Norris Bruce
Apr 18, 2019

Smart Cities With Dr. Jonathan Reichental #639


Aaron Norris is joined again this week by Dr. Jonathan Reichental. He is an award-winning technology leader whose 30-year career has spanned both the public and private sectors. In 2017, he was named one of the top information officers in the world. In 2016, he was named one of the top 20 most influential CIOs in the United States. He is recognized as a global thought leader on a number of emerging trends including urban innovation and blockchain technology. In 2013, he was recognized as one of the top 25 doers, dreamers, and drivers in government in America. His innovative work in government has also been recognized by the White House. He is also a popular write and educator, producing several highly successful online courses on LinkedIn Learning, which was how Aaron got introduced to him. He also co-authored the Apps Challenge Playbook and is a frequent public speaker on a wide range of technology and business-related topics.

Episode Highlights

  • What does it mean to live in a “smart city?”
  • What industries are at risk?
  • What are some economic and demographic trends he is seeing, especially with poverty changes?
  • How does the U.S. compare to other countries?
  • How could sites like LinkedIn change our current education model?
  • Could our way of life change drastically in the future?
  • What is his advice for people wanting to learn more about the field?

Episode Notes

One of the most impactful comments that was made on our radio show last year actually came from a nonprofit that builds affordable housing.  He said if there was ever a massive emergency in California, he wouldn’t want to live along the coast because all your first responders live an hour away because they could no longer afford to live along the coast. Dr. Reichental appreciates that since he works in city government, specifically in California. Those conversations are being had, especially in the Silicon Valley. The number of PIOs is going to be huge in the next year, and it’s going to flush somewhere around $25 billion dollars into the area. So perhaps there’s really no end in sight of gentrification there because of the need for more workers, and it’s gonna be very interesting to follow in California.

Not only is it interesting, it’s painful too. You can make this personal really quickly. Dr. Reichental struggles with housing prices and costs here as do a big proportion of the state. We are not responding quickly enough and well enough to massive demands for housing and affordable housing. It has real repercussions for people’s lives and the quality of life. He doesn’t know how we would get over that. As of early 2019, we’re not in a good place.

Aaron said smart city needs to mean more than a few things that we’re going to be talking about. We definitely need to fix the affordable housing issue, and California is such a unique case. We’ve been talking a lot about the 3D printing and accessory dwelling unit conversation that is specifically happing in California right now. Aaron thinks we’re going to have some interesting conversation this year because what the state is doing and what is happening with 3D printed houses. He thinks 2019 is going be the year we finally start hearing about that, and it’ll be interesting to watch.

Aaron asked Dr. Reichental what makes up a smart city in is opinion. He said this is actually one of the most popular questions he gets no matter where he goes. He’s been thinking about it a lot, and he said the definition is changing as the times change. He has always said that a smart city is a city that is uniquely responding to its needs, and there’s going to be a significant component of technology in those responses.

The reason he defines it that way is because it answers another question which is you know what what cities in the world are doing the right things. That question can’t be answered because it depends on the needs of a particular city. What’s important to San Francisco could be different Barcelona, Moscow, or Melbourne, Australia. It has to reflect needs in that community and the political environments, the infrastructure, and the and the terrain. There’s so many other components. What we can say is because the cities have become and will be the center of all human activity in the future, they have to be great places to live. This can be hard. The smart city is about creating a terrific quality of life and creating places that are livable, workable, and sustainable. He thinks those are the three major measurements of whether a community is working. From his perspective and from many people who kind of operate in the space, smart doesn’t mean technology. But it also means good regulation.

From his perspective, and from many people who operate in the space, smart doesn’t mean technolgy. It also means good regulation, and it also means good laws. It means engaged people who are willing to collaborate with each other and with their government. Like many of his answers, it is multi-dimensional. It’s made up for many many different things.

