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: marc andreessen

  • It’s time to build, but not here

    Oof.

    Let’s assume for a second that you penned an article back in April 2020 called, “It’s time to build.” And in this article, you argued, among other things, that we’re not building nearly enough housing and that home prices are skyrocketing as a result.

    Now let’s assume that a new multi-family zoning overlay is being proposed for your own neighborhood in an attempt to increase said housing supply and alleviate some of the concerns around home prices. And in response to this proposal, you pen this:

    One might call this being hypocritical. But I’m not here to name call. I think the real lesson is what Jerusalem Demsas points out in her recent article, “The Billionaire’s Dilemma.”

    What we have is a macro-micro disconnect that policy makers need to be more aware of. At the macro level we know what we should be doing in order to achieve our stated objectives. But if we allow people at the micro level to veto these efforts, they often will, and sometimes using ALL CAPS.

  • Happiness vs. satisfaction

    I have heard from some of you that you don’t like it when I write about crypto and NFTs. This personal blog is supposed to be largely about city building after all. So today I thought I would write about crypto and NFTs. More specifically, this podcast episode, which I watched last night.

    It’s with Marc Andreessen and Chris Dixon of the venture firm a16z, and it’s actually less about specific things like NFTs and more about the reinvention of the internet in general. Why I found it particularly interesting is that Marc co-invented the first widely-used web browser. Anyone remember Netscape?

    So he was around for what we are now calling web 1 and he is around for what we are today calling web 3. And there are lots of parallels between then and now. Similar to today with crypto, the early internet had lots of critics and lots of people who thought it was dumb and that it would never amount to much.

    Oops.

    Here are a few other thoughts and ideas from the podcast that I found interesting (some of them even relate to city building):

    • No matter how many times we have seen the same movie, humanity seems doomed to repeat the same mistakes when it comes to, among other things, embracing new ideas and innovations. I agree with Marc in that part of this is generational. Younger people are often more open to new ideas because they view it as a way for them to establish themselves and make their mark on the world. Whereas older people (established people) often view new ideas and change as a threat to their current position in the world.
    • Marc drops a number of books throughout the talk and one of them is The Mystery of Capital — Why Capitalism Succeeds in the West and Fails Everywhere Else. This is a well known book by Hernando De Soto and the big idea is that property ownership and property rights are really the fundamental ingredients in our modern world. People need to know that if they hold title and invest money into something, it’s not just going to get taken away by someone. And it is this underlying legal structure that has allowed people to leverage property into wealth.
    • This is a fascinating observation in its own right, but it also relates to crypto. Hear me out. Chris Dixon makes the argument in the episode that web1 democratized information (anyone can search for stuff), and that web2 democratized publishing (anyone can share stuff through platforms like Twitter or the blogging platform I’m writing on right now). He then goes on to argue that the promise of web3 and crypto is really to democratize ownership of the internet. Anyone can buy crypto tokens.
    • Why might this be a big deal? Well if property rights in our offline world are a fundamental ingredient to modern society, it seems logical to me that property rights in our digital world(s) might also be equally transformative. And this is precisely one of the things that blockchain technologies enable for the very first time.
    • Finally, on a mostly unrelated note, I liked Marc’s comparison of happiness vs. satisfaction in life. Happiness, he explains, is like getting an ice cream cone on a hot summer day. The first and second feel great, but after that you move on. Satisfaction on the other hand is enduring. It’s the feeling you get from working on something really challenging and then finally succeeding. And that’s exactly how I feel about real estate development. There are lots of shitty days and lots of grinding. But in the end, I do feel very satisfied.

  • Housing doom loop

    This discussion between Patrick O’Shaughnessy and Marc Andreessen is a great follow-up to my recent post about the productization of housing. Broadly speaking it’s about tech, software eating everything, and the future of the world. But if you skip to around the 15 minute mark, Marc talks about the growing divide in our economy between sectors that are changing rapidly and sectors that are changing slowly.

