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.
Jeff Bezos published his annual letter to shareowners this week. You can find it here. And as is his usual practice, he has attached his 1997 letter to shareholders at the bottom of it. This is his “Day 1” and he clearly likes the reminder.
I was somewhat surprised to learn that 58% of physical gross merchandise sales on Amazon are now by independent third-party sellers. This number has been steadily increasing almost every year since 1999.
And this is despite the fact that first party sales — products sold by Amazon — have grown at a compound annual growth rate (CAGR) of 25% during this same time period. Amazon excels at the fulfillment component and you can have them do that for you as a third-party seller.
There are a number of other interesting facts sprinkled throughout the letter, but I particularly liked the bits on “intuition, curiosity, and the power of wandering.” Here is an excerpt on how Amazon is working to scale the size of its failures:
As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.
A lot has already been said and written about accepting failure in life and business. Nobody wants to fail, but it can happen when you’re trying to “imagine the impossible.”
The two nuances here are that failures should scale along with the company. And that “large-scale risk taking” can actually be construed as a service. It might mean that the impossible becomes possible.
Fred Wilson made an interesting remark in his recent post about the current “IPO bonanza” that is taking place in the tech space. He is, of course, talking about the recent IPO of Lyft, the recent S-1 filings from Pinterest and others, and the expected filings from Uber, Airbnb, and so on.
After listing the benefits of going public, he went on to say that this bonanza will surely also mean that it is going to become even more unaffordable in the Bay Area. Part of this is perhaps self-serving, since he operates a VC firm out of NYC. (Take your money and move to NYC.)
But the data suggests that there is truth to this.
When Twitter when public in 2013, it was estimated that it created some 1,600 millionaires. This is great for the local startup ecosystem as many of these beneficiaries could go on to found their own companies and create a whole new batch of jobs. The money gets recycled.
But what does it do to the local housing market — especially a supply-constrained one like that of the Bay Area where it is difficult to build?
In 2018, Barney Hartman-Glaser, Mark Thibodeau, and Jiro Yoshida penned a paper called, Cash to Spend: IPO Wealth and House Prices. In it, they looked at the impact of IPOs on local home prices in California from 1993 through to 2017.
What they found, among other things, was a “positive and significant association between local house price changes and firms going public.” The price increases were also found to be the greatest the closer you get to the headquarters of the firm that just went public.
If you’d like to download a copy of the paper, you can do that here.
MIT Senseable City Lab and the World Economic Forum’s Global Future Council on Cities and Urbanization are hosting a conference next month on the impact that artificial intelligence is having on our cities. Here is a summary of the event:
As AI (Artificial Intelligence) becomes ubiquitous, it transforms many aspects of the environment we live in. In cities, AI is opening up a new era of an endlessly reconfigurable environment. Empowered by robust computers and elegant algorithms that can handle massive data sets, cities can make more informed decisions and create feedback loops between humans and the urban environment. It is what we call the raise of UI (urban intelligence).
The 2019 Forum on Future Cities, organized by MIT Senseable City Lab and the World Economic Forum’s Global Future Council on Cities and Urbanization, will focus on four aspects of the UI transformation: autonomous vehicles, ubiquitous data collection, advanced data analytics, and governing innovation. Panelists include mayors, academics, senior industry leaders and members of civil society to explore such topics from different points of view, highlighting the scientific and technological challenges, the critical collective decisions we as a society will have to make, and the exciting possibilities ahead.
The forum takes place on April 12th in Cambridge, Massachusetts. And since it looks to deal with many of the topics that we talk about on this blog, I figured that some of you might be interested in attending. If so, you can register here.
This recent post by Sam Altman (of Y Combinator) on how to achieve outlier success was just passed around our office. And it’s so fucking good that I decided to regurgitate it here on the blog by listing all 13 of his thoughts along with some of his most salient points. All of the words below are his (not mine), but most of his words are missing. I wanted to make a more condensed version so that you could easily print out this post and affix it to your desk. I am about to do that. Thanks for a great post, Sam.
1. Compound yourself
I think the biggest competitive advantage in business—either for a company or for an individual’s career—is long-term thinking with a broad view of how different systems in the world are going to come together. One of the notable aspects of compound growth is that the furthest out years are the most important. In a world where almost no one takes a truly long-term view, the market richly rewards those who do.
2. Have almost too much self-belief
Self-belief is immensely powerful. The most successful people I know believe in themselves almost to the point of delusion. Cultivate this early. As you get more data points that your judgment is good and you can consistently deliver results, trust yourself more. If you don’t believe in yourself, it’s hard to let yourself have contrarian ideas about the future. But this is where most value gets created.
