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 is an interesting video by Phil Andrews of Maxinomics talking about the economics of Uber and what it could stand to gain from autonomous vehicles.
As part of this, he touches on the exclusive partnership that was announced between Uber and Waymo back in September. That was a big deal.
I find this topic fascinating because it’s hard to imagine it not reshaping the landscape of our cities. And it continues to get more real by the day.
I watched Tesla’s We, Robot event last night. As many of you know, Elon and his team showcased a Cybercab, Robovan, and a humanoid robot that dances funny, all of which will be available in the market for purchase at some unknowable date in the future. What was obvious is that Elon himself has no clear idea of when this will be.
What I will say, though, is that the designs look cool. The Cybercab looks like a Porsche and a Cybertruck had a love child, and the Robovan looks like an Art Deco rendition of what the future is supposed to be like. I first wondered why they’d create a robotaxi with only two seats. But thinking about it now, most Uber rides probably only have 1-2 passengers.
Despite these pretty designs, the overwhelming reaction to the event seems to be one of disappointment. We’ve heard what was said before. Public transportation is bad (I disagree). Autonomy will free up your time and remove unnecessary parking spaces from our cities (allowing for more public space). And soon you’ll be able to put your under-utilized car to work and earn extra cash.
Cool, but when?
Waymo and Uber are not, as far as I know, hosting similarly flashy events. But as far as I can tell, they’re making meaningful progress in advancing toward full autonomy. As of June of this year, Waymo had already logged over 22 million rider-only miles. And in September, they announced a partnership that would bring AVs to Austin and Atlanta by way of the Uber app.
At this point in the hype cycle, I don’t think anyone is interested in hearing promises about what the future of autonomy will be like, especially without any firm dates. They want to know: Are we there yet? So I think it’s no surprise that people, including investors, weren’t all that pumped up by the event.
On a more important note, Tesla had bicycles with brightly illuminated wheels circulating around their event set (at Warner Bros.) to presumably demonstrate that their Cybercabs can successfully navigate around moving objects (when brightly illuminated). If you missed them, look at the 29 second mark in the below video:
I can’t be the only one who thought: “What are those? Now, that’s what I want!” So I’ve asked Elon when they’ll be available and when I can buy one. I’ll keep you all posted on his response.
It has become fairly common to blame Uber (and ridesharing in general) for increased traffic congestion. I hear it all the time: “If only there weren’t so many Ubers on the road, traffic would flow more freely.” While there are studies suggesting that “deadheading” miles do have a negative impact and that Uber can draw people away from public transit (that’s bad), I think it’s important to consider the bigger picture here. So let’s try and do that today.
Firstly, let’s think about who traffic congestion directly impacts (indirectly it’s everyone). If you’re a pedestrian, you don’t care about traffic congestion. In fact, maybe you gain satisfaction from seeing other people stuck in it. (There’s even a German word for this feeling.) Similarly, if you’re riding the subway, taking any form of transit on its own right-of-way, or riding a bike, you likely also don’t care about traffic congestion. It doesn’t directly impact you.
Where you do care about congestion is if you’re in something like a bus that is stuck in traffic or if you’re driving. In the former case, you’re probably thinking, “hey why can’t these people take the bus like me. Then we’d have less traffic!” And in the latter case you’re probably thinking, “if only there weren’t so many Ubers and bike lanes, then I wouldn’t be stuck in traffic!” Ironically, this is arguably the biggest segment of people who feel they are being impacted by Ubers.
Secondly, let’s think about how Uber vs. driving might impact traffic congestion differently. In both cases, I would think that the majority of use cases involve one person (excluding drivers in the case of Uber) going to their desired destination. So from a raw space per person perspective, they both take up a similar amount of urban space.
The differences are that the Uber likely had some amount of deadhead miles. In other words, it spent time driving around looking for its next passenger. And it likely targeted already busy areas because that’s where it was more likely to find someone. Individual drivers don’t do this. They go from point A to point B.
However — and this is a big however — drivers do require parking once they get to where they’re going. Ubers don’t. This both takes up more space and oftentimes requires some amount of circling around. This is a significant difference and it begs the question: which is worse? Deadhead miles or all of the parking that cars generally require? I would argue the latter.
Where I’m going with all of this is that I think the criticism of Uber is misdirected. It doesn’t get at the real underlying problem. If traffic congestion exists, it is because they are too many cars for a finite amount of road space. This includes the people who choose to drive themselves around. In fact, you could argue that they’re the most impactful to cities. The way you solve this is simple: you price congestion and you encourage alternative forms of mobility.
Everything else is just a distraction.
