"Professor Negroponte is wrong." --Wayne Huizenga, Former Chairman, Blockbuster Video
Nicholas Negroponte’s error, Huizenga asserted in the mid-nineties, was that there was no way of monetizing information. In this particular conversation, Huizenga contended that the value of media was inextricably connected with the physical format it was stored in--that Blockbuster Video thrived, not because it provided movies, but because it rented video cassettes with easy-to-assign values and easy-to-charge late fees. Negroponte, founder of MIT’s Architecture Machine Group as well as cofounder of that school’s Media Lab, was a champion of the idea that the looming digital age would signal a shift from atoms (physical form) to bits (information) as the determinant of something’s value.
You don’t need to be a historian to know who won that argument.
Today, few would argue that businesses need atomic forms to have marketable products. This is obvious with media companies like Spotify and Netflix (the latter was nimble enough to replace the DVD delivery business with the content delivery business). It’s infiltrated the business world with tools like Salesforce and Adobe, whose software as a service (SaaS) model charges substantial sums to put infinite tools at a customer’s fingertips--all with zero tangible media. But the atoms to bits migration is altering seemingly intractably atom-based industries as well.
One such example is the automotive industry, which is shifting from a cars-as-commodities to transportation-as-a-service model.
At first glance, this shift might sound sacrilegious. In the U.S., there’s a massive industrial and cultural complex bolstering the automotive industry. But what if we didn’t need to own cars to get where needed to go? What if it didn’t make sense, from a financial or convenience standpoint, to own a car? What would the industry look like? Would the culture be so robust?
The industry is already shifting, with automakers devoting massive resources to vehicle-agnostic mobility. Last year, Ford launched its Ford Smart Mobility subsidiary, which, according to a press release, is meant to establish the company as "a leader in connectivity, mobility, autonomous vehicles, the customer experience and data and analytics." Virtually every other large automaker has a similar program in the works, attempting to future-proof themselves for the days of tech-enabled, multi-modal transit systems and autonomous vehicles.
Culture appears to be changing in tow. A University of Michigan study found that 60% of today’s 18-year-olds have a driver’s license, compared with 80% in the 1980s. Not only are ride-sharing services reducing the need for private ownership, but social media is replacing some of the proximity-based social activities that make driving necessary.
The Digitization of Real Estate
The implications for atoms to bits are enormous for real estate. This transition is most evident in commercial real estate, where digitization has enabled companies to use far less space than they once did.
Offices can be smaller because technology enables remote working. Gallup found that 43% of employees in 2016 worked remote at least some of the time, up from 39% in 2012.
Offices can be smaller because they are no longer used as large filing cabinets. According to consultant Gunnar Branson, contemporary law offices use a third less space than they did ten years ago because the large tracts of real estate once devoted to legal libraries have been replaced by access to databases.
Ecommerce has moved shopping from brick and mortar retailers with limited inventory to centralized warehouses with tons of ready-to-ship inventory. It’s estimated that between 7,000-10,000 American retail stores will shutter in 2017.
Other innovations affecting commercial real estate include on-demand space access. Companies like Breather, which offers on-demand office space, and HotelTonight, which offers last minute deals on vacant hotel rooms, are using technology to maximize use of vacant or underutilized properties.
The Final Frontier: Residential Real Estate.
George Carlin famously quipped, “your house is a place to keep your stuff while you go out and get more stuff!” But what happens when our stuff disappears, when our media is in the cloud, when our food is delivered on demand, when our cars are summoned by the press of a touchscreen? How much space will we need? With less stuff and space, will we have a different cultural connection to our homes? How will the housing industry shift?
I believe the atoms to bits transition will have (and already has) major implications for the housing industry. For one, a home’s value will be assessed less on its square footage than what it enables a resident to do. If comfort, convenience, entertainment, and privacy can be delivered without excessive square feet, why shouldn't that affect the home's value?
I also believe that technology will enable new ways to accessing housing without owning it. While traditional homeownership is unlikely to disappear, a new class of housing will emerge that is less owned-commodity and more tech-enabled tool. This will enable residents more flexibility, important for mobile workforces.
URBANEER approaches housing from a digital perspective. On a basic level, we try to do more with less. In the same way an iPhone holds the processing power of a computer that once took up a large room, our space-optimizing furniture lets one room perform the same functions of two or three conventionally furnished rooms.
On a higher level, our small, flexible spaces are designed with an understanding of how technology has impacted the way homes are used. We understand that people are trading their owned stuff for on-demand purchased or accessed stuff. This approach frees homes from acting as storage vessels, promoting human-centered--rather than stuff-centered--design. This translates into smaller units, ideal for expensive, high density areas which afford greater access to people, workplaces, and culture.
At the ultimate level, the "ephemeralization" of our lives through technology is designed to provide a high quality of life using fewer material resources. Not only does this approach have a smaller environmental footprint, but it results in lighter lives with less to buy, maintain, and manage, providing more time and personal freedom. We are designing a world that is both small in form and infinite in capabilities.