“Transportation Network Companies” have the potential to reduce consumer costs by $1 trillion, reduce a gigatonne of carbon emissions and save thousands of lives in the U.S. alone
Using autonomous vehicles as a taxi will be cheaper than owning a car … in less than two years
Personal vehicles on roads will decrease by 40% by 2035
Automated mobility services will be a $120 billion opportunity as soon as 2025
As we planned the very first CityAge conference in in 2012, we met the team setting up Car2Go in Vancouver. They told us that Daimler (Car2Go’s parent company) knew that selling cars wasn’t the future of their business. Instead, it would be car sharing services.
Fast forward to 2016, and the future is here. An important new report by the Rocky Mountain Institute (RMI) puts some numbers behind the radical transformation about to hit the personal transportation market.
The cost of buying and operating your car today is about $0.85 a mile. Using Uber all the time would cost you roughly $2 per mile. But more than half of that cost is paying the driver. So automation is going to cut the cost of ride sharing services like Uber, Didi and Lyft (and soon probably Apple, and Tesla’s ride sharing service, and others) in half.
At the same time, the cost of electric vehicles is dropping fast. The RMI forecasts that electric cars should be cheaper than gas vehicles by 2018.
This will transform business models. Car companies won’t just sell cars, they will run networked automobile fleets, allowing consumers to pay for on-demand use of cars and, probably also rent out those they purchase. Instead of a car being parked 95 per cent of the time, it will be used a lot more, thanks to the cloud technology that allows us to follow and rent our cars with a smart phone.
Suddenly, the entry economics of the electric car — which will increasingly fit in the climate change imperative of reducing fossil fuel emissions — are much more competitive. Network transportation companies will operate large electric fleets, increasing turnover.
Some electric car visionaires predict that by 2025 we could see a majority of electric vehicles on the roads. If you own a gas car, there’s a good chance it’s the last one you’re ever going to buy.
And all of this is happening in a market that is worth $600 billion in the U.S. alone (which is why Uber is a $60 billion dollar copmany).
The RMI forecasts revenues in automated, shared, mobility services in the U.S. of $100 billion by 2025. This will come at significant expense for auto companies who don’t transition their services quickly.
The new business models will be bad news for oil companies, but good news for utilities, who should see a 10% increase in national demand by 2040. Whether that increase comes from renewables or fossil fuels will be a critical question.
All of this relies n the technology curve for automated vehicles continuing its rapid progression. Regulatory hurdles and a slower take up of autonomous vehicles could slow the revolution. Many people we know enjoy driving, after all, and won’t give that over to a robot. But the trend lines are real, and they’re happening fast.
It will have major impact on more than how we drive. Cities collect hundreds of millions from parking fees and traffic fines, but those will be reduced. Gas tax revenues pay for public transit, but will we consume as much gas? What happens to the real estate now occupied by gas stations and parking lots? And how are we going to deploy enough electric charging stations, quickly enough? And how will that electricity be generated? How prone will self-driving cars be to hackers?
CityAge aims to gather the leaders who will shape this transition. Email or join us at an upcoming event to take part in this important conversation.
Antoine van Agtmael was one of the first people to understand the value of the world’s “emerging markets”. In fact, he is credited with coining the term emerging markets and promoting them as a major investment opportunity in the early eighties.
And now, he believes there is a major global economic opportunity in America’s former rust-belt cities.
Antoine will be CityAge’s guest at The New American City in Rochester, on June 6th and 7th, to talk about why America’s so-called Rust Belt Cities are key to its economic future. The first 150 CityAge delegates will receive a free copy of his book, The Smartest Places on Earth. Antoine spoke to CityAge a few days ago. Below is an edited transcript.
CityAge: Antoine, welcome to CityAge, and I know that folks will be keen to meet you and hear your message at CityAge in Rochester. At the outset, can you give us a bit of background on yourself, so folks know your background and what qualifies you for this type of a book, and this discussion?
Antoine van Agtmael: Sure. I grew up in the Netherlands, came to the US to study at Yale, became a banker, then an investment banker, then a development banker, finally a manager. And practically my entire career dealt with emerging markets, a term that I coined in 1981. After, towards the end of my career, in discussions with people in Asia I began to see that they were complaining about American competition really surprised me. And why was that? Not so much because of the increased labor costs, or even shale gas. It was because they couldn’t keep up with the American competition. And that led me to the belief that something basic has changed in the paradigm.
The paradigm used to be, try to make things as cheap as possible and compete with China. That’s a losing game. Now the paradigm has become for the next 25 years, “Let’s try to make things as smart as possible.” And there we in the United States, or Canada, we have a real chance to succeed. Because we have great universities. We have freedom of thinking, which is absolutely critical for innovative thinking. And we have a robust legal system. And so, this will give us a leg up again in global competition. And I believe actually that global competition is shifting back again to the North America and Europe.
