Tag: disruption

• What’s the realtor jiu-jitsu move?

  Today’s post is a set of related questions for all of you.

  Fred Wilson has a post up on his blog today called, The Jiu-Jitsu Move. It’s about how people often dismiss new technologies, market entrants, and/or consumer behaviours as silly; whereas the real power move is to embrace and leverage them. That’s what he is calling the jiu-jitsu move.

  He gives a few examples, but for obvious reasons this one stood out to me:

  I spent the day yesterday at a real estate industry event and talked to a lot of agents about the fact that their clients are often more informed than they are these days. I encouraged them to embrace that fact and use it to their advantage and not fear it. It is hard when you have grown up in an industry when your advantage was information and you no longer have that working for you.

  For all the agents (and real estate consumers) who read this blog, I am curious if you agree with the above. Are consumers increasingly more informed than agents? I am sure that many of you will disagree. But if things are really changing, what should the jiu-jitsu move be?

  2018.03.29

• My new gig…

  

  So this is interesting.

  Earlier this month, Travis Kalanick – co-founder of Uber and its former CEO – formed a new venture fund called 10100. According to the WSJ, it was funded with his own money after he sold 30% of his position in Uber for a cool $1.4 billion. 

  Ten-one-hundred’s spartan website explains that the goal of the fund is “large-scale job creation, with investments in real estate, ecommerce, and emerging innovation in China and India.” On the non-profit side, the initial focus will be on “education and the future of cities.”

  Then this week, Travis tweeted out “My new gig…” and disclosed that 10100 had entered into an agreement to buy a controlling interest in a real estate holding company called City Storage Systems (CSS) for $150 million. 

  He also announced that he would become CEO.

  The focus of CSS is on the redevelopment of distressed real estate, particularly parking, retail, and industrial assets. He goes on to say: “There are over $10 trillion in these real estate assets that will need to be repurposed for the digital era in the coming years.”

  This whole series of events is a big bet on some significant changes in the real estate space.

  Photo by Martin Reisch on Unsplash

  2018.03.23

• Business model innovation

  Fred Wilson has a great post up on his blog today about open protocols. By open protocols he is referring to things like TCP/IP (transmission control protocol and internet protocol), HTTP (hypertext transfer protocol), and SMTP (simple mail transfer protocol). Whether you realize it or not, you rely on these protocols every single day if you go on the internet, browse the web, and write emails.

  If you’re interested in these sorts of nerdy things, I recommend you read his post. I’m not going to write about open protocols today – though I do find them fascinating. Instead, I would like to talk about the last paragraph of his post. 

  Here it is:

  “I believe that business model innovation is more disruptive that technological innovation. Incumbents can adapt to and adopt new technological changes (web to mobile) way easier than they can adapt to and adopt new business models (selling software to free ad-supported software). So this new protocol-based business model feels like one of these “changes of venue” as my partner Brad likes to call them. And that smells like a big investable macro trend to me.”

  This is interesting to me for 2 reasons.

  First, business model innovation is incredibly powerful. Once a company has built itself up around an existing model, it can be painfully difficult to change. Imagine you have a 200 person sales team that would become unnecessary should you pivot your business model. Are you going to fire them and make the switch?

  This is also one of the reasons why some tech companies can exist for so long before they make any money. Sometimes – but not always – it’s because the investors believe that if the company has users, attention or whatever it may be, that they will figure out a way to monetize them/it. And maybe, just maybe, it’ll be a business model that no one has ever thought of before.

  Second, look how he is publicly sharing his investment thesis. Why would he do that? Shouldn’t he just go off and do it and not tell anyone? Clearly, he too believes that there’s greater value in being open and transparent.

  2016.07.31

• A money back guarantee on your next home

  

  I’ve written about Opendoor.com a few times. As far as I can tell, they are the furthest ahead in terms of disrupting the residential real estate market. So I like to follow them quite closely.

  They’ve recently launched some new features, so I figured it would be a good time to check-in on what they’re up to. But first – for those of you might not be familiar with Opendoor – here’s what they do.

  Opendoor offers instant liquidity to homeowners by buying homes site unseen. The fee they charge seems to amount to less than 10% of the value of the home. 

  They also say that they typically offer prices that are about 1-3% less than the market value of the home 3 months into the future. (Apparently 3 months is the average time-on-market for the cities in which they operate.)

  Once they’ve bought the home, they then make improvements and put it back on the market. As of today, they are buying about 10 homes a day in the two markets in which they operate (Phoenix and Dallas). They are spending about $75 million a month buying homes.

  To mitigate their risk, they won’t buy a home built before 1960, a home that was pre-fabricated, a home with a solar lease, and so on. They also stick to values that are between $100,000 to $600,000. But apparently this covers off about 90% of homes in the United States. (You can read their full FAQ here.)

  To accomplish all of this, they have raised about $110 million in venture capital.

  What’s fascinating about all of this is that they are starting to create a seamless marketplace. As they continue to buy more homes (and aggregate supply), more buyers are starting to come to their marketplace. They also allow people to easily find local contractors.

