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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  • Digitizing fast food workers

    I think I am 1 of only 7 people in the world who actually likes the Filet-O-Fish sandwich from McDonald’s. That said, I rarely go, maybe only after a fancy small plate dinner. You know, the kind where you leave starving and you’re desperately searching for a burger on the way home just so you can go to sleep full.

    I have, however, been noticing the introduction of their digital ordering kiosks, which are part of the McDonald’s Experience of the Future strategy. The plan is to replace human cashiers in at least 2,500 U.S. locations by the end of this year and in another 3,000 locations by the end of 2018. By 2020, the majority of U.S. locations should have “EOTF” in place.

    Because of this, analysts are raising their price targets for McDonald’s. They are also attributing its surging stock price to these new operational efficiencies. MCD is up about 26% YTD. And you can bet the ROI math on these kiosks only looks better if/when minimum wages increase.

    This isn’t necessarily groundbreaking news, but if you’d like to dig into some of the math behind why customer-facing fast food workers are clearly going to become a thing of the past, you can do that here.

    I did want to single out one stat that I came across when researching how I will be experiencing Filet-O-Fish sandwiches in the future. 

    More than 70% of all McDonald’s sales in the U.S. happens via drive-thru. This stood out to me as being an extraordinary number, not because I don’t believe it, but because it very clearly speaks to urban-suburban form. It is saying that more than 70% of sales are happening in geographies where it’s actually feasible to have a drive-thru window.

    That’s not possible at the corner of Queen and Spadina.

  • The “R” word

    Albert Wenger recently penned an interesting post about the “R” word.

    It’s about health insurance and why redistribution is a toxic word in U.S. politics, but also why much of what we do as a society – from public roads to insurance – is actually about redistribution. What I like about the post is that he cuts through a lot of the noise and gets right at the crux of things.

    Here’s part of his conclusion:

    So what should you take away from this? There always is some element of redistribution to insurance – at a minimum ex post and generally also ex ante. The “why should I (usually some healthy person) pay for x (usually some payment for someone from a different demographic)” objection to health insurance is about redistribution. We should acknowledge this openly and not pretend that it is otherwise, because then we can move forward and say “you should, because that is your contribution to how our society works.”

    The point of his post, which he reiterates in the comment section, is that “insurance is a commons more than it is a market.” Too much individual choice – for instance, rich people opting out because they don’t need it – actually weakens the system.

    But you should really read his entire post. It’s good.

    Photo by Jamie Street on Unsplash

  • Should Uber be shut down?

    image

    Last week Travis Kalanick – the cofounder who built Uber into the most highly valued privately held startup in the world – stepped down as chief executive at the request of his investors. This was the culmination of months of controversy related to the company’s toxic corporate culture.

    So what’s next? 

    Benjamin Edelman, associate professor at Harvard Business School, recently argued that this is it for the company: Uber Can’t be Fixed – It’s Time for Regulators to Shut It Down. I discovered the article through a good friend of mine who has felt similarly since the beginning. Uber’s business model is predicated on illegality and that should not be misconstrued as “innovation”.

    I have a few thoughts on this.

    But let me start by saying that this post is not a comment on the company’s corporate culture or its internal practices related to lobbying governments. I have not really been following what’s going on internally and I’ll leave other, more informed, people to comment on those matters.

    With that said, here are 3 thoughts.

    One, shutting down the company feels like an extreme case of throwing out the baby with the bathwater. Lots of companies go through restructuring, assuming that’s needed, without completely capitulating.

    Two, before Uber came along it was still challenging to pay for a taxi in Toronto with a credit card. More often than not the driver would tell you that the machine was broken or ask that you instead pay with cash. At that point, I would have accepted a clunky payment machine mounted to the rear of the front seats as an innovation.

    To say that Uber’s technological innovations were all banal things that its competitors were already about to introduce is downplaying so much of what the company has done outside of its beneficial cost structure. 

