a16z Podcast - a16z Podcast: A Society Under Construction - Modernizing Infrastructure

Episode Date: August 25, 2017

What is "infrastructure" actually? In the 19th and 20th century, that usually meant the transportation systems supporting roadways, airports, trains... but we don't even really know yet what it might potentially mean in the age of rapidly changing technology, autonomous vehicles, drones, and self-driving cars. In this episode, a16z's Matthew Colford discusses the infrastructure of the future with Anthony Foxx, former secretary of transportation under the Obama administration and former mayor of Charlotte, North Carolina; Keller Rinaudo, CEO of Zipline; and Jase Wilson, CEO of Neighborly. The truth of the matter, says Secretary Foxx, is that we are still a society under construction. How do we think about not just modernizing the 19th century structures we inherited but making new infrastructure for the future anew -- as well as the possibilities of democratizing and crowdsourcing urban planning and public projects? The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business tax or investment advice or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Hi and welcome to the A16Z podcast. I'm Hannah and today's topic is modernizing infrastructure, beginning with the almost existential question of what is infrastructure? And more importantly, What does infrastructure look like in the age of changing technology like drones and self-driving cars? How do we think about modernizing not just the 19th century structures we inherited like roadways and airports and trains,

but creating the 21st and 22nd century infrastructure of the future? And finally, what does it mean to democratize and crowdsource urban planning and public projects? This conversation is moderated by A16Z's policy team partner Matthew Colford and includes Secretary Anthony Fox, former Secretary of Transportation under the Obama administration, and also former mayor of Charlotte, North Carolina, and Keller Ronaldo, CEO of Zipline, which provides to Rwanda and other governments the ability to do instant deliveries like delivering blood at national scale using autonomous aircraft, and Jace Wilson, CEO of Neighborly, which is reinventing the municipal bond and helping neighborhoods crowdsource funding for public projects. Secretary Fox, when you were Secretary of Transportation,

how did you even conceive of infrastructure? A lot of people, people think about airports and roads and ports. What do you guys think of when you think of infrastructure? I thought about infrastructure as the apparatus or apparatus that are necessary to get people and things from one place to another. And, you know, more broadly speaking, you can think of infrastructure is what it takes to achieve a certain objective. You have energy infrastructure. You have financial services infrastructure. You have internet infrastructure. In the broadest sense of the word, I think we always think of infrastructure as kind of an instrumentality, something that that helps us achieve a certain objective.

We view infrastructure as all of the common elements that help create the societies and the economies that we put in our community, not just the roads, the bridges, those physical things that immediately come to mind, but also those physical assets that help make modern society possible and connectivity as something that should be viewed as a utility and and as infrastructure to a modern and functioning society. Then even broader view of infrastructure than that is, you know, some of the assets of communities like education. So schools and libraries, we view all of that in the realm of infrastructure.

It seems like kind of the feature of various technologies that is most going to transform infrastructure is autonomy. For physical infrastructure, you know, in an age of flying cars, that mean we're going to start to have to build these islands that flying cars can, you know, stop on. or massive drone terminals, you know, scattered around the country. Let's think about kind of 22nd century infrastructure. What does that actually look like?

It's definitely 21st century infrastructure. Rwanda actually has the only autonomous system operating at national scale anywhere in the world. Zipline essentially provides to ministries of health and other governments the ability to do instant deliveries at national scale using autonomous aircraft. At this point, Zipline is delivering around 20% of the national blood supply of Rwanda

outside of Kigali, and it's basically used as infrastructure to allow them to provide care to patients closer to where they live. I think this is going to be part of a process that probably is government assisted, but it's going to be driven a lot by innovation. The U.S. has the most complicated airspace in the world because we've got so many different objects up there already. And God knows I tried to think ahead and to do exactly what Keller just said, which is, you know, instead of looking back nostalgically at the infrastructure we had 50 years ago, this is not going to be for the U.S. a time like the Transcontinental Railroad when Lincoln said, let's build it and we built it, or even the interstate highway system when Eisenhower said, let's build it and we built it. I think this is going to happen because the government gets nudged into doing it. And that's what is so interesting about the phenomena of drones and drone delivery. It's going to happen because industry creates this thing called an autonomous vehicle that actually gets to a place where it's in the market and people actually buying the service, if not buying the thing itself.

