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: wall street journal

  • Only the rich can afford this much nothing

    Joshua Levine’s recent (WSJ Magazine) piece on John Pawson, — the architect who “elevated nothingness to an art” — is a good read.

    It’s mostly about the country retreat that he recently completed for himself and his wife in the English countryside, but there’s also lots about his minimalist architecture, his career, his work with hotelier/developer Ian Schrager, and his passion for photography.

    I like this bit about architectural simplicity. The great irony of minimalism, and the reason why brands such as Calvin Klein and Jil Sander began working with John Pawson to leverage his aesthetic, is that it’s often more difficult to do less. Getting the details right costs money. Hence this great line from the New Yorker:

    As the New Yorker cartoon put it, “Only the rich can afford this much nothing.” Don’t expect a rebuttal from Pawson. “It is big, and it is expensive, you know. It’s sophisticated architectural simplicity. This isn’t a religious thing, and it isn’t as simple as you can go. You can go a lot simpler than this.”

    I also like what the following says about labels and what it means to be defined as something:

    Slowing down for Pawson isn’t all that slow. He takes photos constantly and has always used the camera as his third eye. In 2017, Phaidon published Spectrum, a book of his photos, many of them first posted on his Instagram (“I said, ‘Well, I’m not a photographer,’ and they said, ‘You are a photographer,’ so now I’m a photographer”).

    Click here for the rest of the article from WSJ Magazine. And if you aren’t familiar with John Pawson, here is his minimal website.

    Photo: Max Gleeson (Armonia Apartments designed by John Pawson)

  • Every major hurricane in the North Atlantic and Eastern North Pacific

    I came across this map while reading up on Hurricane Dorian:

    It is a map showing the tracks of every known hurricane in the North Atlantic (1851-2013) and in the Eastern North Pacific (1949-2013). Major hurricanes (category 3 or higher) are shown in yellow and tropical cyclones (intensity less than category 3) are shown in red.

    The map is from the National Hurricane Center. Some of their other maps include the points of origin for tropical cyclones (here is August 21-31 from 1851-2015) and the total number of hurricane strikes by U.S. county (here is Florida from 1900-2010).

    What has happened is a catastrophe. UBS is already estimating the insured damages in the Bahamas to be between $500 million and $1 billion. But as is usually the case, the total economic losses will likely exceed the insured losses.

  • The new decentralized workforce

    A few weeks ago the WSJ published an article about Toronto’s growing tech talent pool, arguing that its base now rivals the top US cities, but that it may not be an entirely good thing for the city’s ecosystem. I wrote about it here.

    This morning venture capitalist Fred Wilson published a post on his blog talking about the necessity of scaling tech companies in lower cost locations. It’s a good follow-up to the above article/post.

    Here’s an excerpt from Fred:

    Last week I heard some shocking numbers about salary levels for certain kinds of engineers in the bay area. I checked them out with a few of our bay area portfolio companies and they were more or less corroborated.

    The tight technical labor markets in the bay area, NYC, and a number of other regions in the US are making it hard to scale software businesses without burning massive amounts of cash.

    He goes on to argue that (startup) companies now need to think about scaling in other/remote locations sooner than they ever have before — basically as soon as the company hits about 50 engineers (or 100-200 employees).

    Many companies are now working with a distributed workforce. Supposedly 2/3 of the global workforce now spends at least one day of the week working remotely. I almost never work from home, but I do get how this is possible.

    So what is happening is that engineering talent is spilling over into secondary markets out of necessity. There’s an economic imperative to colonize. But I would imagine that, at least initially, most of the economic benefits accrue to the colonizer.

    Photo by NASA on Unsplash

  • Boom babies (of China)

    A few years ago I wrote a post talking about “depression babies.” In it, I cited a research paper that looked at the impact of macroeconomic shocks on people’s willingness to take on financial risk in the future. The term “depression babies” stems from the Great Depression and how it is believed to have impacted risk taking, savings rates, and probably many other things.

    I was reminded of this when I read this recent article in the WSJ talking about how the Chinese have started spending — and taking on the debt — like Americans, particularly among Chinese under 30. It is the inverse of the depression baby phenomenon. In this case, it is arguably years of economic expansion leading to greater comfort around financial risk.

