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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  • This is what an interface area looks like in Belfast

    A few years ago, I told a friend of mine—who is originally from Ireland—that I visited Belfast while I was living in Dublin. I lived there in 2007. His response was: “Wow. You’re brave. I would never go there.”

    This struck me is a bit odd.

    I mean, I was well aware of the Troubles, but it hadn’t dawned on me, perhaps out of naivety, that it would still be an unsafe place to visit. But I, of course, hadn’t grown up in Ireland. My friend proceeded to tell me stories about childhood Catholic friends who had gotten caught in the wrong side of town in Northern Ireland.

    Then tonight, on my way home from work on the subway, I was reading Malcolm Gladwell’s David and Goliath and his chapter on the turmoil in Northern Ireland, and it got me thinking: Did I totally underestimate the ethno-nationalism still present in Belfast?

    What I subsequently discovered is that the city, particularly outside of the city center, still remains profoundly divided by religion. In fact, this is so much the case that there are a number of well known “interface areas” sprinkled across the urban landscape. These are real physical barriers that separate Catholics from Protestants, and vice versa. The goal being to minimize “inter-communal violence”, hence their second name as peace lines.

    Being that city geek that I am, I of course had to see what these things looked like. It’s an unusual kind of urban condition. Well here’s what one looks like at Springfield Road and Workman Avenue in Belfast. The image is taken (from Google Streetview) looking south on Workman Avenue, from what I think is the predominately Protestant side.

    If you look closely on the left hand side, you’ll notice that there’s an open door. Which has me wondering about how these interface areas actually function in everyday life. Is it common for people to pass through these gates? Is it a go at your own risk type of thing? Or are they hard and fast no go zones?

    Also interesting to note is how these peace lines continue beyond just road intersections. Here you have an image of someone’s house that backs onto the same peace line as above. 

    Can you imagine sitting in your backyard with a looming fence above you?

    Ultimately this research has made me feel incredibly naive about a city I have visited. I should have been in tune to this. If anyone else has any additional insights, I’d love to hear from you in the comments below.

  • Industrial vs. internet scale

    I was watching this talk with Albert Wenger of Union Square Ventures last night. He was recently in Toronto for a Wattpad board meeting (USV is an investor).

    It’s an interesting discussion that touches on education, healthcare, Canada’s tech ecosystem, as well as a bunch of other things. But one point that Albert made that I particularly like is the comparison between industrial and internet scale.

    In both cases, it’s all about growth and scale. The bigger a firm can get, the better.

    But with industrial production, scale is all about driving down the marginal cost. This is also known as economies of scale. As firms increase in size, efficiencies are found that allow the unit of production to drop in price. This, in turn, creates defensibility, because smaller firms simply can’t compete in the market.

    With internet platforms the situation is different. Sure, there are still economies due to scale, but their competitive advantage is often derived from the fact that, on the margin, every new user increases the value for every other user on the network. This is called a network effect.

    A perfect example of this is Facebook. People use Facebook because all of their friends are there. And as more and more friends join, it becomes increasingly more valuable. Without friends, a social network has little value. This make starting one fairly difficult. However once started, network effects are incredibly difficult to dismantle. This is their defensibility.

    Another network effect example that Albert mentions is search (i.e. Google). This one isn’t so obvious. It may not seem like there are network effects with search, but there are. As a search user, you enter a query and then select from a list of results. In doing so you’re actually helping the search engine figure out what the best and most relevant results are for the keyword(s) you just entered. Again, in the end, everybody benefits.

    I found this interesting because, in the case of internet platforms, scale is directly related to value proposition. The bigger something gets, the more useful it becomes. Now, you could maybe argue that the same is true for industrial production, but it’s a bit more tenuous. The direct link is cost.

  • The case for electronic road pricing

    I just finished reading an HBS business case on road pricing in Hong Kong for a class I’m taking as part of my MBA. Since it’s a topic that’s integral to cities, I thought I would post my case prep here. Below are the questions I was asked to my prepare, with my answers below.

    The case is essentially about traffic congestion in Hong Kong and a decision to either build more road (a bypass route running adjacent to the harbour: The Central-Wan Chai Bypass) or implement an Electronic Road Pricing (ERP) system, similar to what was implemented in Singapore in the 70s and in London in 2003.

    If you’re a reader of this blog, you can probably guess which side I’m going to lean towards. I believe fundamentally that the only way to construct a large well functioning urban region is on the shoulders of mass transit. 

    Q: For a typical commuter, what are the costs and benefits involved in using a car over using public transportation? Why would a commuter choose to drive? Who are the most likely to drive?

