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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Tag: business

  • Cynics sound smart but optimists build the future

    There’s an old saying that “cynics sound smart, but optimists move the world.” And indeed, studies show that we typically perceive pessimism as a sign of intelligence. On some levels, this makes sense because it requires intellect to understand something, and then expose its vulnerabilities.

    But at the same time, pure cynicism can be inherently passive. It’s an easy armour to wear, one that protects the user from (1) taking risk, (2) being proven wrong, and (3) doing the hard work to determine whether something might actually work. Importantly, cynicism generally creates zero new value. It may protect you from a bad decision, but it also blocks you from the really great ones. Value creation demands action.

    Now, blind optimism is not the answer. Risk management is essential. In fact, some of my real estate developer colleagues describe the business purely in these terms: “I manage risk for a living.”

    The right answer is a kind of rational optimism. Because the greatest value creation comes when you believe something is true or possible, even if it has never been done before. If someone has already proven the thesis, it doesn’t require the same degree of optimism; it only requires research.

    If you’re looking for evidence of this in practice, consider that the most entrepreneurial cities in the world have robust capital markets that are inherently tolerant of risk. Venture capital, for example, is rational optimism scaled across an asset class. It operates on a power-law distribution. The assumption is that most investments will be a failure, but a select few will more than make up for it.

    This is an important feature because it rewards bold ideas that can change the world. But for all of this to work, you need a healthy dose of institutional optimism. Without it, these bets go unmade and the future gets created by someone else. Let’s not ignore this key ingredient as we build our cities.

  • Why real estate development is an art form

    When I interviewed Michael Cooper, founder of Dream, back in 2016, one of the things he said to me was that real estate development is one of the most creative things you can do. What did he mean by that?

    As a developer, you have to problem-solve within extreme constraints. There are zoning regulations, building codes, investor interests, neighbourhood associations, market conditions, and many other sometimes-competing demands at play.

    The job of the developer is to navigate through this maze, rely on the expertise of others, and come up with the best possible solution. That requires creativity, and it’s what Cooper was getting at.

    The process is also self-reinforcing: constraints are good for creativity. As filmmaker and actor Orson Welles once said, “The enemy of art is the absence of limitations.” In architecture school, we used to always say that the hardest thing is a blank canvas, because design is about solving problems. Constraints present problems.

    Of course, developers can’t solve these problems on their own. They rely on talented multidisciplinary teams and the advice they provide. But it’s important to keep in mind specific professionals tend to view problems through the lens of their discipline.

    A lawyer might feel strongly about a particular legal clause, or a structural engineer might view a particular design as optimal, but ultimately the developer is going to have to take these recommendations and evaluate them against the entire list of constraints they are facing. It becomes a creative trade-off.

    The developer has to have the largest field of view. Seeing the whole board is how you make it out of the maze.

  • Pulling the future forward

    I like the way that Scott Galloway describes entrepreneurship in this recent post about why he’s bearish on Tesla:

    Entrepreneur is a synonym for salesperson, and salesperson is the pedestrian term for storyteller. Pro tip: No startup makes sense. We (entrepreneurs) are all impostors who must deploy a fiction (a story) that captures the imagination and attracts capital to pull the future forward and turn rhyme into reason. No business I have started, at the moment of inception, made any sense … until it did. Or didn’t. The only way to predict the future is to make it.

    He then goes on to describe the difference between an entrepreneur and a liar:

    This is not the same as lying. There’s a real distinction between an entrepreneur and a liar: Entrepreneurs believe their story will come true, as they are laser-focused on making it true. A liar, well, they know they’re misleading people with false data. Usually for money (i.e., fraud). This is where Tesla turns gray.

    Scott continues to say things about Elon and Tesla. But that’s not the point of today’s post.

    The point I would like to make is that real estate development is an inherently entrepreneurial endeavor. You need to be a salesperson and a compelling storyteller, because that’s the only way you’ll be able to create the future. And creating the future is what developers do.

  • Map of every development project in Paris

    It is surprisingly difficult to find good real estate and development information about a market that you’re not familiar with. So I was pretty excited when I came across this map of every development project in Grand Paris (Greater Paris) created by Arthur Weidmann.

    It’s in Google My Maps and what he has done is pin every project according to status: under construction, under renovation, approved, proposed, and recently delivered. For each pin, you’ll also find information like the expected completion date, the use(s), the area, the architect(s), and photos. It is unbelievably detailed and, according to Google, it was last updated 8 hours ago.

