Two Great Reads and Three Trends to Drive Innovation

Two things I have read recently have stayed with me and lingered in my mind.  The first is Ed Glaeser’s Triumph of the City, which focuses on the history of urban development, the impact of regulation and industry structure on urban success, and the future for cities.  Glaeser outlines several trends that suggest that in a world where innovation is fostered by human concentration, where climate impact will intensify, and where economic growth is increasingly occurring in urban versus rural settings, cities will only increase in importance in the future.  Not a new book but highly relevant and fairly timeless.  The second is Lena Khan’s academic paper published originally in the Yale Law Journal titled Amazon’s Antitrust Paradox (https://www.yalelawjournal.org/note/amazons-antitrust-paradox), which was one of the original perspectives on the need to change the way that monopoly power is defined and antitrust is enforced in the world of technology giants and tech-enabled network scale.

Three trends to watch relate to these two reads.

• First, the Federal Trade Commission (FTC) and the Department of Justice (DOJ), along with both parties and both houses in Congress, are focusing on the market power of Amazon, Google, Apple, Facebook, and others in tech and also looking more broadly at the concentration that has occurred across many other industries from mutual funds to airlines to modern agricultural seed production.
• Second, cities are beginning to question and change regulation that zones large portions of their communities for single family homes. The New York Times last week highlighted this in an article “Cities Start to Question an American Ideal: A house with as Yard on Every Lot.”  According to this article, Minneapolis has voted to end single-family zoning city-wide, Oregon legislature is considering similar action state-wide, and California legislature is drafting legislation to do the same thing.  Progressive presidential candidates like Elizabeth Warren, Cory Booker, and Julian Castro are “taking up the cause.”  According to the article, 75% of residential land in many US cities is zoned exclusively for detached single family homes, driving issues such as housing affordability, racial inequality, and climate change.
• Third, climate change impact legislation is accelerating. With New York State legislature passing the “Green New Deal” and the governor expected to sign it, a new era of net zero emissions is emerging.  Other states will likely follow.  With 20 years to generate all electricity from emissions free sources and 30 years to achieve an 85% reduction from 1990 emissions levels, many things are going to change in New York and elsewhere.

From my perspective as an investor in B2B innovation, there is a lot to be excited about.  These trends have the potential to change where people live, where they work, how they work, what transports them, how energy use is monitored, how energy is generated, transported, and traded, how “green credits” get traded, and so many more changes.  Urban centers could become increasingly dense and increasingly vibrant.  A change in the regulatory environment around monopoly definition and industry structure means that the potential for innovation and value to be created by new start-ups versus dominant monopolies expands greatly.

There will be huge winners and huge losers based on these trends.  Some regions and some cities will thrive.  Some areas will be hit hard as people shift elsewhere.  People owning the wrong types of homes in the wrong places could see huge declines in value in their largest asset.  Others located near transportation hubs with large lots of land could see the value of their land greatly increase to support increased density.  Major companies will lose their protected structural advantages.  Newcomers will seize the opportunity.  Cities and industries are potentially going to be reinvented in tandem, at a faster pace than any of us has experienced in the last fifty years.

Entrepreneurs – get ready!  This is your next gold rush.