    A: In my view it’s a trade off between cost, time and, to some extent convenience, although convenience and time are somewhat linked.

    From a cost standpoint, your typical driver has the fixed cost of owning a car (payments, insurance, maintenance, etc.) and the variable costs of driving (gas, parking, applicable road prices, etc.). For those who have already committed to purchasing a car, probably as a result of where they’ve decided to live, it then becomes largely a question of variable costs. In most cases, these costs are higher for driving than they are for public transportation.

    But then comes the question of time and convenience. Residents of global cities, such as Hong Kong, are becoming increasingly cash rich and time poor. There’s a real value to time. And driving often offers speed, as well as the convenience of a personalized and “comfortable” ride (personally, I find gridlock highly uncomfortable). So if the value of the time you’re going to save by driving exceeds the variable cost of driving, you’re likely going to drive. In other words, higher income individuals should choose to drive.

    Q: What are the costs of traffic and congestion for society?

    A: The costs of traffic and congestion to society are huge. You have the lost productivity as a result of people and goods sitting idle. You have the strain on family life caused by working parents struggling to find enough time outside of work. And you have the environmental impact of idling cars.

    Here’s a few stats from Natural Resources Canada:

    “In fact, if Canadian motorists avoided idling for just three minutes every day of the year, CO2 emissions could be reduced by 1.4 million tonnes annually. This would be equal to saving 630 million litres of fuel and equivalent to taking 320,000 cars off of the road for the entire year. Eliminating unnecessary idling is one easy action that Canadians can take to reduce their GHG emissions that are contributing to climate change.”

    Q: Discuss the effect of electronic road pricing (ERP) on: (a) urban re-development and town planning, as well as residential property prices; (b) fare faced by public transport.

    A:

    (a) Based on London’s experience, their property market “recorded no impact, positive or negative, in or around the charging zone.” (Case) However, intuitively, I would expect development pressures and pricing to increase within the boundary of any charging zone and for prices to fall outside, along the periphery. The reason for this is that urban real estate models, such as the Monocentric City Model, argue that as you move out from the center of a city, land prices fall, but transportation costs increase. It ties into the whole “drive to affordability” notion. In the case of ERP, transportation costs have now increased for the periphery, so it could drive down land/property prices. 

    (b) Relatively speaking, an ERP system should make pubic transportation fares appear cheaper since the marginal cost of driving has now increased. Therefore, in the longer term, it may create an opportunity to raise fares.

    Q: Why is the use of road usually free of charge?

    A: Roads are thought of as a public good. And so they’ve been typically priced as such. However, roads, and in particular highways, are also thought of as an economic development engine. They’re a heavily subsidized form of infrastructure that have been used as a tool to spur suburban and exurban growth. By driving down the cost of transportation (without factoring in the environmental costs, of course), extensive highway networks have been used to unlock the value of previously under utilized outlying land. However, I disagree with the notion that all roads should be “free.”

    Q: Why roads are often provided and managed by the government and not by profit- maximizing firms?

    A: Because typically profit-maximizing firms require paying customers. Also, since they’re viewed as a public good, governments typically want to control them.

    Q: What are the differences between ERP and a classic toll?

    A: A classic toll is typically based on a fixed price that is paid regardless of the time of day. ERP is variable. Pricing fluctuates based on the time of day and/or the traffic and congestion levels. It’s the idea that as demand for the public good in question rises, so does the price of using it.

    Q: What are the advantages of implementing ERP?

    A: There are number of advantages. The first is that you get an immediate drop in traffic/congestion. This has been clearly shown through previous case studies in Singapore, London and Scandinavia. As a result of this, the city is then able to offer an improved user experience for those who are willing to pay the increased transportation costs. At the same time, the city now has a new revenue source that it can dedicate towards other infrastructure improvements, such as public transportation. Indirectly, the city will also benefit from increased productivity levels and a smaller environmental footprint.

    Q: Why are there such few cities that have successfully adopted ERP despite the fact that the idea is praised by many economists? Singapore is one of the few successful examples, why?

    A: It’s politically unfavourable. Nobody likes any sort of new “tax”. When Livingston first proposed a congestion charge in London residents called it “Carmageddon.” Few leaders have the guts to push something like this through.

    Singapore, on the other hand, had no choice. Geographically they couldn’t afford not to discourage car use and so the political will was there. I think that Hong Kong is in a similar boat.

    Q: Imagine that you were the government official responsible for the introduction of ERP. What would be your strategy to persuade the public to support your implementation?

    A: I would focus on two main ideas: (1) the value proposition being offered and (2) the future use of the funds being collected through ERP. 