So what would a roadmap look like for the U.S. then? I mean, how did Rwanda actually get to this point where they have such, you know, what we would consider the infrastructure of the future? What would it look like for the U.S. to get there? Look at the airports in the U.S. I mean, from like 1910 to 1950, the U.S. led the world in terms of building this infrastructure for airplanes. And it's not just important because people get to use that infrastructure. It's also important because the United States led the world in terms of developing that technology. So there's a reason that the U.S. is the most complicated airspace.

It's because we led in the development of that technology and the implementation of that technology. The government of Rwanda had the vision. they knew what they wanted to achieve and they were willing to take a little bit of risk to get there. It's a government that's willing to behave a little bit more like a startup. When I read stories of like the founding fathers in the U.S., like I think we used to have that entrepreneurial spirit, it's like a willingness to take a little bit of risk

in order to lead the world. If the assumption is we're only going to do things that we know work perfectly and that we did in the past, then we're going to find ourselves following other more entrepreneurial, more innovative countries. One of the drivers is innovation, obviously. but the other is certainly the citizens who are using this infrastructure on a daily basis. Oftentimes these municipal building projects are initiated by cities and counties,

but is there actually a way in which citizens could start to suggest where things go? Public finance is invisibly guiding the nature and scale of the things that we build in the world. The humble municipal bond is another of the great American inventions. It's two centuries old in the early days of our nation. 1812, New York, we're in lower, Manhattan, we say, we need a canal. You know, imagine only great things we could do with this canal, you know, but how are we going to build this canal? Well, we have an idea. Let's pass the hat around and write ourselves IOUs. It used to be fundamentally a community-driven effort

that would allow the community to build exactly what it needs when it needs it, is now this like hyper-consolidated, aggregated one billion dollar per day market. The cost structure is such that it makes more sense for, you know, communities to put together a bundle of 30 or 40 or 50 projects at a time, you know, some of them that needed to happen years ago, and then some of them that won't happen for another couple of years to do a single mega financing rather than borrow exactly what's needed when it's needed. You know, if a community could receive the funds and a MOU from the local council that says, yeah, you can do that project, then you can do this project and you can put your resources together and other people from other parts of the country might

join. This idea of sort of democratizing and crowdsourcing urban planning. These new units of collective action, an organization that the current mode of public finance does not support. Like the neighborhood scale microgrid building their own all abilities playgrounds, we saw distributed wireless mesh networks pop up in low-income communities to provide high-quality broadband. A hundred households get together and say, we're going to borrow five million bucks and put together a bank of Tesla power packs and, you know, do distributed energy at our, at our neighborhood. Do other countries use municipal bonds as this sort of modern public finance something that's come to other countries? Yeah, it's a very active market in most of the

developed countries around the world. I've been to places like Scandinavia that are doing really remarkable things with getting public input. The government's way is to call a meeting at a certain time in a certain part of whatever government building. If you work, It's limiting if you're not plugged in, if you don't get the notice. Governments are using their municipal resources, but are actually working to go out to where people already are. Go to the coffee shops, to go to the universities, to go out and get public input rather than expecting the public to come to you, so to speak.

There's a role where the government, even with a small amount of funding by basically being an anchor customer for that infrastructure, they can have a catalyzing influence in terms of getting something off the ground and started, where a little bit of critical mass is necessary. And not only that, but by working with a government as an anchor customer, it also often makes it a lot easier to get regulatory permission. I think a lot of people look at some big companies in the world that are doing drone delivery and say, okay, you're talking about delivering someone's latte to their backyard using something that looks like a lawnmower of death. Like, we're not that psyched. But when you're talking about, you know, working hand in hand

with the Ministry of Health to deliver a medical product that someone's life depends on, that's an easy decision for just about anybody in government, even a relatively conservative regulator. Just a little bit of that can go so far in terms of catalyzing the creation of new infrastructure that ultimately will be fully sustainable from a private funding perspective. You just need that ability to get started. All of these technologies that we think are coming, driverless cars and delivery drones, autonomous shipping vessels, what is the greatest challenge for policymakers and actually staying ahead of that? Well, I think the challenge for policymakers is knowing which tool to use in a given situation, the autonomous vehicle guidance. Frankly, there was a lot of

concern that we could end up with a situation where 50 different states had 50 different regulations when it comes to autonomous vehicles. And what we tried to do is the layout of framework that wasn't prescriptive. They'd left room for the technology to grow and become more mature, you know, without killing it in the crib, so to speak, which is different than what I think drones need right now. You were the mayor of Charlotte, North Carolina. You know, the counter argument, to Jason's point, the vision that we've kind of talked about here, is you sort of need a Robert Moses-like figure, this kind of, you know, somewhat autocratic city parks commissioner in New York City in mid-century who kind of through sheer force of will, you know,