Aaron wasn’t expecting him to bring that local flavor into it. Aaron asked him if you are a real estate investor looking for clues, what are some of the things he would look for to hint that the livability, workability, and sustainability issues were being handled at the local government level your message. Dr. Reichental said what is defining of our times and will be even a greater focus in the months and years ahead is the degree of innovation and to what degree we are thinking differently about how we’re doing things.

We have problems with our transportation systems, and we have problems with housing. If we continue to do what we’ve been doing for the last 40 years, if you’re smart you’ll know that’s not going to get us to a good place. Sadly, we see repetition and certain behaviors. Adding another lane to a highway does not solve transportation for the next 100 years, but we still do it. He believes you can’t apply 20th century solutions to a 21st century problem. Half of us think completely differently about how you move people around. This is great because this gets right back to the first thing he said which is people aren’t thinking big enough and bold enough.

Aaron asked if there are any cities he gets really excited about seeing some of the things that they’re doing in this space. He said on the transportation side, there are communities, whether in the Middle East or in Scandinavia that are prepared to take a risk and try something. Even Los Angeles is going to get real bold on their ideas around transportation in the next few years. There’s a scattering of communities doing interesting things. Many cities are are embracing bicycles and scooters now and alternative forms of transportion. Uber, Lyft, and Grab have contributed to the problem in the short term, and in the long term many of these companies have a vision that’s very different for how transportation will be will be handled.

The story line here is that there are new ideas and communities that are prepared to try things. Trying is part of the innovation in the 21st century. We try things even though we’re not sure that they’ll work or not. On the real estate side, we see exactly the same dynamics. We may see 3D printed houses coming. That’s interesting, involved, and innovative. You also have your mini house movement. More density is something that lots of urban environments are looking at and then building up.

One of his criticisms for Californians and being involved in California is we we don’t want high- rises and tall buildings. Earthquakes probably played into it as well as insufficient infrastructure in terms of roads and transportation systems. You solve some housing problems if you build high-rises. You look to Singapore and Hong Kong and even the center of London and other communities where, if you want to get lots of units and begin to stabilize housing prices, you have to go to places you didn’t want to go. However, the future forces you to do that.

Aaron said in California, unfortunately, a lot of the construction industry just takes so long and there’s so much risk. He thinks the fear is that it’s just so costly and that builders will lose money. The National Association of Home Builders said 25% of the cost of building is now regulation. The CEO of the California Builders Association said that in Florida, if you’re a builder and you want to have a conversation about building a track of homes, the question you have to ask yourself is what the economy will be like in one year. In California, the question a builder has to ask is what it will be like in 15 years. It’s frustrating and feels like we can’t have an honest conversation about affordable housing because politics is getting in the way, and that’s not sustainable.

Dr. Reichental said it’s good to recognize that and that it is difficult and frustrating and everybody has important opinions and points of view on this. He sees a couple of possible trends. One is that gradually we’re seeing a new generation of leaders being elected into office. You have a generation of internet natives who were born with technology people who have a greater appreciation of where things are trending. These people are beginning to become the policy makers.

It will take time, but that is one trend which is positive. In some ways, we’re going to be forced into making tough choices. There is a forcing mechanism here that people are demanding more choice. They’re demanding a change, and they’ll do that to other parts and they’ll do that through other channels. We have to recognize where our limitations exist today in terms of existing regulation and what can be done to streamline that in a way that makes most people comfortable and reflects their concerns about the environment and resources. He said they recognize that and work with it. In general, he tends to be optimistic, but he’s a little bit more optimistic in the long term and a bit more pessimistic in the short term.

Aaron said movability has never been as easy as it is now either; so if people don’t like living in California, they can move to other states and probably save money. Our state regulators and politicians are going to have to make some changes, or else it will be painful. They next went on to talk about the shared economy and how work is going to change. In his course, Dr. Reichental talked a lot about there is a lot of fear when it comes to things like artificial intelligence combined with robotics and how that might get rid of a lot of jobs. He brought up the very real facts that in past revolutions it’s actually created completely new sectors.

