All Forum Posts by: Eric L.

I see two main things coming that will affect real estate values.

1) Driverless taxis replacing cars.

Google has passed their millionth mile, although they haven't released it externally. They've also completed 5 million miles in their internal testing environment.

2016 Prototypes will be available.

2018 Initial widespread use of driverless taxis in some cities

2020 Many people in major cities will choose not to purchase as car as it will be 4x more expensive than taking a driverless taxi.

So, then, what affect will this have on real estate? We already talked about how this make 2x more housing supply available in LA.

My city used to be much smaller than it is now. The city limits stopped a few blocks from the street car tracks for almost 30 years. When the automobile became prevalent, the city quickly expanded past the tracks and urban sprawl started. Homes were built in the new sprawl areas and the center of the city received less attention as values decreased.

I believe that driverless cars will have the same effect. Cities will spread out to anything with 100 miles of the city. Housing values will decrease as supply of homes increases. At the same time, more people will actually choose to live in downtown areas as they won't need to worry about parking or traffic.

Population in places with nice weather like LA will increase. Southern California's two biggest problems, home prices and traffic will be fixed. Elderly people take to automated RV's.

2) AI - Home Building Automation

At first AI will be simple. We'll all have personal secretaries. Google has bought almost every AI company out there. They originally stated a year ago when they started their project that it would take 10 years to fully complete their project, although they haven't publicly stated what that is.

After this, we'll start to automate home construction. I can see a cheap plastic material with built in quick connect fittings for plumbing/power being developed. If driverless semis take off they can be built anywhere and delivered cheaply. Homes torn down and put up in a week will be the norm, although what will replace wood construction still isn't clear. 

Elon Musk was recently quoted as saying something similar to, "The general public, even people in Silicon Valley, don't understand how far along we are with AI."

The second wave of AI will be when AI starts to regressively learn. This will be within the next 10 years. I have no idea how society will change here. The impact here will be the same as an alien landing from another planet. If an alien from another planet lands, the first question you ask won't be, "Does it want my job?" The first question will be, "Is it friendly?" and we'll go from there. This point will be within the next 10 years. Crazy to think about when you sign that 30 year mortgage.

I don't think that is the question at all. That is like saying. "The question will be when the taxi companies begin to create a mobile app that lets you easily summon a taxi and automatically pay." They didn't. Uber was built into a multi billion dollar company in two years because the space was ripe for disruption. The question will be, when will the company come that will automate home building?

No, no it's not. The topic is technology. 

Look what technology focusing on computers did to the computer industry. A 1980 computer is almost worthless today, except perhaps for collector value.

When technology starts to focus on housing, the same thing is going to happen. Building a home will be automated and cheap materials will be used. A 1980 home will have the save value as a 1980 computer. 

The man who has built the most impressive company and technology in the last decade is telling us that our industry is next.  It's very likely that everything we are investing in will be disrupted. 

Originally posted by @Vince Beusan:

"Eric, CEO of Google, has renounced his American Citizenship for tax purposes. He's a hypocrite that speaks with other elites that see the big picture."

Do you often create fake slander on the Internet or is this a first time for you? Let's touch on three points.

1) He's created a company with 55,000 employees. That company was voted this year as the best to work for in America.

2) He has a project in the works to stop the #1 killer of Americans age 4-34 with his driverless car project.

3) He's created a nanobot project that with the goal to cure cancer within the next 10 years.

Originally posted by @Bobby Narinov:

"Obviously he is so far off base because he has never seen his property tax bill. If he ever bothered to open it he would have noticed that this $1M house is taxed as $700k LAND and $300k improvements(i.e. buildings). So even if the price of building a house in Palo Alto drops to ZERO (due to process improvements) the price of the land is not going to be affected. Not unless the machines are able to produce more land. This can only be possible in one of two ways: somehow the machines become GOD and/or they figure out how to fit more space into the same space (Dr. Who's TARDIS). Knowing Google, someone inside already have a billion dollars budget on that."

Good points. Let's talk about that. How would you define technology? To me, technology is simply figuring out ways to do more with less. We've seen a lot of technology with data and bits, but we haven't seen a lot of technology with atoms in the last 50 years. We now have all of the worlds information in our pockets, but not a whole lot else has changed.

The Federal Reserve has done everything it can to try to create 2% inflation per year and it has failed. Why? Technology is just now starting to focus on atoms instead of bits. Things like Uber and AirB&B are just starting to make things more efficient.

How are we going to do more with less in housing? Obviously we can't produce more land, so we're going to have to use land more efficiently. The first way we'll do that is with driverless cars. 50% of the land in LA is dedicated to the car. This is highways, parking lots, driveways, garages, and streets. Half of that, 25%, can be re purposed with the driverless taxi as we won't need parking lots, driveways, or garages. In addition to this, any house within 100 miles of a major city will be within the daily commute. Twice as much housing available in LA suddenly means house prices are cut by at least half.

So now we're in a spot where the driverless taxi has reduced our #2 expense, transportation, to a few cents per mile in a driverless car. It has also reduced our housing costs by half, but we still haven't come close to Larry's projection.

In addition to being able to use more land, we'll have to build up. The #1 reason that we don't currently build up in major cities are cost and zoning restrictions.

Zoning restrictions are in place to keep density down. The main reason for this is traffic and congestion. In a world where a driverless taxi can drive inches behind the car in front of it and never be distracted, traffic jams don't exist. Zoning restrictions fade.

Let's talk about cost. It is currently extremely expensive to build up. Over half the cost of the structure of a home is labor. Today, if you want to add a level to your home it will take about a year for the loads to be calculated and for the labor to be completed. What if automated bull dozers could have the home knocked down and picked up in a single day? What if a driverless semi then pulled up with a modular home that could be stacked like shipping containers? What if it had a 3d printer that could print a home out of cheap concrete?

