There is a great quote in Shakespeare's Hamlet: "There is nothing either good or bad, but thinking makes it so."
The point of this quote is to argue that the universe is fundamentally neutral. When an event happens, it is neither good nor bad; the label is determined by the judgment we ultimately bring to it.
Take snow, for instance.
Here in Toronto, I find that when it snows, people tend to look at it as a bad event. They think of the traffic that will ensue and the work that will be required to clear out walkways and driveways. But I love snow (maybe because I don't have a driveway). Snow is good. As an avid snowboarder, it gets me excited for the winter season.
And right now I can tell you that I'm praying to the snow gods for a dumping or two in Northern Utah. The entire Mountain West region is off to a slow start this season and has had to delay resort openings. My judgment tells me this is "bad."
Now, let's consider the real estate development market.
The prevailing narrative right now is that it's bad. But Hamlet would say that only thinking makes it so. An alternative way to think about the market is that it's presenting a generational buying opportunity.
Like snow, I would call that a good thing.
The Stahl House — also known as Case Study House #22 — is up for sale in Los Angeles.
Even if you don't know this house by name, I'm sure you've seen Julius Shulman's iconic photograph from 1960 showing two women sitting in a corner of the house. It is widely credited with turning the house into one of the city's most recognizable landmarks.
Buck and Carlotta Stahl are the original owners. They purchased the steep lot for US$13,000 in 1954 (equal to about $157,000 today). This was a large sum of money at the time, especially for a lot that was thought to be unbuildable by many architects.
Designed by architect Pierre Koenig, the house was built as part of Arts & Architecture magazine's Case Study program, hence the name. The intent of the program was to come up with templated responses for an expected housing shortage following the Great Depression and World War II.
When the program launched, it stated that "each house must be capable of duplication and in no sense be an individual performance," and that "the overall program will be general enough to be of practical assistance to the average American in search of a home in which he can afford to live."
Sound familiar?
The program also secured material donations from the building industry in an effort to make the prototypes as low-cost and repeatable as possible. Ironically, the house became the exact opposite: It became a singular icon of Los Angeles, used in movies, for fashion shoots, and as a general backdrop for a modernist city.
And today, after 65 years of stewardship under the original owners, the house is on the market for US$25,000,000. This works out to nearly US$11,400 per square foot of interior space.
When I first saw the list price I immediately thought to myself, "Interesting, I wonder how much of this price is being attributed to the real estate and how much of it is being attributed to its status as an icon and piece of art."
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.
There is a great quote in Shakespeare's Hamlet: "There is nothing either good or bad, but thinking makes it so."
The point of this quote is to argue that the universe is fundamentally neutral. When an event happens, it is neither good nor bad; the label is determined by the judgment we ultimately bring to it.
Take snow, for instance.
Here in Toronto, I find that when it snows, people tend to look at it as a bad event. They think of the traffic that will ensue and the work that will be required to clear out walkways and driveways. But I love snow (maybe because I don't have a driveway). Snow is good. As an avid snowboarder, it gets me excited for the winter season.
And right now I can tell you that I'm praying to the snow gods for a dumping or two in Northern Utah. The entire Mountain West region is off to a slow start this season and has had to delay resort openings. My judgment tells me this is "bad."
Now, let's consider the real estate development market.
The prevailing narrative right now is that it's bad. But Hamlet would say that only thinking makes it so. An alternative way to think about the market is that it's presenting a generational buying opportunity.
Like snow, I would call that a good thing.
The Stahl House — also known as Case Study House #22 — is up for sale in Los Angeles.
Even if you don't know this house by name, I'm sure you've seen Julius Shulman's iconic photograph from 1960 showing two women sitting in a corner of the house. It is widely credited with turning the house into one of the city's most recognizable landmarks.
Buck and Carlotta Stahl are the original owners. They purchased the steep lot for US$13,000 in 1954 (equal to about $157,000 today). This was a large sum of money at the time, especially for a lot that was thought to be unbuildable by many architects.
Designed by architect Pierre Koenig, the house was built as part of Arts & Architecture magazine's Case Study program, hence the name. The intent of the program was to come up with templated responses for an expected housing shortage following the Great Depression and World War II.
When the program launched, it stated that "each house must be capable of duplication and in no sense be an individual performance," and that "the overall program will be general enough to be of practical assistance to the average American in search of a home in which he can afford to live."
Sound familiar?
The program also secured material donations from the building industry in an effort to make the prototypes as low-cost and repeatable as possible. Ironically, the house became the exact opposite: It became a singular icon of Los Angeles, used in movies, for fashion shoots, and as a general backdrop for a modernist city.
And today, after 65 years of stewardship under the original owners, the house is on the market for US$25,000,000. This works out to nearly US$11,400 per square foot of interior space.
When I first saw the list price I immediately thought to myself, "Interesting, I wonder how much of this price is being attributed to the real estate and how much of it is being attributed to its status as an icon and piece of art."
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.
I don't know the LA market very well, so I asked Gemini 3. What it told me is that comparable high-end homes in this area with pools and luxury views often trade for around $2,000 psf. That would put this real estate at around $4.4 million.
If this is accurate (correct me if I'm wrong, LA people), it means that something like 80% of its list price is being derived from its "brand." Not bad for a case study house built with low-cost subsidized materials.
The other possible consideration is that people really like to photograph and film this house. And so there's also a potential income stream associated with buying it. Assuming that continues (and AI doesn't replace the need for physical shoot locations), then we'd also have to capitalize this income.
In this case, the house would have three value components to it: real estate value, art/brand value, and rental income value derived from movies and shoots. Is that equal to $25 million? I don't know, but the market should tell us soon enough.
Cover photo by Julius Shulman
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.
I don't know the LA market very well, so I asked Gemini 3. What it told me is that comparable high-end homes in this area with pools and luxury views often trade for around $2,000 psf. That would put this real estate at around $4.4 million.
If this is accurate (correct me if I'm wrong, LA people), it means that something like 80% of its list price is being derived from its "brand." Not bad for a case study house built with low-cost subsidized materials.
The other possible consideration is that people really like to photograph and film this house. And so there's also a potential income stream associated with buying it. Assuming that continues (and AI doesn't replace the need for physical shoot locations), then we'd also have to capitalize this income.
In this case, the house would have three value components to it: real estate value, art/brand value, and rental income value derived from movies and shoots. Is that equal to $25 million? I don't know, but the market should tell us soon enough.
Cover photo by Julius Shulman
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.
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog
Share Dialog