    Examples of the former include things like computers, media, retail, cars, and a lot of the other stuff that we regular consume. Examples of the latter include things like healthcare, education, and housing (you know, the pillars of the American Dream).

    The noteworthy problem with this divide is that the fast changing sectors are producing things that have been getting more affordable over time. The specific example that he gives is televisions. Think about how much more TV you can get today compared to when they were first introduced.

    In contrast to this, things in the slow changing sectors keep getting more expensive. The same university education is exponentially more expensive today than it was a few decades ago, even though it’s far more important for people to have an education than to own TVs.

    A similar thing can be said about housing. How much has really changed in terms of the way we build new homes?

    One of the common threads across these slow change sectors, Marc argues, is strong government intervention. We restrict supply such that we can’t meet demand. We then respond to higher prices by trying to subsidize demand, but this only drives prices up even further. Because, at the end of the day, we haven’t addressed the underlying issue.

    The result is a doom loop.

    If you can’t see the embedded podcast above, click here.

  • It’s time to build

    Marc Andreessen’s recent essay, called “It’s time to build,” is destined to ruffle feathers. In it, he not only sings the virtues of building in its broadest sense — everything from healthcare and housing to education and manufacturing — but he calls out the western world for smug complacency with the status quo. We are no longer choosing to build. And a good example of that is how we have been managing (and mismanaging) this current pandemic.

    Here’s an excerpt:

    In fact, I think building is how we reboot the American dream. The things we build in huge quantities, like computers and TVs, drop rapidly in price. The things we don’t, like housing, schools, and hospitals, skyrocket in price. What’s the American dream? The opportunity to have a home of your own, and a family you can provide for. We need to break the rapidly escalating price curves for housing, education, and healthcare, to make sure that every American can realize the dream, and the only way to do that is to build.

    Marc has also included a suggested reading list if you click through on the above tweet. By the time you do that, I am sure there will also be a lot of discussion around his essay.

  • Moving up the stack

    The new GoPro HERO6 is a miraculous little camera.

    It now films in 4k at 60 frames per second. It has great image stabilization. And the screen on the back is new for me and a real game changer. The creative possibilities are endless.

    But probably more importantly you can tell that GoPro is investing heavily in their software. They have to make it easier for people to share the content they create.

    They also know that their survival likely depends on some sort of software layer.

    At its peak, GoPro was trading at $86 per share. Right now, as I write this post, it’s $9.40. Some think the company will be sold within the next year.

    Here is a recent quote from Benedict Evans:

    As we saw with first GoPro and now perhaps Sonos, if you’re riding the smartphone supply chain cornucopia but can’t construct a story further up the stack, around cloud, software, ecosystem or network effects, you’re just another commodity widget maker.

    To borrow Marc Andreessen’s line: Software is eating the world.

  • Why I write about tech on my city building blog

    I had a friend ask me this week about how I decide what to write on this blog. His comment was that I tend to write about a variety of different topics. He wondered: Isn’t it better to focus on one particular niche?

    The simple answer is that I write about what interests me. And secondary to that is any concern around what will get the most clicks. In fact, I try not to fall into the trap of worrying about the latter. Sometimes it can be paralyzing to fixate on what will appeal most to the tens of thousands of people who read this blog on a regular basis.

    The reality is that my interests are much broader than, say, just design and real estate; though these two topics are clearly central. 

    I learned a long time ago while studying architecture and art history that what we make as a society is generally a product of the cultural milieu at the time. In other words, the built environment doesn’t happen in a vacuum. It is the physical manifestation of what we believe to be true at a particular moment.

    Today, it’s pretty hard to ignore the importance of tech. Think of some of the most valuable companies in the world right now: Apple, Google, Amazon, Facebook, and so on. Now, technology has always shaped our cities, but what makes this moment different is the decisive shift toward software.

    It’s arguably no longer about who can build the best mousetrap. It’s about who can build the best software layer on top of that mousetrap.

