Will Tech Leave Detroit in the Dust? | Hacker News Reader

Will Tech Leave Detroit in the Dust?

wsj.com

78 pointsRestlessMind88 comments

I suppose this article is musing about how the big car companies are responding to the pressure from tech companies, and how they are trying to pivot into tech companies themselves, which is a fine premise.

I do think the title is misleading though, by conflating "Detroit" with "The Big 3" (General Motors, Chrysler and Ford).

Detroit itself is already well on it's way to diversifying it's economy and particularly making investment in tech. There is what's known as "The Family Of Companies" (1) referring to a whole fleet of businesses supported by Dan Gilbert of Quicken Loans and many of them are in tech and in the buildings downtown. Gilbert himself owns something like 30+ buildings in the Detroit area.

There is a start hub near by as well in Ann Arbor which has recently produced companies like Duo Security and FarmLogs.

Real estate/cost of living here is much cheaper than in most of the bigger tech hubs and it's bringing all sorts of companies.

There is a somewhat valid critique that salaries aren't quite competitive for tech, but I've found the quality of life has been quite nice. For ex: I know several people coming out of bootcamps with or without degrees and making 70/80~k with 1-2 years experience, but with rent being only 700-1k for your own apartment ( less with roommates obv ), you wind up putting away plenty at the end of the month.

In my opinion, it's actually a pretty great place to live and is handling the shift of becoming a tech city quite well.

(1) https://www.quickenloans.com/about/partner-company#chat_clos...

As someone who works in Detroit, I think that the city is a lot more fragile than people like to believe. Quicken Loans is just as vulnerable as the auto makers due to the fact that its core business is dependent upon consumer demand. Fewer people buying homes due to economic factors like rate raises and a general downturn in the economy is going to hit them hard. Sure, there's other companies downtown like GM in the RenCen, BCBS, and StockX, but Quicken Loans is the juggernaut.

as a young person i'm constantly looking for cheap areas to live with growth prospects. i went to detroit for a weekend last year and was just stunned by how cheap some of the property is, but also how run down the east side of town is, it's unfathomable to believe that could happen to an american city until you visit. on a block of 10 houses there would be 5 empty/stripped, 4 rundown, 1 artist commune.

i just don't see what the growth prospects are for detroit. i don't think manufacturing is coming back anytime soon to the US, and in terms of natural resources/weather detroit seems limited. the music scene is cool, but not the serious tax revenue generator the city needs. as a resident are you seeing any growth industries cropping up?

> just stunned by how cheap some of the property is

What kind of prices are you talking about?

Not up on the current but there were houses for ~$10k a few years ago. That's next to a burnt out crack house from the Eminem movie, like #8 below:

https://detroit.curbed.com/maps/lose-yourself-in-this-8-mile...

Here's a selection of homes from East English Village, which has won the Detroit Curbed Cup competition 2 years in a row (for what that's worth):

3 bd / 1 bth / 2 car garage: $90k [0]

4 bd / 2 bth / 2 car garage: $190k [1]

3 bd / 2 bth / Garage status not mentioned: $120k [2]

[0]https://www.trulia.com/p/mi/detroit/5257-cadieux-rd-detroit-...

[1]https://www.trulia.com/p/mi/detroit/4800-bishop-st-detroit-m...

[2]https://www.trulia.com/p/mi/detroit/5042-grayton-st-detroit-...

What's with the real estate photography trend of trying to make everything look like a circa 1998 3D Render?

I bet that it's due to subpar lighting combined with the mindset that HDR will fix all visual flaws.

Well, those are inflated prices from being listed on Trulia.

You can buy thousands of houses in Detroit at auction for $5,000 plus back taxes. They all will need rebuilding.

However, the soil is contaminated with heavy metals (I would check where the foundries and prevailing winds were) and the water supply has issues.

And if you want to raise a family, you will need to find an area with a credible school and police force.

The biggest issue in my opinion are Detroit schools, they're just abysmal. Directly to the south of the houses I posted is a separate group of cities called the Grosse Pointes. They're in the same county as Detroit, but they're their own cities complete with different schools. The same houses I posted above would go for 1.5-2x their price if they were less than a mile south simply due to the school districts.

Just a few years ago there were some spectacular deals if you didn't mind a (major) fixer-upper: https://www.huffpost.com/entry/cheap-detroit-houses-auction_...

While you're unlikely to find anything like that today, the prices vary widely depending on which part of the city you look at. According to Zillow, the median price is $41.5k but the range is massive (i.e. low 5-figures at the low end to (I believe) low 7-figures at the high end)

Maybe AV R&D, but that's the biggest one right now. Duo Security just got bought by Cisco for $2 billion I believe, but that's in Ann Arbor.

