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.
This past February, a new central train station opened up in Delft in the Netherlands. As part of the train station, there’s an underground parking facility for 5,000 bicycles.
Here’s a video of how it all works:
[youtube https://www.youtube.com/watch?v=UuhLv1AN0bE?rel=0&w=560&h=315]
Isn’t it amazing what you can achieve when you decide to make something a priority?
T E S L A by Thomas Juel on 500px
Yesterday I posted a video about the career of Elon Musk. And it reminded me of something that’s been on my mind as I think about transportation, cities, and the future.
Elon’s story for why he founded SolarCity, Tesla, and SpaceX is incredibly compelling. He chose problems and industries that he felt would move humanity forward. He felt that we needed sustainable forms of energy production (SolarCity), sustainable forms of transport (Tesla), and a way for humans to occupy other planets (SpaceX). That’s incredible ambition.
Today though, I just want to focus on the transportation piece.
Electric and driverless vehicles, I believe, are a step in the right direction. I honestly believe that at some point in the not too distant future we’re going to look back at that time when people used to drive their own cars and wonder how we ever allowed that to happen.
But fundamentally, I think there still remains a question of how best to plan our cities.
There’s lots of talk today about peak car and the death of the automobile. Certainly within planning and urbanist circles, there’s an almost universal belief that planning (most of) our cities around the car, as opposed to people, was a huge mistake. Multimodal solutions with a public transit backbone are now the way forward.
But will that always be the case as the notion of the “car” evolves?
Intuitively, driverless vehicles feels like a massive opportunity to leverage data and better optimize our private transport assets. We know that the utilization rate for most private cars is incredibly low and so there’s lots of room to improve how we use and share private vehicles and how we move people around cities.
But how big is that opportunity? Does a city filled with driverless electric vehicles and with networks like Uber mean that public transportation now becomes less important? And if so, how much less important?
I can’t help but feel like private and public transport are on a collision course right now. I suppose that isn’t anything new. But this time around I wonder if private transport won’t figure out a way to achieve similar efficiencies to large scale public transport.
A few days ago, Bill Gurley – who is an investor in Uber – wrote a really fascinating blog post called, Uber’s New BHAG (Big Hairy Audacious Goal): UberPool. Bill doesn’t update his blog very often, but when he does it’s incredible stuff.
I’ve touched on UberPool briefly before. But basically it’s a true “ride sharing” service where people with overlapping routes can easily share the same car – much like people do today informally. The obvious advantage of this is cost. It’s cheaper to share.
What’s most fascinating about this service though is how it fits into Uber’s larger mission to drive transportation costs down. And there’s a specific reason for that (via Bill Gurley):
When Uber launched its low-cost UberX offering in the summer of 2012, the company quickly realized that the demand for its transportation services is HIGHLY elastic. As the company achieved lower and lower per-ride price points, the demand for rides increased dramatically. A lower price point delivered a much better value proposition to the consumer, yet still remained a great business decision due to the remarkable increase in demand.
So what Uber quickly figured out was that if they could increase the utilization rate for drivers (the time actually spent with passengers), they could charge consumers lower prices while at the same time maintaining driver salaries. Prices went down, but volume went up.
One way to do that is to obviously decrease driver downtime by improving liquidity on the marketplace. But another way is to simply increase the number of passengers being transported at one time. Hence the creation of UberPool.
But it doesn’t stop there.
Because of all the transportation data that Uber now has (the company has a data group called the “math department”), they can fairly accurately predict what a price cut will do to their ridership levels. This allows them to “forward invest” their capital in new services – such as UberPool – before they even have the revenue from the anticipated increase in ridership.
So what does this all mean?
It means that Uber is going to get cheaper and cheaper and cheaper. Uber is trying to get to what they call “The Perpetual Ride”, which basically means that drivers will always have customers (100% utilization). That’s quite a goal, but it would mean the absolute lowest prices for consumers (barring any other changes to their cost structure).
Dirt cheap transportation is a pretty compelling value proposition, which is why I continue to believe that cities should be hard at work trying to figure out how to harness this transportation shift.
If you’re interested in this topic, I would encourage you to give Bill Gurley’s blog post a read.
This morning I woke up to a post from venture capitalist Fred Wilson talking about the cost of loyalty when it comes to local transportation markets. More simply, it was a cost comparison between regular city taxis and ride sharing services such as a UberX, Lyft, and Sidecar in San Francisco, Los Angeles, and New York.
The data was sourced from whatsthefare.com and looks like this:
The way to understand this chart is to think about it as the answer to this question (from whatsthefare.com): If I were to take 1,000 rides over my lifetime with one individual service, how much more would I pay than if I compared prices and always picked the cheapest option?
What you should immediately see is that regular taxis are far more expensive in San Francisco and Los Angeles compared to all of the ride sharing services. In the words of Fred Wilson: “That is crazy. They are going to go out of business in those markets with that pricing.”
In my words: They are fucked.
I wonder where Toronto would place against these cities. My gut tells me that we would be closer to San Francisco than New York. And if that is the case, I think you can figure out what that means.
I thought this would be an interesting post given yesterday’s point about our cities being multi-modal. We urbanites have many more options at our disposal than we did only a few years ago. And if they’re cheaper and more convenient, we’re going to use them. I think that’s a good thing.
I just stumbled upon an interesting piece in the Boston Globe (from last December) talking about how the bicycle is “emerging as a new conservative front in the culture wars.”
It starts by talking about Toronto mayor Rob Ford and asks: Who elected this guy? Their response comes down to mode of transport.
The answer, in large part, comes down to transit. Ford is famously pro-car, and his strongest support came from suburbs outside downtown Toronto, where voters drive into the city during the day and return by car in the evening. One political scientist found that the strongest predictor of whether someone voted for Ford in the 2010 mayoral election was the person’s method of commuting: Car commuters were Ford voters; everyone else wasn’t. Ford repaid their loyalty by declaring on his first day as mayor that the “war on cars” was over; he abolished the vehicle registration tax and announced a plan to kill light rail in the city simply because, he said, streetcars “are just a pain in the rear end.”
The article then goes on to argue that Ford is at the forefront of a growing conservative movement using bikes as a new political lightning rod. Conservative politicians view cyclists as urbanites (statistically this is true) and therefore not part of their core voter base (statistically this is also true). And so hating on bikes has become a convenient way for them to galvanize their support base.
But beyond bikes, we’re really talking about a bigger city building issue: How do you unify a city with such divergent priorities? How do we stop this downtown versus the suburbs mentality? These are important questions and I don’t think the answer is to de-amalgamate Toronto. That’s the easy way out.
Whether we like it or not, the Toronto region functions as one contiguous economic unit and, if we want to be able to effectively compete on the global stage, we’re going to need cohesion. We need to get our house in order. It’s still early days for Toronto’s 2014 mayoral election, but I really hope the next 4 years turn out to be better than the last. I think they will.
