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.
Social media can be both fun and useful. Over the weekend, we were exploring a few different design options for an address sign at Mackay Laneway House and so I posted this image on Twitter and storied it on Instagram. I got a bunch of responses, as well as some great suggestions. And we ultimately ended up making a small change to the design. That process was both fun and useful. The final design is now out for pricing and production.
But as we all know, there is also a dark side to social media. The algorithms that power social media have been optimized to amplify whatever drives the most engagement. Oftentimes that means whatever gets people the most enraged. In this recent NY Times article, Stuart A. Thompson and Charlie Warzel make a compelling argument that Facebook has actually been coaxing many Americans into taking more extreme views on the platform — it made them more popular.
And we’re not talking about extreme views on home address signs.
Founded in 2003, Tokyo-based BALMUDA refers to itself as a creativity and technology company that creates home appliances and other products designed to deliver “thrilling and wonderful experiences.” Last year they entered the US market with products such as The Kettle and The Toaster. A toaster is perhaps one of those things that isn’t usually described as being thrilling. But BALMUDA The Toaster is one beautiful toaster, and according to Monocle Magazine it has become a sleeper hit around the world. (The company went public last December in Tokyo and its share price is up nearly 80% at the time of writing this.) It has a special steaming technology that keeps bread moist on the inside and crispy on the outside. What you do is add 5 cc of water to the toaster before heating it up and that produces a thin layer of steam within the appliance. I never knew that my bread needed this, but clearly it does. Watching the latest movie from The Minimalists has taught me nothing. I hope these guys start shipping to Canada very soon.
Toto announced a new product this month at the Consumer Electronics Show (CES) called the Wellness Toilet. It won’t be available to consumers for at least several years, but the plan is for it to do two key things to improve overall health and wellness. It will scan your body when you sit on it and it will analyze your poop. (Not urine?) It will then make recommendations via your smartphone about how you might start to make better life decisions. Presumably this will include being more active and eating better. This, to me, feels like an obvious way to innovate around the toilet. If it were available today and it actually worked, I would likely be an early adopter. Either way, I look forward to hopefully including this in future development projects.
The WELLNESS TOILET uses multiple cutting-edge sensing technologies to support consumers’ wellness by tracking and analyzing their mental and physical status. Each time the individual sits on the WELLNESS TOILET, it scans their body and its key outputs, then provides recommendations to improve their wellness. There is no additional action needed, so people can easily check their wellness throughout their daily routine, every time they take a bathroom break. They will see their current wellness status and receive wellness-improvement recommendations on a dashboard in an app on their smartphones.
The residential bathroom is the perfect place to support people’s wellness for a variety of reasons. First, although there are a number of other products that track individuals’ wellness (e.g., wearable devices), it is more convenient to monitor and analyze the body as a part of the everyday routine act of using the WELLNESS TOILET, to which individuals are accustomed. Second, toilets and people have two unique touchpoints that cannot be found elsewhere – the skin and human waste. The WELLNESS TOILET is in direct contact with individuals’ skin when they are sitting on it, and it analyzes the waste they deposit — a wealth of wellness data can be collected from fecal matter.
This week, Union Square Ventures, which describes itself as a “thesis-driven venture capital firm,” announced a new $162 million Climate Fund. The thesis for this fund is pretty simple. They want to invest in companies that either provide mitigation for or adaption to the climate crisis. The thinking behind this approach is as follows. They want to invest in companies that directly attack the causes of climate change (mitigation), but they are also recognizing that the climate crisis is not some distant thing. It’s already here, which is why it’s important to also focus on companies that are dealing with the consequences of it (adaptation).
One of their first investments is in a company called Leap. What Leap does is provide the connective (software) tissue between local energy devices/applications and the broader energy markets. For example, let’s say you have a Leap-enabled smart thermostat. If the grid is in need of power, it might automatically reduce your local energy consumption so as to help with load balancing on the broader network. In exchange for this, you would earn money for your contributions. In effect, Leap acts as a kind of virtual power plant.
Why does this matter? Well, it matters because two important things seem to be happening with energy production: (1) It’s moving toward renewables and (2) production and storage are both decentralizing. Assuming this trend continues, there will be an increasing need for software to help manage energy consumption, production, load balancing, the broader energy markets, and so on. That’s where companies like Leap come in. It’s also why many are arguing that Tesla is so valuable. More than an EV company, it is creating a new decentralized renewable energy network through its car batteries, powerwalls, and solar panels.