I'm excited to see what happens when/if StockX is bought by someone. It could turn out to be the spark the city needs to jumpstart more tech jobs.

i checked out stockx it's like an ebay focused narrowly on street wear. i guess tech$co$ acquiring this could provide some jobs but isn't ebay laying off/rebranding and doesn't craigslist (similar concept) operate with 50 employees? hopefully the car industry can overcome AV level 3+ challenges and bring some affordable autos to mkt soon with true hands off autonomous (level 3) capabilities

StockX is owned by Dan Gilbert.

StockX just raised the biggest VC round in Detroit history, with $44MM from GV and Battery.[1]

Full disclosure: I’m on the StockX Engineering team (serverless), and we’re hiring.

[1] http://detroithomecoming.com/stockx-raises-44-million-from-n...

You guys don't happen to use F# do you? Is it all python/SQL?

What's even more worrying is that years after the bailout, investment and economic stabilization, detroit's population is still declining ( although at a slower rate ).

If people are leaving when times are good, what will happen during a recession?

Moreover QL's technology is as brittle as GM's or Ford's. They happen to have an acute focus on customer service and marketing which made them number 1. But it's a matter of time before someone automates the hell out of the mortgage industry correctly. As far as I've seen, it's Shore Mortgage.

For a company that’s trying to automate an industry (Shore), I’ve ancedotally heard nothing good about their technical stack and technical talent.

QL definitely has a huge focus on automation right now.

StockX is a Dan Gilbert company so if QL goes down, they probably do too.

The main factor that prevents someone like me (and probably much of the tech talent in America) from going to a tech hub like that in Ann Arbor is cultural homogeneity.

Being an Indian American with immigrant parents, my ability to fit in in the Bay Area is much higher than in most places in America.

There are plenty of Indian's in Ann Arbor and Metro-Detroit. I worked with a ton of them.

I 2nd primrose's comment. Ann Arbor is way more diverse than what you'd expect, or what you assume in your comment. Ann Arbor is thriving in tech, education, and culture.

Also, most people would prefer areas with warmer, less humid, sunnier weather.

Agree with all of this. The Metro Detroit area is diversifying itself better than it ever has.

The biggest problem I see is recruiting talent. The University of Michigan has established itself as a west-coast feeder school.

I personally left the area post-graduation and got a job at a FANG company. As much as I’d love to move back, I just can’t find a job that pays anywhere remotely near what I make on the west coast.

Apparently, salaries are starting to rise, which can only be good for the area as a whole.

Detroit has a large population of engineers working in the auto industry, from the Big Three to the suppliers. How well does their talent, training, skills, and experience translate into IT and startups?

Based on the origin myth that I've heard (but never really looked into), defense industry engineers started SV.

It's not just a struggle for control - it's a struggle for survival. The auto industry has reached one of it's rare inflection points with the arrival of pure EVs. They will have to offer a model that people will buy, or they'll lose the company.

Previously, this happened to the US tire makers in the post-1973 oil-crisis years. They'd been happy producing bias-ply tires, when suddenly everyone wanted radials because they got better mileage and lasted 2-3 times as long. Goodyear was the only one to make the switch, and they're still in control of their business. All the others - Firestone, General, etc. did not, and ended up getting sold to someone else.

https://www.alixpartners.com/media-center/press-releases/pil...

The car makers realize this, and will spend whatever it takes, regardless of the return on capital, to stay alive.

I don't think EV's are that big a deal on the automative manufactor side of things. The engine is only one component of the multi-ton combination of steel, cloth, rubber that is the automobile. Sure it's one of the most complex parts, but that's just bigger reason to ditch it and replace it with something that doesn't give their industrial engineers panic attacks

> The engine is only one component of the multi-ton combination of steel, cloth, rubber that is the automobile.

It's not just the engine. Some things EVs don't have or do differently: Engine, transmission, cooling system, fuel system, fuel tank, exhaust system, emissions controls, power steering (electric, not hydraulic), everything else on the accessory belt (which itself no longer exists), vehicle frame (designed for batteries in the floor instead of engine at the front), instrumentation, etc. It's a lot of stuff.

They have a huge infrastructure for building oil pans and belt-driven A/C compressors and decades of expertise in valve timing and equipment for compliance with vehicle emissions regulations, and none of that applies to EVs. They have to start over.

