Brandon Donnelly

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.

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Category: Tech

  • Tokenized real estate and public databases

    One of the ways that you can turn a traditional real estate company into more of a web3 company is talk about how you’re going to tokenize the ownership of real assets. But what does that even mean and how would it work?

    Here is one example that I recently discovered (but of course there are countless others and I’m not suggesting that you should use their product). Bricknest is a startup that is focused on buying vacation apartments in popular tourist destinations. They then split the ownership into 365 non-fungible tokens that live on the Solana blockchain.

    Each token is intended to correspond to a day. And so if you own 1 token, you own 1/365 of the asset and you get 1 day. You can choose to either use it yourself on this day, or rent it out and get the rental income sent directly to your crypto wallet. If you own all 365 tokens, then it would be similar to you just owning 100% of the asset.

    The obvious question is how is this different from, say, fractional ownership, which can be similarly found in high-demand vacation spots? And the dumb answer is that, well, tokens exist on a blockchain and fractional ownership shares do not. So I guess the real question is whether or not tokens will make this ownership model any different.

    There is a long history of trying to democratize the ownership of real estate. In fact, this was the general idea behind REITs when they were created in the 1960s. So again, we are back to the question of whether tokenization will be any different from what we already have.

    But I think that most people are asking this same question of crypto/web3 in general — why does all of this matter? And a big part of the problem is that crypto is generally hard to explain. One of the best explanations that I have come across is this one here by Albert Wenger.

    Simply put, most internet companies today can be thought of as large privately controlled databases. Instagram, for example, is a database of all of our photos (among other things). But because it’s Instagram’s database, they get to decide what can be done with it. And naturally they are going to do what it takes to maintain their economic moat.

    Blockchains are similarly databases. And right now they’re not particularly good databases. However, the key differences are that (1) they are public, (2) they are not controlled by a single entity, and (3) anyone can read and/or write to them. And so they directly attack the thing that gives many companies today their economic advantage.

    Does this mean that tokenized real estate is the future? Does it make a difference that rental contracts can be programmed into the blockchain so that distributions are automatic? It still feels too early to tell. But I do think that most people are underestimating how disruptive a seemingly small change like this might be.

  • Twitter > Instagram

    If I had to pick only one social network to use, it would be Twitter. I, of course, also enjoy Instagram because I like taking photos. But if I had to pick one, it would be Twitter.

    I just find that Instagram is more about passive consumption (like watching TV), whereas on Twitter I’ve found a way to actively engage in productive discussions around the topics that interest me — everything from real estate and architecture to NFTs and photography.

    The crypto community is also very centered around Twitter. I haven’t looked at the numbers, but I would think that NFT activity has been, or at least should be, a boon for the company. That said, Twitter has never really been a great business and public company.

    But maybe that changes now that Elon Musk has become its largest shareholder with a 9.2% stake in the company (currently valued at a few billion). The stock jumped over 27% today. Or maybe it doesn’t change at all and this is just a fun side hustle for Elon.

    Here is a typically funny explanation from Matt Levine introducing what just happened:

    Look this all makes complete sense, obvious, intuitive, simple sense. If you are the richest person in the world, and annoying, and you constantly play a computer game, and you get a lot of enjoyment and a sense of identity from that game and are maybe a little addicted, then at some point you might have some suggestions for improvements in the game. So you might leave comments and email the company that makes the game saying “hey you should try my ideas.” And the company might ignore you (or respond politely but not move fast enough for your liking). It might occur to you: “Look, I am the richest person in the world; how much could this game company possibly cost? I should just buy it and change the game however I want.” Even if your complaints are quite minor, why shouldn’t you get to play exactly the game you want? Even if you have no complaints, why not own the game you love, just to make sure it continues to be exactly what you want? The game is Twitter, the richest person in the world is Elon Musk…

  • How do you charge an electric vehicle if you park on-street?

    Last year, about 10% of all new motor vehicles registered in Canada were some form of electric vehicle (battery, hybrid, or plug-in EV). But this number is rising. And even though we’re still early on in the adoption curve, you can live a pretty great life with an electric vehicle today.

