Our economy and the way we live are rapidly changing, we can already see the forces that will shape the cities of the future.
Eventually the CBDs will be a ghetto.
That’s my prediction. You can hold me to it. If it hasn’t happened in the next 120 years, I’ll buy you a case of Penfold Grange.
Now, I don’t know for sure, but it’s not hard to imagine a scenario where our CBDs are hollowed out, and left as nothing but unattractive high-rise housing (though the number of phone and internet connections is fantastic.)
The key drivers of this change are going to be dematerialisation and demonetisation.
These are two forces of modern business identified by Peter Diamandis. The more I see of his work the more I like it. Buy his book. Trust me, you wont be disappointed.
Anyway, dematerialisation and demonetisation are two gargantuan monsters unleashed on the business world by the digital age. Businesses that can’t adapt will die. Many have already.
Once an industry goes digital, dematerialisation and demonetisation follow quickly on its heels.
Think of CDs.
Online music sales pretty much killed the CD store as we knew it. I’m kind of amazed every time I see one. Like Video stores. But both are getting harder to come by.
The rise of online retail meant that you no longer had to physically purchase your CD. CDs are generic units, so there’s no need to inspect it before you buy it. There’s no need to even get off your couch.
But not only that, the music itself went digital, and CDs are pretty much redundant. I don’t even have a CD drive in my house. I’m not just talking about CD players, I’m talking about a CD drive. All my computers are now solid state – no moving parts.
(If someone gives me a CD, it’s actually a hassle. I have to wait til someone with an old laptop comes over, and then rip it to their computer, transfer it over… yada yada yada. I don’t have time for that. I’m a busy man.)
So now, not only did you not have to go into a store to buy a CD, you didn’t actually need a CD.
Music had dematerialised. And that killed the CD store concept.
(Thankfully Richard Branson had already got into airlines and space travel).
But it doesn’t stop there. After dematerialisation comes demonetisation.
And for music it comes with online radio stations like Spotify and Last FM.
Once average bandwidth increased to the kinds of speeds that made downloading music trivial, Spotify and co built huge libraries of pretty much every song ever recorded…
… and offered it to you for free.
There are subscription models, but if you’re willing to put up with regular advertising, you don’t have to pay a thing.
As long as you have the bandwidth and the download limit, you can listen to all the music you want for nothing.
Music had been demonetised. And it’s another nail in the coffin of the music recording industry.
(Hipster bands across Melbourne are crying into their lattes, but I don’t think many people will shed a tear for them. I’ve heard some of them talk about organising a consumer boycott, but if consumers didn’t care about pregnant ladies being tortured in Asian sweatshops making shoes, they’re not going to give a toss about rich white musos missing out on their disco-biscuits.)
In many ways, music has been the canary in the coal mine, but every industry has to deal with the forces of dematerialisation and demonetisation in some way.
Even physical industries will be disrupted by it. What happens when people have 3D printers in their homes? I actually don’t think that’s likely. I think it’s more likely that there will be 3D printing facilities located in remote areas. You’ll log on, submit your print to the queue, and wait for their drones to air-deliver it to you when it’s done.
Drone–delivery is leaping towards being a commercial reality. It still sounds far-fetched but give it 5 years. And that might not sound like much, but think how long it’s taken for touch screens to go from unheard of to ubiquitous.
And think about what happens to our roads if 50% of our transport needs are taken care of by driverless drones.
So how will all this reshape our cities?
Well, I think the first stage is that retail business will flee the CBD. Department stores are already in a death spiral. Parking is a nightmare, and most people just use you to trial things they’re already planning to buy from Hong Kong. Why bother?
Retail will give up on the CBD, leaving only cafes and 7-11s there to service office workers.
But how long are offices going to last? Do you really need everyone in your organisation in the same place? I mean if you worked in a company of 500 people, how many of those people do you actually interact with, let alone need to see face-to-face?
It might be a nice ideal, but cost pressures will eventually cause big org’s to disintegrate into small teams in cheaper locations, or networks of work-from-homers. They’ll probably leave ‘shopfronts’ in the CBD so people can find them, but they’ll only occupy a fraction of the real estate they do now.
So what have you got left? Retails gone, offices are gone. All that’s left is residential. But almost the only drawcard of living in the CBD is being close to work. But if your work dematerialises, what’s the point?
Why not move out to suburbs where you’ve got a bit of space?
Demand (and prices in relative terms) for CBD real estate will plummet.
And voila. Our CBDs are the ghettos of the future.
Does this make sense?
What other forces do you see shaping the cities of the future?