    Here are a couple of figures from the article:

    JPMorgan estimates China’s ratio of household debt to gross domestic product will climb to 61% by 2020. That’s up from 26% in 2010 and higher than current levels in Italy and Greece.

    The level in the U.S. is about 76%, after falling from 98% in 2006, according to the International Monetary Fund.

    By another measure—the ratio of household debt to disposable income—China appears to have already surpassed the U.S. Its ratio reached 117.2% in 2018, up from 42.7% in 2008, according to calculations by Lei Ning, a researcher at the Institute for Advanced Research at Shanghai University of Finance and Economics. The U.S. peaked at 135% in 2007 and dropped to 101% in 2018.

    Not surprisingly, the article goes on to talk about how this dramatic increase in household debt might be something to worry about. Maybe. I’m not an economist. But I do think this is designed to boost the Chinese growth machine and I do think it makes them less reliant on other countries — such as, maybe, the United States.

  • Is Toronto’s tech ecosystem too US-centric?

    The Wall Street Journal’s recent piece about “Silicon Valley invading Toronto” is, in my view, describing a generally positive outcome.

    We are one of the largest cities in North America (the exact ranking depends on where you draw the urban boundaries).

    We have more enlightened views around foreign and high-skilled workers (I was given a short window in which to leave the US after I finished my first graduate degree there).

    And we have a large and highly educated pool of tech talent (the salary differential discussed in the article looks to be, at least partially, a result of the weaker Canadian dollar).

    US companies are gobbling up office space in Toronto. And presumably, this is one of the reasons why 139 new flights were added between Toronto and Francisco over the last two years. (Source: WSJ)

    However, I do agree with the remarks from people like Jim Balsillie (Blackberry) and Harley Finkelstein (Shopify) that a better outcome would be the creation of more massively successful Canadian tech companies.

    As Finkelstein points out, there’s a big difference between 100,000 square feet of space for the HQ of a new and growing Canadian tech company and 100,000 square feet for a new branch or satellite office.

    The stats we read in the papers about the number of tech jobs being created in Toronto generally don’t speak to composition. Where in the value chain do these people sit? Where is the value accruing?

    The intellectual capital is here. And we should be doing everything we can to foster and finance new homegrown ideas and businesses.

    Image: WSJ

  • WordPress buys Tumblr for (only) $3 million

    Last week it was announced that brandondonnelly.com/ (which is what I use for this blog) had purchased Tumblr for around $3 million. This is, of course, after Yahoo had purchased it for $1.1 billion in 2013 and later wrote it down, having never figured out how to monetize it. Yahoo lost its shirt on the investment. I am sure you’ve probably seen some of the headlines and searing commentary online:

    I used Tumblr every day for more than 5 years. I started this daily blog on it because I had already been using it to share and collect photos. At one point Tumblr had more active users than Instagram and Pinterest combined. But eventually it lost its way. Yahoo (and later Verizon by way of its acquisition of Yahoo in 2017) didn’t know what to do with it.

    And so at the beginning of this year I said goodbye to Tumblr and switched this daily blog over to WordPress. A big part of that decision had to do with the fact that Tumblr was never really designed for long-form blogs like this one and its mobile support was even more appalling for this use case. It was impossible to write on an iPad. Switching was the right decision. I should have done it sooner.

    But now Tumblr is owned by brandondonnelly.com/. At $3 million, it feels like they're almost starting again from scratch. Maybe they'll figure Tumblr out. Or maybe they won't.

  • The Information Age: Tech & the S&P 500

    The below chart from this morning’s Wall Street Journal is perhaps a good example of our ongoing transformation from an industrial economy to an information economy. Just four stocks — namely Microsoft, Apple, Amazon, and Facebook — have accounted for 19% of the S&P 500’s total return this year. All of them are “tech.”

    And this is not new to 2019. Similar contributions were made by tech last year and in 2018. I have been used to hearing about the 4 horsemen of tech. But apparently there’s even now something called the “FAANG stocks,” which refers to Facebook, Amazon, Apple, Netflix, and Google (Alphabet).