3. Learn to think independently
Entrepreneurship is very difficult to teach because original thinking is very difficult to teach. School is not set up to teach this—in fact, it generally rewards the opposite. So you have to cultivate it on your own.
4. Get good at “sales”
All great careers, to some degree, become sales jobs. You have to evangelize your plans to customers, prospective employees, the press, investors, etc. This requires an inspiring vision, strong communication skills, some degree of charisma, and evidence of execution ability.
Getting good at communication—particularly written communication—is an investment worth making. My best advice for communicating clearly is to first make sure your thinking is clear and then use plain, concise language.
5. Make it easy to take risks
It’s often easier to take risks early in your career; you don’t have much to lose, and you potentially have a lot to gain. Once you’ve gotten yourself to a point where you have your basic obligations covered you should try to make it easy to take risks. Look for small bets you can make where you lose 1x if you’re wrong but make 100x if it works. Then make a bigger bet in that direction.
6. Focus
Once you have figured out what to do, be unstoppable about getting your small handful of priorities accomplished quickly. I have yet to meet a slow-moving person who is very successful.
7. Work hard
I think people who pretend you can be super successful professionally without working most of the time (for some period of your life) are doing a disservice. In fact, work stamina seems to be one of the biggest predictors of long-term success.
8. Be bold
If you are making progress on an important problem, you will have a constant tailwind of people wanting to help you. Let yourself grow more ambitious, and don’t be afraid to work on what you really want to work on.
9. Be willful
People have an enormous capacity to make things happen. A combination of self-doubt, giving up too early, and not pushing hard enough prevents most people from ever reaching anywhere near their potential.
10. Be hard to compete with
Most people do whatever most people they hang out with do. This mimetic behavior is usually a mistake—if you’re doing the same thing everyone else is doing, you will not be hard to compete with.
11. Build a network
Great work requires teams. Developing a network of talented people to work with—sometimes closely, sometimes loosely—is an essential part of a great career. The size of the network of really talented people you know often becomes the limiter for what you can accomplish.
12. You get rich by owning things
The biggest economic misunderstanding of my childhood was that people got rich from high salaries. Though there are some exceptions—entertainers for example —almost no one in the history of the Forbes list has gotten there with a salary.
You get truly rich by owning things that increase rapidly in value.
13. Be internally driven
The most successful people I know are primarily internally driven; they do what they do to impress themselves and because they feel compelled to make something happen in the world. After you’ve made enough money to buy whatever you want and gotten enough social status that it stops being fun to get more, this is the only force I know of that will continue to drive you to higher levels of performance.
Earlier this month it was announced that the on-demand electric scooter and bike startup, Lime, had closed a $310 million series D round. This values the 18-month old company at around $2.4 billion and brings its total raise to $867.1 million. For comparison, Bird — its main competitor — has raised around $400 million.
These numbers should tell you about the kind of growth that the “micromobility” startup is seeing. They are now in 15 countries and its riders have taken over 34 million trips. In the last 7 months alone, the company reports that it has seen a 5.5x increase in ridership. They are seen as an affordable last-mile solution. Supposedly 1/3 of its users report an income of less than $50,000 per year.
Lime entered the Canadian market last fall via Waterloo. They have yet to expand anywhere else, though I suspect we’ll see them in Toronto this spring/summer. One of the barriers is that their scooters (with airless tires) aren’t equipped to deal with snow, so they currently pack them up during the winter months.
This is in addition to the regulatory challenges they are facing in cities all around the world. But like Uber, I am sure there is a compromise to be had.
Bloomberg recently published a good summary of Zillow’s business and their move into algorithm home buying and flipping. (They are trying to avoid the “flipping” moniker because of the negative connotations associated with it.)
Zillow started buying homes directly from owners last spring. They charge the seller between 6-9%, so more than using a typical agent, but inline with their competitors. There’s clearly a segment of the market willing to pay a premium for the added convenience.
The thinking used to be that discount brokerages were the way to disrupt the housing market. This is the opposite strategy.
Interestingly enough, Zillow felt that they needed to make this pivot with their business model. It used to be about selling ads. They were definitive in that they were not a disruptor of real estate agents.
But now:
If getting an offer from an iBuyer became a crucial step in the selling process, they worried, Zillow could lose its audience and its advertising base. What’s more, market researchers kept finding that consumers said they’d pay a modest premium to get a cash offer. “People expect to press a button and have magic happen,” says Rascoff, a 43-year-old former Expedia executive who’d earlier started the travel search engine Hotwire, which he sold to Expedia for $700 million. Getting into the business of buying homes directly, Rascoff says, was “the only way to remain in a leadership position.”