    The caveats are perhaps as follows: (1) it really helps to have some kind of garage or driveway (so you can install a dedicated charging station) and (2) depending on your lifestyle, you may encounter the occasional feeling of “range anxiety.”

    I drive to the mountains to go snowboarding every winter and my sense is that we need to get far more serious about blanketing our most densely populated regions with charging stations.

    But here’s another problem that came up this week in conversation: How do you charge your EV if your only option for parking is on-street?

    Do you have to run a cable from your home across the sidewalk? And then what happens if the spot in front, or nearby, isn’t available? Is it really going to be feasible/desirable to have charging stations on the sidewalks of every residential street when EV penetration reaches the majority?

    This is clearly a problem that will need to be solved, and I know that many people and cities are working on it as we speak. I don’t know how advanced this is, but Norway, for instance, is working on wireless charging roads that power up vehicles from below.

    What other possible solutions have you seen out there?

  • Shares vs. tokens

    Crypto tokens are kind of like shares in a company, or at least they can be pretty similar if one wants them to be. Here is an interesting post by Tomasz Tunguz comparing the two. More specifically, he looks at inflation and deflation for both kinds of assets. According to Tomasz’s numbers, the average annual change in share count for software companies is about +5% (see above chart). Though there are some notable exceptions, such as Apple, who are aggressively buying back shares and decreasing their counts.

    The median inflation rate for crypto tokens, on the other hand, is much higher. Based on the projects that Tomasz chose for his post, the median rate is about 25%. Given the age of most of these crypto tokens, this generally makes sense. Younger companies also tend to have higher inflation rates as they raise outside money and issue new shares to attract talent. But this is likely to change as the space matures. Those of you who are following closely, will know that Ether is set to become deflationary sometime later this year.

    But going beyond these inflationary and deflationary numbers, what is more interesting to me is how similar shares and tokens can be, but also how meaningfully different they can be at the same time. They are similar in that they represent some sort of value, they can be bought, sold, loaned and generally used to earn a yield, and they can be used for governance matters, among other things. Where they are the most different is that (1) we don’t really know how to value most tokens right now and (2) tokens can have utility.

    I am confident that (1) will change as the space evolves. It is still very early days and valuation methodologies will get figured out. (2) will also grow and evolve into things that are unimaginable today, but even right now you have the option of using your crypto tokens to buy things like NFTs. This option should, in theory, have some sort of value attached to it. Though nobody has any clue what these NFTs will be worth ten years from now and so it’s pretty easy to poke fun at JPEGs of Apes. But with some new NFT projects seeing over $52 million in trading volume in their first 30 days, my instinct is to learn as opposed to eschew.

    Not every crypto token will have enduring value, just like not every share in a company has enduring value. Some are worth a lot and some are worth nothing. At the end of the day, what matters is the underlying business or project or city that you are becoming a part owner of. And I can tell you that lots of exceedingly smart people are working on exactly this for the token space.

  • Quietly booming tech town

    We have all seen these headlines before, so it’s not so under the radar for us. But the New York Times just published this article about Toronto calling it a “quietly booming tech town.” Depending on how you want to measure things, Toronto is now the third largest tech hub in North America after Silicon Valley and New York City (or at least that’s what the NY Times is telling me). The article touches on some of the ingredients for this success, but let me be a bit more explicit in this post because I think it is particularly relevant right now.

    Canada is a “Western” country. What does that mean? It means that we’re a democracy, we have the rule of law, we respect individuals (including private property), and we allow for pluralism of opinion, along with many other freedoms. These are all wonderful and magical things that are sometimes taken for granted. But I couldn’t imagine living in a place that doesn’t allow for such freedoms, nor would I want to.

    On top of this foundation, we have two other important ingredients: extraordinary universities, like the ones mentioned in the article (University of Toronto and University of Waterloo), and some of the most liberal immigration policies in the world. Our borders are open for the smartest and most ambitious. With just these handful of things — freedom, rules, education, and talent — we can screw up a lot of other stuff and still accomplish some pretty great things. I may be oversimplifying, but probably not by much.