CityAge: Excellent. So, you’re joining us in Rochester for CityAge: The New American City conference, which will look at how Rust Belt cities are repositioning themselves for exactly the type of economy you speak about. . . Did you look at Rochester as part of your book?
AvA: Yes, we mentioned Rochester because I think there is a strength based on Kodak, Xerox, etc. They . . . certainly have the old industrial base. They have some of the new technology. They have photonics. They have strong support from the state of New York.
So, with that combination with the University of Rochester and its strong history of industrial expertise, and its potential production methods, new discoveries, new materials, they have a chance to develop a new economy. . . .
CityAge: One of the major investments is happening in photonics there, which builds on their old industrial companies, and a lot their unique skill sets. . . . You mention that, I think, one of the key elements of the Brain Belt cities you look at is that they are home to a major global company, you know, like Intel in Portland, or even like Blackberry in Waterloo, and other places.
CityAge: Do you have advice for the companies and the cities when the company maybe 10 or 20 years removed from its global status?
AvA: Kodak was one of my very first clients as a markets analyst. So, I used to go to Rochester on a regular basis to talk to . . . Kodak. The best advice I can give is this, and it will always succeed: If you work very closely with the major universities like the University of Rochester and the Rochester Institute of Technology, with young, smart brains there, and try to develop trends that are new, and try to work with local startups, it is this sharing of brainpower, between universities, old-line companies, and startups that is really the key to innovation and the key to competitiveness in the future.
CityAge: How much does physical place matter? Because Kodak used to have its base a little away from downtown. We see downtown is growing again. We see university campuses also moving downtown. Is that something you looked at?
AvA: Yes. Place can be a deterrent. And for a while, I think certainly in Rochester, probably in lots of similar cities, place could have been detrimental to economic development. Now, it can also be . . . a place where people get together in a kind of natural way. But that requires simple things like cafes, bars, places where people can meet informally. Just meeting informally and this interchange of ideas between multiple disciplines is absolutely key, because that’s how you invent trends.
CityAge: So, urban design matters, and quality of design matters.
AvA: Absolutely. Absolutely. The future is all about connecting and connectedness. And by having the left side and the right side of the brain working together. Just having engineers is not enough. Just having artists are not enough. But having the two work together creatively, having scientists working with engineers, having computer scientists work with people with liberal art backgrounds, that is the future.
CityAge: One of the pieces I loved about your book . . . is when you speak about the increasing role of the connector in a community. Can you speak a little about that and, you know, who can take that role of a connector?
AvA: The connectors that we have seen can be a university president. I think in Albany, it was a former Christian militia flyer. In other places it was a local university administrator. In Portland it was Phil Knight at Nike. So, it can be all kinds of different people. What they have in common is: 1) they have a vision, 2) they have the kind of emotional intelligence to be able to connect people, to bring people together, 3) they have the respect of different groups, and 4), they have a big Rolodex. They are the kinds of people who can pick up the phone and bring people together. Because they have convening power. And then, they must have this ability to then bring people together and make them see a goal that is more important than themselves, or their company.
CityAge: In a nutshell. what’s the macro-trend here? Where are Rust Belt cities are going to be in 25 years?
AvA: Well, what I know is that this new style of innovating — where as I said, universities and startups, and old-line companies, share brainpower — we see now in about thirty places. It’s not limited to Silicon Valley and Cambridge. It’s thirty different places. And about 20 of them are former Rust Belts. So, that is significant critical mass already. And I expect that to grow. How fast is hard to say.
CityAge: Thanks, Antoine. We will see you in Rochester.
Every city has a name. But do they have a brand — and a strategy to use it for economic development?
That was one of the key questions this week in Metro Vancouver, where many of the region’s leaders gathered for half-a-day to kick-start a plan for a unified brand identity overseas. A unified brand strategy has long-eluded the locals.
At the moment, the 22 municipalities that make up Metro Vancouver generally pitch themselves first on trade missions. Come to Surrey. Invest in Richmond. Try Burnaby. What about North Vancouver? The outsider invariably asks, where on earth are those places. Is it the same as Vancouver?
All those municipalities, with their particular strengths and characteristics, are crucial elements of Metro Vancouver. But they need to subordinate themselves to the brand that actually works beyond the region. That is Metro Vancouver, the only brand that works internationally.
Other cities have already figured this out — and they succeed because of it. Denver is the classic example.
When it hit hard economic times in the 1980s, a group of city leaders — the Crazy 8 they were called — launched the crazy idea that to transform itself, the metropolitan region had to unify it’s more than 70 municipalities around one marketing strategy to sell to the rest of the nation and world. That brand was Denver.
When Denver’s trade missions went out to attract a major investor or company, no longer would one municipality promote itself over the other. They sold the vision of a new Denver.
The companies would listen to the pitch and decide where to set up a headquarters or invest. A code of ethics was written to ensure Denver’s municipalities would not drift into parochialism. Any municipality that tried to do an end-run around a fellow municipality after one of those deals were sealed, for example, could be cast out of the next trade mission for acting in bad faith.
