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Featured Guests:
- Mike Hess – Smart City Project Director, City of Orlando
- Craig Ustler – Owner and President, Ustler Development, Inc.
Episode Transcription:
Paul Jarley: When I worked at the University of Kentucky, I swore I would vote for any politician who could synchronize the stop lights on Harrisburg Road and cut my travel time to and from work. Smart city initiatives promise to make city life more efficient. But are people really willing to give up their privacy on the promise that Big Brother can cut down on their commute time or save them money on their energy bill? And honestly, if smart cities require smart politicians, I’m skeptical.
Paul Jarley: This show is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? On to our show.
Paul Jarley: So about a year ago I was half asleep in a meeting of deans when somebody said the term smart cities and I hadn’t heard that before, so I wrote it down and I will have to tell you, my initial thought was, “Dang, those people in Silicon Valley have the best marketers in the world.” I mean, who could be against smart cities?
Paul Jarley: So I wanted to do some learning about that and what that really means and whether the marketing is far ahead of the reality or not and what it’s likely to do to my world and my students’ world going forward. So a couple of people have graciously agreed to join me today who have some opinions on it and I’m going to probe their opinions a little bit.
Paul Jarley: So, next to me is Craig Ustler. Craig leading the master development team for the Creative Village here in downtown Orlando. He is also co-developing several vertical projects at Creative Village, including a $105 million student housing project that’d better be ready by August 2019, or we will have a lot of homeless students downtown.
Paul Jarley: We’re also joined by Mike Hess. Mike is the smart city director for the city of Orlando. He’s a Leed fellow and mechanical engineer. He was recently brought on board by the city of Orlando to lead off their smart city efforts. He’s worked as the VP of smart and sustainable buildings for Panasonic Smart City team. And he has worked on several smart city projects across the US.
Paul Jarley: So, let’s start at the beginning. What the heck is a smart city? Craig, you want to?
Craig Ustler: There’s a couple answers. So one is sort of consistent with your experience. It’s become a buzzword that is somewhat self-invented through some marketing folks and real estate folks. And it means in theory, this idea that you’re going to use data driven or the Internet of Things and whatnot to connect everything and measure it and analyze it and make things more efficient.
Craig Ustler: I sort of choose to turn the term and I say cities are smart and suburbs are dumb. I sort of feel like the city by definition is smart, city and urban development is smart, and suburban development is inefficient and dumb. So in my view, it’s more of an urban planning question about how you arrange things to be smarter and more efficient, and then you use technology in what is I feel like a better arrangement of how you build a city.
Craig Ustler: And that sort of, to me, what a smart city is. It’s sort of, you start with city building a city design and then you overlay technology on top of that to make a really great place. Said a different way, you could build the smartest city in the world, but if it’s in a place nobody wants to live or it’s poorly designed or has a bunch of other attributes that don’t make it attractive, it’s really not ultimately gonna matter how smart it is. Right?
Craig Ustler: And I think technology and what Mike’s sort of background brings is part of being smart. So I think being able to use technology and analytics and data driven intelligence, I think that’s one form of being smart. I have a different term that I call urban IQ. But the idea of a city’s IQ is not just its sort of technology footprint and how smart it is, but there’s an IQ about being more cultured and being more diverse. It adds value to society.
Craig Ustler: So, so I tend to think about being a smart city is kind of like a technical degree. It’s like getting a master’s in engineering and being smart. Being a truly great city with a high IQ is a liberal arts degree. And it’s like being good at a bunch of things. So, I think you gotta be both to truly be a smart city. That’s my definition of it. That’s not the definition you were referring to, but that’s how I think of it.
Paul Jarley: Mike?
Mike Hess: Yeah, so I would certainly agree with that. In my previous life, I worked for a technology company and I think one of the things we learned very early on in our, you know, role in the smart city space is smart city is not all about the technology. In fact, technology should really be the last part of the discussion.
Mike Hess: There’s plenty of technology out there already. Technology is already changing. It’s always changing. And so that really shouldn’t be your first step because a lot of times if you just start throwing shiny objects and technology to try to solve a problem, it may not actually work. We saw a lot of technology that was out there to try to solve problems that didn’t necessarily have to exist. So really to me, smart city has to start with a good planning processes, so stakeholder alignment, getting people to sort of think outside their silos, both within city, city working with developers, but getting people to sort of think differently and think together was really the first piece to smart city.