But at the same time they have billions in unfunded pension liabilities and debt weighing them down. GM's current total liabilities stand at seventy-six billion dollars. They also have tons of assets, but how much of the assets are facilities for the manufacture of mufflers and fuel filters?

They have the resources and incentive to make the transition, but they've also got a hill to climb and hungry competitors.

GM and Ford are one economic slowdown away from insolvency (due to the liabilities you mentioned, and most vehicle purchases having been pulled forward with easy credit).

I grew up in a suburb of Detroit, and came of age in the early 80s. Every time a "business cycle" came along, the leaders of Michigan swore that Detroit needed to diversify into something other than cars. Then, when things picked up, all was forgiven and we started making those cars again. Rinse and repeat.

"Detroit" meant all of the Midwest, since every town had a plant, small or large, doing something for the auto industry.

I hope it sticks, this time.

> "Detroit" meant all of the Midwest

Not entirely sure about that. Most of the midwest outside the rust belt was not under the influence of Detroit. Chicago for instance was fairly decorrelated to Detroit.

Chicago is an outlier in most ways, but, still, I’m from St. Louis and a connection to Detroit would be news to me. There are parts manufacturers all over Ohio, for example, but the Midwest is a lot bigger than Ohio.

Right. I’ll bet entire states of Nebraska, Iowa, Kansas, Wisconsin, Minnesota, Illinois and Indiana has very little interaction with Detroit either. They were more agricultural by nature so their interactions would be more with Chicago (with its mercantile exchange and transportation). Chicago has always had a diversified economy so has ridden ups and downs relatively well. It’s still the largest city in the Midwest and 3rd largest in the country.

Good point. Chicago somehow maintained a more diverse economy. Rust belt would be a better term.

I hear Chicago is in terrible financial trouble. Perhaps the people and companies are doing OK, but when the city starts going after people for money to repay its debts they may just start leaving. I know a guy who left and feels he got out just in time. He moved to the Detroit area...

> Perhaps the people and companies are doing OK

This.

Chicago is a bit of a paradox.

The city and county are definitely struggling financially due to debt load from crushing pension obligations and historic entitlements (along with a dose of financial mismanagement and corruption -- I mean, this is Illinois).

But its economy is actually doing OK.

Unlike Detroit, many corporate headquarters are still moving to the city (McDonald's and Discover, for instance, recently moved their HQs to Chicago because of corporate incentives). Chicago is still a major draw for young talent especially around the midwest. The city of Chicago itself is vibrant and has a great deal of creative energy, and despite all the bad press, many people still want to live there. The cultural and intellectual life in the city far surpasses most US metro areas outside of Boston, SF, NY and DC. It is also home to great universities like Northwestern and the University of Chicago.

I would say if one doesn't aspire to home ownership, Chicago remains a very attractive destination and a very affordable big city. Renters are mostly doing fine. That said, if you do choose to settle down long term, there are challenges. There's a deep sense that you aren't going to seeing your money's worth in services, and Cook County taxes are going to keep going up.

Auto companies already left Detroit in the dust. Will tech save it? Everyone in Silicon Valley forgets that the second part of self driving is the car part. The POC is done (waymo and cruise) The next next step is mass production. Google is notoriously bad at that phase. The companies knowledgeable about that are the established auto companies. Tech will come to Detroit to get close to that knowledge (the manufacturing may be gone but the offices remain). Detroit is going to be a happening place for the next decade.

Cruise is owned by GM.

http://archive.is/vs4Q8

Got out 5 years ago and headed south - was the best decision I've ever made. It wasn't until I left that I realized just how economically backwards and dysfunctional the region (and state) was. I remain dubious about the city's prospect at regained glory.

But I applaud those who stick around and think well of the city and the tri-county area, and who fight the good fight to improve it. I wish them better luck and fortune than those that preceded them in the prior 50 years.

'Some auto executives say they can hold on to their roles as hardware providers while also tapping into the growth of more-profitable services'

Simple question for anyone in the auto industry who thinks this statement makes sense: for every car put on the road by Uber / Lyft (or any similar service you invest in), how many net new car sales will you see? (hint: their passengers may no longer need to have a car of their own)

I hope that this is just them putting their spin on the story and that when it's all said and done they realize their future depends on minimizing how much they have to shrink rather than maximizing how much they can grow.

Kodak believed that the move from film to digital represented an opportunity. It would have been for them, had they been realistic as to the size of the opportunity.

There are a lot of countervailing forces at play and it's by no means obvious where things end up in 2 or 3 decades.

- An increase in urbanization among certain demographics.

- New safety/autonomy systems that may drive faster upgrade cycles

- Will most people still want to own their own cars for a variety of reasons?