    The main value proposition is reduced congestion for a segment of the population that I suspect would be willing to pay for the convenience. Again, I return to the idea of being cash rich and time poor. 

    For those with absolutely no willingness to pay for this convenience, the value proposition becomes increased investment in public transportation (as a result of the ERP funds). This is how I believe the funds should be allocated.

    I also think it’s critical to be open and transparent to the public about how exactly the funds will be used. You don’t want the public to think of ERP as a tax. You want them to think about it as investment in infrastructure in the region.

    However, it’ll take a change in mindset. People are accustomed to roads being “free.” But to paraphrase Harvard economist Edward Glaeser, from his recent book the Triumph of the City, if you offer a hugely valuable good—such as a road or highway—and make it free, you’ll never be able to keep up with demand. It’s for this reason that building new and more roads is rarely the answer. Traffic patterns simply adjust to take advantage of the increased supply.

    If you want to control usage, you need to slap a price tag on it.

  • Province of Toronto

    Earlier this week I talked about the huge importance of cities and how our governance structures are entirely ill-suited to the realities of our new urban focused economy. It was in relation to a talk that Richard Florida gave at the Rotman School.

    Well this morning, I stumbled upon an old blog post by Alan Broadbent, who is the author of a book called Urban Nation. In it, he echoes a similar belief: Our governance structures, particularly as they relate to cities, are completely outdated. Toronto would be better off as its own, separate province.

    Here’s an excerpt from his blog post:

    “In my book Urban Nation (2008), I wrote that Canada’s cities were the orphans of Confederation, creatures of the provinces locked in constitutional arrangements that are almost a century and a half out of date. Our large urban regions are now the economic, social, and cultural engines of the country. They compete with other large urban regions around the world to create prosperity and well-being.

    In Canada, these regions create the wealth that gets shared with the rest of the country through our redistribution and transfer arrangements. It is in our cities that the capital pools are assembled to take the oil, gas, and minerals out of the ground, where the factories and laboratories are built, and where much of our modern industries of information and design are based.

    But our cities are not in control of their own destiny. Like Blanche Dubois in A Streetcar Named Desire, they are very much reliant on the kindness of strangers. They have few residual powers and limited revenue tools, being overly reliant on property taxes and barred from levying income or sales taxes, the big revenue generators. They are closely controlled by provincial governments and generally ignored by Ottawa. Their role in Confederation is to send money and keep quiet.”

    This is a big deal and a big problem. We’re stymying the full economic, social and cultural potential of our cities. We’re underutilizing our greatest assets. It’s time for a new, urban focused, governance structure.

  • [vimeo 51295174 w=500 h=281]

    I just came across this fascinating mini documentary of the 54-storey Ponte Tower in Johannesburg. It’s by filmmaker Philip Bloom and it’s only about 10 minutes long. It does a great job of summarizing the building’s interesting and checkered history.

    Initially built in 1975, the tower first served as luxury apartments for the rich. The cylindrical tower, which is actually hollow in the middle, became quickly known as the place to live for the well to do.

    But its architecture very much reflects the political climate at the time. Whites lived in the outward-facing units and their servants, and likely other blacks, lived in the grim inward-facing ones.

    However, when Johannesburg got hit with the same white-flight that plagued many American cities after the war, the tower and area rapidly declined.

    Ponte City, as it was referred to at the time, then became known for crime, drugs and suicide (this will become obvious when you see the inner core of the building).

    It’s worth a watch.

    (Source: http://player.vimeo.com/)

  • Urban bifurcation

    In light of Bill de Blasio being elected yesterday as the new mayor of New York City, I thought I would post this interesting graphic I found on Atlantic Cities:

    image

    What it shows is a clear split.

    If you live in Manhattan or nearby areas in Brooklyn, Queens and the Bronx, you most likely saw your property values rise from 2008 to 2012. However, if you live on the outskirts of the city, you may have seen your property values fall as much as 20% (the darkest red areas).

    This shift back to city centers has been well documented and labeled, by some, as The Great Inversion. But in many ways it’s a symptom of a greater phenomenon at work: rising income inequality.

    It’s happening in New York. It’s happening in Toronto. And in many other global cities. New York VC Fred Wilson believes that the solution lies in the three Es: education, empowerment and entrepreneurship. That sounds like a great start to me.

  • Richard Florida on why creativity is the new economy

    Richard Florida recently gave a talk at the Rotman School as part of Toronto’s “Big City, Big Ideas” lecture series. It was called: Why Creativity Is the New Economy. You can watch it here via Rotman. It’s about an hour long.

    If you’re familiar with the work of Richard Florida, you’ll find much of what he talks about familiar. But there is one point that I think is absolutely worth reiterating again, and again: The new economic unit of our time is the city. It used to be nations but, in today’s world, cities trump nations, provinces and states in terms economic importance.