    Humans are wonderfully talented. Let people be and they’ll show you. Because history has shown us time and time again that the above recipe works remarkably well. (Related post: Do the best cities have a lot of immigrants?)

  • San Francisco now has autonomous vehicle taxis

    These are two short videos of autonomous Cruise vehicles driving around San Francisco. Cruise, which is owned by General Motors, received a permit from the state of California to operate autonomous vehicles — without a safety driver — in September of last year. In November 2021, one of the cofounders of Cruise took the first ever driverless taxi ride in the company’s history. And on February 1, 2022, Cruise announced that it was opening up to the public.

    If you read the comments on Twitter you’ll see that some people have found these vehicles to be hyper reactive to traffic lights and to do oddly long pauses at stop signs. So I guess they’re not perfect. But oddly long pauses are certainly better than not stopping at all. Either way, this is a big deal. I’m not sure if these are the first unsupervised autonomous vehicles out in the wild, but they are easily some of the first.

    There has been a lot of discussion over the last few years about autonomy being a hugely tricky technical problem to solve. One that is perhaps more difficult than a lot of people thought it would be at the outset. I’m assuming that this is at least one of the reasons why ridesharing companies like Uber and Lyft ended up selling off their AV divisions while searching for profitability.

    But the market never gave up and it’s pretty exciting to see this coming to fruition. Oliver Cameron is VP, Product at Cruise and the former CEO of Voyage (which was acquired by Cruise last year). If his tweets (above) are any indication, San Francisco is going to be seeing many more autonomous vehicles in the coming months.

    This is going to have a profound impact on the unit economics for ride sharing companies like Uber, but more importantly it is likely to have a profound impact on our cities. Mobility innovations have a way of doing that. Some of the impacts might be negative, but I believe that many of the impacts can and will be positive.

    As most of you will know, I am a believer in dense and walkable cities. I do not believe in planning cities around cars. And so that is not what I am advocating for here. My view is simply that I think autonomy grants us the ability to rethink our definition of a “vehicle.” And maybe it becomes something that more closely resembles public transit. That could be a positive thing for our cities and something that draws people away from private vehicle ownership.

    So I remain both optimistic and excited about what’s to come.

    Have any of you had a chance to ride in an autonomous vehicle? If so, leave a comment below or on Twitter.

  • Who cares if there’s an NFT bubble?

    The Financial Times recently reported on “the great NFT sell-off” here in this article. Daily trading volumes on OpenSea, which is the largest NFT marketplace, are down 80% ($50M) from their high in February ($248M). Bored Ape Yacht Club, which is the most expensive NFT collection out there, has seen its average daily price come down by about a third (see above). Of course, they still remain extremely valuable NFTs. And a recent CryptoPunks auction was just pulled from Sotheby’s so that the owner could “HODL” until things recover.

    I don’t think any of this should surprise both NFT holders and the naysayers. This is a high-risk space and it is all very speculative. You can’t run a discounted cash flow (DCF) model on a Bored Ape and most other NFTs (though some might actually produce cash flow through, for example, secondary sale royalties). The more important point of all of this is that we are living through what many people believe is the creation of a new kind of internet. Cryptocurrencies are what underpin these new digital economies, but we are still figuring out how they will function and what their long-term business models will be.

    For me, this is an exciting thing to be a part of. I’m not a venture capitalist, but buying NFTs and doing other crypto things feels a bit like I am an amateur one. Holding ETH or SOL is similar to holding Canadian or US dollars (currencies that underpin economies). So what I am doing is using these currencies to put money into ventures (NFTs) that seem interesting. And to do that, you look at the art, the team behind the project, the roadmap, and how well they appear to be executing against that plan. Indeed, many of the most successful NFT projects are naturally run by teams who are constantly building and shipping.

