How to Build a Smart City

Of all the predictions that pundits have gotten wrong in recent decades, one of the most compelling has to do with cities. Cities were supposed to die out. The proliferation of the automobile meant that everyone would move to the suburbs and never come back. The decline of urban manufacturing meant that the city itself would decline. And then there’s all the crime, noise, pollution, and chaos that cities are known for. Who on earth would ever want to live in any city? As it turns out: just about everyone! We’re in the middle of a historic — and wholly unpredicted — rise in urbanization. It’s happening here in America and all over the world. One problem: many of our cities are old, which means they’re not exactly optimized for the 21st century. And it’s not so easy to retrofit an entire city. So, how about building a new city, for the 21st century and beyond — from scratch?

Dan DOCTOROFF: Our mission is to use technology to redefine urban life in the 21st century.

Today on Freakonomics Radio: a look at the city of the future, with a man who’s been rebuilding New York City for the past few decades — a man some people call a modern-day Robert Moses, the controversial Master Builder of decades past.

DOCTOROFF: Look, I think if somebody says it meaning that they got a lot done, then I think it’s a compliment. I think if somebody says, “Oh, you did a lot of top-down planning and you displaced lots of people,” then it would be an insult. It would also, I think, not be true.

Along the way, he learned the central paradox of successful cities.

DOCTOROFF: The question is, how do you actually manage supply and demand?

A conversation with the mightily credentialed urbanist Dan Doctoroff. Take a seat and get comfortable — ‘cause that’s what he did.

DOCTOROFF: I’m sitting. I’m leaning back, I’m smoking a cigar.

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If you happen to live in New York City, as I do, there’s a name that’s been routinely popping up for a few decades now, always attached to interesting — and often controversial — projects.

DOCTOROFF: Sure. I’m Dan Doctoroff.

Don’t worry if you haven’t heard of Doctoroff. He’s not quite a household name. But his fingerprints are all over the biggest city in the United States. He grew up in Michigan and became a New Yorker quite reluctantly; it just wasn’t his kind of place. But he settled in. He and his wife started raising their family here. He worked in investment banking and private equity — seemingly just another money harvester from the provinces who finds the urban riches too good to pass up. This went on for years.

DOCTOROFF: And along the way, I came up with this crazy idea that New York ought to host the Olympics. And eventually that idea became a bit of a movement. It drew the attention of Mike Bloomberg, who at the time was just an ordinary billionaire. And I don’t think was even seriously thinking about running for mayor, but he joined our board, gave some money.

Michael Bloomberg wasn’t seriously thinking about running for mayor. Much less being mayor. Which, as you may know, also describes the arc of our current president. Donald Trump’s run for president apparently started out as a means of enlarging the Trump brand. Bloomberg’s run for mayor of New York City was apparently his way of enlarging Bloomberg L.P., the financial-information company that made him rich.

But voters — well, voters are funny animals. Bloomberg, while short on charm, had a certain appeal: smart, self-made, fiercely pragmatic, and he spoke his mind — often to the detriment of the people he was speaking about. He was the opposite of a career politician. And then the Twin Towers were obliterated in the September 11 terrorist attack. Less than two months later, Mike Bloomberg was elected New York’s 108th mayor. Now what? Bloomberg, a political neophyte facing a recovery of unknown dimensions, invited some other neophytes to help.

DOCTOROFF: And when he unexpectedly won, right after 9/11, he asked me to join him in City Hall, and so I became Deputy Mayor for Economic Development and Rebuilding.

Dan Doctoroff did that job for six years.

DOCTOROFF: He then asked me to go run his company, which I did for seven years, Bloomberg L.P.

When Bloomberg was finally done being mayor, in 2013, after squeezing out a third term despite a pre-existing two-term limit, he considered running for President. He considered some other things too. But then, to the surprise of many, he went back to Bloomberg L.P.

DOCTOROFF: And when he decided he wanted to come back to the company, I left. And — tremendous relationship with him, but I decided that I just didn’t want to go back to being his deputy mayor anymore, and formed a company with Google called Sidewalk Labs.

And that’s where Doctoroff can be found today, as C.E.O. of Sidewalk Labs.