    Here’s the full map with all statuses shown:

    And here’s what it looks like if you filter by only projects under construction:

    It’s interesting, but not surprising, to note that the majority of construction projects seem to be taking place outside the boundaries of Paris proper. However, if you alternate to projects under renovation, it more or less flips, with most of the projects being within Paris:

    This tells you something about the city.

    Sometimes when I’m looking at or for information like this, I think to myself that I must be in the minority of people who are interested in tracking development projects with this level of detail. So I find it interesting that this map has been viewed nearly 300,000 times. Clearly, I’m not actually alone.

  • I’d actually like a Tesla bicycle

    I watched Tesla’s We, Robot event last night. As many of you know, Elon and his team showcased a Cybercab, Robovan, and a humanoid robot that dances funny, all of which will be available in the market for purchase at some unknowable date in the future. What was obvious is that Elon himself has no clear idea of when this will be.

    What I will say, though, is that the designs look cool. The Cybercab looks like a Porsche and a Cybertruck had a love child, and the Robovan looks like an Art Deco rendition of what the future is supposed to be like. I first wondered why they’d create a robotaxi with only two seats. But thinking about it now, most Uber rides probably only have 1-2 passengers.

    Despite these pretty designs, the overwhelming reaction to the event seems to be one of disappointment. We’ve heard what was said before. Public transportation is bad (I disagree). Autonomy will free up your time and remove unnecessary parking spaces from our cities (allowing for more public space). And soon you’ll be able to put your under-utilized car to work and earn extra cash.

    Cool, but when?

    Waymo and Uber are not, as far as I know, hosting similarly flashy events. But as far as I can tell, they’re making meaningful progress in advancing toward full autonomy. As of June of this year, Waymo had already logged over 22 million rider-only miles. And in September, they announced a partnership that would bring AVs to Austin and Atlanta by way of the Uber app.

    At this point in the hype cycle, I don’t think anyone is interested in hearing promises about what the future of autonomy will be like, especially without any firm dates. They want to know: Are we there yet? So I think it’s no surprise that people, including investors, weren’t all that pumped up by the event.

    On a more important note, Tesla had bicycles with brightly illuminated wheels circulating around their event set (at Warner Bros.) to presumably demonstrate that their Cybercabs can successfully navigate around moving objects (when brightly illuminated). If you missed them, look at the 29 second mark in the below video:

    I can’t be the only one who thought: “What are those? Now, that’s what I want!” So I’ve asked Elon when they’ll be available and when I can buy one. I’ll keep you all posted on his response.

  • Writing business memos

    One of the important things that I remember them drilling into our heads in business school was about how to write a business memo. This might not seem like a big deal, but it is. Emails, decks, and recommendations are ubiquitous in business.

    I remember three main points.

    One, use clear and concise writing. If you can use fewer words, do that. Two, be decisive. In fact, they used to tell us that being decisively wrong was always better than being vaguely correct. And three, be as quantitative as possible.

    If you can replace words with numbers, you should do that. For example, instead of saying that something recently increased significantly, it is far more effective to say that something increased by 27% over the last 18 days.

    I was reminded of this earlier today when I came across this:

    Supposedly, it is what Amazon used to tell its employees back in 2018. I don’t know the source, but the tips sound right and make sense. Be concise. Use data. Eliminate weasel words. And make sure you’re communicating a “what”. In other words, be decisive.

  • Airbnb still has a lot of accommodations

    There are a lot of headwinds facing Airbnb. Cities around the world seem to be systematically making it more difficult to be a host. New York City, as many of you know, recently made it so that you need to be physically present while the dwelling is being rented. That is pretty limiting. Similar things are happening in non-urban markets too. North of Toronto in Muskoka, there’s a draft by-law that will, among other things, limit short-term rentals to 50% of the total number of days within certain time periods. That eliminates the possibility of doing this as a business. So in many ways, it’s easy to be pessimistic about the future of Airbnb.

    But at the same time, if you step back and look at the bigger picture, there are over 7 million active listings on Airbnb. This effectively makes it the largest hospitality brand in the world. There are more accommodations on Airbnb than with Marriott, Hilton, Intercontinental, Wyndham, and Hyatt combined. (The below chart is from Scott Galloway.) It’s also important to point out that while Airbnb doesn’t own any of its own supply, the same is true of most hotel brands. They are, brands. The difference is that Airbnb created a more scalable platform and a more decentralized approach to aggregating supply.