Mike Hess: And also really starting to think about what are the new business models or different ways we can work together once we get out of our silos to figure out how to solve our city’s issues. And that may be a technology solution; it may not be.
Mike Hess: So, I agree with you Craig, 100%. And really then, technology comes in at the end to kind of fill the gaps. And you know, I would also encourage everyone to Google the definition of smart city. I mean, it’s sort of all over the place and most of them that you see are very technology-focused. But I would encourage you-
Craig Ustler: Or self-declared. Right?
Paul Jarley: So, whenever I’m trying to think through whether something is a thing or not. The first question I always ask is what problem are we solving here? So what is the promise of a smart city? What is it looking to solve?
Mike Hess: And so that’s an interesting question because that answer is going to depend on where you are. So really, the first part of any smart city process should be around planning and having the community decide what do we want to solve under this sort of smart city.
Craig Ustler: Like, traffic on I-4?
Mike Hess: Yeah. So, and I can tell you this is something that the city of Orlando is about to really dive into is a smart city master planning process. We’re literally going to be a getting started on some of this next week. And really that process is all about community engagement. Residents, developers, all the stakeholders in the community, to come together and figure out what does smart city mean to us in Orlando? What do we want to solve?
Mike Hess: And once you get to that point, I mean, there are a million things smart city can solve and I can kind of walk you through from an Orlando perspective, when we do this planning process, we’ve already started to sort of figure out what some of our major categories are that we want to work within in our planning process.
Paul Jarley: Give us a sense of what’s the top three things, like on your list.
Mike Hess: Yeah, so I would say communications infrastructure is a big one. How do we solve that digital divide? How do we make sure everyone is connected and has access to technology?
Paul Jarley: Because increasing inequality could be an outcome here, right?
Mike Hess: Absolutely. I mean, another example on sort of the equity side from an energy perspective, a lot of my past work has been around energy equity and resiliency, so that everyone has clean power. Everyone has access to resilient power. So, that’s another thing you can potentially look at in the smart city space.
Paul Jarley: Two more on your list.
Mike Hess: Okay. I was going to say I could keep going.
Paul Jarley: Go ahead.
Mike Hess: I don’t know. How long do you guys have? We could be here a while.
Mike Hess: I think transportation is a big piece. You mentioned that. There are different ideas that we’re already starting to think about from a city perspective in in the transportation space. I actually was in a meeting just this morning where we were actually looking at technology to create a frequent flyer program for alternative transportation. So, finding new ways to leverage technology to encourage people to use alternative transportation.
Mike Hess: And I’ll give you one more, because this was also a discussion yesterday: food waste. So think about all of the food that we just had at this event that is now going to go to waste. Our Office of Sustainability has been working on the food waste issue, because it’s actually a very big issue in central Florida. So our smart city team actually has been coming across some technology that we can use to basically get rid of food waste on demand using GrubHub, Uber Eats and those kinds of things. So that’s another area that we can tackle under smart cities.
Paul Jarley: Craig, do you have a wishlist?
Craig Ustler: Yeah, so the problem to solve in Orlando … it’s not unique, it’s the same problem Atlanta has, any really suburban sprawl-based city has. So Orlando has really, really strong, what I call an urban asset balance sheet. We have a lot of things you want and we have population growth and all these great stats and all this stuff, but it’s arranged poorly. It’s arranged inefficiently. So that’s the promise of a smart city for a place like Orlando. It’s efficiency. I mean the problem when you asked me what we need to solve, it’s all these assets that should add up to more than they are, but they don’t add up to what they should be because of the way they are disconnected and inefficiently arranged.
Craig Ustler: So the promise of a smart city, especially in a suburban layout, is if you can connect all that stuff in a way where you can essentially just achieve a lot better efficiency, a lot higher return on your investment. So this is the promise on down from traffic and all that kind of stuff, that you can manage what you have better. That’s a somewhat different promise than in a truly smart city market leader, a New York City or a Boston or internationally, Shanghai. Whatever it is, I mean. That’s somewhat of a different promise, right? I mean that is sort of these global leaders in thought and technology and advancement.