Aaron asked him if he is afraid that things are moving so quickly that upskilling won’t be able to keep up fast enough and lead to industries completely disappearing? Dr. Reichental said it’s an important question for all of us to think about and act on. It’s a little unclear, and there is a whole school of arguments that there will be more jobs and more demand in the future. There’s a pretty decent amount of arguments that we are going to struggle to find things to do and there’s going to be massive unemployment in the future.

There’s good arguments on either side of this, and the reason why both are in many ways appropriate is we simply don’t know. There is this kind of unpredictability, and each of us have to look at the data and make up our own minds. Dr. Reichental said he is struggling a little bit with this one because he thinks we are going to see massive change in the world of work in the decades ahead, greater than we’re anticipating right now. That will have impact. Just like with everything else, it won’t affect everyone equally. If you are a person who has traditionally done unskilled work, it could be that the impacts of automation and AI are going to be much greater than if you have very specialized creative work and you’ve had a significant amount experience and education around it. The impacts could be large, and they could be unequally distributed.

At the same time, about 50 percent of the things that people will do in the future are jobs that don’t even exist. What will they be, and what kind of training should people have for them? We will likely understand that in a timely enough manner, although there are some uncertainties about it. There’s no doubt that there will be new opportunities. The question is whether they will be accessible to everybody and what it will take to be good at them.

One of the things he discussed in his course on the foundations of the fourth industrial revolution is that the more specialized you are and the more you have an education around the topic, the more likely you are to have more success. That’s important today, but it’s going to be even more important in the future. Relying on lower skilled work in the future is risky and will cause problems for people who, for whatever reason, can’t get a highly skilled job. There could be many reason for this.

What we do have to recognize today as individuals and enterprises is that the world of work is going to be transformed and is being transformed as we speak. One useful example and data point that people find useful is that already over 30% of the American economy are individual contributors. That’s sizable, and it’s only going to grow in the years ahead. Historically, Americans belong to an organization. They work, they get a paycheck every two weeks, and they do it in a factory or in an office. Now the phenomena is people are participating in the gig economy or they’re starting their own businesses individually. That in itself is changing the working dynamics here in the US.

Aaron reached out to the Census Bureau and asked them how they were measuring, but he knows they were bringing back something they retired in 2005. Aaron asked what he meant by 30% and if those are those individuals that participated in some way, shape, or form in the gig economy or that strictly 30% are working for themselves. Dr. Reichental said it is all of those things. It’s the notion of an individual contributor. You don’t belong to a traditional organization.

It will be fascinating to see if the census puts some questions together on that and how they start measuring it. Whenever he gets into like an Uber or Lyft, Aaron asks them if this is their full time job. He said he doesn’t have enough data points and is pretty sure his margin of error is huge, but in his experience only one Uber driver said that it was their full time gig. Dr. Reichental brought up some really good points in his course about the challenges. There may be freedom and flexibility, but it doesn’t come with those safety nets like a retirement account and health care that we’ve typically been used to having. This includes the kinds of jobs that we used to have that are changing quite a bit.

The social statement is going to evolve, and this is going to put some pressure on the debate on health care in the United States. It’s important to recognize that many of these phenomena are global. These are not U.S. centric. When it comes to health care, there’s been the debate with some cities wanting to try the idea of a minimum living wage for everybody in a city. That’s an interesting phenomenon that might happen starting this year. This is the idea of the universal basic income. It’s not just blue collar jobs that are in the mix, it’s white collar, engineers, attorneys, and it’s certainly real estate. In the real estate industry, there are a lot of Wall Street companies coming in the space. We’re intermediaries where the brokers are in the middle, and the very nature of Blockchain is getting rid of the middleman.