    We got perfect information: Where is my car right now? We got full pricing transparency before even accepting a ride: Should I take an Uber or transit or should I drive? We got the ability to get in and out of a taxi without pulling out our wallets: I’ll quickly jump out at this red light. We got dynamic ride pooling and cost sharing: Let’s split this ride 3 ways to bring the fare down. And we got clean cars that didn’t smell.

    Why weren’t any of the incumbent taxi companies do this?

    Three, I fully agree that Uber (unfairly?) benefited from a meaningful cost advantage by operating in the unregulated side of the market. This was a huge boon for the company because, as the data suggests, the demand for taxis is highly elastic.

    But I also believe that the incumbent taxi companies were perpetuating a marketplace that was anything but free enterprise. It ensured that the status quo was maintained and that those who historically benefited from the system continued to benefit from the system.

    Because of this, I’m not sure that we would have seen the innovation that we saw without a company like Uber deciding to operate within a gray area and not ask for permission. Protectionism may have stomped it out. This may be why Hailo – which operated in the regulated side of the taxi marketplace here in Toronto – ultimately wasn’t able to survive.

    Though I suppose you could argue that Hailo’s failure (at least here in Toronto) strengthens the argument that Uber was only able to thrive because of its illegal cost structure. 

    However, it’s important to remember that Uber got its start by actually charging more than traditional taxis. At the outset it didn’t have enough liquidity in its marketplace to compete based on speed and/or price, and so it decided to offer a premium experience. 

    UberX didn’t introduce steep discounts until later on and even today many people will gladly accept surge pricing at multiples of a regular taxi fare. Clearly customers are deriving some other benefits from the app.

    Edelman ends his piece by referencing Napster as an example of another startup that defied legality and was ultimately forced to shut down. Again, shutting Uber down seems extreme to me, but I do agree with his conclusion. Regardless of what happens, the lawful innovations that Uber introduced are here to stay.

    Photo by Carl Joseph on Unsplash

  • Why you should sometimes ignore your customers

    In business we are told to listen to our customers. Be customer-centric. In city building we are told to listen to the community. Be community-focused. And there’s no question that these mantras exist for a reason. They are paramount.

    But when should you not listen?

    I watched a Chef’s Table documentary last night on Massimo Bottura (pictured above), who is the owner and operator of Osteria Francescana in Modena, Italy. Osteria Francescana is a 3 star Michelin restaurant and widely ranked as one of the best restaurants in the world.

    But it wasn’t easy for Massimo at the beginning. His goal was to bring the Italian kitchen into the 21st century and so his plates are often creative takes on classic Italian dishes. His restaurant blends the old and new; food and contemporary art.

    This approach upset a lot of people at the outset. Massimo was seen almost as a traitor who was turning his back on traditional Italian cooking within provincial Modena. Don’t mess with centuries of tradition they would say. Grandma knew best, son.

    Because of this, his restaurant sat empty in the early years, to that point that he was ready to close its doors. The only reason he kept it open was because his wife encouraged him to give it one more year. She said: This is the kind of food you want to make. If you don’t try, you’ll regret it.

    So he gave it another year and luckily he got a few breaks, including a glowing review by a well known food critic from out of town. Once this hit, the Modenese started to quickly rethink their distaste for Massimo’s idiosyncratic dishes. Before long, his restaurant was full.

    So what changed? It wasn’t the dishes. It was perception. The out of town critics and positive reviews gave people permission to like the dishes. This is critical because nobody needs permission to like tradition. It’s tradition, after all. There’s little risk in that.

    But there’s risk in liking something new that hasn’t been done before. Change creates uncertainty. And if Massimo’s wife hadn’t encouraged him to stick with it just a bit longer and ignore the naysayers, the world may not have one of its top restaurants.

    Sometimes we don’t know what we like and want until we are shown.

