I was 20 years old in Vegas when I felt like luck had finally fallen my way. I had always wanted to be at the beginning of something, and here I was staring down the wave I thought would come to swallow our country.
The new Uber logo had just been unveiled, with a soundtrack to follow. It reflected the focus on bits and atoms, the merging of the digital world with the physical, and the focus that the company had brought to both.
When I think about those years, I think about the first time a driver thanked me for uploading his documents to get him on the road and his excitement in having a new way to earn money on the side to pay off his tuition. I remember the pride in serving someone just like me. I remember the fear a driver felt when the OFAC process held up a paycheck because they were a Muslim immigrant who had gotten lost in the terror watchlist program, and our helplessness to solve it. I remember thinking that could have been me too.
I loved every minute of it. A real product that touched real people in the real world.
The most frequent question asked in London and New York was “there are cabs everywhere – why do we need Uber?” I think it can be found in the thousands of driver stories. Before ridesharing, the opportunity to earn flexible income through driving was constrained to those who could procure the license, cost, and access to one. In contrast to the digital, the natural state of the physical world is to remain in the status quo given the regulatory, price, and bureaucratic constraints.
Most drivers presumed the artificial scarcity of supply brought by medallion costs, which priced many of them out, was here to stay forever. While the digital world is enabled in principle by the lack of regulatory oversight, changes in the physical world require pushing through the regulatory, political, and economic structures we have today. When we do break through those barriers, we internalize this departure from the norm in our core.
I was optimistic that Uber was the beginning of what was to come next. With a transformation of technology intersecting with the physical world, entrepreneurs would break ground across every category and touch people’s lives in ways they had forgotten possible.
Several years later, I’m not so sure that’s the case.
Many of the Uber folks attempted to parlay the same success and strategy into the next mobility wave of scooters. But cities caught on and the brashness with which they launched without permission was met with a polite and measured “fuck off”.
Still, I believed in the promise that Uber had shown and went looking for a similar opportunity to build software for the physical world and found Opendoor.
Opendoor provides home sellers with a direct cash offer by taking on billions of dollars of capital risk and cutting every possible dollar out of the transaction. The home sale process is perhaps the most stressful experience of our lives – even more so than divorce. To attempt to change the process for a custom so entrenched, Ben Thomspon called “Opendoor: a startup worth emulating.
While Uber fought the constraints of the transportation world, such as mob-run taxi cartels, and poorly enforced legislation – Opendoor fought the real estate norms set by one of the most powerful lobbying groups in the country.
Perhaps because of these accepted norms, customers expected pain in the process and eliminating it from their transaction made the work profoundly touching and personal. I became a loan officer and heard from hundreds of customers, who in the wake of the death of a loved one or the marriage to a new special someone, were grateful to have the opportunity to buy and sell their home without the stress. Similar to Uber, the experience touched them in a meaningful way given how much better the experience was than the horror stories they had heard of and anticipated.
I have consistently found that most of us are generally apathetic to the physical world - we assume that what is, will be. We presume the physical world is unassuming to changes in customer preferences, price, and experience but when we create the opportunity for change in this realm, the impact felt by consumers is astounding.
Culdesac stood out to me for precisely this reason. The natural successor of Uber and Opendoor, Culdesac is building a city without cars that gives folks the walkable lifestyle they desire. This wouldn’t be possible without the progress in mobility that came over the prior decade, but the work has a depth to it that I have never seen before. The work to build a city involves applying for permits, securing equipment, contracting construction labor, financing and leasing. As a result, anyone who spent a couple days at Culdesac would quickly understand why so few folks engage with projects in the physical world. The grit required to push through construction delays, supply chain squeezes and the black hole of city council is astounding.
These are some of the reasons entrepreneurs do not start companies in the physical world, but there are others too. Chief amongst them being that full-stack companies often provide lower margins than software-only businesses, create regulatory concerns and come with the general messiness that creates problems that cannot be addressed from your pajamas in bed.
Long gone are the days of the girl with the lemonade stand who sold you a cup of your favorite summer drink. Now, her resolve would be subject to the legal and regulatory framework wielded by the United States. The exact source of her lemons would be inspected under the microscope. Upon completion of the lemon review, a local environmental group would hold out approval as the cups did not meet biodegradable standards. Her regulatory process was finally complete, it would be the end of the summer, and school would start again – leaving no stand on the street.
Since the 1970s, progressives have sought for a good reason to put new balances on the power that technocrats wielded in the name of building to prevent them from steamrolling the powerless. The result was the fragmentation of our governance, economic and political structure has decayed our ability to build important projects quickly. In the wake of a depression, we built the Empire State Building in 410 days and the Pentagon in 16 months during the war. Contrast this to a recent initiative to bring more protected bus lanes to San Francisco, an effort 20 years in the making, we find that labor shortages, environmental restrictions, and changing scopes have made progress impossible at the altar of perfection. This is most prevalent in the affordable housing conversation, where we debate the number of affordable units in a multifamily development but not the parking lot it replaced.
In the most optimistic case, McKinsey estimates that construction productivity has risen just 1% in the last 20 years. Meanwhile, the people who do this work have never been more scarce, as the BLS reports ~450k unfilled jobs in construction alone where we have an aging workforce as 41% of the construction industry nears retirement age. As Brian Potter mentions in his blog, the distribution of cost outcomes in the construction industry is right skewed and fat-tailed which poses existential risk for innovation. So while we will need more than 2 million new construction workers in the coming decade, we’ll find that not only have we not gotten better and faster at building the things we need but we also do not have the people to build them.
To build again in America, the primary objective must be speed. Speed kills in almost all aspects of business and life.
Tony Fadell, who launched the iPod just 9 months after conception remarked that he was moved to release the product fast because “I saw so many projects that died at Philips because they didn’t happen fast enough, politics set in.”
We must create a new generation of companies focused on bringing speed back to building in the U.S. Speed is the antidote to our apathy and general malaise.
The depth of our construction labor shortage has led to a slowdown in the work which can be completed as GCs decline new work. A backlog of requests has piled up from an inability to address requests from the developer seeking to break ground or the dad just looking for a new deck. There is nobody available left to service these requests. We need new companies which train and onboard construction workers, up-skilling them from their current roles in retail, college, etc to help them fill the need we have.
The fragmentation of our permit process can require years of review on the state and federal levels, with dozens of stakeholders and 50+ rounds of review. If you try to add an accessory dwelling unit to your home in California, you might wait an average of 6 months to hear back though the state requires a decision in 60 days.
The major infrastructure projects, proposed by President Biden, are likely to take up to 4 years for environmental review alone which will slow down not just the momentum of the project but the likelihood it happens at all. We need new companies which help others to move through these reviews faster, satisfying needs to protect the public at large while helping projects break ground.
This tiring nature of managing our review process almost entirely manually leads to an inability to meet customer demand in the physical world.
In San Francisco, restaurants attempting to meet customer demand for streetside dining by building parklets face so many new rules that they have decided to tear them down once and for all. This aspect of ongoing quality control and compliance seems particularly well suited for a company to tackle, with an opportunity for real neighborhood impact.
If we can’t build a parklet in the epicenter of American innovation, we’ll struggle to build more ambitious projects that defend the security of our nation.
If you’re looking to build something new in the physical world and struggling to move quickly, I would like to talk to you and learn about your roadblocks. If you’ve tried to ship something in the physical world and failed, I would like to talk to you and see if there are pathways we can pave for others to succeed. If you’re looking for a challenge to do something more ambitious, I would like to talk to you and explore what we might do together.
Thanks to Patrick Collison for maintaining a list of important projects which happened quickly here, it’s always been an inspiration to me.