    In 2011, venture capitalist Marc Andreessen (previously the co-founder of Netscape) published a widely shared essay called, “Why Software Is Eating the World.” And over the past 6 years he has been proven to be very right.

    The 3 main points he aimed to make with that essay are as follows:

    1. Every product or service that can become software will become software.
    2. Every company will have to become a software company.
    3. The winning companies will be the best software companies.

    Depending on your industry, this may sound ludicrous to you. Certainly in 2011 it probably seemed that way. 

    But a perfect example of this phenomenon is the iPhone. The phone itself is manufactured in China, albeit where a lot of great hardware innovation is taking place. 

    But at this point, phones have become fairly commoditized. The profits that Apple makes from the iPhone disproportionately come from the software layer and the app ecosystem it has developed.

    You could make a similar argument with Tesla. Autonomous navigation – which most of us can agree will have a profound impact on cities – is largely a software challenge. 

    And so if you believe that autonomous vehicles will be a fundamental part of the future of mobility, then it’s not that hard to believe in point number three: the winning car company will also have to be the best car software company.

    Some industries have been less touched by tech and software – real estate being one of them. But if Andreessen is right and it’s not a question of if, but a question of when, then it behooves all of us to think about the potential impacts.

    I love how Andreessen ends this podcast discussion with Barry Ritholtz of Bloomberg and so I’m going to repeat it here to close out this post. He says: “There are no bad ideas. There are only early ideas.” 

    And that’s why I write about tech on my city building blog.

    Photo by Michal Pechardo on Unsplash

  • I can’t spend unrealized gains

    image

    Earlier this week the Wall Street Journal published an article claiming that the celebrated venture capital firm Andreessen Horowitz was lagging behind its elite peers in terms of returns.

    The firm then responded with a well-written blog post explaining why this accusation is off the mark. Their response was simply that you can’t measure returns on “unrealized gains.” Until there is a liquidity event – that is, the company gets sold or goes public – it’s just paper returns. And what matters is cash. 

    As the post clearly states: “I can’t spend unrealized gains.”

    But beyond just a rebuttal, the blog post is a great primer on how the venture capital industry works. We talk a lot about the tech space on this blog, so I thought some of you might find it interesting. 

    One of the reasons I like to follow the VC space is that there are many similarities to real estate development. Not only in the way that the funds are structured, but also in the way that the gestation periods are incredibly long.

    The post talks about this as a “J curve.” In the early years of a fund, the returns are negative. Money is going out the door to invest in immature and risky startups. And it’s not until the harvesting period (7+ years later) that the realized gains start getting paid out to investors (LPs).

    It’s also interesting to note that the exit timing for companies – at least according to Andreessen Horowitz – seems to be increasing (10+ years). This is yet another similarity to real estate development where it seems to be getting harder and harder to build and deliver new supply.

  • Technology is eating the world

    Large Gantry Crane on Sunset by Sasin Tipchai on 500px.com

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

    Earlier today the comment section of an old post I wrote about UberX was revived with a discussion around technology and what it means for human capital.

    The concern expressed was that technology and machines are going to put us all out of a job. And it stemmed from a discussion around driverless cars. Clearly we are headed in that direction and so eventually we will no longer need to drive or have people drive us around. This means that something that was once a job will no longer exist.

    But I am not yet convinced that it will be as dire as some believe it will be – though it could very well necessitate some significant structural changes in the economy.

    Here are two things to consider:

    Marc Andreessen has written and tweeted a lot about the topic of “robots eat all jobs” and his argument is that this line of thinking often revolves around something called a lump-of-labor fallacy. This is the idea that there is a fixed amount of work to be done. And so when technology replaces humans, we are just making the labor pie smaller.

    But the reality appears much different. Human wants and desires increase and we find new ways to put people to work. One of the examples I’ve heard Marc give, that I really like, has to do with buildings. In the past, there used to be a guy whose only job was to shovel coal into a furnace. He physically heated the building. But eventually technology did away with that requirement and that job. Is that not progress? Or should we go back to that in order to put people to work?