    Image: Osteria Francescana 

  • Laneway housing represents 19% of all new single family and two family dwellings in Vancouver

    One of the criticisms surrounding laneway housing is that – while great – there is no way for this housing typology to have a meaningful impact on the overall housing supply equation.

    I’ve previously written about the impact of laneway housing in Vancouver. But I wanted to revisit some of the data following this tweet by GRIDS Vancouver, where they link to a spreadsheet they prepared using the City of Vancouver’s building permit data.

    Laneway housing was first allowed in Vancouver in 2009. In that first year, only 18 building permits were issued. But since then the number has grown steadily. In 2014, they hit 377. And in 2015 (up to September), they hit 360. So for the full year, it is highly likely they will show yet another year-over-year increase.

    Since laneway houses became permissible (and up to September 2015), a total of 1,885 building permits have been issued. During this same time period, 8,239 permits were issued for other low-rise housing, up to and including duplexes. This includes single family dwellings, single family dwellings with a secondary suite, and two family dwellings.

    So for a period of almost 8 years, laneway houses have represented on average 19% of all new single family and two family dwellings in Vancouver. If you include low-rise multifamily product into this equation (more than 2 units, but 3 storeys or less ), the percentage is still slightly above 17%. This is something. It’s not everything, but it is certainly something. 

    More conventional low-rise housing still represents a greater number and, of course, most of the new supply is coming in the form of condos, apartments and other higher density housing. But 17-19% are still meaningful numbers when part of the affordability problem is clearly a lack of supply.

    It is for reasons such as these that I, along with many others, want to bring laneway housing Toronto. If you feel similarly, please consider supporting my prototype project by signing your name here.

    Update: A previous version of this post stated that 19% of all new low-rise housing in Vancouver had become laneway housing. This number was calculated on all low-rise housing up to and including duplexes, but excluded low-rise multifamily product. The above post has been updated to lend more precision to my understanding of the data.

  • Screw Toronto

    Hamilton, Ontario is on the rise. It’s no secret. 

    In fact, Toronto Life just ran a piece called The New Hamiltonians, where it profiled ex-Torontonians who have made the move west for more affordable housing and a higher quality of life.

    What stands out for me about the article is how there’s already growing resentment toward both developers and the local business owners who are helping to revitalize the city. Here is an excerpt:

    As builders encroach on Hamilton’s old neighbourhoods, a simmering resentment is building toward the upstart businesses that make rundown areas attractive to developers in the first place. Dave Kuruc, who owns Mixed Media, says that last year, the front door of his and neighbouring shops got slapped with a sticker that read “FUCK YOUR BOUTIQUE. DEFEND HAMILTON.” Last June, a bus tour for ­developers—branded “Try Hamilton!”—was interrupted by masked activists spraying sour milk out of water pistols and wielding signs that read “Developers + Investors = Predators.”

    So it’s not just developers. It’s also those damn boutiques. But the City of Hamilton eliminated development charges and put in place many other incentives for a reason. It wants to see more new construction. 

    Some people clearly aren’t happy about that.

  • The roots of the tree

    Yesterday morning I attended a CTBUH (Council on Tall Buildings and Urban Habitat) breakfast event called The Story of Marketing Tall Buildings.

    It consisted of a talk by William Murray, who is Group Director of the UK-based creative agency Wordsearch, and then a panel discussion with some of Toronto’s leading developers. (David Wex of Urban Capital was one of the panelists. Many of you will probably remember him from this BARED post.)

    Shown above is one of William’s slides. The title is: The roots of the tree. And I thought it was a great metaphor for what tall buildings, well really all buildings, should aspire to do.

    The tendency is to think of buildings as objects. Here, look at how beautiful this thing is. That’s obviously important, but what about its roots? What about the way in which it interfaces with its context and hopefully gives back? Is it a catalyst for positive change?

    I thought it was a good slide.