DOCTOROFF: Our mission is really to use technology to redefine urban life in the 21st century, and we want to do it by literally building a city, or a district of a city. And we have chosen Toronto to do that.

OK, let’s back up a bit. To before Doctoroff was a known quantity.

Stephen DUBNER: So you were, for many years, obsessed with the idea of bringing the Olympics, the Summer Olympics, to New York City. And you toiled first in obscurity for a while, spending a lot of your own money, recruiting a lot of people to your cause. You got some leverage over time, you got in the Bloomberg administration. You were first reluctant to take that job, because you thought it would curtail your Olympic activity, but Mike Bloomberg persuaded you that it actually would give you leverage to help. You got delayed, you wanted it to be 2008, it got pushed to 2012 Olympics. You pursued, you pursued, you pursued. You traveled the world, did everything you could. Finally, New York was voted the U.S. city in the bid, and then ultimately lost out in the I.O.C., in the International Olympic Committee vote.

DOCTOROFF: Sounds pretty nutty, doesn’t it?

DUBNER: I don’t mean to be dismissive of the Olympics themselves, but was the Olympic bid on some level kind of a stalking horse to rebuild New York City whether the Olympics came here or not? And is it possible that New York perhaps benefited more from the bid for the Olympics and all the infrastructure and related benefits that it produced, than it would have benefited from actually hosting it?

DOCTOROFF: I wouldn’t describe it as a stalking horse. I would just say that that was always part of a strategy, that it was sort of the off-ramp from the strategy. That the Olympics could be the catalyst to getting things done that people have been talking about for generations, but never were able to muster the political will or financial resources to actually do. And you could look at successful examples in the past as to how they’d used the deadlines at the bidding for the Olympics, or more likely hosting the Olympics, created sort of an imperative in a city — so Tokyo in 1964 built the subway system around it. Barcelona in 1992 did an amazing job of recovering from being a stepchild to Madrid under Franco for decades, and revitalizing the city.

DUBNER: You’re leaving out the counter examples like Athens. But I mean, it’s not quite a science of what kind of region will benefit from.

DOCTOROFF: And that all depends on the planning, and it depends on the economic resources and other things. But I convinced myself that where New York was in its development cycle, having that kind of catalyst could be a really important thing. And we used the deadline of the Olympic decision to get massive rezoning done in time, et cetera, et cetera. Now, the second question you asked was, are we better off having not won? And there I think the answer is no, because I think we could have used another seven years of deadlines to get more stuff done.

DUBNER: Imagine our subway today if we’d gotten the Olympics, right?

DOCTOROFF: I think that might have had a real impact. We could have argued, “Look, all these people are coming.” I think it could have been the deadline to getting, for example, congestion pricing done. But at the end of the day, much of what we wanted to do as part of the Olympic plan — and that was redeveloping the waterfront in Brooklyn and Queens, or the whole west side of Manhattan, or the High Line, or regeneration in Coney Island and Harlem and Flushing, areas that had been largely ignored for a long period of time got a big boost from the fact that we bid for the Olympics.

DUBNER: I’d love you to give me, Dan, in just a minute or two, what you would consider the best accomplishments of the Bloomberg administration.

DOCTOROFF: Well, in my area, I think, we fundamentally redefined the economy and land use of New York for literally much of the next century. I think the rebuilding of the World Trade Center site in Lower Manhattan has to rise to the top of that list, because it was an emotional, financial, physical imperative. The legacy of parks all over the city, and whether that’s the High Line, Brooklyn Bridge Park, or Fresh Kills, which is a huge park built on a dump in Staten Island, or lots of others, I think, will be an important legacy.

DUBNER: How should a city like New York, or any city, address the paradox that if you’re a successful city, you’ll inevitably become expensive and then those cities become unaffordable for a lot of people? So there have been historical government interventions, like rent control and rent stabilization, which are — at least in the eyes of economists — nearly always a terrible idea. They create perverse incentives, and they lead to dilapidated housing stock, and so on. On the other hand, your administration promoted this somewhat more market-based 80/20 solution — market level versus subsidized. And that seems to sort of be working, but not anywhere near to the satisfaction of affordable housing advocates.

