Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 916

We used Uber to get pretty much everywhere when we were in Rio de Janeiro. For reasons of convenience, cost, and safety, it just made the most sense. I can tell you that it felt a lot more valuable in place where you don’t speak the language and you’re acutely aware of being in the wrong place at the wrong time.

And since Uber is going public later this year (along with Lyft), it got me thinking about whether or not it is a stock that I would want to own. Are they destined for monopoly profits? Do they have a defensible business model? How powerful are their network effects? Having first-mover advantage doesn’t guarantee anything.

My initial thoughts are that the network effects for their core offering – single rides – don’t feel that strong. Sure you need a critical mass of drivers so you’re not waiting around too long, but at a certain point the response time is likely good enough. Rides are a commodity.

This arguably changes as you get into services like Uber Pool and Uber Commute, because more users on the network in close proximity to you can mean lower costs and higher service levels. But is there any sort of lock-in effect?

Many passengers and drivers seem to “multi-tenant.” In other words, many (or maybe most) people have multiple ridesharing apps installed on their phone and they will switch back and forth when it makes sense to do so. I do that when prices are surging. And drivers appear to be doing the same based on the Uber and Lyft emblems in their cars.

For a long time, Uber was the only show in town here in Toronto. Hailo only lasted about two years or so. But as soon as Lyft entered the market, both companies moved to aggressively discount their rates, and that is still going on to this day. This suggests certain things to me.

Among other things, it is a reminder that the demand for (commoditized) transportation services is highly elastic. We are price sensitive. We will use whatever is cheaper. So one way to win is to obviously create a cost structure advantage. Hence the current autonomous vehicles “arms race.” 

Lyft is also trying to establish itself as a multimodal transportation solution. (When are scooters coming to Toronto?) Perhaps that will make them less of a commodity. But again, how defensible is that approach? I suppose the market will tell us what it thinks later this year.

At the beginning of this year – January 2nd to be exact – Apple revised its earnings guidance, downward. It was the first time in 15 years that the company had to do this. 

Tim Cook’s letter to shareholders, which can be found here , focuses a lot on China and its “economic deceleration.” But M.G. Siegler of 500ish Words believes that a greater pivot could be underway. His piece can be found here . It’s a good read.

Firstly, Apple’s current growth period is probably over. And secondly, the company is likely going to need to diversify away from high margin hardware/software sales and continue to grow its Services business (something that Microsoft has, ironically, already done).

Here is an excerpt from M.G. Siegler’s essay ( Apple’s Precarious and Pivotal 2019 ):

The iPhone has simply been too good of a business. And it’s hard to see what tops it. Certainly in the near term. If Services is to carry Apple in the future, it will likely be only after years of relatively stagnant iPhone revenue growth mixed with a rising overall market. In other words, time and the broader world will have to catch up. And then Apple can have their “Microsoft Moment” — a services-based resurrection of growth.

As Tim points out in his letter, most of Apple’s Services revenue is tied to its installed base, as opposed to current period sales (also: less exposure to China). Last quarter that number was $10.8 billion – a new record.

So what we may see in the near future is the end of outright phone purchases and instead some sort of iPhone as a Service (or iPaaS). Pay Apple every month in perpetuity; always have the latest iPhone.

Of course, Apple has many other irons in the fire. Apple Watch has turned out to be a big business and the company is said to have 2,700 “core employees” working on its autonomous driving project. 

Maybe some of these businesses will also end up as Services.

Over the weekend I learned about Dan Buettner’s Blue Zones . These are cities and parts of the world where, according to Dan, people have a much longer life expectancy. The five regions he identifies as Blue Zones are: Okinawa (Japan); Sardinia (Italy); Nicoya (Costa Rica); Icaria (Greece); and Loma Linda (California).

Many of you have probably heard of this finding from Malcolm Gladwell. I think he writes about it in Outliers . I had. But I didn’t know about Dan Buettner and his efforts to teach these “secrets” to other regions around the world. 

I can’t speak for the efficacy of his consulting practice, but I think it’s interesting that some of the characteristics of these Blue Zones include a strong sense of family and community, as well as constant moderate physical activity . In other words, activity that is integral to normal life, such as lots of hills in a mountain town.

The links between urban form, walking and biking (instead of driving), and health outcomes are something that get a lot of air time. It is, of course, one of the reasons why denser cities are thought to be healthier cities. They encourage more active forms of mobility.

But what else could we be doing to make physical activity an inseparable part of urban life? In Rio de Janeiro, they often incorporate fitness facilities into their public spaces, whether it’s a parklet or the beach. That probably doesn’t qualify as inseparable, but it’s certainly a start.