Here is a recent post by Scott Galloway comparing Uber and WeWork. In it, he praises the virtues of asset-light business models:
For most of business history, having assets was good, and having more was even better. However, one of technology’s tectonic unlocks has been elevating information (bits) over objects (atoms). In the information age, owning assets is one business, while operating them is another, and each demands distinct capital structures, management approaches, and operational skills. Businesses offering the greatest return on invested capital don’t have much capital (assets) and can scale up faster, as they don’t bind themselves to cars, apartments, or even inventory.
We know this. Uber doesn’t own cars. Airbnb doesn’t own rental properties. And most hotels, as Galloway mentions, also don’t own their real estate. Generally speaking, hotels are brands that enter into fee-earning management contracts with people who own real estate.
However, WeWork is not this. According to Galloway, WeWork had $47 billion of pre-IPO lease obligations. These ran/run through to 2038. In this regard, WeWork is more bank-like: they have a similar mismatch of short-term assets and long-term liabilities.
Galloway also argues that asset-light businesses offer the greatest ROI because they can scale up faster. And this is certainly one of the virtues of tech businesses. In more asset-heavy businesses like real estate development, each project/asset is largely a discrete effort.
But there are significant advantages to owning real estate; one of them being that, at the end of the day, you own a hard asset.
Venture capitalist Fred Wilson once wrote on his blog that one of his big lessons from the dot-com bubble was that he learned to take his tech wealth and funnel portions of it into hard assets — namely real estate in New York City.
This, of course, comes with its own set of risks. But clearly there is something to be said about owning real estate.
Oftentimes when I think about Los Angeles, I think about the fact that you generally have to drive everywhere. And since I have a personal preference for dense and walkable cities, this thought helps me feel slightly less envious about their perfect weather.
Los Angeles is probably the original car city. Here is an excerpt from this excellent post by Brian Potter, where he summarizes a 1987 book by Scott Bottles called, “Los Angeles and the Automobile”:
Los Angeles was especially quick to adopt the car. By 1920 Los Angeles had the highest per-capita rate of car ownership in the US, four times more automobiles per capita than the US average, and eight times more than the much-denser Chicago. In 1920, 9 times as many people entered downtown LA via streetcar as via automobile. By 1924, that had nearly equaled.
And interestingly enough, people started using them, almost immediately, to create Uber-like services:
A popular early use of the car for public transit was the jitney. Car owners would pick up passengers (often waiting at streetcar stops) and drive them to their destination for the same price as a streetcar ride (5 cents). Car owners would often simply put their destination in their windshields, and pick up anyone along the way who was headed in the same direction. Because jitney travel was much faster than streetcars, and wasn’t limited to the fixed streetcar routes, jitneys often had better service than streetcars.
Jitney travel first appeared in Los Angeles in 1914, and by November of that year was being used for thousands of trips per day. The jitney quickly spread to other cities. By early 1915, an estimated 62,000 jitneys operated around the country in cities such as San Francisco, Seattle, Denver, and Birmingham. As jitney travel became more popular, electric rail companies found that they were losing significant ridership
What this again underscores is just how disruptive the car was — right from the outset. It was quickly seen as being more convenient, especially in a city like Los Angeles, which wasn’t as dense as its counterparts on the east coast.
Sadly, and as Potter suggests in his post, it is not clear that the headwinds facing public transit have changed all that much since the first jitneys started appearing on the streets of Los Angeles a century ago.
Last month, Waymo (Alphabet) and Uber announced a new multi-year partnership that will bring Waymo’s autonomous vehicles to Uber in the Phoenix area later this year. Already, Waymo operates across 180 square miles of the city, making it the largest fully autonomous service area in the world. But now, or I guess later this year, people will be able to order a Waymo AV through the Uber app.
Not a lot of people seem to care about autonomous vehicles anymore. For a while, every conference had people talking about how they were going to reshape our cities. But then the technology didn’t arrive quite as quickly as people were hoping, and so everyone lost interest and move on to other more exciting things. But clearly things are still happening. And this announcement strikes me as being an important one.
The first time I went to Italy was, I think, when I was about 18 or 19 years old. My friend and I took the train down to Milan from Zug, Switzerland (where his father lives), and we got out of the train station without any idea as to where we were going or where we were going to stay. We were young and brazen and clearly not very prepared. I was probably also wearing Diesel jeans and holding a Sony Ericsson T68 in my hand. Sadly, neither of these things were all that helpful as travel aids.
Today it’s impossible to imagine traveling without our smartphones and apps like Google Maps, Google Translate, Airbnb, Uber, and many others. I know that Uber has received its share of criticism over the years, but if you want to fully appreciate what Uber brought to the world, go to a place that you don’t know, that is generally unsafe, and where you don’t speak the language. It becomes invaluable. (This was Rio de Janeiro for me.) But even without all three of these things, it’s an incredibly powerful tool.
