Jeff Bezos Has An Answer for the Future of RE Tech
06/28/2019
All participants in commercial real estate are hunting for a competitive advantage. Whether you are an investor, broker, or other player, you have probably explored technology to improve your success. And technology is a great tool. But, there is much more to the story.
When talking about the future, you may be surprised to know that Jeff Bezos advised us to “focus on what doesn’t change.” Even though his use of transforming technology took Amazon to meteoric success, his actual words offer insight:
“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: “What’s not going to change in the next 10 years?” And I submit to you that second question is actually the more important of the two — because you can build a business strategy around the things that are stable…”
Is it possible that instead of focusing on the ways technology will change the CRE business the real benefit can be found by contemplating where it will not change?
What has changed?
Let’s start with what technology has changed. Simply; it’s made access possible where it wasn’t before. Access to market data, research, rental rates, transportation (via ride sharing), and other items are all available–to all, for free.
Consider how the iPhone has impacted the NYC rental market. The phone and mobile apps have given renters and buyers access to data they never used to have — past rents, concessions, other unit availability. While the NYC rental market used to be a black hole of misinformation for the consumer, they now have almost as much information as the rental broker. This has shifted the balance of power and caused owners to be more competitive with their rental product and rates.
Further, the iPhone has given renters access to ride-share apps like Uber, Lyft, and others, expanding the geographic possibilities for an acceptable place to live. As renters no longer need to be next to a subway line, commuting patterns have changed, and new neighborhoods have opened up. In the last 10 years, technology has given renters more power, inadvertently expanding the rental supply, and further incentivized owners to improve the quality of housing.
For buyers and sellers searching for market information, anyone can access past offering prices, recent sales, trends, and learn the correct contact information for industry participants actually doing the deals. Before, a buyer could only gather this type of information by walking hundreds of properties, speaking to multiple individuals, and it would take several months. Really, only those in the brokerage industry had access to this much needed information. Now, very specific and detailed transaction information is no longer scarce and widely available, to anyone, instantly.
…As a result, the business has evolved
As a result, technology has lowered the bar to enter the business, and raised the bar to be successful. It’s made it better for the best, and worse for the worst.
Lowered the Bar to Enter
When I started in brokerage, I had to invest a huge portion of my initial time on the research required to operate. I researched building owners’ contact details by hand, and it often took months or even years to gather what was needed. As a byproduct, while doing this research, you learned and incredible amount about the business. The lack of easy information actually served as a barrier to entry to the business.
Today, you can download that same information in minutes with minimal investment. This has lowered the bar for entry into the industry. Anyone can do it. It’s no longer a rite of passage. I am happy about this. It’s made the industry better, but changed it in other ways.
Richard Sarkis, CEO and Co-Founder of Reonomy, and myself take a deep dive into how big real estate data is changing the playing field in commercial real estate in the podcast episode linked below.
Raised the bar to be successful
As the abundance of data has made it easier to enter the industry, it’s actually raised the bar required to be successful. Simply having information was the “value add” for some brokers in past. Today, having market data alone won’t cut it.
Instead, the superior ability to sell, influence, guide, and convey actionable advice is what’s scarce. Having a lot of information does little good without the ability to interpret it and offer sound guidance. The best brokers detect subtleties and nuances during face-to-face interactions, garnering critical information you can’t find on a spreadsheet. If you have those abilities you are providing the value needed.
If you are a buyer today, just having access to an opportunity won’t differentiate. It’s the combination of your access to the opportunity + how you will use your creativity to add value that’s important.
What does this mean for the future?
Those who can combine human creativity and problem solving skills with technology will be tomorrow’s leaders.
Good data helps you make better decisions. Technological capability and innovation are no longer competitive differentiators–its now just what’s required to be in the industry. The future will mandate you deliver value added advice, supported by data, that causes people to take action.
In the face of too much information, moving people away from “analysis paralysis” is the major skill. It’s helping investors think through their problems and achieve their goals. This is where technology will never beat good human intelligence.
Referencing Jeff Bezos’ question above: technology is constantly evolving, which renders it not a permanent competitive advantage. The teams that combine the latest technology with sales skills, relationships, and the ability to provide clear advice will be the next leaders in this industry.
Analog vs Digital
There is a lot of talk in our industry about how this or that technological platform is going to change the way the business is done. To be sure, the efficiency and effectiveness in the business will improve because of the use of technology. But make no mistake, people make investing decisions when guided by the advice of a close circle of trusted advisors. It’s a relationship business.
In the book, The Revenge of Analog, author David Sax provides a powerful argument that an increasingly digital world is not necessarily an improvement. “Analog experiences can provide us with the kind of real-world pleasures and rewards digital ones cannot,” he writes, and “sometimes analog simply outperforms digital as the best solution.”
“The more time we spend in the digital world of clicks and taps and swipes,” Mr. Sax writes, “the more people have begun to recognize the value of face-to-face interactions.”
At New York Multifamily, we emphasize cutting through the noise so we may guide investors to their personal goals. This saves our clients time, improves the results they get, and makes us the easiest people in the industry to work with.
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