  Over time as they gain scale and as their algorithms improve, one could imagine their pricing becoming more competitive, them taking more of the market, and them bearing much less market risk as homes quickly trade. 

  They liken their model to car trade-ins. Apparently 60% of people who buy a new car are trading in an old one. That’s an interesting comparison that I hadn’t thought about before.

  So what’s new?

  Two things…

  First, they are offering a 30 day full refund on new home purchases. In other words, if you buy a home through their platform and, for whatever reason, you end up not liking it, they’ll buy it back (minus some transaction costs and so on).

  Second, they are providing a 180-point inspection report to buyers and if anything breaks in the first two years of ownership (presumably it is something that contravenes the inspection), they’ll come and fix it.

  These additions are helpful because it starts to target buyers, which will help them fill out the other side of their marketplace. It also promotes greater transparency because now they’re partially on the hook for the home’s performance.

  I like what they are doing and, again, I can’t think of any other company making such big bets in this space.

  2016.06.07

• Introducing Tech:NYC

  Following the lead of San Francisco, a new non-profit, member-supported organization for New York tech companies has just launched. It’s called Tech:NYC. Here are their goals, taken from this blog post:

  Tech:NYC’s primary goals are to support the growth of the technology sector in New York City, to increase civic engagement by leaders of the New York tech community, and advocate for policies that will attract tech talent, jobs, and opportunity to NYC.

  Tech:NYC will advocate for policies that: 1) underscore a regulatory environment that supports the growth of technology companies and technology talent in NYC; 2) promote inclusivity; and 3) ensure access for all New Yorkers to connectivity, technology tools, and training.

  What makes something like this important is that many public policy issues are now rooted in the tech sector. Think about all the debate regarding ride-sharing, home-sharing, drone regulation, contract employees, and so on.

  But what is also clear is that many cities are struggling to deal with these issues. As I’ve argued before, just saying no to innovation that doesn’t fit neatly into our currently regulatory boxes is often shortsighted. 

  So how do we put in place policies that deliver the right results and that are balanced? How do we grow the tech base while at the same time managing the disruptive fallout? That’s what this group hopes to do.

  And it strikes me that every big city could likely benefit from an organization like this.

  2016.05.03

• What’s next for Walmart?

  Today I was surprised to learn from Charlie Gardner’s blog that groceries now represent 56% of Walmart’s sales. This is a huge number that I frankly wouldn’t have expected. 

  Groceries have relatively low online penetration, which makes them great for brick-and-mortar retailers. I’ve written about this topic before in the context of big box stores and online shopping. But I clearly didn’t realize that it had become such a big segment for Walmart. 

  What’s also noteworthy about grocery shopping though, is that customers appear to be less likely to travel far distances for it, even for lower prices. This means that the radial impact of Walmart the supermarket is less significant and far tighter (~2 miles) than Walmart the discount store. Click here for that study.

  This is important because a big catchment area has been central to the Walmart model. They consume cheap land on the outskirts of cities and then offload the transportation costs (indirect costs) to consumers in exchange for everyday low prices (direct costs). Studies show that we, consumers, typically undervalue indirect costs.

  Charlie argues in his post that this does not mean that we should write off big box retailing. And I would agree. The Walmart Express concept may have failed, but they are clearly looking for ways to rethink their model. Urban stores will need to form part of that.

  2016.02.23

• 16 mobile theses and how tech might change the built environment

  

  https://500px.com/embed.js

  One of the things that I try and do here on this blog is examine the intersection of design, real estate, and technology. I didn’t explicitly set out to do that, but more and more I find myself thinking that way when I’m writing and when I’m giving talks.

  Part of that is because of my passions, but part of it is because there is a big and important overlap. One example of that is autonomous, self-driving cars. The tech community is enamoured with driverless cars, but everyone involved in the built environment should also be thinking about their impacts. Because it’ll be significant.

  Benedict Evans – who is a venture capitalist with Andreessen Horowitz in the Valley – recently published a post called, 16 mobile theses. It’s a look at 16 topics, trends, and shifts that are happening in the tech space. (There’s also a related podcast discussion.)

  If you’re involved in internet products, you absolutely need to give it a read. But I also think it’s interesting to read it through the lens of a designer or real estate person. Productivity is changing. Notions around the living room are changing. And yes, autonomous vehicles are going to have a profound impact on the urban landscape of our cities – just as cars did initially.

  Below are 3 excerpts from Benedict’s post that I really enjoyed.

  The first is about mobile and just how massive it is:

  “The mobile ecosystem, now, is heading towards perhaps 10x the scale of the PC industry, and mobile is not just a new thing or a big thing, but that new generation, whose scale makes it the new centre of gravity of the tech industry. Almost everything else will orbit around it.”

  The second is about how “networked” is quickly becoming a given:

  “Our grandparents could have told you how many electric motors they owned – there was one in the car, one in the fridge and so on, and they owned maybe a dozen. In the same way, we know roughly how many devices we own with a network connection, and, again, our children won’t. Many of those uses cases will seem silly to us, just as our grandparents would laugh at the idea of a button to lower a car window, but the sheer range and cheapness of sensors and components, mostly coming out of the smartphone supply chain, will make them ubiquitous and invisible – we’ll forget about them just as we’ve forgotten about electric motors.”