In situations where there is zero overlap in languages, I have also used Google Translate to have entire conversations. When push comes to shove, I prefer this approach over trying to impose English (or French) on someone. After all, I am the visitor. I should be the one bending as much as possible. You can also use the app to photograph a restaurant menu and have the entire thing translated in realtime. This to me — realtime reading — feels like a powerful use case for when augmented reality arrives.
I also like to use to Google Maps to fastidiously track where I want to go and where I have been. I love logging my travels, and that is much easier to do today compared to the Diesel jean days. I also try and remember to pre-download whatever maps I need so that I’m less reliant on roaming. Here is what Marseille and Sicily look like right now following our trip:
(If any of you are looking for recommendations, CRABE-TORO was our absolute favorite restaurant in Marseille and Càssaro was our favorite place for a drink in Noto, Sicily. We, unfortunately, never tried the food at the latter, but I’m sure it’s terrific.)
Technological change has always elicited criticism, negative externalities, and some people wishing that things would just remain as they are. And there is, of course, something liberating about getting off a train in a foreign city and figuring out things as you go. In Milan, we simply walked into various hotels, asked them what their rates were, and then probably got taken advantage of as two young Canadians.
At the end of the day, though, I am a firm believer that the world is a better place because of technological progress. From the Gutenberg printing press to Google Maps, technology empowers us as humans. And I have little doubt that 10 years from now we’ll all be traveling with some sort of augmented reality device and romanticizing the good old days of pins on a Google Map.
For the Canadian readers out there, I wish you all a happy Thanksgiving weekend. I am back in Toronto and regularly scheduled programming will now resume on the blog. I hope you enjoyed some of the post diversions over the last 10 days.
Photo taken at La chiave in Catania, Sicily
Despite having somewhere around 4,000 employees and being valued at upwards of $15 billion (2021 figure), CloudKitchens remains an incredibly secretive company. In 2020, it was reported that they had spent over $130 million in the preceding two years on properties in about two dozen cities, and this week the Financial Times reported that they have been quietly building “dark kitchens” across Latin America, alongside a new food and convenience goods business called Pik N’ Pak.
The way this all supposedly works is that the “dark kitchens” prepare the food for delivery and pick-up takeaway, and any excess space within these buildings is used to store convenience goods like over-the-counter medicines and pet foods. I guess it is literally about picking and packing various items that you can then attach to takeout orders. In both cases, the food and goods are delivered to customers using local app companies such as Uber Eats.
All of this appears to represent a shift in the supply chain for takeout food and various convenience goods. But what I am really curious about right now is what the real estate footprint of this network looks like within our cities. What is the optimal square footage of a ghost kitchen? What radius do they serve? And how does this ultimately change the landscape of our cities? I don’t know the answers to these questions, but change appears to be underway. Here’s an excerpt from the above FT article:
“…the growth of dark kitchens across Latin America has caused controversy in certain cities. The proliferation in São Paulo, the largest city in the Americas, sparked objections from residents living nearby, with banners against new facilities appearing in well-heeled neighbourhoods. The town hall has proposed local regulation of dark kitchens and earlier this year placed a temporary ban on the issue of new licences. People have complained about noise, smells, smoke and motorcycle drivers — known colloquially as motoboys — waiting outside to collect orders. One unhappy local said his son had been nicknamed “bacon” and bullied in school because of the odour on his clothes, according to Cris Monteiro, a city councilwoman.”
Travis Kalanick seems to have a knack for upsetting people and changing the way our cities operate. Although, the same could be said about a lot of other startups.
Canada Day weekend was a lot of fun in Toronto. This city was alive and it felt like people had come far and wide to visit downtown. But it was a good reminder that even if all of our cars were electric and even if they were all able to drive themselves, we would still have this problem:
I was in an Uber on Saturday afternoon heading over to the west side of downtown and we had no choice but to declare bankruptcy and hop out in the middle of Bay Street. We thought about waiting for the Ontario Line to be ready, but that seemed a bit far out.
So we rented bikes instead and rode along the waterfront, which was a considerably better experience. But then we couldn’t find any docks with available slots, so we had to ride up into Liberty Village, drop our bikes off there, and then walk back down to Ontario Place.
Of course, this was still the better option. I’m fairly certain that we’d still be in that Uber had we stuck it out. And maybe not finding a bike dock is just part of life in the big city on a beautiful long weekend in the summer.
Still, it was frustrating. So I’ll use this opportunity to once again ask our city leaders to reconsider their ban on dockless electric scooters. Toronto clearly needs all the mobility support it can get.
