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.
After becoming a real estate developer, you might know that I completed an MBA with a focus on innovation and entrepreneurship (which happened by default as a result of the electives I ended up being interested in).
And finally, you might know, given the content of this blog and my startup history, that I have a significant interest in technology. More specifically though, you might know that my interest is in figuring out how technology will continue to infiltrate and impact “non-tech” industries such as real estate.
But what you might not know is how I even ended up in architecture and real estate in the first place. Unlike a lot of people who seem to have grown up wanting to be an architect – perhaps because they had a relative who was one – I didn’t decide to study architecture until a bit later on.
Growing up my primary interests were: art and computers.
During high school, my art teachers used to tell my parents that I was going to be an artist. And my computer teachers used to tell my parents that I was going to be a computer geek – or maybe they said computer scientist.
Maybe it had to do with timing and the emergence of the commercial internet in the 1990s, but computers sort of won out during that point in my life. I spent a lot of time building them from scratch, playing with software, and asking my mom not to pick up the phone because I was literally dialed-in to the internet.
So when it came time to enrol in university, I fairly effortlessly decided on computer science. It just seemed to make sense. But after about a year I realized that it wasn’t for me. I didn’t love programming like my classmates did and the thought of doing it for a living scared me.
At the same time, I felt like I needed to feed the artist in me. I wanted something both artistic and technical. So I decided to drop out of computer science and give architecture a try. It just seemed like the perfect marriage of my interests.
I immediately fell in love with architecture. And I spent the next 7 years studying it across 2 degrees.
But during that time, two things hit me. First, I came to the realization that real estate developers are the ones who really have the most say in terms of how our cities are built. And second, that technology was having a massive impact on business and life.
This told me that design alone wasn’t going to be enough. I also needed to engross myself in real estate, finance, business, and technology. So that’s what I set out to do. And I really enjoyed it. On the technology side, it felt like I was coming full circle in a way.
But today, I feel a bit like a 3 legged stool. There’s the design leg. The real estate/business leg. And the technology leg. And oftentimes I feel like life would be a lot simpler if I could just balance on one of those legs – instead of trying to stand on all three. But that’s simply not me.
These are my passions and I need all of them to stand-up.
Venture capitalist Chris Dixon recently published an interesting post called, Two eras of the internet: pull and push. In it, he describes two patterns that have emerged within the internet over the past decade and a half.
Pull (2000s):
Pull is when you are seeking information, usually an answer to a question. You want to know the closing time of a restaurant, the description of a hotel where you are thinking about staying, the details of an historical event you heard about, etc. You go to your computer and pull the information. The killer app for pulling information was Google.
Push (2010s):
Push is when you are using the internet in a more passive way and content comes to you. The killer app for push is social networks, the most popular being Facebook. Information is pushed from user to user via likes, shares, tweets, etc. People tend to push things they find funny, interesting, moving, outrageous, etc.
Now let’s think about this for a second, because it’s a pretty significant change.
Google’s mission is to organize the world’s information. And they have certainly made it easier for us to get the information we want. Instead of physically searching for something, you just type in a few keywords and it pops up. But, it still involves us deciding we want something and then pulling the information.
What’s fascinating to me about push is the idea that content and information comes to you. And it’s one of the reasons that I’ve always found Foursquare more interesting than Yelp – even though Yelp is far more popular as a tool to help you find somewhere to eat, drink and so on.
When I walk into a restaurant or bar now, oftentimes I’ll see a Foursquare notification popup on my phone showing me a tip that somebody has left: “Try the meatballs – they’re to die for”. I didn’t search for that. I didn’t ask for a recommendation. But Foursquare knew where I was and presented me with that information.
Now, there are obviously potential downsides to constant interruption, but let’s focus here on the opportunities. How could these same principles to be applied to other industries such as, say, real estate?
I think there’s a pull and push parallel.
Today MLS operates in a way like a search engine for homes. You decide you might be interested in buying a home and so you go online and start pulling listings.
Of course, the vast majority of people also work with a real estate agent. And in a way they’re kind of like your push. They get to know you, they figure out what you’re looking for, and then they push relevant listings and information to you.