It worked. In the years that followed, Denver transformed itself into one of America’s fastest growing and most livable cities.
Can that work for other cities? That seems certain. It’s only a question of leadership and will.
As the day wrapped up on Metro Vancouver’s quest for a unified brand, Vancouver Mayor Gregor Robertson was asked if his fellow leaders could craft a unifying vision statement for Metro Vancouver in the next year. He said it was possible.
Then there was a few notes of disagreement. The city’s most famous international architect, Byng Thom, didn’t think a year was reasonable. It’s got to be done in six months, he said. Martha Piper, the President of the University of British Columbia, said that the Metro Vancouver vision should have been done yesterday.
Vancouver is at the epicentre of an urban affordability crisis that is gripping many cities. Now, it’s come up with a novel and nuanced idea.
The BC Housing Affordability Fund (BCHAF) proposes a 1.5% tax on all residential property in the province that is bought by investors but remains unoccupied. That could raise $90 million or more in Vancouver, alone, money it proposes should be returned to Vancouver homeowners and renters to help them keep up with soaring rent and property taxes.
Unlike recent efforts in Hong Kong, Singapore, and Sydney (which CityAge covered here), the plan isn’t a tax on foreign investors. It essentially applies to anyone — other than pensioners, the disabled and veterans — who buy a property and don’t put it into productive use.
An added benefit: administering the tax will help create a database for Vancouver’s leaders to learn more about the state of foreign ownership and vacancy, as well as the patterns of home-grown speculators.
This just might be an idea that is an elegant step toward dealing with affordability for many cities. In the end, the tax will only apply to individuals or investors who own property but choose to keep it vacant.
Housing affordability is a problem in Vancouver, and it’s only getting worse. As the region becomes what The New Yorker has called a Hedge City, it risks pricing out the professions the city requires to function. By raising revenue for the people who live and work here, and by discouraging empty houses and condos in Coal Harbour and West Vancouver, the BC Housing Affordability Fund is a plan that just may work.
At CityAge we hear a lot about the affordability crisis, because it’s a major issue in each of the cities we’re headed to in 2016, including San Francisco, Toronto, Los Angeles and Hong Kong. This is an idea that presents a potential — and equitable — path to balance.
It may take a visit to the world’s freest economy to teach North America how to deal with soaring housing prices in its major cities.
CityAge’s next conferences take us to five of the world’s top 10 most expensive housing markets — Hong Kong, San Francisco, San Jose, Vancouver and Los Angeles.
Achieving housing affordability is becoming one of the great economic challenges for these cities. A productive economy needs housing for not just for its most affluent, but also the rest of the people who make a dynamic city function.
Hong Kong is doing something about the affordable housing crisis It’s attempting to increase the supply of land, to allow for more construction. It’s also building more public housing on its own, something few other cities do any more. And Hong Kong is taking aggressive action on speculation and putting controls on foreign buying.
Hong Kong Chief Executive CY Leung summed up the policy in a few sentences: “Our responsibility is to address the public’s housing problem by increasing housing and land supply…and to curb demand in three areas, namely investment demand, speculative demand, and demand from outside of Hong Kong.”
One of the most interesting policy innovations we’ve learned about in Hong Kong is the buyers’ stamp tax duty. It’s simple. There is a 15 per cent duty on non-Hong Kongers, or companies owned by a foreigner or local who buy a home. If any of those want to buy two properties, the stamp duty doubles to 30 per cent.
How is this intervention being regarded by the people of the city state that has been voted the world’s freest economy? Well, most residents don’t mind taking on the speculators. And the policy appears to be working.
Hong Kong’s official home-price index — which in Hong Kong can soar as quickly as a skyscraper — has reported its first decline in two years.
“California”, said Wallace Stegner, “is like the rest of the United States, only more so.”
California is booming.
In 2014, the state economy grew 27 percent faster than the nation as a whole. In the past year, it created 462,000 new jobs. Its power of innovation is unsurpassed.
Name ten companies changing your life and 8 will likely be Californian. Google, Uber, AirBnb and Apple, Nest and Facebook, Tesla, even Tinder.
But America’s most populous state is also dealing with this century’s great urban challenges: air pollution, gridlock, social inequality, water usage & drought, immigration and densification, the digital divide — and more.
California will have 50 million people by 2050. This mirrors America’s continued population growth, almost all of it in cities. It also mirrors our rapidly urbanizing planet. It means that urban innovation in California is an opportunity for us all.
That’s why we’re organizing a three-event CityAge series in California. The urban solutions developed and deployed in California can be used across the country, and exported to the world.
Hold the date for CityAge. San Francisco at The City Club in SF on April 5 and 6. This will be a focused event of 150 people, so please let us know if you’re interested early on.
We’ll announce the dates for Los Angeles and San Diego soon. And of course, we’re holding a series of other events in 2016, including Vancouver, Hong Kong and others. We’ll keep you posted.
Please email us with any ideas! And we hope to see you in 2016.