  And the third is about those self-driving cars:

  “The move to electric and the move (if and when) to autonomous, self-driving cars fundamentally change what a car is, but also what the whole automotive system might look like. Electricity changes the mechanical complexity of cars and hence changes who might build them and what they might look like. Autonomy and on-demand services change who buys them, meaning the buying criteria will be different. But they could also change the urban landscape just as much as cars themselves did – what do mass-market retail or restaurants look like if no-one needs to park?”

  Can you think of other ways in which tech will impact cities and the spaces we occupy?

  2015.12.20

• Will parking spaces in cities become more, or less, valuable in the future?

  

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  Lately I’ve been having discussions around the future value of parking spaces in urban centers. So yesterday I tweeted out this poll:

  Will parking spaces in cities become more, or less, valuable in the future? 💸 #AThisCity

  — Brandon G. Donnelly (@donnelly_b)

  November 4, 2015

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  The sample size is very small, but for what it’s worth, there are some/many people who believe that urban parking spaces will become more valuable in the future.

  This is a reasonable assumption. 

  Over the last couple of decades here in Toronto, I would guess that parking ratios for new multi-family developments have probably fallen by more than half. It used to be that you had to build 1 to 1.5 parking stalls for each unit and now we seem to be sitting somewhere close to 0.5. Although, there are also exceptions and some projects today are getting built with no parking.

  So given that the supply side of urban parking spaces seems to be getting constrained and many cities are actively trying to encourage other forms of mobility, it’s not unreasonable to believe that parking stalls will only become more valuable. That’s why a new underground spot in Toronto might cost you $60,000 today and why some spots in New York can even fetch a $1 million. 

  But this assumes that the demand for parking will remain more or less the same. What if it doesn’t stay the same? What if we were to experience a tipping point that rearranged urban mobility? What if the cost of driving became so high that people stopped driving at scale? In these scenarios, the demand side of the equation would change.

  If you’re a regular of this blog, you probably know what I’m going to say next. But already I can think of two innovations that would contribute to the above scenarios: Uber and driverless cars.

  Uber’s goal is to continually drive down the cost of transportation and eventually get you to no longer own a car. They know very clearly that the demand for transportation services is highly elastic and that the cheaper they get the more you will use them. And the way they get cheaper is by continually increasing the utilization rate of their drivers/cars. An idle driver/car is the enemy.

  Of course, the other way to drive down fares is to remove the driver all together. And once you’ve done that, there is, in theory, no reason that a car should ever sit idle – like they do today. (The utilization rate for my car is around 2%.) And if a car is never sitting idle, then why would you ever need to park it? Certainly you wouldn’t need to park it as often as you do today.

  All of this isn’t going to happen tomorrow, but I believe – despite the supply constraints – that we are going to end up with excess parking spaces in our cities. And that will mean that they are going to be perceived as less valuable than they are today. I also believe that it will eventually seem silly to drive your own car. 

  What do you think?

  2015.11.05

• The taxi cartel

  

  Taxi by Roland R. on 500px

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  Early this morning Peter Cheney of the Globe and Mail published an article called: How Uber is ending the dirty dealings behind Toronto’s cab business.

  And I highly recommend you read it. He’s been investigating this industry for decades.

  Though the article is specific to Toronto, I know that there are middle people and archaic policies governing the taxi industries in many other cities around the world.

  Here it revolves around taxi licenses issued by the city (known as “plates”), which are expensive and almost impossible to get. Last year the average price of a plate was $118,235 (2014).

  The way it works is that people – typically non-drivers – buy/inherit/get these plates and then charge rent on them to drivers who want to use them. The result is a taxi cartel:

  In fact, Toronto’s taxi plate system is anything but free enterprise. Instead, it is based on the artificial restriction of a natural market, and the granting of licences to a fixed number of participants. Even those who paid top dollar for a plate used to enjoy an annual return of more than 12 per cent. And for those who inherited plates, the return was manna from heaven.

  So it shouldn’t come as a surprise that the taxi industry is grouchy about companies like Uber. But the cost structure of the incumbents is going to need to change if they want to stay in business.

  Jeff Bezos of Amazon is famous for saying, “Your margin is my opportunity.” And that’s exactly what is happening here. A bloated legacy cost structure is being quickly supplanted by better/cheaper.

  2015.07.16

• Why brick-and-mortar stores should be scared of same hour delivery

  Venture capitalist Fred Wilson wrote a post on his blog today called, Same Day/Same Hour Delivery.

  The post is about why he believes that Walmart could get the “most disrupted by the Internet.” And it has to do with the rapid rise of same day and even same hour delivery from ecommerce companies. If you can order it online and receive it within an hour, why bother going to a brick-and-mortar store?

  His post reminded me of one I wrote towards the end of last year called, The threat to big box retailing. But since Fred is in the business of making bets on technology companies and he has accumulated a significant amount of wealth doing that, I thought you might like to also hear it from him.

  2015.03.19