    Florida has long stressed this point in his work and I think he’s absolutely right. The problem, however, is that our governance structures are ill-suited to deal with this shift. There are too many layers of government and our cities do not have nearly enough autonomy. 

    Toronto is also facing a profound leadership deficit at the municipal level, to say the least (See Rob Ford). This cannot continue. Strong municipal leaders are critical to our sustained global economic competitiveness. It’s every global city for themselves and I, for one, want to win.

    To give you an example of the dramatic rise of cities, take a look at this recent TechCrunch article on billion dollar startups. If you take a look at learning number 9, you’ll see an incredible interesting fact: San Francisco—not “the Valley”—is now home to the most billion dollar startups. Startups are eschewing the suburbs for the city.

    I’ve written a lot on this trend, but I still don’t think that our governments have truly woken up to the fact that, in the new economy, our cities are our most important asset.

  • Express trains

    A lot of people love New York. They love it for the culture, the nightlife, the shopping, the opportunities, as well as for many other reasons. And these are all great reasons. But being the city geek that I am, there’s another reason I think New York is great: express trains.

    Broadly speaking express trains are simply trains that run faster than other trains on a network. In the case of New York, there are express trains and local trains. The latter stop at every station and the former typically just stop at major transfer points.

    To make this all work, the New York system uses a 4 track system. There are 2 tracks headed in each direction with the local train on the outside track and the express train on the inner track. On stations where the express trains stop, the 2 tracks split from each other and the platform sits in the middle so that you can switch across the platform from express to local (and vice versa).

    The benefit of express trains is obvious. It makes it significantly faster to travel long distances. And it makes, in a lot of cases, taking the subway the fastest alternative. That’s how transit should be.

  • I just pledged my support to dramatically improve transit in the Toronto region

    I care a lot about transit.

    I fundamentally believe that it needs to be the backbone of any well functioning and thriving metropolis. As the global economy continues to become an increasingly more urban one, we are seeing the rise of cities at a scale the world has never seen before.

    Tokyo is over 37 million people. Jakarta is almost 27 million. Seoul is almost 23 million. And the list goes on. With cities of this size, do we really think it’s reasonable for everybody to be driving around in cars? It ain’t going to work.

    Here’s an image from the Guardian, with the title, “Imagine if Paris had as many new cars as Mumbai”:

    Now, by global standards, Toronto is a relatively small city, at just over 6 million people in the region.

    But that doesn’t mean we don’t have challenges. In my view, the single biggest threat facing Toronto’s long term economic competitiveness is our severe infrastructure deficit. It’s impacting productivity levels, social cohesion, the environment, our global brand and many other things.

    Because of this belief, I’ve become interested in the work of CivicAction. It’s a group of non-partisan civic leaders who care about the future of our city. They have 3 areas of focus:

    1. Accelerating regional transportation
    2. Enhancing the region’s economic performance
    3. Fostering inclusion and resilience

    They’ve just launched a pledge that allows Torontonians to make their voice heard to elected officials. I just pledged to support new ways to raise funds for a better transportation network, and I would encourage you to do the same if you care about the future of our city. I know I certainly do.

    At the time of writing this post, 2,821 members of the general public and 126 elected officials had pledged.

  • Why I like Porter and the island airport

    I’m going to New York City tonight. I’ll be flying Porter from the island airport. And I’ll probably walk there.

    I’m a big fan of Porter and, while I’ve noticed some minor slippage over the last few years, it’s still one of the best flying experiences in the city.

    But the island airport has always been a contentious subject. Stopping a bridge to the island was a fundamental part of our last mayor’s original election campaign.

    Today the contentiousness is around expanding the airport so that it flies further using “jets.” Primarily people appear concerned about noise and that the runway will need to be expanded out and into Lake Ontario to a certain extent.

    As someone who lives along the waterfront, I really don’t share the same concerns.

    For one, the “whisper jets” are supposed to produce the same amount of noise as the current fleet, which don’t bother me in the least. I hear yappy dogs barking more than I hear planes.

    Secondly, I think the island airport is fantastic from an economic development standpoint. If we were in Europe, Toronto would have high speed rail connections to New York City, Montreal, and other cities.

    But it’s not Europe and we don’t have those rail lines. What we do have though is short haul flights from the island which, similarly, allow people to leave the city from downtown.

    This may not seem like a big deal, but an extra hour can mean the difference been making and missing a morning meeting or whether your trip needs to be overnight or not.

    If you’re against the expansion, I’d love to hear your thoughts in the comment section below. Debate is important.