And maybe that’s why nobody has killed off real estate agents – despite the numerous attempts. Everybody has been focusing on new pull platforms (listing platforms) as opposed to a new push platform.
Who knows.
But I think it would be naive to think that these emerging push platforms won’t reach far beyond social media.
Earlier this week Richard Florida published on article on CityLab talking about the relationship between tech innovation (in cities) and inequality. Specifically, the article deals with the correlation between venture capital investment and a variety of factors, such as monthly housing costs, wage and income inequality, and so on.
The intent of the piece was to address the growing backlash against tech workers – in places like San Francisco – who have become the symbol for the growing gap between the rich and poor.
The strongest correlation appears to exist between venture capital investment and housing costs. As the amount of venture capital goes up, so do housing costs – which probably shouldn’t surprise you. The rich start outbidding the poor for housing. Note: The two outlying dots at the top right, in the graph below, are Silicon Valley and San Francisco.
But when it comes to inequality, the relationship isn’t so clear. For wage inequality, there seems to be a relationship. But for the broader income inequality measure, the relationship is fairly weak. Here’s the graph:
So this is not as black and white as it might seem. Regardless, Florida ends the piece with the following statement (that I think is spot on):
It’s time to stop pointing fingers and get on with the far more important task of harnessing the urban tech revolution to create a new urban middle class and a more inclusive urbanism—one in which many more workers and residents can participate, and one from which many more can benefit.
The answer is not to stop innovating. That would be counterproductive. We should be be encouraging innovation, but at the same time figuring out how best to harness it for society as a whole.
Tomorrow, I’ll touch a bit more on how we might go about doing that. I have a post planned that I think will tie in really nicely to this discussion. So stay tuned.
Yesterday Opendoor.com finally launched their product in Phoenix. If you’re a regular reader of Architect This City, you might remember that back in July of this year I wrote about how they had just raised $10M of funding to make selling your home as easy as a few clicks.
Well, since then, I’ve been following them like a hawk. I had all the founders on Twitter notification (so I got notified every time they tweeted) and I was eagerly anticipating their launch.
Now that they’ve launched, we have a much better idea of how their business model is going to work. I say “better idea” only because there’s still portions of it that are a question mark for me.
In any event, Opendoor basically provides instant liquidity to homeowners. You go on, tell them about your home, and they then make you an offer to buy, which looks like this and lasts for 3 days. The offer they make you is calculated using comparable sales and adjustments based on your home’s unique characteristics.
Upon accepting their offer, they then schedule a home inspection (at their cost) to confirm your home’s condition. Once this is done, you just select your move out date and Opendoor handles the rest. The fee for all this is 5.5%, which the company claims is less than the 6% that realtors typically charge (this would be high for Toronto).
After buying your home, Opendoor plans to turn around and resell it.
What this reminds me of is a “bought deal.” In the world of investment banking, a bought deal is when the bank itself agrees to buy the entire offering of a particular security, as opposed to going out to the market and trying to raise the money. The advantage to the company (offering the securities) is that there’s no financing risk. They know they’re going to get their money. But it usually means the company gets a lower price.
So what I wonder, is if this is what’s going to happen here. Since Opendoor is effectively taking on the selling risk, does that mean their offers will be lower? Or are all their costs built into that 5.5% and that’s truly their core business model? I’m sure some of this will surface in the coming weeks.
I do, however, think they are smart to be focusing on the supply-side of the marketplace and offering virtually perfect liquidity to homeowners. Real estate is a unique asset in that it’s difficult to bring supply to the market. And so if control the supply-side, I think you have a pretty good shot at controlling the market as a whole.
This Tuesday evening at 630pm, WORKSHOP – which is a design studio, gallery, and retail shop located in Yorkville, Toronto – will be hosting a panel discussion titled: What is Smart Now?
On the panel will be a building scientist, a computer scientist, and two architects. The moderator will be Larry Wayne Richards, who is Creative Director of WORKSHOP and the former dean of the Faculty of Architecture, Landscape, and Design at the University of Toronto. He was dean when I was completing my undergraduate degree and is one of my favorite people in the world of Toronto architecture.
