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: tech

  • Opinionated design

    This is a longstanding joke / criticism among nerds:

    Namely, it is the fact that the charging port for Apple’s Magic Mouse is on its bottom, meaning, when it’s being charged, you can’t use it. This would be annoying if you ignored the low battery warnings and let it die in the middle of working on something critically important. And so lots of people think it’s a ridiculous design. But is it? Here’s an excerpt from a recent post by John Gruber of Daring Fireball:

    Yes, with the charging port on the mouse’s belly, you cannot use it while it charges. There are obvious downsides to that. But those positing the Magic Mouse as absurd act as though Apple doesn’t know this. Of course Apple knows this. Apple obviously just sees this as a trade-off worth making. Apple wants the mouse to be visually symmetric, and they want the top surface to slope all the way down to the desk or table top it rests upon. You can’t achieve that with an exposed port.

    This is an argument that feels right. Apple is not the kind of company that makes arbitrary design decisions. And the deliberate decision they have made is that a more perfect design is more important than solving for the few instances where a user was negligent and forgot to charge their mouse. Gruber goes on to say, the “charging port placement is an opinionated design, not an absurd design.”

    But this then raises another question: Is opinionated design the right approach?

    For well over a century, one of the maxims of good design has been that form should follow function. In other words, the shape and design of an object should relate to its intended use. And so, in this instance, if “function” involves using the mouse while it’s being charged then maybe, by this criteria, it isn’t a good design. Then again, it is a wireless mouse. Maybe Apple doesn’t want you to use it while it’s charging.

    Let’s consider another design object that you touch with your hand: Walter Gropius’ famous door handle.

    Originally designed in 1922, the simple design consisted of a square bar and a cylinder. And its job was to communicate to you that, in order to use it, you should grab the cylindrical part, and not anywhere else. So on this level, the design was responding to its intended use, to our hands. Grab here. But is this truly an example of form following function? It’s debatable.

    Architect and professor Witold Rybczynski, who I would say generally isn’t a fan of modernism, has argued that it’s not. His critique of the overall Bauhaus movement — of which Gropius was the founder — was that it was actually a design school dedicated to “form follows predetermined aesthetics rather than form follows function.”

    In some ways, he’s right. You can tell when something came out of the Bauhaus, just as you can tell when something is from Apple. There’s a particular aesthetic and stubbornness to maintaining it. That’s why the Magic Mouse can’t be charged while in use and why Apple, equally famously, clung to the simplicity of a single-button mouse. Two just didn’t look as nice.

    But I see this as an honorable quality. Having an opinion is better than not having one. And there are lots of objects out there without one.

  • Toward a culture of innovation and entrepreneurship

    One way you could oversimplify the Canadian economy is to say that it revolves around three things: natural resources, real estate, and high immigration. (You can tell me I’m wrong in the comments below.) More recently, we’ve also been touting the growing number of tech workers in our cities. But in some ways this is a bit of a vanity metric. 

    I think of it in terms of two different categories of workers. There are tech workers that are the result of foreign companies opening satellite offices to take advantage of the weak Canadian dollar and our more enlightened immigration policies. And there are tech workers that are the result of Canadian-based companies innovating, growing, and needing more talent. Think Shopify.

    The former situation is not at all bad, but a lot of the value is going to accrue outside of the country. Whereas in the latter situation, we get to be the principal recipients and we get all of the positive externalities associated with innovation and entrepreneurship. One of these is a powerful compounding effect. Successful startups tend to beget even more new companies. 

    So even though I work in and benefit from one of the three things that I mentioned at the beginning of this post, I believe that we need to be much better at encouraging a culture of innovation and entrepreneurship in Canada. We’ve become too complacent.

    This is a critically important topic that we don’t seem to be talking about nearly enough. So I plan to do more of that here on the blog.

  • Hong Kong wants to be a digital asset hub

    Today, June 1, is an important day for crypto and Hong Kong. The city just lifted its crypto ban and is once again allowing retail trading.

    Now, there’s a lot of speculation about what this will ultimately mean for the city and for Asia, given that Beijing is a crypto hater (all crypto transactions have been banned in China since 2021).

    Some think that this could be a leading indicator for a softening Chinese position on crypto; while the cynics think that this reinstatement could be short lived given that Beijing remains a hater.

    Whatever the outcome, I think it is noteworthy that Hong Kong is trying to reestablish itself as a global hub for digital assets and that it believes crypto is here to stay.

    It is also a good reminder that, even though the herd has moved onto AI, there’s still important work happening beneath many of the mainstream headlines.

    My own conviction and activities around crypto haven’t changed over the last year, and so I’m happy to see cities like Hong Kong working to reassert themselves in this space.

  • Thoughts on Opendoor Exclusives

    My most recent post about Opendoor, the so-called iBuying company, is about how it wants to become the “transaction layer for homes.” What that means is they would like to start facilitating third-party transactions between buyers and sellers, and move away (either partially or completely) from actually owning homes for a period of time.