Swiss running brand On recently opened up a new flagship store in NYC’s NoHo district. It was designed by the Swedish architect and designer Andreas Bozarth Fornell (whose firm is called Specific Generic), and I think it’s a good example of the whole push toward “experiential retail.” Before Zappos there was a belief that nobody was prepared to buy shoes online. Surely shoes are something that you need to try on to make sure that they fit properly. But then Zappos and Tony Hsieh came along and decided to offer free returns so that you could just order a few different sizes to try on at home and return the ones that don’t fit. And then just like magic, we’re now living in a world where I myself couldn’t tell you the last time I bought a pair of shoes offline.
What is obvious at this point is that people will buy pretty much anything online — everything from boats and real estate to shoes and tires — and so, in many cases, the physical retail experience needs to be exactly that — an experience. Something special. What On has done with their flagship store in NYC is try and create a space that, among other things, tells their brand story, acts as a hub for the local running community, and offers up a unique technological experience that is likely pretty difficult to replicate online. One of the key features is a “magic wall” that analyses your technique and scans your feet as you run past it (pictured below). The invisible foot scanner is supposed to help you find the perfect shoe size, accurate to within 1.25mm.
If you’re a serious runner, I could imagine this being a pretty appealing in-store experience. (And if you’re not a runner, I guess you could just take a selfie in front of the magic wall. People seem to like pink walls). Whatever the case may be, I think On has done a great job trying to rethink the retail experience around its brand story and philosophy. But it leads me to a bunch of questions. Which brands and/or products are suitable for a new retail experience? (Does toilet paper, for example, want a new high-tech warehouse space in NoHo?) Assuming we continue down this path toward experiences, does this ultimately lead to less retail space per capita? Probably. And if we’re destined for less space, what does that ultimately mean for the ground floor experience of our cities? What should these spaces become? How does street life evolve?
Another day, another set of announcements about large companies and rich people moving to lower cost US states. Yesterday it was announced that Oracle will move its corporate headquarters from Silicon Valley to Austin, Texas. (If you remember, Elon Musk also recently announced that he had moved himself to Austin from California.) The company has said that the move puts Oracle in the best position to grow and to give its employees greater flexibility about where and how they work.
While these sorts of moves are making headlines right now, it’s important to keep in mind that this is not necessarily a new phenomenon. In fact, depending on how you look at it, you could argue that these headlines are a lagging indicator for trends that have been underway for some time. Below is a chart from New Geography showing the top 50 state-to-state moves last year. Number one is the move from California to Texas with 45,172 net movers. And number two is the move from New York to Florida with 38,512 net movers.
According to New Geography, California saw a net domestic migration loss of 912,000 people from 2010 to 2019. And the most popular receiving states are what you would expect: Florida (1,230,000 people) and Texas (1,146,000 people). A big part of this story obviously has to do with housing affordability and the search for an overall lower cost of living. As well, since companies are always in need of young and smart talent, it makes since for them to locate in places where young and smart people want to live.
But urbanists like Richard Florida have also pointed out at this relocation of companies could be a leading indicator for something else: the decline of innovation in America. Here, he argues that in the nascent stages of a new invention, there tends to be a tight clustering phenomenon. Think steel in Pittsburgh, cars in Detroit, and computing in Silicon Valley. However, as the industry matures, the tendency to centralize seems to decline and companies then start moving around.
I’m not yet convinced that this is what’s happening. Because there seems to be a pile on happening in specific cities like Austin (which, by the way, I hear is terrific). Even before this pandemic, there was a growing sense (from the outside, mind you) that the Bay Area had simply gotten too expensive, both for individuals and for companies. It would seem that when you greatly restrict the supply of new housing and make it unattainable for many, people go find housing somewhere else. Sometimes in other states.
Not surprisingly, their business as a travel company has been heavily impacted by COVID-19. Last year, the platform saw 326.9 million nights and experiences booked, with 251.1 million being booked in the first nine months of 2019. This year, nights and experiences are down to 146.9 million for this same nine month period. Revenue is correspondingly down from $3.7 billion for the first nine months of 2019, to $2.5 billion for the first nine months of this year.
But what is also clear from their data is that people still really want to travel and have new experiences. As soon as April passed and the Northern Hemisphere entered the normally busy Q3 travel season, domestic travel began to quickly ramp back up. For many, this likely took the place of international travel. See above chart.
Of greater concern might be all of the regulation that now surrounds short-term rentals. As of October 2019, about 70% of the platform’s top 200 cities (by revenue) had some form of regulation impacting short-term rentals. But at the same time, no one city accounts for more than 2.5% of the platform’s revenue. So there’s strong geographic diversification.