DOCTOROFF: If you look at what I’d call successful cities, cities where there’s a lot of demand and the population is growing — which I, by the way, think is the mark of a successful city — you’re attracting customers. People want to come. The question that, I think, you posed is, how do you actually manage supply and demand more effectively? You want more people to come. I don’t think you want to slow that down, because cities can either go two ways — they can go up or they can go down. You’re not smart enough to ever manage it so that you can, kind of, keep things completely in balance.

So it really becomes a question of, how do you produce more supply? And there’s really only two things that you need in order to do that: You need land for people to build on, and you need money in order to subsidize it for people at all income levels. We saw that, right from the very beginning of the Bloomberg administration. We believed the city was going to grow. And that’s why, at a time when we had no money, we created what was to become an $8 billion affordable-housing program that produced 165,000 units of affordable housing, which basically means subsidized housing.

The question is, when you look back on it, did we do enough? And the answer is, no. We let demand get out ahead of supply. It was really a market-timing issue. What ended up happening was, we were keeping things more or less in balance for the first five or six years of the Bloomberg administration. We were accommodating the growth, the prices weren’t going up that dramatically, homelessness in fact was starting to come down. Then what happened was the financial crisis. The city actually — in part because a lot of the other economic development initiatives — bounced back dramatically faster than ordinarily would have been the case. In fact, the city recovered faster than the national average for the first time following a financial panic, crisis, or bust. Yet when you have a financial crisis, financing largely slows — grinds to a halt. And so there was a big pause, in terms of the production of affordable housing. And that’s, I think, when supply and demand got out of whack.

DUBNER: As someone who’s been in business a lot, before and after your political time, how, I guess, grubby or corrupt or unworkable is politics compared to business?

DOCTOROFF: In New York City, the amount of so-called grubbiness was, I think, minimal. Pretty much the only times that we had real problems — certain exceptions to this — was when somebody from the state legislature actually got involved. A good story of grubbiness was as we decide to rezone the waterfront in Brooklyn. After World War II, New York City literally lost almost all of its manufacturing. And so the waterfront, which had spectacular views of Manhattan across the river, had essentially been abandoned. So it was dilapidated wharves and warehouses and factories.

And so we decided we were going to turn it into one of the more desirable parts of New York, fit for a 21st century economy. So we worked on this rezoning for about two years. This was while I was bidding for the Olympics — I literally on the day before the vote in the city council, I arrived back from Korea, where I was lobbying for votes. And I’m called into City Hall, because there was a snag in our rezoning. It turns out that the state representative, Vito Lopez, from the district, had his hand out. What he wanted was a million dollars for a daycare center that I think his girlfriend had some involvement in.

And I literally, after midnight, called the head of the the agency that oversaw, sort of, day care centers. Woke him up in the middle of the night — I’d never actually talked to him before. I said, “You don’t know me, but I need a favor. Can I count on you for the million dollars for this daycare center?” He said, groggily, “Yes.” And we got the deal done. Sometimes there were just insurmountable obstacles. They usually occurred at the state level, the politics there really can be awful. At one point I think the New York Times counted up in something like 35 legislators had been convicted of various crimes. That included the Speaker of the State Assembly, as well as the Senate Majority Leader.

DUBNER: Let’s not forget governors — Eliot Spitzer, of course.

DOCTOROFF: We had Eliot Spitzer, too. And so we tried to avoid the state, honestly, as much as possible. But sometimes we just couldn’t avoid them. Good example of that was the stadium on the west side of Manhattan. As part of the Olympic bid, and as part of the Hudson Yards plan, we proposed a stadium over part of the rail yards that are on the west side. And we just couldn’t find a way to get around the state legislature. And eventually this, really, one guy who was the Speaker of the Assembly, who has been convicted of corruption, blocked it without a vote, and did it for lots of reasons, none of which I’m sure we’ll ever know, including the fact that he had a cozy relationship with Madison Square Garden, which opposed it. I mean, it sort of went on and on and on.

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Dan Doctoroff started his New York City life as just another banker, who then got obsessed with bringing the Olympics to New York, who then joined the Bloomberg Administration to help New York recover from the 9/11 attack, who then paired the recovery effort with the Olympic dream to dramatically reshape the New York that exists today. One of his projects at the moment is a new cultural center on the West Side of Manhattan called The Shed, of which Doctoroff is chairman and president.