- When does self-driving actually happen in a widespread way?

- What happens with Uber/Lyft when the subsidies eventually run out?

- Does self-driving actually increase mileage driven and therefore car replacement cycles?

- Does peak demand at certain times of the day mean you can't actually reduce the number of cars that much?

The list goes on. I think we can be certain that there's going to be a lot of change but it's not clear to me that all of the "conventional wisdom" around things like car sharing will actually play out to the degree many think it will.

By all accounts, Kodak wasn't a particularly well-managed company. But when you have a consumables business that was once big enough for Kodak to own their own chemical company, you're probably going to have problems when that business falls off a cliff. They actually were into digital fairly early on.

Fujifilm took a somewhat different tack and came out OK in the end. But they were also much smaller and had a pretty rough period too.

That's my point. The auto companies had spectacularly poor management for decades (2 out of 3 of the American big auto companies went bankrupt during the crash... the crash didn't do them in, the 30 years prior to the crash did.) I'm skeptical that they are really that much better managed now. And Kodak was very well positioned (as you say, they were in quite early), the auto companies aren't (they're playing catch-up on all fronts: ride-sharing, driverless, electric.)

I'm not saying that good management and execution won't work, merely that their future isn't likely to be one of growth. If they think it is, they run the risk of ending up in the same situation as Kodak. If they plan today to be much smaller enterprises 10 and 20 years out, they could come out the other side in good shape.

I don't really disagree with any of that. Even if you don't think that vehicle sales will fall off a cliff and even if you have confidence that the big automakers and their suppliers can get to self-driving and electric by the time there's a sizable market for them, it's hard to see a scenario where the market for consumer vehicles increases or even stays flat.

I actually dumped my auto stocks fairly recently. It's a lot easier to imagine downsides than upsides for the industry as a whole, much less individual companies that, as you say, don't have a great track record in recent decades.

Exactly. I'm not suggesting that it's all going to come crashing down or even happen overnight, just that the trend line for them isn't up and to the right. I sincerely hope the auto companies realize this and plan accordingly even if they won't say it publicly.

> They actually were into digital fairly early on.

But they had fears it would cannibalize their existing business so they chose not to go that route; newcomers in the space were able to take over.

Sounds a lot like car manufactures, they stick to what they are doing and are good at despite being able to innovate. A lot of them may still do it the old way until nobody wants to buy that anymore, just like Kodak.

Probably true but there also wasn't a whole lot of interest in digital when they first did it. The broader point in this discussion is that losing their film and consumables business was going to cause them significant difficulties no matter how perfectly they navigated their way through that event.

I seem to remember they had some quite innovative digital products early on, my first digital camera was a Kodak.

In retrospect I'm not sure there is much they could have done, the likes of Canon and Nikon had decades of experience making cameras and electronics. Competing against them was always going to be tough.

More importantly, how many _American_ cars will be put on the road by Uber and Lyft? I think I've taken my share of Uber rides and I can't recall any that were in a domestic car. The drivers are obviously very sensitive to the economics and they are all driving Toyotas.

In Seattle Uber/Lyft drivers drive 95% Toyota Priuses. High gas mileage == you can actually make a profit in the job.

This hasn’t been my experience at all, unless you mean airport pickups, which indeed is mainly priuses due to regulations by the airport. However, for regular trips in town, you rarely get to ride a prius (because they are too busy serving these profitable airport routes)

95% is a bit of an exaggeration, it's more like 30-40% inclusive of ALL Hybrids including the Prius. The one factor you're missing here is that many drivers consider a somewhat expensive non-hybrid luxury vehicle as an investment because they're able to solicit higher tips.

Depending on the model in question, a "foreign" car might be manufactured in Tennessee, or an "American" car in Canada or Mexico. The old labels are becoming somewhat meaningless.

Yeah but we’re talking about actual Detroit I think. Their interests lie in particular makes.

>Auto executives say they need to avoid a nightmare tech scenario that’s become a common refrain at industry gatherings. They don’t want to become the next “handset makers”—commodity suppliers of hardware, helplessly watching all the profits flow to software makers like Apple

Weird comparison since Apple has always made the lion’s share of profits from hardware. Also interesting contrast between big automakers and Tesla. I see Tesla as being in the hardware biz primarily

> Weird comparison since Apple has always made the lion’s share of profits from hardware. Also interesting contrast between big automakers and Tesla. I see Tesla as being in the hardware biz primarily

I disagree. Tesla is hardware + software just like Apple. And software (e.g. autopilot, self driving) is a significant part of Tesla's strategy, just like it is with Apple (e.g. iOS)

I was under the impression that tech left Detroit in the dust several decades ago.

