new buildings with reduced parking, or no parking at all. That will be good for housing affordability.
However, the autonomous vehicles will need to park and corral somewhere at some point. My guess is that we will see something akin to rail yards today. This would be a good use for some of our excess parking, though this use won't require nearly as much. I would also imagine that many of the cars will leave the most valuable and dense parts of a city during off-peak periods.
At the same time, it's not clear what the winning business model for AVs will be. Will it be a Waymo-like model where the ride-hailing company owns and operates all of the cars? Will it be a Tesla Robotaxi model where individuals own the cars and put them out to work? In this case, maybe the Robotaxis just go back to people's individual garages. Or will Uber remain the dominant platform? Meaning, an asset-light model that aggregates customer demand remains the highest-value component of the stack. Personally, I can't see Tesla's Robotaxi model being very lucrative for individual owners, so I'm inclined to look toward Waymo and Uber.
In yesterday's post about bottom-up urban development, I mentioned (in parentheses) that the focus on regenerating local economies is arguably even more important in the context of Japan, where a shrinking population is creating urban decline in many communities. And the reason I said this is because it is widely known that Japan has a demographic problem.
Since 2009, the country has seen its population decline every single year. Currently, it is hovering at just over 120 million people, but by 2050, it is expected to fall to roughly 100 million (or lower), with people aged 65+ accounting for nearly 40% of the population.
When this is your backdrop, you're usually more concerned about urban decline than you are about building enough new housing. As Fred Wilson mentioned in this recent post, "pressing issues like the unaffordability of housing, for example, can quickly change if we are living in a shrinking world, not a growing world."
Of course, it's not just Japan. The global fertility rate (as of 2024) stands at around 2.25 live births per woman. This is not that much higher than the replacement level of 2.1, and it's being largely propped up by only one region: Sub-Saharan Africa (>4 births per woman). Remove this region, and the world is now already shrinking in population.
This will have dramatic consequences not just on our cities and real estate markets, but on the global economy as a whole, which is why some people, like venture capitalists, are already betting that the world will need to move from labor-bound to energy-bound. What this means is that we're going to need a lot more energy-consuming tech to compensate for the fact that we have less of the other stuff.
You know, humans.
The first time I ever used dial-up internet was sometime in the 1990s. Some of you will remember that a company called CompuServe used to mail out floppy disks with "10 free hours." And I still remember the feeling of amazement the first time I tried it. Suddenly, I could chat with people from around the world. Remember a/s/l? It was so enthralling that those 10 free hours certainly didn't last very long.
Fast forward to more recent times, and I got that exact same feeling of amazement when I started diving into crypto. The first time I created a wallet, logged into to a service (using only the wallet), and then transferred funds around, I thought to myself, "Wow, this is a fundamental shift in how the world works." A lightbulb went off. And I still feel this way about crypto, which is why I remain long ETH.
But now I'm also excited about AI (along with the rest of the world). With every new model release, it gets that much more impressive. Last week I wrote about Gemini 3 and, since then, I decided to cancel my ChatGPT subscription and move all my activity over to it. I'm sure that a better model will get released before we know it, but for right now I'm having a lot of fun creating just about everything.
Here's a cartoon isometric of Toronto that I prompted to include "landmarks" and the day's weather.
Fred Wilson chose the perfect quote by William Gibson, here, to describe the current status of self-driving cars: "The future is already here — it's just not very evenly distributed." That's how it feels right now.
Waymo isn't in Toronto yet, but they are expanding rapidly throughout the US and elsewhere. Last week they announced fully autonomous driving in five new cities: Miami, Dallas, Houston, San Antonio, and Orlando. Autonomy is here, as we have talked about many times. There's no longer a question.
But what's interesting is that we're at the point in the hype cycle where expectations are not as inflated as they were a number of years ago (at least that's the way it appears to me). Years ago, everyone in real estate was talking about how it would disrupt parking requirements and reshape the landscape of our cities.
So when does this happen?
Fred ended his post by saying that "the downstream effects of this technology and behavior change are going to be profound." But he doesn't get into what these changes might be. Let's do a reminder of that now. Some of the most commonly believed consequences are as follows:
Cars consume a vast amount of real estate and also spend the vast majority of their lives just sitting around idle. Switching to a "mobility-as-a-service" model will require dramatically less parking. This is going to force landlords to repurpose the parking they already have and it's going to encourage developers to build new buildings with reduced parking, or no parking at all. That will be good for housing affordability.
However, the autonomous vehicles will need to park and corral somewhere at some point. My guess is that we will see something akin to rail yards today. This would be a good use for some of our excess parking, though this use won't require nearly as much. I would also imagine that many of the cars will leave the most valuable and dense parts of a city during off-peak periods.
At the same time, it's not clear what the winning business model for AVs will be. Will it be a Waymo-like model where the ride-hailing company owns and operates all of the cars? Will it be a Tesla Robotaxi model where individuals own the cars and put them out to work? In this case, maybe the Robotaxis just go back to people's individual garages. Or will Uber remain the dominant platform? Meaning, an asset-light model that aggregates customer demand remains the highest-value component of the stack. Personally, I can't see Tesla's Robotaxi model being very lucrative for individual owners, so I'm inclined to look toward Waymo and Uber.