Here’s a bit more on the panel:
For more than half a century, visionaries and companies such as Monsanto, Hewlett-Packard, Microsoft, and Samsung have promoted the concept of technologically smart homes with highly integrated, interactive systems. However few of these homes have actually been realized, leaving us to wonder why.
Meanwhile, architects, builders, and home owners have become aware of the advantages of being smart in terms of energy efficiency and sustainability, from using common sense to selectively employing high-tech.
But now, with the digital realm and software advancing rapidly, will sophisticated smart home systems merge with recent advances in high performance materials and energy-efficient construction, making “totally smart” (and affordable) homes commonplace? Will we finally be living in the magical future that was imagined 50 years ago? And what are the implications for architects and architectural education?
And here are the panelists:
PAUL DOWSETT, Architect and Founding Principal, Sustainable TO
SRINIVASAN KESHAV, Professor of Computer Science, University of Waterloo
TED KESIK, Professor of Building Science, University of Toronto
JANNA LEVITT, Founding Partner, LGA Architects, Toronto
LARRY WAYNE RICHARDS (Moderator), Creative Director, WORKSHOP
Given the current “Internet of Things” trend and the fact that software is creeping into so many non-tech fields, such as housing, I think this is a really timely discussion to be having. I also think it’s critical for these kinds of conversations to be cross-disciplinary. There are infinite opportunities in the housing market for people who are able to think in that way.
If you’d like to attend, click here to sign up. It’s free and open to the public. WORKSHOP is located in the lower concourse level of 80 Bloor Street West.
I was rushing to get to a real estate forum dinner last night and so instead of walking — which is normally what I would have done — I decided to grab an UberX. As some of you might be aware, I like UberX. It’s convenient to use. And the fares are cheaper than regular taxis. So why wouldn’t I use it?
But last night I got an extra treat. A guy named Mike picked me up in his Tesla Model S:
According to Mike there are two of these “Easter eggs“ in the UberX Toronto fleet, which I was also told is now up to hundreds of cars. So it’s not everyday that you’ll get picked up in a Tesla.
If you’ve never been in a Tesla, the first thing you’ll likely notice is the absolutely epic screen that sits in the dash. Most people’s laptops don’t have a screen this big. It’s gorgeous.
But there are a bunch of small details that also standout. For example, the door handles sit flush with the door until they’re needed. Here’s a video of how they work:
But the real question that is probably on your mind is: Why is some guy with a Tesla driving around Toronto offering rides via UberX? That was certainly one of the first questions I asked him after I got in the car.
And the answer is that he does it for fun.
He actually owns a medical clinic in Markham, but comes downtown on the evenings and weekends to drive around and meet new people. In fact, he called it the “best networking tool on the planet.” Because as soon as he picks people up in his Tesla, they immediately take him seriously and want to have a conversation. That has translated into business relationships and even invites to parties. As in, he drives a group to a party and they ask him to come in — which he said he often does.
If he really took it seriously and did it full-time, he figures he could make around $40,000 – 50,000 a year driving for UberX. And I believe that’s close to what a regular taxi driver would make. But again, that’s not why he’s doing it. Isn’t it interesting how things change?
One evening this past spring I was leaving a Rotman School event at Liberty Grand on the west side of Toronto. There aren’t a lot of taxis coming through this part of the city, so I figured I was going to have to wait while I hailed one from my phone. But as luck would have it, one happened to be pulling up just as I walked out of the hall.
As he drove up and rolled down the window, I told him that I was going to the St. Lawrence Market area and that I needed to pay by credit card (I was trying to be a nice guy and avoid the inevitable fight when he was dropping me off). He responded by saying, “My machine is broken. Can’t you pay with cash?” I told him, “No, unfortunately I don’t have any cash on me. I need to pay with credit card.” He then rolled up his window and drove up closer to the entrance of the hall.
Faced with this scenario, I did what most people would probably do nowadays: I pulled out my phone so that I could hail either an Uber or a Hailo cab (I’m sad that Hailo has since left the North American market). I decided on Hailo (it was cheaper until UberX came along) and ordered a car.