Here is a map of the companies in this particular space and the cities in which they operate:
Some investors aren’t sold on this strategy and have begun short selling Zillow (according to the Bloomberg article). I keep getting the sense that there’s a greater end game in the cards here. It is about building up A (algorithmic home buying and flipping) in order to unlock B.
But what’s B — a new end-to-end transactional model for the housing market?
As I am sure you have all heard, there’s a lot of debate in New York right now (city and state) about whether they should reject Amazon’s decision to open up a new headquarters in Queens.
Urbanist Richard Florida has been arguing that one of the richest companies in the world shouldn’t be receiving taxpayer subsidies and that Amazon should do the right thing here. They should open up in New York but without any inducements.
As a counter argument, Kenneth Jackson, professor of history at Columbia University, recently opined that this is actually business as usual. American cities have a long history of competing for companies because the benefits outweigh the costs over the longer term.
Here is an excerpt from his op-ed in the New York Times:
They are right about one thing. It is absurd that any city would agree to such a deal. But this is how the game is played. Paying companies to relocate has been the American way since 1936, when Mississippi established the nation’s first state-sponsored economic development plan. Under that plan, since followed by many other jurisdictions, cities and states agreed to pay companies to relocate by promising them new factories and low or nonexistent taxes. With those inducements, numerous businesses relocated in the decades after World War II, usually from the union-dominated Northeast and Midwest to the business-friendly South.
Perhaps for obvious reasons, I am interested in how important issues get debated. I have written before about how I think the community engagement process for new developments is largely broken. I think it naturally incents certain kinds of feedback.
Recently, I’ve been playing around with an online platform called Kialo. They call themselves “an easy to use, yet powerful tool to engage in thoughtful discussion, understand different points of view, and help with collaborative decision-making.”
The site works by trying to create a structured hierarchy of pros and cons around debatable questions. You participate by making claims (supported by links). Duplicate claims are neatly grouped together. And unthoughtful suggestions are moderated out.
The UI looks like this (top level question shown):
But you can then drill down into specific claim groupings (note the org chart looking graphic at the top):
I’m not yet convinced that it creates the “collaborative reasoning system” that they are after (maybe because I haven’t used it enough). But I do really appreciate the structure and civility that they are trying to introduce to topics that are often vehemently debated.
I just finished watching this Bloomberg video on Shenzhen, called “Inside China’s High-Tech Dystopia.” The video obviously has a particular point of view, but there are parts of it that I wasn’t overly fussed about, such as the push toward increased factory automation. Jobs evolve. We used to have elevator operators. Now we don’t. Presumably those people found other empoyment.
What stood out to me was Shenzhen’s solution to jaywalking. They use cameras, facial recognization software, and a “wall of shame” to fine and then discourage people from illegally crossing a street ever again. One guy in the video explains how he once had the fine automatically withdrawn from his WeChat account. No authorization required. And it happened within seconds following the infraction.
That feels unsettling. (If you only want to watch the jaywalking part, skip ahead to 5:35 in the video.)
This Toronto Life article about a 32-year-old who has managed to buy 10 homes in the city is very Toronto Life. At a time where many young people are struggling to afford housing, here is a millennial who has bought 10 of them (albeit with some partners). The underlying message: You’re not working hard enough.
I am fairly certain Toronto Life writes these sorts of articles because they know they’ll enrage people. As Facebook has taught us over the last few years, getting people pissed off is good for engagement. And engagement is what drives advertising-based businesses.
One of the best ways to manipulate attention is to appeal to outrage and fear, emotions that increase engagement. Facebook’s algorithms give users what they want, so each person’s News Feed becomes a unique reality, a filter bubble that creates the illusion that most people the user knows believe the same things. Showing users only posts they agree with was good for Facebook’s bottom line, but some research showed it also increased polarization and, as we learned, harmed democracy.
If you take a look at the Twitter conversations surrounding the above Toronto Life article, you’ll see the reactions you would expect: Troll article. Yeah, but how much debt has he taken on? He had help from wealthy friends. Here’s how a 32-year-old is eroding housing affordability in Toronto.
I appreciate all of this, but I will never understand the need to shit on other people because of their successes, regardless of whether they are self-made or were born with a competitive advantage. Billionaire isn’t a bad word in my books. I am a first generation real estate developer, but I wouldn’t be at all upset if my great-grandparents had decided that buying land in Toronto was a good idea.
Here is a guy that moved to Canada for University. Lived in a basement with cockroaches after leaving his first job after school. Took some risks. And saved his money instead of doing bottle service at the club on the weekends. I can respect that.
But again, these sorts of articles are bound to make a lot of people cranky. And Toronto Life knows that.