Here's a photo of a woman standing in the middle of a street in Tokyo wearing a trench coat and holding an umbrella. My prompt also asked it to make it look like a "grainy digital photo."
And here's a knolling shot (new word I just learned) featuring the gear of a global citizen (or globizen if you will). I prompted each of the objects, down to the white panel on the Blue Jays hat.
It's not perfect. Text remains an issue. If you look closely at the front of the passports or the text on the Fujifilm camera, you'll see that it's AI. But it's only a matter of time before this goes away. These kinds of images used to require a lot of time and effort. Now I can create them with one hand on my phone while I'm eating a bowl of cereal and having a morning coffee. There's zero marginal cost.
Thank goodness I've got more than 10 hours of usage.
Street parking will be replaced by a proliferation of pick-up/drop-off zones. This urban design problem will need to be solved as we dramatically increase the number of people getting in and out of AVs on busy urban streets.
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. Something like a half hour each way. This became known as Marchetti's Constant. What this has meant is that as new technologies (streetcars, cars, and so on) allowed us to move faster within that 60 minutes, humans have tended to sprawl further outward. Will AVs do the same, and could they actually break Marchetti's Constant?
As we all know, the key difference with AVs is that we will no longer need to pay attention to our commute. We could sit in an AV and sleep, work, watch a movie, or do whatever else we'd like. One can think of it like a mobile office or mobile living room. This should, in theory, make commuting long distances a lot more enjoyable and encourage even greater "super sprawl."
The counterforce to this phenomenon is that if more people are willing to commute long distances in an AV, we will see demand greatly outstrip supply on our roads. In other words, traffic congestion in large cities will get even worse. I think this will force more/most cities to adopt congestion pricing. Politically, it will finally become acceptable, because now we'll be able to use "the machines" as our scapegoat. They're overrunning our cities! Ironically, this means that we won't adopt the thing that makes driving a lot better until we all stop driving.
So where do these opposing forces ultimately net out? Well, my view (and bias) is that human-scaled walkable communities will always have value. We are social animals. I also think that the experience within our cities will improve dramatically. Pedestrian safety will increase (the data already supports this) and far less space will be dedicated to cars. Good.
At the same time, I think that reducing commute friction will encourage an exurban explosion. Like the technologies that came before AVs, it's going to empower humans to further decentralize. What this will do is exacerbate the divide between our urban cores and our suburban and exurban fringes.
Of course, this is just me surmising. I don't really know. But AVs are here, and I think it's time we get back to discussing and planning for the second and third-order effects of this technology.
Here's a photo of a woman standing in the middle of a street in Tokyo wearing a trench coat and holding an umbrella. My prompt also asked it to make it look like a "grainy digital photo."
And here's a knolling shot (new word I just learned) featuring the gear of a global citizen (or globizen if you will). I prompted each of the objects, down to the white panel on the Blue Jays hat.
It's not perfect. Text remains an issue. If you look closely at the front of the passports or the text on the Fujifilm camera, you'll see that it's AI. But it's only a matter of time before this goes away. These kinds of images used to require a lot of time and effort. Now I can create them with one hand on my phone while I'm eating a bowl of cereal and having a morning coffee. There's zero marginal cost.
Thank goodness I've got more than 10 hours of usage.
Street parking will be replaced by a proliferation of pick-up/drop-off zones. This urban design problem will need to be solved as we dramatically increase the number of people getting in and out of AVs on busy urban streets.
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. Something like a half hour each way. This became known as Marchetti's Constant. What this has meant is that as new technologies (streetcars, cars, and so on) allowed us to move faster within that 60 minutes, humans have tended to sprawl further outward. Will AVs do the same, and could they actually break Marchetti's Constant?
As we all know, the key difference with AVs is that we will no longer need to pay attention to our commute. We could sit in an AV and sleep, work, watch a movie, or do whatever else we'd like. One can think of it like a mobile office or mobile living room. This should, in theory, make commuting long distances a lot more enjoyable and encourage even greater "super sprawl."
The counterforce to this phenomenon is that if more people are willing to commute long distances in an AV, we will see demand greatly outstrip supply on our roads. In other words, traffic congestion in large cities will get even worse. I think this will force more/most cities to adopt congestion pricing. Politically, it will finally become acceptable, because now we'll be able to use "the machines" as our scapegoat. They're overrunning our cities! Ironically, this means that we won't adopt the thing that makes driving a lot better until we all stop driving.
So where do these opposing forces ultimately net out? Well, my view (and bias) is that human-scaled walkable communities will always have value. We are social animals. I also think that the experience within our cities will improve dramatically. Pedestrian safety will increase (the data already supports this) and far less space will be dedicated to cars. Good.
At the same time, I think that reducing commute friction will encourage an exurban explosion. Like the technologies that came before AVs, it's going to empower humans to further decentralize. What this will do is exacerbate the divide between our urban cores and our suburban and exurban fringes.
Of course, this is just me surmising. I don't really know. But AVs are here, and I think it's time we get back to discussing and planning for the second and third-order effects of this technology.
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