    This shift is, of course, one of the reasons why every city is trying to establish a strong tech ecosystem. I saw that first-hand in Lisbon this past week. And frankly I think the city has many of the same characteristics that made Berlin a great place for tech. It’s affordable. It’s filled with young and smart people. And it’s a fun place to be.

    There’s a reason that Lisbon now hosts the annual Web Summit, which is generally considered to be the largest tech conference in the world. (The North American offshoot, called Collision, relocated to Toronto this year in order to be in a more global city.)

    Portugal only has a population of about 10 million people. There are some 3 million people in the metropolitan area of Lisbon. But that doesn’t really matter because most startups today are immediately targeting a global customer base.

    I learned more about Portugal and Spain’s colonial pasts on this trip and I found it fascinating. In many ways, it was the start of globalization. But that was the Age of Discovery. Those centuries are over and done with. Our century is the Information Age. The above chart is part of that story.

  • New York state law restricts condo conversions

    The State of New York just enacted a new law (on June 14, 2019) requiring that 51% of existing tenants agree to buy their apartments before a building can be converted into a condominium or a cooperative. There was previously no requirement for anyone to buy in order for a conversion to take place. Tenants who chose not to buy, could simply remain in the building as a renter.

    Supposedly, the real estate industry believes this new requirement will be a largely impossible threshold to meet, meaning that condo/co-op conversions could now be dead in NYC. There’s also an argument that conversions have historically helped many middle class New Yorkers buy a home since they sometimes (usually?) had the chance to buy their apartment below market at the time of a conversion.

    I’m not familiar enough with this space to be able to opine on the merits of these arguments, so I won’t. Perhaps some of you will in the comment section below. Instead, I will leave you all with a chart showing the median condo sale price in Manhattan over the last ~30 years (taken from the same WSJ article). I like seeing long(er) term charts. Maybe you do too.

  • Using AI to estimate crowd sizes

    This recent NY Times article about crowd estimates for Hong Kong’s annual pro-democracy protest is a good follow-up to my post about the number of people who, allegedly, showed up to last month’s NBA Championship parade here in Toronto.

    For years, Hong Kong has been seeing divergent estimates for its annual protest. Organizers typically overstate. And the police typically understate. This year, organizers claimed 550,000 people in attendance, whereas the police claimed only 190,000.

    The difference this year is that a local tech company has started using AI software (loaded up onto iPads) to help supplement the standard practice manual counts. This year they concluded — perhaps more definitively — that 265,000 people protested in the streets of Hong Kong.

    Image: NY Times

  • 17 years of inventory in Miami

    Miami has historically had a volatile housing market because of its position as a second-home destination and because of its dependency on Latin American buyers. There is perhaps no other housing market in the US with the same kind of overall reliance on capital from abroad. This recent article by Candace Taylor in the WSJ is yet another reminder that we are once again in one of those cycles. Below are two excerpts that I found interesting. Note the stats, particularly the last bit in bold. It is also a reminder that when housing supply exceeds demand, usually something happens: prices come down.

    At the same time, new condos launched just as the owners of older units looked to cash out. There were 691 condo sales in Miami Beach in the first quarter of 2019, down 24 percent from 909 in the first quarter of 2015. During the same period, single family homes sales dropped to 81 from 117. The threat of climate change has had some impact on Miami home buyers’ decisions. A 2018 study showed that the value of single-family homes near sea level in Miami-Dade County rose more slowly than that of homes at higher elevations. But agents said a greater threat to the high-end market is inventory buildup.

    Meanwhile, a strong dollar incentivizes international buyers to sell the units they already own, even at below-market prices. The result is a glut of condos for sale, both new and resale. In December 2018, there were 3,663 condo listings for sale in the greater downtown Miami area—more than double the 1,591 for sale in December of 2013, according to an Integra Realty Resources report. Sunny Isles, where new buildings include the 53-story Jade Signature, the Porsche Design Tower and the Turnberry Ocean Club, is estimated to have about 17 years of inventory of condos priced at $5 million and up.