  • Visualizing the origins of MIT’s international students

    “Like the United States, and thanks to the United States, MIT gains tremendous strength by being a magnet for talent from around the world. Faculty, students, post-docs and staff from 134 other nations join us here because they love our mission, our values and our community.” -L.Rafael Reif, MIT President

    The MIT Senseable City Lab recently analyzed nearly 20 years of ethnographic student data in order to visualize the origins of its international faculty, students, and researchers from 1999 to the present.

    The above chart may be a bit small (larger version here), but it shows all students (undergraduate, graduate, and visiting/others) by country. The top 5 countries are China, India, Canada, South Korea, and France.

    To give you some sense of the math, there are 3,808 international students at MIT as of 2017. 888 of them alone are from China – mostly at the graduate level (688 out of the 888). So China represents almost ¼ of MIT’s international student population.

    Another thing that stood out for me was the drop off in Canadians in 2009. You can see that “V” roughly in the middle of the chart. Canada went from 233 to 144 students. I wonder if this had something to do with the economic climate at the time. Not sure.

    Click here to see all of the visualizations. 

    Note that you can toggle by region and country, as well as by “Trump’s EO Countries.” That feature, as well as the quote at the beginning of this post, should give you an immediate appreciation for some of the motivations behind this exercise.

    Images: MIT Senseable City Lab

  • Video: New York 1911

    The Museum of Modern Art (MoMA) recently restored and published a “documentary travelogue” of New York City from 1911. 

    It was originally filmed by a Swedish company, called Svenska Biografteatern, that went around the world filming noteworthy places such as Niagara Falls, Paris, Monte Carlo, and Venice.

    Not surprisingly, New York City is a vibrant and bustling place at the beginning of the 20th century. But it somehow feels serene. Maybe it’s the soundtrack. It’s also interesting to think that this was filmed only 3 years before World War I broke out.

    I particularly enjoyed seeing all of the streetcars (trams) and elevated rail running through the streets.

    Below is a screenshot of a young girl – clearly bored and/or disinterested – being chauffeured down Fifth Avenue in what was almost certainly a fancy convertible at the time.

    MoMA doesn’t allow you to embed the video, but you can watch it here through July 14. It’s 9 minutes and, if you’re a city nerd like me, I think you’ll really enjoy it. The street life footage kicks in around the 3 minute mark.

    Screenshot Images: MoMA

  • Autonomous vehicles will strengthen the case for road pricing

    Joe Cortright of City Observatory recently published a post about the types of policies that cities should be looking to adopt in response to autonomous vehicles. It’s called: Pricing roads for autonomous vehicles.

    Many have argued, including urban economist Edward Glaeser, that autonomous vehicles are going to be positively disastrous for cities. Once you remove the labor costs associated with the driver and the overall price per kilometer plummets because of pooling/technological advances, we are going to see an huge surge in demand – well beyond the capacities of our roads.

    Of course, there are solutions. We can accurately price the roads, which is something that more cities should be doing today even before autonomous vehicles arrive. Here is an excerpt from Cortright’s article:

    “With modern electronics, and especially with autonomous vehicles, position and speed is monitored with great precision. There is no reason why they [drivers] should not pay for exactly the amount of roadway that they use. And we know that the cost of the city’s roadway varies substantially across space and over time. Use of road capacity in less dense neighborhoods at off-peak hours imposes nominal costs on the city’s road budget. In contrast, peak hour use of city streets and arterials, particularly in and near the city center, imposes huge costs on the city and its residents. Those who use the system at peak hours in congested locations should pay the costs associated with creating, maintaining, and where necessary expanding that infrastructure.”

    This isn’t a novel concept, which is why when Toronto was looking at a flat road toll I argued here on the blog that it was a step in the right direction but that it was too blunt a tool. 

    It’s a moot point now because sadly the province ended up pandering and rejecting the plan, but we should have been considering something that could achieve the above objectives. It needed more finesse.

    But in all likelihood our cities will have to face that reality sooner rather than later.