DUBNER: The Shed – I was just curious about the why in this — why did New York City need another arts complex? You, I understand, are not exactly a performing-arts fiend, at least.

DOCTOROFF: Yeah, well, the origin of it actually dates back to when we re-planned the west side of Manhattan, which we did in two separate parts. One part of it was in West Chelsea, and the core of it was to save the High Line. The second part was to build what’s called Hudson Yards, which is this area on the far west side of Manhattan. And we decided at the intersection of the High Line and Hudson Yards, we wanted to have a cultural institution.

We set two standards for it — one, it should be unlike anything else in New York, which is hard because there’s 1,200 cultural institutions in New York. And secondly, that it should play a role in keeping New York on the leading edge, culturally, in the world. And so we eventually had an insight about the role of technology and the role that it’s playing in reshaping the cultural ecosystem, that led us to conclude that what New York needed was a completely different kind of institution, one that would be the most flexible, both programmatically and physically.

DUBNER: This is a building that kind of can be reconfigured, like a transformer.

DOCTOROFF: That’s exactly right. It’s like a transformer — the building literally moves. It will open up in — March 29 is what we’re targeting — 2019, and it may be one of the largest cultural startups of all time.

DUBNER: And the C.E.O., a fellow named Alex Poots, ran for many years the Manchester International Festival, which, again, is unusual in that it takes place — or took place at least — all over the city, not in set theaters. From what I can gather, The Shed seems to be a sort of professionalized guerrilla operation in a way, right? It’s got a lot of the experimentalism of the experimental arts movement, with the juice and leverage of a big city like New York.

DOCTOROFF: That’s a great way of saying it. Another way of expressing it is a cultural festival every day, because there’s multiple spaces that can be reconfigured, that can accommodate virtually any cultural discipline. I mean, look, our basic view — whether it’s with respect to culture or whether it’s with respect to city building — is, nobody’s smart enough to predict the future. So you cannot plan to the detail or even, sort of, the gross level what’s going to happen in the future. Instead what you can do is, create the infrastructure. That might be physical, it might be digital, might be some ground rules, et cetera, that enable people to project their own ideas and innovations onto it as taste, technologies, trends begin to change. And I think that is a very different notion of a cultural institution as well as city building.

DUBNER: I find it — and I mean zero disrespect by this — but I find it interesting that of all the things that attract people to New York City these days — outsiders, visitors — the High Line is among the most popular. It was proposed that it be turned into this public park and strolling area and you were not a big supporter of it. Not that you were so hard against it. But it’s just a striking illustration that you and your folks around you, who were obviously doing this central infrastructure planning, you couldn’t have possibly predicted that something like that, and as humble as the High Line — for God’s sake, it’s an abandoned freight line — would turn into this thing that has so much appeal. And I’m just curious what kind of lesson that taught you.

DOCTOROFF: When I came into City Hall, the High Line was really one court decision away from being torn down. And the Giuliani administration, which had preceded us, was really intent on ripping it down, because the land owners who owned land under the High Line were really pressuring the Giuliani administration to get rid of it. And there were some of us in the administration who immediately saw what the two young guys who had basically kept it alive saw, which is that this could be a beautiful park and amenity. I will confess, I didn’t see that right away. But the key point is that you seize opportunities as you see them, and as they evolve, and if you’re flexible enough to do that, then ultimately you can create something that might be amazing.

DUBNER: I mean, the paradox in that is flexibility is not a hallmark of government, is it?

DOCTOROFF: Well, it generally is not, because government is really hard, and just getting anything done often takes extraordinary effort. But it should be, on some level, a hallmark of government. At the same time, you have to have a sense for what you want to do, And so you have to combine, sort of, this openness with determination to get things done, or else nothing ever happens. One of the principles that we always operated with is that, look, we’re a competitive entity in New York, and whether we were competing with London, or Los Angeles, or Jersey City, to be honest, we can’t make policy that puts us at a competitive disadvantage.