    At the same time, I mentally write off every NFT I buy to $0 as soon as I purchase it. I am also limiting my total crypto allocation to between 5-10% of my non-real estate investments and buying with a scheduled dollar-cost averaging approach. So if this whole web3 thing went to zero tomorrow (which I firmly do not believe will be the case), my life would still go on. None of this is, of course, investment advice. Please do your own research and make your own decisions. But I can tell you that it is a lot of fun following and learning about what smart, creative, and entrepreneurial people are doing in this emerging space.

    If you’re interested in NFT photography, check out my global citizen collection on Foundation.

    Chart: Financial Times

  • Hanging out in the metaverse

    I’ve only hung out in Decentraland a few times. One of the times was to check out a Deadmau5 concert, which was cool, though not quite the same as a live show. But I have no doubt that all of this is a big deal and that I’ll probably end up at another virtual concert at some point. JP Morgan, for example, just opened up a virtual banking lounge in Decentraland’s Metajuku district, called the Onyx Lounge. They also just released this new report talking about how the metaverse is probably a $1 trillion market opportunity (based on their projected yearly revenues).

    Here are some other figures. In 2019, about $54 billion was spent on virtual/digital goods. These are things like game skins. This is compared to $42 billion at movie theaters and $30 billion on recorded music. So things that are purely digital (and have a very low marginal cost) are already a huge deal and people are spending a lot of money on them. Last year, the market cap of NFTs also surpassed $40 billion. The naysayers will tell you that you can just “right-click, save as” instead of spending any crypto on NFT images, but clearly something broader is underway.

    JP Morgan is of the opinion that it is only a matter of time before the metaverse infiltrates every sector of the economy in some way, shape, or form. Would you agree?

    Image: Decrypt

  • The enduring allure of private vehicles

    Uber’s recent investor day presentation (link here) is interesting if you’re an investor or thinking about becoming an investor, but it’s also interesting from an urbanism standpoint. Part of the promise of Uber was that it was going to help lure people away from owning cars. Looking at the data though (see below), ridesharing penetration is still pretty low in even Uber’s largest markets: 3.9% for the US and 3.3% for Canada. Brazil is a leader here, which you might think is because of a lower cost per mile, but Australia isn’t far behind.

    At the end of the day, the vast majority of mobility trips are still being done through personal vehicles. This is certainly the case in the US with 6.6 billion weekly trips in personal vehicles versus 191 million on public transit and 22.6 million with UberX (all 2019 data). And for those taking Ubers, about 90% of riders are using some form of UberX — that being a solo, on-demand, point-to-point trip with a 4-door car. So sharing a car with strangers and using different/multiple modes of transport hasn’t really caught on here.

  • Be a global citizen — my new NFT photography collection

    I have enjoyed photography for as long as I can remember. But I got into it in earnest during undergrad while studying architecture. At that time, Toronto-based photographer Sam Javanrouh was in the early days of running his decade-long photoblog called daily dose of imagery. And I remember checking it religiously to see his captures of the city. This was a fairly novel medium for photos at the time. Instagram wouldn’t arrive for another 7 or so years. So I found it deeply inspiring.

    So much so that I went over to Henry’s at the corner of Queen and Church, bought a refurbished Canon Rebel, and started capturing my own photos of Toronto — often at night after school. I’m positive that I’d be embarrassed if I ever pulled out those old photos from the archives, but regardless, photography more or less stuck with me as a hobby. It also formed an integral part of the design portfolio that I used to get into graduate architecture school. (My photos proved to be less useful for business school.)

    I later moved onto shooting with Fujifilm cameras (currently a Fujifilm X-T3). And nowadays I mostly shoot when I’m traveling and have some free time. But two decades after buying that refurbed Rebel, I can’t help but feel like we are at yet another important turning point in the evolution of photography (and, of course, art more broadly). We now have tools and technologies that allow for the ownership of digital assets. (See non-fungible tokens.)

    So I have decided to start minting and making my photography available for sale on Foundation. The first collection is called “Be a global citizen”, and the plan is to slowly add my photography from around the world to it. The floor price is currently set at 0.25 ETH. And all of the photos were taken on my Fujifilm X-T3. I hope you like it. To check out the collection, click here.