Aaron said talking about being highly specialized and looking at the value that we bring to the transaction, The Norris Group is not just considered an intermediary. Aaron asked Dr. Reichental how he sees other industries addressing this very same topic. He said they are not doing it well or quickly enough. It goes back to the notion of Blockchain, which, as a distributed database platform, has the ability to displace traditional intermediaries and a whole range of transactions. This could include mortgage brokers or any type of financial type activities and many others, including those that overlap with the real estate industry.

Things are evolving and there’s unpredictability. People aren’t ready to fully commit to a different path. If you’re in a particular industry, you’re seeing technology that’s looking like it might be disruptive. To what extent do you make huge change? What happens is the technology either burns out, it doesn’t do what it’s supposed to do, or it takes things in a different direction. That’s why it’s increasingly hard to be a business leader today and will even be hard in the future. You have to make more and more bets on things that are greater and greater and more unpredictable.

However, he does think there are industries that are not moving quickly enough to reflect shifts in change. He immediately thought of physical retail. For a long time it was known that Main Street was going to be challenged by online e-commerce. When you look at the big stores in the United States like Sears and Circuit City, they were significant players in retail in the United States for several decades. Just like everyone else, they knew that things were changing. Year over year, online commerce was getting bigger and bigger and pulling more and more weight from brick and mortar. That eventually would become more difficult to sustain real estate presence because of the course and the shrinking revenue. You see these major retailers going bankrupt almost weekly in United States, including big brands that were around for a couple hundred years. They are just shutting down overnight.

You have what they did not learn or what they did not see that others should see. If you’re in retail today and have a large brand and a big footprint, you better be thinking about a completely different model. Otherwise, the future doesn’t look so good. For Dr. Reichental, that is very characteristic of changes that are right in front of us and yet organizations are not necessarily moving fast.

Another example is there are some interesting experiments that have been happening in the retail physical retail market in terms of automating checkout systems. You have Amazon’s store where there’s no staff. You just go in, get your products, leave, and it’s automatically charged. We’re going to see impacts to people who work in retail jobs. In America, the largest employer of women are retail jobs, and many of those are going to go away. Since we know that, the question now is what we are going to do about it.

The same thing is happening with drivers too. This is the single biggest category of employment for men, and we know driving is going to go away for the most part. Knowing this information, how are you going to act? There is change in front of our eyes that could possibly work, but we’re not taking the right action knowing that it’s also complicated and unpredictable.

Aaron ended by asking Dr. Reichental if he had any advice on how, not just real estate investors, but people in general are looking to learn more and where he plugs into it. He said it is a part of who he is. He loves information and knowledge. He is a big fan of Twitter on the information side. However, he is not such a big fan of the trolling and all the ugly stuff. However, he definitely likes being able to follow companies, individuals, NGOs, and governments. It’s cool to have that accessibilty to people and knowledge. This is going to be the quality of the future. Those that are more informed that are better able to critically think through change are going to be better positioned.

His recommendation would be you have to learn something new every day. You have to figure out what your channels are to learn that. More and more we control our own destiny, and you have to take the proactive steps. It’s about figuring out the ways in which you can learn. A big chunk of his day is reading, watching videos, talking to people, and listening to and absorbing more information to be able to better understand where things are and where they are going. He can then challenge them and ask them the tough questions. He wants to share and help others. This was why he took the call with Aaron for this interview he loves to collaborate and share hisknowledge, and it helps him learn and to be current. Aaron said with YouTube and sites like LinkedIn Learning, there’s not really an excuse not to find time to learn since a lot of it is free.

For more information, there’s a couple ways to reach Dr. Reichental. You can reach him on twitter at @Reichental. If you follow him, you can interact with him there. LinkedIn is also one of his preferred channels. Between Twitter and LinkedIn, he is very accessible and would love to have a conversation or help anyone he can. Aaron also highly recommended Foundations of the Fourth Industrial Revolution. it’s one of 11 courses on the digital transformation leadership, which is quite interesting.

The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.

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