DUBNER: Let me ask you about that competition between — whether it’s faraway cities, or near cities. You and the Bloomberg administration made it a point to change policy and stop throwing a lot of money at firms or institutions that threaten to leave, using that kind of standard financial incentive. But I’m curious what effects that zero-sum competition has on each area. Because, on some dimensions, I’d imagine the competition is healthy, right? On the other hand, firms and institutions can and do game the system and basically skim a bunch of taxpayer money for their own purposes. So what’s the best way to balance that and still incentivize firms and institutions to be where they can do the most good?

DOCTOROFF: Our view was that financial incentives to lure companies, or more importantly, keep them, was almost always a fool’s errand. We did a lot of work when we first came in, the economy was just on its back. We were facing enormous budget deficits. So the easy temptation would have been to bribe companies to stay, or bribe companies to come. We met with C.E.O.’s of companies all over the country and all over the world, in addition to in New York, we analyzed their cost structures in great detail. And eventually what we concluded was, companies are going to do what’s in their economic interest over the long run, and that providing these sorts of incentives was like giving them crack. But the crack was ultimately going to affect the dealer more than the user. And so it just didn’t make a lot of sense, and so we just stopped.

Instead, the way we’d compete was based on our natural strengths, which we thought we could enhance. And our number-one natural strength was that New York had been a haven for people from all over the world. It was sort of this optimistic sense that produced this incredible energy that attracted companies to New York, and we ought to build off of that. Most places have some sort of competitive advantage, but they got to be honest about what it was. And so that for us was really what the strategy became.

DUBNER: It’s really interesting to see places that have had a good turnaround. I think of Pittsburgh, which was a hardcore industrial manufacturing, natural-resources city. And it took a while, but now they are the capital of autonomous-vehicle research. They’ve built up a lot of industries that were totally unrelated to what they’d been known for.

DOCTOROFF: I think we’re seeing it more and more as people recognize that they, again, have to build off their competitive strengths. So what’s Pittsburgh’s competitive strength?

DUBNER: Carnegie Mellon’s pretty good.

DOCTOROFF: Carnegie Mellon was the biggest component of it. And I think the city and the University and the not-for-profit sector kind of worked together to develop a strategy. Indianapolis did the exact same thing around sports, for example, and healthcare. So you got to be true to yourself. That’s one of the things that I consistently preach to leaders in cities around the country and around the world. Cities are like people — or maybe like companies. They have personalities, they have strengths and weaknesses. You know how hard it is to change your own personality — it’s hard to change your city’s personality. But that doesn’t mean you can’t structure around your strengths and structure around your weaknesses.

But cities — unlike people, or even companies — can be, as we noted earlier — difficult to retrofit. Not just physically — all those buildings, all that transportation and energy infrastructure — but also psychically, and culturally, and economically. Which is why, Doctoroff concluded, it would be really interesting to start a city from scratch. In 2015, he teamed up with Google to create a company called Sidewalk Labs.

DOCTOROFF: And our mission is to really help to redefine urban life in the 21st Century, combining cutting-edge innovation with great urban planning. And the way we want to do that is by demonstrating to the world what that can be in a specific place. And so we have chosen Toronto for a variety of great reasons.

DUBNER: Give me a few great reasons.

DOCTOROFF: Well, one is, they have a remarkable piece of land on their waterfront. The second is that we’ve partnered with a governmental entity called Waterfront Toronto, which for the last 15 years has been developing the waterfront. But what’s really significant about them is that they are a tri-governmental agency. So they are effectively owned by the City of Toronto, the province of Ontario, and the national government of Canada. So there is incredible alignment. But beyond that, Toronto is a city that has a really rich urbanist tradition. Jane Jacobs, for example, fled New York for Toronto. But they also have a really powerful and growing technology ecosystem.

And then beyond that, there’s the dynamics of the city itself. It’s one of the fastest-growing cities in North America. In fact, it’s probably the most diverse large city in the world. But what’s actually happening — and it comes back to some of the conversations we were having earlier — is because it’s growing so fast, there are increasing pressures on affordability, on mobility, and how people get around. All of that is pushing middle-income and lower-middle and lower-income people out from access to employment, which is creating opportunity challenges. They’re so committed to this notion of inclusion, but ironically because that openness has produced the pressures that are making it harder to be inclusive, they’re very open to new approaches.