The jury is still out. Somebody still will have to make cars. Uber and Lyft are just information. Look at Tesla. It ain't easy. And especially now with the additional software.

I'm not sure how helpful it is to think of the world's largest companies as "tech companies" anymore. The previous dominant companies simply failed to adapt to incorporate new technologies (witness the fate of Sears vs Amazon).

And Detroit's auto manufacturers aren't doing much in the way of electric or self-driving, so if they fail that's on them. The best self-driving company and the best electric car company are both California "tech" companies.

Detroit’s big 3 are working on self-driving and electrication. GM is leading the bunch, but all three are pouring billions into it. I wouldn’t call spending billions as “not much”.

https://www.slashgear.com/gm-cruise-gets-2-25bn-from-softban...

They aren’t good at talking about it. Nobody has any idea what the hell Jim Hackett is doing at Ford for example. GM is much better but they haven’t been able to position themselves as leaders yet.

There's nothing to talk about yet because they're so far behind. Tesla has four different EVs already on the market, and Nissan and BMW have had EVs on the market for a little while too. Chevrolet just got into the game this model year with the Bolt EV. Ford has nothing. The big US manufacturers are a decade behind.

They're so late to the party though.

The big 3's dealership model will sink their chances at being leaders in electrification:

"To that end, “an electric car has no engine and no transmission. It has no spark plugs, fan belts, air filters, timing belts, or cylinder heads. It never needs oil changes, tune-ups, or emissions checks. Your brake pads go years without needing replacement, too, since just lifting your foot from the accelerator slows the car down (by recharging the batteries).” It’s no wonder dealers want to boot Tesla from their state. A National Automobile Dealers Association spokesman said dealers make triple the profit from service as they do from selling new cars."

quoted from https://www.inverse.com/article/49995-tesla-electric-cars-st...

They are far behind Waymo and Cruise/GM, the undisputed leaders

I believe you'll find that Ford at least is taking autonomous driving quite seriously. While Google & Tesla make good headlines, the investment in these fields is deeper & broader than you might think. For example, the #1 & #2 companies with the most advanced self-driving capabilities don't even make cars (o;

And those that do make cars rely on a single graphics card manufacturer (as far as I'm aware)

Given the current low valuations of the auto manufacturers, I see it more likely that a tech company like Google or Uber acquires one of them similar to Amazon's purchase of Whole Foods

Non paywall version.

https://outline.com/uvszzK

The entire idea of specialized regions is incredibly frustrating. When will companies invest in remote work?

Kind of hard to do manufacturing remotely ...

This is true. Are all jobs manufacturing?

I'd wager that most jobs at an auto manufacturer can't be done remotely. Besides all the assembly line workers, a lot of the engineering and testing is physical too.

All jobs that require making stuff are in manufacturing. As tempting as it is to think that software is taking over the world, humans will always live in a 4D world, and we'll always need stuff to help us live in it.

Manufacturing will change dramatically, but it's not going anywhere or becoming 'obsolete'.

I can quite easily conceive of manufacturing things becoming almost entirely remote, with only a skeleton crew on-site.

There are quite a few start-ups I'm familiar with manufacturing various widgets in China without ever stepping foot there, just sending CAD files.

Cars aren't built from iron ore in Detroit either. They're basically assembling parts put together in various countries around the world.

So... no, not all jobs are manufacturing. ‍️Was soapboxing necessary?

You can write controllers for manufacturing machines in lots of places.

It's a little harder troubleshooting them from a beach in Florida though.

Yes. You still need a test bench and to either travel a bit or have some local engineers. But the point is all the "manufacturing jobs" aren't people welding, etc.

People don't do a whole lot of welding in many areas of manufacturing including automotive. It's all robots.

There is a lot of automated welding, sure. But, in every small to midsize fabrication shop in America, men and woman are welding, right now.

Manufacturing locally may become a thing though. Kind of nonsensical to manufacture stuff on the other side of the planet and then ship it across when robots can replace the cheap labor that made that economical to begin with. That's an opportunity for places like Detroit to make some kind of comeback.

It is all a matter of scaling vs transportation, quality, and other costs really for if it makes sense to centralize or decentralize. If a specialized factory making only very specific parts enmasse and shipping them is far more efficient than a more general purpose localized manufacturing set up.

GM moved the "headquarters" of Cadillac to New York for some stupid reason, but they recently moved it back.

Well as soon as you install a 60-ton press in your garage, you can probably consider it...

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