Craig Ustler: I don’t think, at least in the short term, that’s Orlando’s promise as a smart city, I think you sort of start with some stuff you can do as a city, especially. You identify some of the ways you can really just gain efficiency. And I like to also break the problem down to somewhat of a scale you can manage. I’ve struggled with the term smart city from the get go because the promise is too big. If you go to the conference of the smart city guy, it’s like you’re going to live your whole life on your device. It’s this George Jetson promise of efficiency, which is really, really difficult to achieve. So
Craig Ustler: I think if we bring it down to a top, whatever we can do, make those things more efficient and make you feel better about the way you do it, then I think that’s quote-unquote the “problem” you’re trying to solve.
Craig Ustler: And then I also would say that there’s just an inherent frustration by many, many, many stakeholders in what seems to be a false promise of technology improving something. And so we’re still challenged.
Craig Ustler: I use digital permitting as an example, right? As a city, it should be easier to get digital permitting ready. As a real estate person, digital communications should have made your life, it should have freed up your time because you now have quicker ways of getting it, but it hasn’t. It’s sort of made it more complicated.
Craig Ustler: So it also would be in my mind, the challenge, the problem that you’re trying to solve would sort of be if the city is quote-unquote “smart,” then make it better for me. Make the outcome be better for me. And you guys are supposed to be so smart now and have all this technology, why doesn’t the road move traffic any faster than it did? And the capacity is the same, there’s not any more cars on nit. Because everybody is texting and driving and technology’s made it worse. Right?
Craig Ustler: It’s a weird thing that we’re sort of searching for outcomes. Technology’s delivered on its promise in some areas, like on your phone. It hadn’t delivered and how you manage parking inventory in downtown Orlando. And it just frustrates you that, how in the world can I not be an app for that? I mean, Uber’s figured it out and our app exists and doesn’t really working. You can’t get the private garages and the public garages. Right? So that’s where I’m talking about, come up with a problem we can solve. And I think maybe that’s a quick, that’s what you’re looking for, right? It’s something we can do.
Mike Hess: Absolutely. You sound like you’re a little mad at me there, Craig.
Craig Ustler: So, parking management.
Mike Hess: Yeah. And honestly, so I mean I can tell you, and I don’t have all the answers yet. So as we go through our smart city planning process, we intend to engage the community. So I think you just made it onto the advisory committee.
Paul Jarley: That’s always how you get on the advisory committee. Is Orlando a particularly good candidate to be a smart city? If so, why?
Craig Ustler: I can start that with that. Oe of the number one things about this, you’ve got to want to do it. So the reason that Orlando is a leader in sustainability is cause Mayor Dyer’s committed to that and he’s committed executive leadership position and resources for. So, he’s done the same thing with Mike’s position. It matters to him. He travels around the country and he sees other cities and talks to other mayors and he sees what they’ve accomplished. He’ll see a place like Pittsburgh that’s reinvented itself essentially based on sustainability and being smart. And he’ll say, “How’d you do that?” The Pittsburgh mayor will say and Mayor Dyer says, “That sounds like a good idea. Maybe I could figure out how to do that on my team.”
Craig Ustler: So that’s part of it, is we are a good candidate because we have leadership that cares about it. And then I also think we’re a pretty good candidate for it just because we have some things, we have some projects especially, where the particular developers are interested in it, so the sports and entertainment district project that the Magic are working on, are very, very committed to a smart city approach. Tavistock is very out in front of a lot of smart city technology. Creative Village and we’ve talked about an alignment with the university and doing it there and making that a living laboratory for a lot of university stuff. So yeah, I think, I think we’re well positioned in the sense that we have some real influential stakeholders that would be willing to do it.
Craig Ustler: And I think tourism is also a neat candidate. We haven’t talked about that yet today, but I think we would all agree that this technology, if you’ve been to Disney lately and you’ve figured out how to pay more money and skip the line and all that, that’s a place it has delivered. But I think that’s a huge audience to try to analyze, you know? The tourist market and make that more efficient. So, I do see that as kind of low hanging fruit and probably a lot of good strategic partners there.