And so we want to create a place, ultimately of large scale, that can be a laboratory for innovation across every urban system, including mobility, sustainability, building form and design, public space, and then even community and social services, in which we leverage technology to fundamentally bend the curve on a lot of those quality of life metrics.

DUBNER: When you say create a space, just to be clear, you’re talking about, this is essentially a physical neighborhood you’re building, correct?

DOCTOROFF: We think of it as a district.

DUBNER: And can you just talk about what would be the most overt, I guess, futuristic elements of the construction of this area? For instance, I assume that a lot of functions that are currently above-ground in a lot of cities, like freight delivery and trash disposal, those will not be above ground.

DOCTOROFF: All of that is true. But I think the thing that will have the most profound impact is if you don’t allow traditional vehicles, particularly automobiles, into the district.

DUBNER: So it’s all autonomous summoned vehicles, yes?

DOCTOROFF: Ideally much more shared than they are today. So if you begin to do that, the consequences are truly profound. In a typical North American city, 30 to 40 percent of the land is dedicated to parking, or the separation of roadways that these highly dangerous vehicles demand. If you begin to carve most of that back, you can create greater density. You can also, however, dramatically increase the amount of public open space. If you can begin to put people very close to open space and you can figure out ways to weatherize that, particularly in places like Toronto where the weather is not so nice a large percentage of the time, then maybe you can begin to re-conceive space in people’s apartments in new ways, which will also be enhanced by enabling people to store a lot of their stuff off-site, because with autonomous delivery it will be much easier and convenient, and you combine that with new approaches to construction, like modular construction, or perhaps cross-laminated timber, then you can begin to meaningfully lower the cost of housing. You combine lowering the cost of housing with lowering the cost of mobility, which we believe is really possible by as much as 50 percent, and you can begin to see cost of living decreases that are meaningfully into the double digits, which we think would be a remarkable demonstration.

DUBNER: Now, the people who will live there, as I understand it, are opting into a program to have a great deal of their personal data gathered, because this is a laboratory and you want to learn as much as you can from the data of how people move around and communicate and so on. One interview you gave, you said that the data really shouldn’t be used to be commercialized. But this is a project run by, funded by, a company, Google, for whom commercializing data is its actual business model. So why on earth would we think that these data won’t be commercialized and why on earth shouldn’t we think that this entire project is just an extension of Google’s already monolithic reach?

DOCTOROFF: We’re just going to have to demonstrate to people through agreements, engagement, specific actions, that that’s not our intent at all. And by the way, it’s not Google or Alphabet’s intent at all either. Our purpose here is to demonstrate how that combination of innovation and urban design can fundamentally bend the curve on quality of life, and to the extent data gets used, it’s going to get used for those purposes. We have to prove it to people, and memorialize that in different ways, and that we will do. So we understand the skepticism. And we will satisfy people over the course of 2018, which is our year to really put the plan together, including privacy and data protection plans, of our intentions.

I believe in something I call the virtuous cycle of the successful city. The object of a city should be to grow — and that is grow the number of residents, grow the number of jobs, grow the number of visitors. Because the marginal revenue of those additional people is greater than the marginal cost. And then you can take that net profit, if you will, and reinvest it back in quality of life in the city, in an affordable housing, and education, and safety, and social services and when you do that and you improve quality of life, more people come, perpetuating the virtuous cycle.

DUBNER: So, when can I move there?

DOCTOROFF: Well, if all goes well, the first people could probably move in in maybe five years or so. But then that would be a place to prototype a lot of the interesting ideas and approaches. But obviously a lot of the systems have to scale into a larger area. This is a project that would take 15 to 20 years, for sure.

That’s Dan Doctoroff, C.E.O. of Sidewalk Labs. If you want to learn more about the Olympic bid and rebuilding New York, check out his book, Greater Than Ever: New York’s Big Comeback.

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Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Max Miller, with help from Andy Meisenheimer. Our staff also includes Alison Hockenberry, Merritt Jacob, Greg Rosalsky, Stephanie Tam, and Harry Huggins; we had help this week from Ania Grzesik. The music you hear throughout the episode was composed by Luis Guerra. You can subscribe to Freakonomics Radio on Apple Podcasts, Stitcher, or wherever you get your podcasts.