Operations, Real Estate Trends, Technology,

Wealth of Nations Has Some Questions, A Couple of Suggestions

It’s been quite the week Detroit.  Let’s jump right in…

The Autonomous Vehicle Race

You won’t be surprised to learn that being a Detroit headquartered firm has its disadvantages.  One of which is that our area’s talent and business investment climate is consistently dismissed by folks who are confident they know better (I and a small group of people know exactly what I mean).  It’s as if the the Rust Belt moniker applied to both industry and intellect.  This attitude lies behind the the persistent ignorance of Detroit’s innovation heritage (a heritage that predates Gilbert and even the 20th century).

We had a good chuckle in the office when we read Wired.com’s article on Detroit’s clear lead in developing autonomous vehicle technology.  Aside from the great headline (“Detroit Is Stomping Silicon Valley in the Self-Driving Car Race“) the reporters made the solid point that tech is only one component of delivering a product to market as complex as a car. Detroit has a superior combination of experience, talent, scale, strategy, tech and capital that explains its lead in this race over Google, Uber and Tesla.  Moreover, those who tout Silicon Valley’s decided advantage in venture capital forget about Detroit’s retained earnings capacity.   Our innovation is funded through the retained earnings of some of the world’s largest corporations.  Not private VC investor pools.  This is the reason, for example,  that even though Michigan barely makes the top 25 in term of 2016 VC deals  (1,894 deals in CA vs. 39 in MI according to PwC), it nonetheless finishes as the 6th best state in terms of utility patents issued per capita  according to the USPTO (top 8 overall regardless of population).

We will see if Detroit is able to maintain this lead going forward.  The biggest threat undoubtedly lurks in the Valley’s debt-free and legacy-cost-free balance sheets. More on that in the future.

Facade Improvement Grants as Economic Development?

Photo by: Katrease Stafford, Detroit Free Press

Curb appeal matters, no doubt, but people traffic matters more.  I guess that’s why we are more than a little skeptical of programs like Motor City Re-Store, announced this week by Mayor Duggan.  Aside from the relative small scope of the program, it will do little to generate actual retail activity.  It is almost literally the least that can be done to make an area look different.  Programs like this work best when they are part of a comprehensive, concentrated investment effort.  Critical mass is everything in real estate redevelopment.   When promoted as a standalone program, they don’t do very much.  The Free Press had an interesting rundown of prior efforts:

Facade improvements for local businesses is an issue the city has tackled previously, along with a number of non-profits and neighborhood associations.

Midtown Detroit Inc., has operated a façade improvement program in the city for several years and in the past, the organization has also given grant money to homeowners for facade improvements.

Facelift Detroit, a non-profit organization, has also operated a similar improvement program and focuses on the city’s blight issues, according to its website. Neighborhood organizations such as the Eight Mile Boulevard Association have also launched successful facade programs as well.

That’s a long history with not many needles moved.

The Administration is getting it right in other ways like the Fitzgerald Neighborhood Plan, but election year sops like the Re-Store (and the “Green” program we discussed last week) disperse too few resources over too wide an area to be taken as anything other than a political expedient necessity.   Then again, political expediency has its role.

Amazon’s Purchase of  Whole Foods Revolutionary?  Nope.

I’m not sure who this person is that wrote this research note, but I thought it was very well reasoned if a bit misguided.  It was published on Seeking Alpha‘s platform and makes a number of excellent points.  But I think it draws the wrong conclusion.  Sometimes an acquisition is what it appears to be.  In this case, this is a straightforward scale expansion.   I don’t see how Amazon’s involvement will somehow revolutionize the grocery industry – at least not beyond what’s already occurring via automated self checkout and delivery.  Amazon is a scale, membership fee and  consumer data play, that also happens to be a large delivery operation.  There’s no way however, that Whole Foods becomes a delivery platform for Amazon’s millions of products (except if it does, see below).  Instead, the acquisition seems clearly aimed at engaging consumers in a way that Amazon has heretofore been unable to do at scale; satisfying the weekly grocery trip.  Grocery shopping remains a routine, mandatory exercise that is very difficult for a tech company to disintermediate.  Amazon Go is a recognition that there’s only so much a person is willing to acquire online.  Instead, think of Amazon’s Whole Foods acquisition as a “last mile” play.  It controls the interstate fiber optic cables (I’m speaking figuratively here), but now it wants to control from pole to home.  To have a full image of its customers, Amazon must be intimately involved in activity that occurs weekly and consumes 10% of the average household budget.

That being said, might we suggest that the rooftops of Whole Foods stores across the country would make great delivery drone airports – or “droneports” if you will.  You heard it here first.  You’re welcome Jeff Bezos.

And now a photo humbly submitted for your nightmare material courtesy of some obscure Italian drone website:

Photo from faqdroneitaly.org


Experienced real estate consultant, scholar and visionary, Emery Matthews founded and serves as the principal of Detroit-based Real Estate Interests, LLC. Matthews has been a major player in the Detroit real estate landscape for more than a decade, regularly managing hundreds of millions of dollars worth of projects and investments. Real Estate Interests, LLC provides specialized consulting services designed to help guide companies through major changes and complex deals, managing assets and property, and advising decision makers. Matthews and his team are currently managing projects in Detroit and across the U.S. in the automotive, manufacturing and education spaces, while increasing their foothold in the rapidly growing Sub-Saharan African nations of South Africa, Ghana and Nigeria. A Detroit native, Matthews earned his bachelor’s degree from the University of Michigan and simultaneously earned a Juris Doctorate and Master’s of Business Administration degree from Harvard University. As a lifelong learner with a global vision, Matthews is fluent in German and currently working to improve his Chinese.