“The Future of Real Estate” is a topic growing in popularity and dimension. Joe Lonsdale, founding partner at 8VC, a venture firm that has also invested in companies such as Blend, Flexport and Oscar, has a unique perspective on how real estate— on the cusp of massive transformation—will evolve over the next decade. His investment in “smart enterprise” businesses and other innovative companies solving infrastructural challenges give him unique insight into what lies ahead.
At the Future of Real Estate Summit held in Austin Texas last week, Lonsdale sat down with Qualia CEO, Nate Baker, to discuss just what “smart enterprise” means and its impact on the real estate industry. The pair also discussed innovations Lonsdale is keeping an eye on in the next few years that may change real estate in unexpected ways including flying taxis, tunneling systems, and tech-driven cities.
Defining the “smart enterprise” wave
When the phrase “enterprise software” comes up, companies like SAP and Oracle may come to mind. These businesses transformed office operations to make corporations more efficient through basic automation. They ushered in technology solutions that eliminated manual paper processes.
Now, technology advancements that enable businesses to leverage massive amounts of data are pushing industries toward the next phase of integrated solutions—or what Lonsdale calls the “smart enterprise” wave. Through this new wave of companies, decades-old infrastructure will be replaced with technology that brings entire industries onto single platforms. Rapid deployment of industry-wide innovations will subsequently follow.
“You had a lot of original software in the 80s in about 300 subsectors of the economy,” Lonsdale explained, “What started happening in the past 10 years with the cloud and big data is that we’ve started to think about how we can use data better to replace older, linear software.”
Lonsdale explained that with platforms and network effects, entire industries can come together to use data in non-linear ways to better collaborate and bring forth industry-wide breakthroughs.
So what are platforms and network effects exactly?
- Platforms work to replace legacy systems with a new infrastructure on top of which other services and technology can be built. Platforms allow many new products to take advantage of their framework, providing companies a way to innovate faster and cheaper. For example, Apple’s App Store supports developers who build apps within Apple’s protocols, making it simple to bring new products to a large audience of potential users.
- Network effects refer to the power a platform accumulates as its user base grows. The more user groups that join the platform, the more value the platform has to the industry at large, and the faster the platform’s influence can spread.
What Lonsdale values when evaluating new businesses
Baker and Lonsdale discussed Londsale’s approach to investment and how Lonsdale discovers businesses that he believes will be successful in the “smart enterprise” era.
“I look at businesses that are tackling conceptual gaps in the world,” Lonsdale said. “They are forecasting toward what an industry should look like in 10 to 15 years and look for opportunities for platform and network effects.”
Lonsdale referenced one of his businesses, Addepar, as an example. Addepar is a wealth management platform that is transforming the ways wealth managers work. “Before, wealth managers would spend thousands of hours tailoring data to individual customers,” Lonsdale said. “Now, they can get their data in one place by working on top of one platform.”
Addepar, like other successful platform businesses, now powers tens of thousands of professionals working across different businesses.
Lonsdale pointed out that Qualia is another platform witnessing network effects and Baker agreed. “Our core customer is the title agent. We started with them because they are in the middle of this very complicated process working with lenders, real estate agents, buyers and sellers,” Baker said. “Because the title industry is so influential in the real estate transaction, the network effects are powerful and we can build solutions on top of our platform to fix things for every stakeholder in the transaction.”
Unexpected innovations that will transform real estate & home ownership
Londsale and Baker discussed areas Lonsdale is keeping an eye on in the real estate sector. “A lot of these new investments sound crazy and science fiction-like, but I believe they will all be impactful in the next decade,” Lonsdale said.
Tunneling businesses like Elon Musk’s Boring Company
“In cities like San Francisco, there is so much economic opportunity with so many jobs; however, the commute limits these opportunities,” Lonsdale said of the 3 hour roundtrip commutes many people take to participate in San Francisco’s economy.
With low-cost tunneling systems, suburban dwellers can access careers in the city without the hassle of a long commute. This will open up home ownership opportunities in the suburbs for those who are currently leasing apartments and homes in high-rent cities such as San Francisco and New York City.
Lonsdale noted that the tunnelling systems are closer to reality than many people think. The city of Las Vegas is currently finalizing plans to create a tunnel system from the airport to the Las Vegas strip.
Vertical take-off + landing aviation companies
Londsale believes companies like Joby Aviation will transform real estate by providing us with new avenues for improved transit.
Joby Aviation’s “flying taxis” aim to reduce city congestion by taking passengers from place-to-place above roadway traffic. The aircrafts take off vertically and land on top of buildings instead of dropping passengers off at street entrances. Lonsdale says the electric aircrafts are much quieter than a helicopter and will eventually be inexpensive enough for widespread use by the middle class.
Others have their eye on Joby Aviation as well. Recently, Toyota announced its $394 million investment in Joby Aviation’s vertical take-off and landing aircraft.
Reimagining community living and city design
“Right now in the US, we’re only using 3-4% of our land for living,” Lonsdale said. “There’s so much open space we’re not using that could be used to create entirely new communities.”
Londsale believes technology companies and city developers could reimagine cities to create technology-driven communities that leverage flying taxis, tunnel systems, and co-living spaces for more efficient and sustainable living.
“In the past, city concepts were developed by companies like Ford and General Mills,” Londsale said. “These were pretty dystopian, but now there are new models that could work.” Lonsdale noted that with the right people and companies shaping the vision, these new communities could be successful.
Real estate 10 year outlook
To wrap up the discussion, Baker asked Lonsdale to place bets on where real estate will head in the next decade. Lonsdale said he’s putting his sights on technology that will help real estate professionals do their jobs better. “The best solutions happen when computers do what computers are best at and people do the things that people are best at… I like technology that empowers people.”
Editor’s note: 8VC is an investor in Qualia.