    The company is still trying to sell homes that it purchased in Q2-2022, which, as we all know, was a very different kind of housing market. So by doing this, Opendoor would be both reducing the market risk that it takes on and making its business model less capital intensive.

    Knowing this, I actually think that “iBuyer” is the wrong moniker for their business. As I see it, the long-term objective is not to just be an iBuyer of homes. The objective is to ultimately facilitate transactions in a capital efficient kind of way. The point of iBuying is/was to seed their two-sided marketplace with sellers.

    As we have discussed before, two-sided marketplaces usually always have a chicken-and-egg problem. No sellers equals no buyers, and vice versa. So you have to figure out a clever way to attract one side. Of course, now that Opendoor has sellers, the company can start to aggregate the demand side (i.e. buyers). And that is exactly what it is doing with Opendoor Exclusives.

    Exclusives works like this:

    • The inventory consists of “off-market” homes that have yet to be listed on MLS
    • The homes are discounted about 2-4%
    • They are available for 14 days
    • You can’t negotiate the price — it’s first come, first served
    • If your appraisal comes in lower, Opendoor will price match
    • And finally, Opendoor will not pay any buyer commissions (which is reflected in the above discount)

    As I understand it, if the home doesn’t sell, it then gets listed on MLS and all of the normal terms and practices would apply. But before that happens, the key objective is to facilitate a quick transaction in one of two ways.

    The first way is for the seller to request an offer from Opendoor’s network of buyers. In this scenario, Opendoor never needs to own the home or perform any improvements (which is usually what it does when it iBuys). It is an intermediary earning some sort of take.

    The second way is for Opendoor to do its usual thing and make an instant offer to buy the home. But here’s the thing. With enough buyers on its platform and by creating a sense of urgency (hey, here’s a lower price!), presumably the idea is that it may never need to close on a number of these homes. It just needs to find another buyer within 14 days.

    If it works, this could be an interesting business.

  • The end of free money

    Tech analyst Benedict Evans — who has 175,000 subscribers to his weekly newsletter — has just published his big annual presentation about “what matters in tech?” This year’s is called “The New Gatekeepers.” And as is normally the case, he explores a number of macro trends that I think will interest many of you, even if you aren’t in or interested in the tech industry. To check it out, click here.

  • Opendoor wants to be a transaction layer for homes

    We have spoken a lot over the years about Opendoor. And for a period of time, iBuying seemed like a very good idea. Zillow go into it. Redfin got into it. Everybody was iBuying. But then this year everybody started losing money, mostly due to algorithms that could not contend with falling prices.

    It turns out that being a market maker for homes can be a tough business because there is a lag between when you buy the home and when you hope to sell it. And so right now, few people want to be an iBuyer. Zillow no longer does it. Redfin no longer does it. And Opendoor’s stock is, at the time of writing this post, down 87.19% YTD.

    It is pretty easy to be pessimistic on this space, and that pessimism may be warranted. Though it may not be. My thinking has always been as follows. The process of buying and selling a home will eventually move online. The industry is ripe for change and there is no debating that. The real question is: how the hell do you do it? Everybody, including me in my late 20s, has tried.

    Two-sided marketplaces are tricky, because you always run into a chicken-and-egg problem. If you don’t have buyers, no seller is going to bother with your real estate marketplace. And if you don’t have sellers (i.e. homes), no buyer is going to bother with your real estate marketplace. So generally speaking, the way to build a marketplace is to start with one side, somehow get them on and using the platform, and then open it up to the other side.

    And this is exactly what iBuying hopes to do. Today it is largely a tool for sellers. It is a tool that says, “I will give you instant liquidity for your home so you don’t have to worry or care about who might actually buy it.” This is, of course, convenient for sellers, which is why people have been using it; but it is capital intensive and, as we have seen this year, it transfers some risk to the iBuyer.

    In the world of Opendoor, they call this a first-party (1P) transaction. It is them buying directly from sellers. But the larger vision is for Opendoor to become more of a transaction layer and instead just facilitate third-party (3P) transactions. This is currently being done through Opendoor Exclusives and the objective here is to match buyers and sellers directly, so that Opendoor can avoid taking on the risk of actually owning homes for a period of time.

    Will this work? I don’t really know. But I do think it is exciting and I do think it is the way to think about what Opendoor is ultimately trying to do with their business.

    Reminder: I am long $OPEN

  • Is crypto just snake oil?

    As I understand it, databases are pretty important to technology companies. Here is an excerpt from a recent post by Albert Wenger talking about why he and his company (Union Square Ventures) believe that web3/crypto is going to unlock new value for our society:

    As a first approximation all the big powerful internet companies are really database providers. Facebook is a database of people’s profiles, their friend graphs and their status updates. Paypal is a database of people’s account balances. Amazon is a database of SKUs, payment credentials and purchase histories. Google is a database of web pages and query histories. Of course all of these companies have built a great deal more over time, but operating a database has stayed at the core of why they are powerful. Only they get to decide who has permission to read and write to this database and which parts of it they get access to.