But within a few minutes, the same taxi with the broken credit card machine circled back around, rolled down his window, and told me that his machine was now working and he would take me to the St. Lawrence Market. Knowing exactly what had happened, I said to him, “Wooooow, that’s funny that within the span of a few minutes your machine has magically started working again.” He wasn’t happy with that response.
Now, we all know why he didn’t want to take my credit card. He didn’t want to pay the fees and he wanted the cold hard cash. And who can really blame him for wanting to maximize his profits. But for the end user, this experience sucks. When it’s 2 in the morning and all you want to do is go home to bed, you don’t care about the few dollars he’s trying to save. You just, want, to go, home.
And that’s one of the reasons why Uber (and previously Hailo) is having such a huge impact on the market. Even before UberX arrived (the cheaper alternative), lots of people were more than willing to pay the Uber premium. And they continue to pay their controversial surge prices. But that’s because the experience is so much better than what’s offered today.
We all know that Uber is under a lot of fire for what they do, but Toronto mayor Tory is 100% right in saying that ridesharing and peer-to-peer taxis are here to stay. Toronto may be seeking a court injunction to stop the service in this city, but I would agree that it’s likely going to be a big waste of money. The cat is already out of the bag.
What’s happening here is no dissimilar to what happened with Napster. A court order may have forced the company to shut down, but it didn’t maintain the status quo for the music industry. That industry went, and continues to go through, a lot of change. So a better option, would be for everyone to sit down together and figure out what the future of the taxi industry is going to look like. Because I can guarantee you that it’ll continue to change.
McKinsey recently put out a great interview with one of the founders of Airbnb, Brian Chesky, talking about the relationship between his company and cities. I thought it was fascinating. Click here to watch the video.
If you don’t feel like doing that, I’ve also pasted the interview transcript below and bolded some of the really interesting takeaways. Let us all know what you think in the comment section below.
It’s a currency of trust, and that used to live only with a business. Only businesses could be trusted, or people in your local community. Now, that trust has been democratized—any person can act like a brand.
Airbnb is a way that you can, when you’re traveling, book a home anywhere around the world. And by anywhere, I mean 34,000 cities in 190 countries. That’s every country but North Korea, Iran, Syria, and Cuba.
The reason we started was I was living with my roommate, Joe, in San Francisco, and I couldn’t afford to make rent. That weekend, the International Design Conference was coming to San Francisco. All the hotels were sold out. Joe had three air beds. We pulled the air beds out of the closet, we inflated them, and we called it the “Air Bed and Breakfast.”
The reason it’s grown so fast is, unlike traditional businesses, we don’t have to pour concrete. The infrastructure and the investment was already made by cities a generation ago. And so all of a sudden, all you needed was the Internet.
The ‘disruption’ debate
I never really loved the word “disruption,” because it suggests that maybe it’s the kid in a class who was disruptive, who probably didn’t add a lot to class. I think that we have a lot to add to society.
Over time, cities have gotten so big that the sense of community has gotten lost. And I think once you know everyone, that community can reemerge. And as far as our relationship with cities, we can’t succeed without a city. Or we can’t really thrive without a city. We don’t want to thrive in spite of a city. And I think if we work together, it’s going to be amazing. I think the people win. And I think if we don’t work together or if we fight, the loser isn’t really us or the city—it’s the people in that city.
Getting cities to embrace sharing
Fundamentally, the idea of the sharing economy is going to be great for cities. It means that people all over a city, in 60 seconds, can become microentrepreneurs. And they can be empowered. And they can make an income. Now, this is amazing, but it’s also complicated because there are laws that were written many decades ago—sometimes a century ago—that said, “There are laws for people and there are laws for business.” What happens when a person becomes a business? Suddenly these laws feel a little bit outdated. They’re really 20th-century laws, and we’re in a 21st-century economy.
It’s probably going to be a fair amount of work to revise some of the laws and rethink the way cities and platforms work together, but I think that work is worth it. Because what cities don’t have to do is invest billions of dollars in infrastructure to create jobs. Whereas historically, to create opportunities, cities would need massive projects and investments, these jobs only require the Internet. Now what they need to do is navigate the legal framework, which is typically outdated. We want to work with the cities. We’re not telling them that their laws are terrible. The world continues to change. Laws must continue to adapt for that world.