Mike Hess: Yeah. And I would agree. I think Orlando is a great city for this and I can give two perspectives from past life working with a technology company.
Mike Hess: One of the things we noticed as we were working with cities is a lot of times the sort of medium-sized cities were really better at being innovative and you know, really thinking differently about smart cities, as opposed to some of the bigger cities.
Mike Hess: And then from a city perspective of, I haven’t even been with the city for two months, but obviously the leadership of the mayor has been a key, but also just the rest of the city team. I think Orlando has really assembled an A Team within the city. A lot of our staff are excellent. And so I think we’ve got the right team to be able to implement these things.
Paul Jarley: So, one of the issues that routinely comes up in the smart cities conversation is privacy, right? Somewhere, George Orwell is rolling over in his grave when he’s thinking about smart cities. You know, I’d be really interested to know how many of you are willing to give up your privacy to get to where you want to go 10 minutes quicker in town or 15 minutes quicker? Yeah, more of you should raise your hand, because you do. Okay? Google tells me this. But that’s a challenge. Right?
Craig Ustler: Probably the greatest challenge we have on the implementation side is if you take, and especially as it extends to social issues, so someone says, “I want to really address crime and homelessness,” and some stuff like that. We have the technology to do that right now, if everybody will submit to a face scan when they walk out of here and every public right of way, your face was constantly, we could virtually eliminate a lot of segments of crime, if we would all commit to that level of, you know, whatever.
Craig Ustler: So, it’s a challenge in a lot of the ways we think about deploying the technology because again, the promise of technology is intriguing. But then when you actually tell somebody the reality of what that means, it’s controversial. Charlotte and I were just in New York this weekend, huge new development called Hudson Yards. They’ve got a great public art piece that everybody wants to climb up, or so they thought until they read the social media policy that you sign, you have to get the app and it says we can use any photo you take and post on Instagram for our own profit and for our own whatever.
Craig Ustler: And a lot of people have really pushed back on that because they don’t like it from a privacy standpoint. And you’re sort of like, well what did you think? You were going to go take a picture in New York City of a famous piece of art and put it on Instagram and you were gonna own? That was going to be private to you? But you’d be surprised how many people struggle with that.
Craig Ustler: So, that’s an unknown right now. I will say that-
Mike Hess: We’re talking about acts of government here, by the way.
Craig Ustler: Yeah. To me that’s still a really, I don’t know if I want to call it generational, because that makes me sound old.
Mike Hess: Not a thing. I already covered that.
Craig Ustler: Suffice it to say, maybe a younger generation is a little more open minded to the way technology might be completely interwoven into your life. And we have found pushback, corporate tenants and other folks that come from a more privacy-driven mindset. I don’t know if that’s been your experience, but.
Mike Hess: No, that’s absolutely been my experience, and I think that really goes back to the very beginning of what is a smart city and that that definition changes based on your community and the local culture. I’ve worked on smart city projects in Japan where it’s a little bit different culture and they’re willing to give up a lot of that privacy. In the US, it’s different. Within different communities in the US, it’s different.
Mike Hess: I mean, I can say as part of our smart city planning process, that’s something we really want to wrap our minds around. There’s really this balance between data privacy and cybersecurity versus transparency and open data. And so we’re going to continue in that planning process to think about our policies around open data and data privacy because it’s a huge issue.
Paul Jarley: You mentioned that security issue, right? Let me give a plug to my colleagues in engineering at UCF who has probably the best cyber-hacking team in the country. The issues around terrorism, right? Around getting that data I think would be enormous challenges here for people to kind of confront going forward.
Paul Jarley: So, I’ve got a bunch of real estate professionals here today. What should they know about smart cities? How’s it going to impact how they do business?
Craig Ustler: So the way we think about it is in Orlando, especially as Mike has more time on the job that there’s essentially going to be in the same way you think about a region that has a transportation master plan and a sustainability master plan, there will be a longterm plan and view about how we think about ourselves as being a smart city. And I think that’s good. That will set the framework for what we expect and then we will have this, and the real estate community will respond, as it usually does, sort of based on what the market decides it wants.