These things might seem like science fiction, but I think that we can all agree that framing a home with wood and raising the framing is 1800's technology that could be much more efficient.  There are a lot of way we could do more with less here.

Google has bought almost every robotics company out there. They are very clear that their goal is to replace human labor within 10 years. That was last year.

This affects each and every one of us a real estate investor. We all agree that technology is moving faster. We all agree that housing is the #1 expense of Americans. In fact, it's almost twice as expensive as the nearest expense. We can see companies like Google moving from bits to atoms. If technology is doing more with less, it's very clear that housing will ground zero for technology innovation in the coming decade.

http://www.ft.com/intl/cms/s/2/3173f19e-5fbc-11e4-8c27-00144feabdc0.html

A perennial optimist when it comes to technology, he argues that all that will change. Rapid improvements in artificial intelligence, for instance, will make computers and robots adept at most jobs. Given the chance to give up work, nine out of 10 people “wouldn’t want to be doing what they’re doing today”.

What of people who might regret losing their work? Once jobs have been rendered obsolete by technology, there is no point wasting time hankering after them, says Page. “The idea that everyone should slavishly work so they do something inefficiently so they keep their job – that just doesn’t make any sense to me. That can’t be the right answer.”

He sees another boon in the effect that technology will have on the prices of many everyday goods and services. A massive deflation is coming: “Even if there’s going to be a disruption on people’s jobs, in the short term that’s likely to be made up by the decreasing cost of things we need, which I think is really important and not being talked about.”

New technologies will make businesses not 10 per cent, but 10 times more efficient, he says. Provided that flows through into lower prices: “I think the things you want to live a comfortable life could get much, much, much cheaper.”

Collapsing house prices could be another part of this equation. Even more than technology, he puts this down to policy changes needed to make land more readily available for construction. Rather than exceeding $1m, there’s no reason why the median home in Palo Alto, in the heart of Silicon Valley, shouldn’t cost $50,000, he says.

For many, the thought of upheavals like this in their personal economics might seem pie in the sky – not to mention highly disturbing. The prospect of millions of jobs being rendered obsolete, private-home values collapsing and the prices of everyday goods going into a deflationary spiral hardly sounds like a recipe for nirvana. But in a capitalist system, he suggests, the elimination of inefficiency through technology has to be pursued to its logical conclusion.

“You can’t wish away these things from happening, they are going to happen,” says Page. “You’re going to have some very amazing capabilities in the economy. When we have computers that can do more and more jobs, it’s going to change how we think about work. There’s no way around that. You can’t wish it away.”

Yesterday, there was an interesting Harvard study released. There is a map where you check the housing burden for your specific area and also a panel discussion.

http://www.jchs.harvard.edu/research/state_nations_housing

They're now pumping these out 10 a day.

http://www.businessinsider.com/a-chinese-company-3d-printed-10-houses-in-a-day-2014-4

Pretty much every industry has been disrupted by technology, with the exception of residential real estate.

Commercial retail was disrupted by eBay and driverless cars will continue that. Working from home is disrupting corporate real estate. This will disrupt residential real estate.

It sounds like some people realized that it might not be in the citizen's best interest to use their own money to prop up the cost of their largest expense. Hopefully this will mean lower housing costs in the future and a return to free markets.

http://www.latimes.com/business/mone...#axzz2vhykMTqS

As far as recreational driving, there are a lot of people even today who have horses. Recreational driving will always exist.

If you can ship things in semi's that can drive 24/7 without a driver, shipping gets cheaper. If the semi's can all go down the highway two feet from each other you get a 20% reduction in fuel use on top of not needing to pay a driver and having 3x the available driving time from the semi.

Self driving cars will eliminate traffic jams. You can also fit 3x as many of them on the road at the same time as they can drive much closer together. This eliminates the need to build more lanes.

You want to be in control of your car, but you already have systems in your car that drive for you. ABS, Traction Control, and Active Handling all take over in times of emergency. Not only are they there, they are mandatory in the US.

Some might not see the relationship between self driving cars and RE investing now. This is the biggest change since the Internet. I'm sure a lot of investors didn't see how the Internet would impact RE in '95 as they were sitting down for coffee and flipping through the pages of the latest MLS listing magazine. Retail since then has been a victim of eBay and Amazon and with it the commercial store front they once occupied. Many more people are working from home, so large commercial buildings are starting the trend as well. The idea is to discuss this so we can get ahead of this trend. :)

I agree that the first "this person is dead because of driverless cars" 24 hours news segment is going to be rough. Only 93% of accidents are driver related. Someone in that 7% is mechanical failure, so accidents caused by car companies are already happening. We're losing 30k American lives a year from cars. The bar is as low as it can get.

The legalities of that accident are already figured out in some states. The owner of the car simply gets insurances instead of the driver.

I would say that the biggest three reasons that people don't take taxis are that

1) The taxi is expensive

2) The taxi takes a long time to drive across town and get me

3) I have to interact with a driver

The driverless taxi fixes all of these.

Let's say that your driverless car takes you to work, drops you off at the door and goes and parks itself. You know that you won't use your car again until 5pm. What if instead of sitting there the car could make you money by driving other people around town, don't you think most people would opt for the extra money? Now let's assume that that started to work out for the car owner. They would probably want to buy another car to make even more.

There are a ton of people that look at cars as appliances. The top selling car is not the Mustang or the Corvette it is the Camry and the Focus. Most people would love to just have one pick them up whenever they wanted. If you told someone they could get rid of oil changes, tires, insurance, and their car payment they would be all over it. The supply will be there for driverless taxis. The demand is already there, but the three hurdles above need to be removed.

Nissan expects to not just have a car available by 2020. They will have this available on their entire model line for a cost of $1k.