We want to help cities understand what our world looks like so they can modernize the laws to make sense. We’re not against regulation. We want to be regulated because to regulate us would be to recognize us.
Airbnb’s plans for growth
We want travelers to be able to book homes anywhere. Anywhere includes Asia. Asia’s a nascent market for us. Number two, we’re also looking at other use cases. Airbnb started as a way for travelers to find a budget way to vacation in a city. But now we’re starting to see people who aren’t on a budget. They want a much more high-end experience. And the third is that at the end of the day, if you’re traveling to Tokyo, you’re not traveling to Tokyo to stay in a home or a hotel. You’re traveling to Tokyo—if you’re on vacation—because you want to have an experience. And we’d love to do more to make that experience special and memorable.
The future of sharing: Your free time
I don’t think people would view the jobs created in the sharing economy as jobs. I don’t even know if they get counted as jobs when the White House has a new jobs report. They are jobs. As far as I can tell, people are working, they’re making income, and they depend on that income. Half of our hosts depend on it to pay the rent or mortgage. Maybe it’s a new kind of job. Maybe it’s like a 21st-century job. Tom Friedman talks about how in the future people may not have jobs. They’ll have income streams.
I believe that the sharing economy broadly can probably provide tens of millions of jobs or income streams for people all over the world. This is going to have a pretty big effect on the economy, mostly a good one.
The sharing economy started by democratizing and creating access to probably two of the biggest assets people have: their homes and then their cars. But I think the whole idea of ownership is changing. When my parents were young, owning things was a privilege, and there was a sense of romance to owning a house, owning a car.
Today’s generation sees that ownership also as a burden. People still want to show off, but in the future I think what they’re going to want to show off is their Instagram feed, their photos, the places they’ve gone, the experiences they’ve had. That has become the new bling. It’s not the car you have; it’s the places you go and the experiences you have. I think in the future, people will own whatever they want responsibility for. And I think what they’re going to want responsibility for the most is their reputation, their friendships, their relationships, and the experiences they’ve had.
So I think the biggest revolution will be in the biggest asset of all. The biggest asset is not a house. It’s not a car. It’s people’s time. People’s time may start with just gigs: waiting in line for you, delivering something for you. Over time, I think it’s going to move upmarket. And eventually, menial tasks become real trades, and real trades become art forms.
Somebody may say, “I cook a great brunch. I wonder if people would enjoy having brunch at my house?” And you could be able to book a brunch at someone’s house, instead of at a restaurant. That person isn’t trying to create a restaurant, they’re just allowing someone to have brunch. They build a reputation. One day, that person can be a Michelin-rated chef in their house.
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.
I’m a big fan of wine. But in particular, I like and I support Ontario wines. And last night I was in Niagara-on-the-Lake for the Stratus Vineyards annual harvest party. It happens every year and, as the name suggests, it kind of marks the end of the growing season for the vineyard. I say kind of because not all varietals have been harvested by this time.
At one point during the evening, I was speaking with the winemaker, J-L (Jean-Laurent) Groux, who is a native of the Loire Valley in France and first learned how to make wine in Burgundy and Bordeaux. And I asked him: why Niagara? Why did you bring your talent to Niagara? (When he came, Niagara would have had a great reputation for crappy wines.)
He first responded by saying that he had been traveling around the world to different wine regions, and Niagara just so happened to be where he was when he ran out of money. But he went on to say that he saw Niagara as a place of opportunity. It was a region on the rise and he knew that he would have the creative freedom to experiment and do whatever he wanted.
And that just wasn’t the case in France where tradition dictated. Good for Niagara.
But as he was telling me all of this, I couldn’t help but think that it’s the classic business story of incumbents and disruptors. I’m not saying that French winemaking will get disrupted. I’m just saying that in a world of established wineries, corporations and other groups, it would seem impossible for them to be threatened in any way by upstarts. They, the incumbents, have more money, more people, and more resources all around.
But what they sometimes lose along the way, is the will to try new things.