Craig Ustler: And that to me is the tough part to figure out right now. We’re conflicted. When you build multifamily units or student housing or whatever, the technology intelligence that they hold in their hand is superior, right? You don’t need to really worry so much about programming the air conditioning, you know, they just now sell the air conditioning thing that adds onto your air conditioning unit that you control over your phone. I mean, physically building it into your real estate is probably not as important as just the ability to accommodate a lot of these innovations that come along.
Craig Ustler: But I do think an overarching commitment to being a smart city, as I said, is important. And I do think real estate developers will ultimately figure out what we think some of the innovative things that make you smart or make the city smarter are. And in Orlando, the good news is, we’re still in that sort of adolescence phase of growing up as a city and we don’t have this mature transit system and we don’t have a mature sort of data analytics around a way a lot of these things could end up. And so, I’m encouraged by that actually, because we kind of get to figure out what we invent our future to be.
Craig Ustler: Real estate developers are notoriously bad at what I call presumptive arrogance. We decide what we think the market wants and we build it. And this has really been a huge mistake in smart cities. You thought everybody wanted this house that had a control panel. And the next thing you know, ADT came out with it six months later and no one cared. So this is where I feel like the risk in real estate is. In some ways, we need to sit back and figure out what the market tells us we need to be able to adapt to and we need to build in smart locations so that we can put smart people in smart cities, right? But we don’t need to focus too much on the actual kind of thing that it is. And I worry that thing would get outdated quickly anyway.
Paul Jarley: You can just count the numbers of miles of cable I have in BA1 and BA2 that no longer matter.
Craig Ustler: That you were told-
Paul Jarley: As a result of wi-fi, right?
Craig Ustler: That you were told was the best and the brightest at the time.
Paul Jarley: Mike, what do you think about that?
Mike Hess: And this is all experience from my past life. I mean, I’ve seen impacts on real estate all over the place. So it really depends on what you want to focus on.
Mike Hess: Some of our early smart city projects, in my past job in Japan, what we actually saw were increases in value. So we were building a smart city development and seeing that residents were willing to pay a 25 to 30% premium to live in that development because they wanted the resiliency. They wanted the technology that was helping with public safety. I mean, they wanted those things.
Mike Hess: On the flip side though, some of the projects we were working on in San Francisco were really geared around affordable housing. How can you use smart city technology to create places where the police and firemen and teachers can actually afford to live in San Francisco? How can we use technology to drive down construction costs? Some of my work in Denver, we really wanted to focus on carbon neutrality. So, it was really partnerships with utility with Denver Airport on really a new business model and new planning process around energy that quite honestly unlocked a carbon neutral neighborhood without it costing any more. So it really depends on what are your goals and then you’ll get the desired impact you want on your real estate.
Craig Ustler: Yeah, so from a real estate standpoint it’s a good thing that we think about, so it would be smarter to house yourself in less square footage. This is what should happen, as we try to keep addressing affordable housing and you can’t really affect, although you’d like to, how much concrete costs or anything. Ultimately, a smarter generation, a smarter city will house people in an average dwelling size that is not 2,500 square feet. Just sort of by definition, it will be smarter to live more efficiently.
Craig Ustler: The office world has actually already discovered this, whether you like coworking space or not. And I think this pendulum will shift a little bit back, but coworking space is nothing if it’s not more efficient. I mean, it just is. You’re using real estate for a longer period of time with more people using it.
Craig Ustler: And so I do think that thought process will extend into residential, and this is starting to be talked about a lot. For a very long time, it was thought that you could invent a better thing to build it out of, like 3-D printing a house or something. That was where technology started in addressing the affordable housing thing. I actually think now the promise is really in the efficiency of a lifestyle you can create through a smart citizen. This is in Asia and everywhere already.
Paul Jarley: I should buy IKEA stock?
Craig Ustler: Right, so IKEA … that’s exactly right. The idea of an IKEA unit being smart.
Paul Jarley: Tiny houses are a thing, apparently.
Craig Ustler: Yeah, they are a thing. That is what I think you’re going to see in real estate as far as the way we house ourselves in the future, it’s ultimately becoming about less square footage.
Paul Jarley: So when we reached out to you, you replied that you thought it was a really interesting topic and that there were smart-smart cities and dumb-smart cities. Would you like like to expound upon that a little bit?