    All this said, unemployment and job displacement are still serious issues for cities and countries. Which is why some people – including many capitalists – believe that minimum wages will not be enough going forward. We will also need to look at things like a “basic income guarantee” to redistribute wealth and ensure that, no matter what, everyone has a certain amount of money to live.

    At first blush, this doesn’t feel right. But I think it’s important to remain open minded and engage in discussion. Hopefully we can do a bit of that today in the comments below.

  • The middle class myth — a conversation with Marc Andreessen

    New York Magazine recently published a really great conversation between Marc Andreessen and Kevin Rose. Marc cofounded Netscape way back when, and now runs a venture capital firm.

    In addition to technology, the conversation touches on a bunch of different topics such as why it’s beneficial to be an optimist and why change can be difficult for people to accept.

    But they also hit on a number of broader economic shifts, such as the replacement of labor by machines, and the rise and decline of industrial production in the US. Here’s a snippet on that latter point:

    You’ve described the middle class of the 20th century as a myth.

    There are two middle classes. There’s the historical middle class—which is the bourgeoisie—starting in the, like, 1600s. This was the businesspeople and the traders, the merchants, the butcher, the baker, the general-store manager, the guy who was going off to China to go get silk and bring it back. Businesspeople.

    But in the 1940s something really significant happened, which is we bombed the rest of the industrialized world. And so the industrial base of Germany was obliterated. Japan was reduced to rubble. The rest of Continental Europe was bombed. England was bombed. The industrial base of the world was bombed. The one major industrial country that wasn’t bombed was the United States. So the United States became the monopoly producer of industrial goods.

    The army bombed the American middle class into existence?

    It was an accident of history. We had a window of opportunity which we took full advantage of. We had this window from basically 1945 to 1966, 1968, in which we were basically running unopposed. In that window, all kinds of wonderful things happened. One of the things that happened was the rise of this new idea of the middle class, which there was no historical precedent for, which was college-level wages for high-school-level education. As long as there’s no competition, it’s all well and good. The minute the Japanese show up, the minute the Germans show up, it just all falls apart.

    Click here for the full conversation. It’s an interesting read.

  • Car or smartphone?

    I was browsing my Tumblr feed this morning and I found a link to an interview with Marc Andreessen posted by Fred Wilson.

    I liked Marc’s response to a question relating to people’s love of cars and so I decided to post it to Facebook. I then received an email notification from Fred Wilson’s AVC blog titled “The New Freedom.” Turns out that he liked the quote as well. With so much love for this quote, I figured it was worth reposting here.

    The interviewer started a question to Marc with, “But people love their cars.” This is his response:

    “Ask a kid. Take teenagers 20 years ago and ask them would they rather have a car or a computer? And the answer would have been 100% of the time they’d rather have a car, because a car represents freedom, right?

    Today, ask kids if they’d rather have a smartphone or a car if they had to pick and 100% would say smartphones. Because smartphones represent freedom. There’s a huge social behavior reorientation that’s already happening. And you can see it through that. And I’m not saying nobody can own cars. If people want to own cars, they can own cars. But there is a new generation coming where freedom is defined by “I can do anything I want, whenever I want. If I want a ride, I get a ride, but I don’t have to worry. I don’t have to make car payments. I don’t have to worry about insurance. I have complete flexibility.” That is freedom too.”

    This ties in well with the return to city centers and downtowns. When people live in walkable neighbourhoods, cars can be more of a liability (car payments, insurance, parking, and so on). In fact, I think of them as a liability all around. Banks think of them as an asset, but I like my assets to increase in value.

    The other interesting point that Marc makes about cars is that supply and demand are not very well matched using the current model. If you only use your car to drive to and from work, it sits idle 90% of the time. This is where the sharing economy comes into play: How can people better optimize that 90%?

    My smartphone certainly doesn’t sit idle 90% of the time.