    The numbers also don’t suggest that things are slowing down for Airbnb. (Here’s their Q3 2023 shareholder letter.) Active listings on the platform grew 19% YoY in Q3 2023 (or by almost 1 million listings). Revenue is up. Free cash flow is up. And in Q3 of last year, the company repurchased $500 million of stock, bringing their one year total to somewhere around $3 billion. So despite all of the efforts to curb short-term rentals within our cities, the company, at least for now, seems to be holding up just fine. And if they can successfully diversify beyond their core business, there could even be reason to be bullish on the world’s largest hospitality brand.

    Full disclosure: I am long $ABNB.

  • The Grouse Grind is no joke

    Our server at lunch today told us that the Grouse Grind hike should take us about 45 minutes. She also mentioned that she has seen some people attempt it in flip flops, but that she would strongly advise against that. That was sound footwear advice. But even sans flip-flops, it still took Bianca and I about an hour and a half.

    The Grouse Grind is no joke. It is 850 meters of nothing but steps and steep incline. But it is well worth it.

    I’ve heard that some people do “the Grind” for meetings and/or business development. In fact, Chip Wilson, founder of Lululemon, has said before that he uses it to vet potential partners. It’s a way for him to test cultural alignment. That makes a lot of sense when you consider what Lululemon is all about.

    This exact approach — you know, doing “the Grind” — may not make as much sense for other businesses and industries. But it doesn’t change the fact that culture is critical within organizations. And as far as I can tell, the most effective way to cultivate it and test for alignment is to be face-to-face.

  • Internal locus of control

    Before bed last night, I came across this New Yorker article from 2016 that I thought was fascinating and broadly useful for both life and business. In it, Maria Konnikova talks about how people learn to become resilient. And she starts by citing the work of a developmental psychologist and clinician who spent decades studying why some people seem to manage stress and trauma far better than others. Here is an excerpt talking about why that might be the case:

    From a young age, resilient children tended to “meet the world on their own terms.” They were autonomous and independent, would seek out new experiences, and had a “positive social orientation.” “Though not especially gifted, these children used whatever skills they had effectively,” Werner wrote. Perhaps most importantly, the resilient children had what psychologists call an “internal locus of control”: they believed that they, and not their circumstances, affected their achievements. The resilient children saw themselves as the orchestrators of their own fates. In fact, on a scale that measured locus of control, they scored more than two standard deviations away from the standardization group.

    It immediately reminded me of something that Steve Jobs once said in an interview back when more people wore buttoned up jean shirts. His comment was that one of the most powerful things you can learn in life is that much of what surrounds us was created by people who are no smarter than us. His point being that everything can be altered. We all have that ability. We are “orchestrators of our own fate.”

    The article goes on to argue that one of the ways we can exhibit a strong internal locus of control is by learning to view and respond to situations in a productive way. Put differently, whether or not we are subjected to shitty experiences matters less than how we ultimately react to and view those shitty experiences. If you can reframe and place in positive terms, then you can reduce any perceived stresses and become more resilient.

    The good news is that, supposedly, these are skills that can be learned. So if this topic is at all interesting, I would encourage you to check out the full article. It certainly caught my attention before bed last night.

  • How to get rich (and why talking about money is okay)

    I’ve written about this before on the blog, but one of my qualms about architecture school was that it was too often taboo to talk about business and money. Why? Talking about and understanding the realities of the world doesn’t have to mean that you’re compromising on good design. Constraints are often good for design innovation. Similarly, I’ve always felt that personal finance should feature more prominently in schools at an early age. It should be considered a basic life skill.

    In any event, I came across this tweet thread last night by Naval Ravikant talking about how to get rich (without getting lucky). It’s from 2018, but the lessons — and there are many — obviously haven’t changed. (For those of you who may not be familiar, Naval was the co-founder of AngelList and was an early stage investor in companies like Uber, Twitter, and Opendoor.)

    When you see a headline like this it’s perfectly normal for your bullshit radar to go off. (In fact, it is one of his points.) But this thread is not bullshit. It’s about building wealth. Owning equity instead of renting out your time. Working hard. Taking a long view. Leveraging your time and skills. Understanding compound interest. Partnering with people of integrity. Being accountable. And becoming the best at what you do because you’re pursuing genuine curiosity (among many other great points).

    Here are a couple of his tweets. But I would encourage you to have a full read.