Craig Ustler: Yeah, so I think about that a couple of ways. So, smart-smart cities or what we’re trying to do. They’re intentional and they’re thoughtful in their plan and they actually have a reason to call themselves that.
Craig Ustler: Dumb-smart cities are really a marketing gimmick. They are in a location that isn’t smart or they don’t have technology that’s smart or they don’t have stakeholders that are committed to being smart, but yet they just call themselves that to give you the false promise that they have one thing like, a guard gate that goes open automatically when your car thing sets it off or something. It’s not even smart in the first place. Right? But because it’s sort of a buzz thing to say that you’re smart, right?
Craig Ustler: And then I also think smart-smart cities have smart people, right? Dumb- smart cities have done people. You have to retain and attract intellectually superior and knowledge sort of based economy, all this idea. I mean, that’s what the whole world has become about, right? And we’re all in competition for this subset of really, really smart people. And so, that ultimately is the measure of a smart city.
Craig Ustler: I don’t know if you actually scored how it would shake out the places that we aspire to, but there tends to be a relationship. San Francisco and Seattle and Denver and Austin and Portland and Boston. All these people that show up on these places as being these really smart. It’s not just because the technology is smart, the people are smart, they tend to have the most universities per capita. They have very high education attainment level. Right?
Craig Ustler: So, that’s sort of what I mean by this idea. You can’t just sort of build the bones of it and still have it. But I do think there is also a self-selecting kind of a thing. I might want to live in a dumb city. I don’t know how smart I am. That’s why I’ve struggled with the term, just even of itself of calling yourself smarter than the other place. But I do think that’s what we’re talking about. I mean, to hear Mayor Dyer say and hear us say, we’re all after this same, I always argue that dumb people need a place to live, too.
Craig Ustler: But the smart city piece of is, that’s what we’re talking about. At the end of the day, it’s just can we get a place that where we all want to live in would attract the talent and sort of what we need to grow our economy? And be diverse. And you know, if you think about it, which I think is what smart city means, smart means being diverse and having a place for everyone and being inclusive and all these things. Right?
Craig Ustler: So, that’s what I want us to mean by smart. I don’t want it to be this elitist term that we’re just trying to get everybody from Harvard with an MBA to move to Orlando. That’s not what I think it means, but I think it does get misconstrued sometimes.
Mike Hess: I was going to say I would agree with that. I mean, it’s a very strange term, smart city. It always has been to me. You may actually see the name start to change. I mean, some players in the industry already are. They’re using connected city or other definitions. It’s a buzzword now, but the buzzword might change.
Paul Jarley: You can’t be smart city certified, like you can be lead certified. Is that that fair to say?
Mike Hess: Yeah, not, not quite yet.
Paul Jarley: Do you think that’ll come? Do you think there’s a set of standards there that might apply?
Mike Hess: There are always standards that develop. So yeah, I would, I would suspect, yes.
Paul Jarley: So, the podcast does not end wishy washy. You each have to answer the question in three sentences or less. Are smart cities a thing? Yes or no? Craig?
Craig Ustler: Yes, smart cities are a thing. I don’t think they’ll be called that when they ultimately become a big thing, though.
Paul Jarley: Mike?
Mike Hess: I hope it’s a thing or I’m going to be looking for a new job soon. But no, I think some vendors sort of treat it as a gimmick to try to sell you a shiny object. But I think the whole process of bringing the community together, getting people aligned, understanding what issues we want to solve, I think that’s absolutely a thing.
Paul Jarley: So, it’s my podcast, so I get to go last.
Paul Jarley: My dad was a hoarder. One of the things he hoarded was magazines from the 1950s and I remember one that Life did on what life was going to be like in the 1970s and it had a number of predictions in them, and all of them were wrong. Okay?
Paul Jarley: I think smart cities is going to be a lot like that. What we think smart cities are today probably aren’t going to be a thing, but some version of it, after people interact with it, probably will be a thing.
Paul Jarley: Thanks for the conversation. Really appreciate it and for all of you participating.
Paul Jarley: So, what’s your take? Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach & Engagement here at the UCF College of Business, and thank you for listening. Until next time, charge on.