If you’d like to take a look at the company’s S-1, you can do that over here. And for those of you who might be curious, these are Airbnb’s top 10 cities based on revenue:
These days, everybody seems to be talking about the 15-minute city — Bloomberg, Treehugger, the Financial Times, as well as countless others. While not a new concept, it is a moniker that is easier for most people to digest. COVID-19 has also created the right backdrop for the moment that it is currently enjoying.
The 15-minute city is a polycentric and somewhat decentralized approach to urbanism. It is about encouraging and creating multiple centers of urban activity near where people live. The idea being that everybody should have most of their essential services within a 15-minute walk of their home. Put even more simply, it’s about creating an urban environment where people can live locally.
The benefits to this are numerous. It encourages more compact forms of development, which in turn encourages people to rely more heavily on active modes of transportation such as walking and cycling. The result is less commuting, less carbon emissions, more time, and likely better health outcomes given the reliance on active mobility.
Indeed, living in a walkable urban community is something that I personally put a huge value on. If I can’t walk out of my home to go grab a coffee and something to eat, it’s probably not the neighborhood for me. But at the same time, I don’t think we can ignore the fact that there are powerful centralizing forces present within our cities.
As Natalie Whittle points out in this FT article from the summer, new technologies — from the telegraph to the internet — have always elicited predictions that humans would now flee cities and move to the countryside. While it is true that there are other technologies — everything from the streetcar to the automobile — that have allowed us to decentralize to a greater extent, most of us are all still bound to cities.
In fact, you could argue that the opposite of decentralization has played out. As we have transitioned to a knowledge and information economy, the returns to being embedded within cities and within a particular place have only become greater.
Take for example the phenomenon of “collab houses” that has been playing out in Los Angeles for some time now, including during this pandemic. Collab houses are typically LA mansions where clusters of young people come and live together in order to create content for platforms like YouTube and TikTok. It’s like a big dorm for creators. And supposedly the biggest one is Hype House.
What’s fascinating to me about this phenomenon is that it reinforces two things. One, if you want to be rich and famous (emphasis on famous), Los Angeles is seemingly still an important place to be. And two, if you really want to be at the top of your game, it’s apparently not enough to be in the same city as other likeminded individuals; you also need to be under the same roof, bouncing ideas around and pushing one another.
So what does this all mean? Well, maybe this time is different and we are all currently living through a reorganization of how we will live, work and play. Or, maybe this time isn’t all that different. And the 15-minute city, while an important goal, won’t be the be-all and end-all of modern city building.
According to a recent Wall Street Journal review of property and corporate records, Travis Kalanick’s ghost kitchen startup, called CloudKitchens, has spent over $130 million over the past two years buying more than 40 properties in about two dozen cities.
Travis is co-founder and the former CEO of Uber and this latest startup provides commercial kitchens to restauranteurs who are looking for a low-cost way to launch delivery-only food concepts.
In some ways, it can be compared to coworking spaces for delivery-only restaurants. Instead of renting a full restaurant space, you lease 200-300 square feet of real estate at a lower cost address. CloudKitchens then handles all of the distribution and fulfillment, effectively lowering the barriers to entry for food startups.
Some of the properties that they have been buying include a vacant restaurant space in Miami Beach for $9.2 million (May 2020) and an industrial property in Queens, New York for $6.6 million (March 2020). They’ve also bought in cities like Portland and Las Vegas.
As you might imagine, now is a pretty good time to be buying some of these properties. And if you think about it, there are some real cost advantages to what they are doing, not to mention some co-working-style arbitrage on the real estate.
The company is apparently going to great lengths to conceal what and where they are buying. But what is perhaps more interesting is their asset-heavy approach. They’re buying lots of real estate, which is inline with what companies like Opendoor are doing, but is distinct from Uber’s asset-light approach.
It is also different from what many other ghost kitchen startups are doing. It seems that most are leasing their spaces. There has to be a reason for this difference.
Maybe that’s why housing is one of the last major categories that technology has left alone. Sure, companies have tried. Tons of them. The startup graveyard is filled with companies led by entrepreneurs who realized that the way we buy and sell homes sucks, but couldn’t ultimately figure out how to change it. They weren’t thinking big or long-term enough. The companies that have made the biggest impact, like Zillow and Redfin, make it easier to search for houses, but then kick buyers over to agents to go through the offline process, the same way it’s always been done.
This is topic/problem that is near and dear to me because I spent a year of my life working on a startup that initially set out to solve this exact problem. But like countless others, we couldn’t figure out how exactly to change things. So we pivoted.
Has Opendoor finally cracked the code? I don’t know. But they’re on to something. It is, however, worth noting that the company was founded in 2013. And so what is happening today is already 7 years in the making — and probably longer if you consider the founder’s past startups.
