
Will Tech Leave Detroit in the Dust? - RestlessMind
https://www.wsj.com/articles/can-detroit-become-a-software-business-1540008107
======
leesec
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...](https://www.quickenloans.com/about/partner-
company#chat_close)

~~~
jdhn
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.

~~~
roymurdock
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?

~~~
echelon
> just stunned by how cheap some of the property is

What kind of prices are you talking about?

~~~
jdhn
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-...](https://www.trulia.com/p/mi/detroit/5257-cadieux-rd-detroit-
mi-48224--2050771507)

[1][https://www.trulia.com/p/mi/detroit/4800-bishop-st-
detroit-m...](https://www.trulia.com/p/mi/detroit/4800-bishop-st-detroit-
mi-48224--2050769906)

[2][https://www.trulia.com/p/mi/detroit/5042-grayton-st-
detroit-...](https://www.trulia.com/p/mi/detroit/5042-grayton-st-detroit-
mi-48224--1001626271)

~~~
captain_perl
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.

~~~
jdhn
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.

------
chiph
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...](https://www.alixpartners.com/media-center/press-
releases/pile-up-awaits-auto-industry-investments-electric-autonomous-future-
balloon/)

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

~~~
tomatotomato37
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

~~~
AnthonyMouse
> 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.

~~~
toomuchtodo
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).

------
analog31
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.

~~~
wenc
> "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.

~~~
dionidium
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.

~~~
wenc
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.

------
true_tuna
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.

~~~
a_t48
Cruise is owned by GM.

------
neonate
[http://archive.is/vs4Q8](http://archive.is/vs4Q8)

------
andrew_
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.

------
blihp
'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.

~~~
romed
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.

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

~~~
Greed
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.

------
jtraffic
>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

~~~
asaph
> 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)

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

------
purplezooey
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.

------
CydeWeys
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.

~~~
brohoolio
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...](https://www.slashgear.com/gm-cruise-gets-2-25bn-from-softbank-
for-2019-autonomous-launch-31532516/)

~~~
slededit
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.

~~~
CydeWeys
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.

------
jameslk
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

------
RedStarComrade
Non paywall version.

[https://outline.com/uvszzK](https://outline.com/uvszzK)

------
drb91
The entire idea of specialized regions is incredibly frustrating. When will
companies invest in remote work?

~~~
CydeWeys
Kind of hard to do manufacturing remotely ...

~~~
drb91
This is true. Are all jobs manufacturing?

~~~
m52go
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'.

~~~
falcor84
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.

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