builds these massive, massive public projects. So maybe from a mayor's perspective, like, how do you think about sort of democratizing and crowdsourcing the process of urban planning? Or do you really need to kind of centralize control of planning in some ways? We have a particular challenge in America when it comes to building infrastructure. And that challenge, and we shouldn't sugarcoat it, is that we are. a pluralistic country. And, you know, if you look at the history of how infrastructure's been built, and Robert Moses is a good example of this, the autocratic style that was prevalent at a certain part of our history resulted in essentially using infrastructure as a way of creating

barriers between Americans. And I worry, frankly, that we may be repeating some of the same problems when it comes to the use of technology and transportation. There are some dangers inherent in a lot of this tech progress just with regard to further separating people, further segregating certain communities. How did you actually think about mitigating those risks, especially since you were there at such a unique kind of point in history where you saw the emergence of drones and driverless cars? To a citizen, is showing up at a public input hearing on a road project or a rail project or something. The process is mysterious because they don't exactly know what input they're giving where it's going to go, what impact it could have on the overall project. And we

actually created a pamphlet that basically lays out for the average person how to influence the process of getting a project done the way that person would like to see it done. And that's just one way of trying to correct past practice, which was more autocratic, quite frankly. We also look forward a little bit. We invited mid-sized cities across the country to tell us how can cities best utilize available technology to solve their problems. We also asked them to explain to us how the deployment of that technology was going to help every citizen in that community, regardless of their socioeconomic status. We started to see the development of solutions around this. One solution was neighborhood kiosks where people who didn't have a mobile phone could have

access to the same application that you and I have access to through hours. And solutions that worked around the unbanked that gave people the ability to use cash where they didn't have, you know, another way of paying for a certain service. If we're not careful and intentional, we could be unintentionally repeating some of the history that we have inherited. I think it's so interesting because we've talked about how individuals at a local level can both create and fund a lot of these infrastructure. projects that other people might not think about. We talked about how technology might make it possible to get some of the same benefits from infrastructure for one-tenth of the cost,

but also that when you look at some of these new solutions, there are complicated regulatory environments. We have to find ways of at a local level trying new things and experimenting and then taking advantage of the things that we see working and taking advantage of the things that benefit people equally rather than lead to more inequality. Yeah. So how do we make sure it's not just the wealthy community is getting better and better infrastructure and lower income communities not getting these benefits. I grew up really poor in really crazy turbulent circumstances in a rural community in the Midwest, right? And I had an awesome mom and a park down the street and some public school teachers that were willing to enable to look past the nonsense of a troubled little

dude, right? And, you know, those things, the awesome mom is kind of unique to me. I I would go to that park, right, and think about a world that was, like, better than the world that I currently knew. And I go to the public school and have these teachers who would mentor me, and I would come to understand things that existed outside of my immediate circumstances and grew up assuming that's, like, constant. That's just a given that everybody has those things, right? Everybody's got a park.

Everybody's got a good school. Then I ended up studying cities, right? And seeing up close and personal that that's not the case, that, you know, those things are highly unevenly distributed. When times get tight, what goes? And it would be there's 50% of the budget for the park. The school is cutting this many hundreds of teachers next year. The art program's gone.

Communities looking at things like privatizing playgrounds, literally creating pay-to-play. You used to be a nation of communities that would get together and say, we want a ballpark. We're going to crowd fund the ballpark with municipal bonds. And we're going to all get together and invest and do this thing. And it's going to be for the benefit of all citizens. But then there's a global capital network of thousands of investors of various types from someone down the street from the project all over to a global bank that because of the Community Reinvestment Act needs to put, you know, $300 million a year into low to moderate income communities as designated by the Fed. They haven't been able to really invest in those communities through municipal bonds because of the aggregation that, you know, it's. Clean energy upgrades for the school in the low income district combined with, you know, the

sewers citywide. And suddenly that bank can't say this is a Community Reinvestment Act investment. So it doesn't count towards that. Now we can do very specific targeted types of things where we have banks that say we're going to, you know, invest in this energy upgrade that will save this low income school district, $100,000 a year. This is a new type of investor that has direct access to those types of opportunities. We mentioned Robert Moses earlier, and that's the antithesis of what we do. It really is more about Christopher Alexander, right? If you read Moses, you have to read Alexander. It's for, you know, projects that get beat up in today's billion dollar a day public finance market, like bike lanes. Fantastic. So infrastructure has been in the news with this proposed