    So how will web3 be any better? Well blockchains, at least right now, are poorer performing databases in almost all dimensions, according to Albert. And this is one of the reasons why they’re being so quickly dismissed by most people. But they do have one key advantage: permissionless data. No single entity controls a blockchain database. More from Albert:

    It is difficult to overstate how big an innovation this is. We went from not being able to do something at all to having a first working version. Again to be clear, I am not saying this will solve all problems. Of course it won’t. And it will even create new problems of its own. Still, permissionless data was a crucial missing piece – its absence resulted in a vast power concentration. As such Web3 can, if properly developed and with the right kind of regulation, provide a meaningful shift in power back to individuals and communities.

    All of this said, I do agree with Fred Wilson and others that the web3/crypto enthusiasts on Twitter these days are getting to be a bit much. For obvious reasons, everyone is trying to pump the crypto stuff that they own. And it can certainly feel like shills trying to sell snake oil. But as Fred pointed out today, this isn’t the first time that we’ve been here:

    It reminds me of the early days of web2 in 2001/2002/2003, when we started USV. That was also a time of great cynicism. We almost did not get our first fund raised. Nobody was buying the story we were telling. But of course, that story turned out to be true. And I am confident this one will too.

    If/when this story does turn out to be true — and I believe it’s a when — I think we will see it permeate through all sectors of the economy, including how we plan, build, and operate our cities. Of course, this will probably take decades and much of what will happen is unknowable right now. But it’s pretty hard to ignore that this was a pivotal year for the crypto space.

  • Three steps to the future

    Each year, tech analyst Benedict Evans publishes a “big presentation” on the macro trends in the tech industry. This year’s presentation is now out (link here) and it’s called “Three Steps to the Future.” Not surprisingly, crypto, web3 and the metaverse feature prominently in his exploration of what tech might look like by 2030 (obligatory market cap chart shown above). But there’s also a lot about ecommerce, logistics, TV/content, and a number of other topics and industries. The back half is filled with some great charts and I think that many of you will find it interesting.

  • All-in-one real estate transactions

    Opendoor just published its 2021 year in review.

    In it are a few interesting figures about the housing market in the US. According to a recent survey that the company did, the average first-time buyer made 10 offers before successfully securing a home last year. The percentage of all-cash offers is also up to 25% from 15% a year ago. What is clear is that demand is currently outstripping supply. Based on these figures, housing supply in the US is at the lowest it has been since the early 1980s.

    But of course, the real point of the year in review was to talk about all of the great things that Opendoor has been doing to digitize the real estate industry. Perhaps the most interesting is its focus on creating “all-in-one real estate transactions.” What this aims to do is consolidate the now separate processes of selling a home, buying a new home, and obtaining financing, into one digital workflow. Whether or not Opendoor is the one to do it, I believe that this is the future.

    And what we have learned from other industries (that have successfully digitized) is that when you make something super easy, people end up doing a lot more of it.

    Full disclosure: I’m still long $OPEN.

  • Decentralization, centralization, and new frontiers

    In this recent post by Naval Ravikant, he argues that innovation seems to like two things: decentralization and a frontier. He starts by giving the examples of more decentralized states (i.e. smaller federal governments) and the Wild West. The American frontier was, as you know, wild. But it was also a place of great innovation.

    Naval then goes on to talk about the pendulum that tends to swing between centralization and decentralization. And in the world of technology, the last decade has been one of centralization (big companies). But this pendulum is much broader. Cities, as we have talked about before on this blog, are constantly in tension between centralizing and decentralizing forces.

    COVID was a powerful decentralizing force for cities. Everything was closed and we were all supposed to stay home. And so most/all of the benefits of centralizing in a city were suddenly, yet temporarily, turned off. Many people naturally decentralized. But when the dust finally settles, I highly doubt it will be as dramatic as most people initially thought.

    We know that cities and urban density encourage innovation. That’s why “unicorns” tend to overwhelmingly originate in big cities. But here’s the thing: this is a form of centralization. The fact that cities even exist in the first place tells us that their centralizing forces are winning out over the decentralizing ones.

    So how do we reconcile this with Naval’s argument that new frontiers and decentralization are actually what are needed for innovation? I agree wholeheartedly that one of the key innovations with crypto, for example, is that it is decentralized and permissionless. But what does this ultimately mean for cities and our built form?

    Does it encourage a similar sort of decentralization to happen? Or is the irony that decentralized technologies actually still thrive in centralized urban places? We may all be online buying NFTs, but we still want to get together in person to show them off and exchange ideas.