trillion-dollar infrastructure plan that President Trump has talked about, setting aside the politics of it, Secretary Fox. How does it compare to these other previous? infrastructure plans like, say, the, you know, 1956 Interstate Highways Transportation Act that President Eisenhower is so famous for? The American Society of Civil Engineers has done a series of studies that show that the country has an infrastructure deficit in transportation of a trillion dollars. President Trump tried to more or less craft a package that would achieve that amount of investment. one, using project streamlining as a way to accelerate projects.

Secondly, he's talking about putting forth some credits to the private markets to invest in infrastructure and credits to local and state communities for taking assets that were once publicly owned and putting them in the marketplace for some level of privatization. And then the third piece is some type of investment at the federal level. I think this is where they will struggle the most is finding the revenue sources to build a system to actually build a trillion dollar program. Now, you ask me, you know, how does this differ from 1956? The short answer is I'm not sure because from 1956 to now, we've basically had a view of transportation that was very much focused on the automobile. and I argued strenuously for a national program that would take a more multimodal focus

that would, from surface transportation perspective, look at the roadways and cars, but also transit and walking and biking and give people more choices. One of the most important things that we think about is we need to make sure that we're investing in the infrastructure, not just in the infrastructure of the 19th century, but that we're also investing in the infrastructure the 21st century. I think it's kind of easy to look at this and say, hey, you know, rebuild the railroads, rebuild the bridges. And it's like, yeah, we have to do that. But at the same time, there are so many ways that new technology, autonomous vehicles, ride sharing drones are going to make

it possible to actually achieve the same goals for less cost. Look, everybody knows there's not like a trillion dollars just lying around. So how can we find ways of solving the same problems in an order of magnitude, more efficient ways? So what is the greatest challenge that's going to confront, on the one hand, regulators and on the other hand, entrepreneurs in building this next generation of infrastructure. Yeah. When you really think about what the future looks like, is that particularly when it comes to being a startup and wanting to work on big infrastructure problems, Secretary Fox was talking about the inequality between the haves and the haves-nots on a national level. But what about the global level? Because the reality is so many of the infrastructure

shortcomings that we have here in the U.S. I mean, This is nothing compared to some of the infrastructure challenges that lead to, for example, 5.8 million children dying every year due to lack of access to basic medical products. And so we think particularly if you're building infrastructure, it's not just like, oh, we're a U.S. companies who are going to try to build infrastructure in the U.S. And I actually think this is one of the shortcomings of the vision of so much technology coming out of a place like Silicon Valley. I think our assumption is that any technology company that's going to scale fast is going to

sell to rich people in like this specific geographic part of the world. Particularly when you're talking about infrastructure, some of the most exciting opportunities and the places that have the highest needs are not the U.S. But these are global problems. There are global infrastructure problems that are looking for new solutions and you can build viable, sustainable businesses serving them. And in fact, this is probably where a lot of the innovation in infrastructure is going to happen because the need is so high. And a lot of times you may not have as complicated of a regulatory framework. We're able to, you know, understand each other and communicate with one another at a pace that was simply unimaginable, even 30 years ago, right,

that now we have a global brain and we can transmit ideas and share ideas and get feedback and iterate towards something very quickly at the global scale. And I have really high hope. Power will be defined at the local level. And as, you know, autonomous really takes off, on the street, you start to see autonomous and drones as, you know, combined the next big paradigm shift in our settlement patterns, right? You know, the 20th century was defined as the sort of hollowing out at the hands of the automobile of cities and becoming distributed and, you know, the rise of suburbs. This new paradigm shift allows us to get together in new ways, like the quilt work, the polycentric model, right? Regions of places.

around the human being, which is the most important unit? The truth of the matter is that we are still a society under construction. And we still have fissures in our society. We still have needs as people to congregate, to socialize, to be with each other. It's really important not to lose sight of that. Because, again, when we talk about equity issues, that's one variation of what I'm talking about, where we can completely create this whole new thing and build a moat between the people who can afford and the people who can't. I don't think it's an issue of people's intentions at this

stage. I think it's more of blind spots that we have to be careful to fill in. Great. Well, thank you guys. We're all excited about this infrastructure of the future and great to spend some time talking about it. Thanks for advancing the conversation here. Thank you.