On this week’s Beyond the Box episode, we present to you the brilliant mind of Robert Hahn (author of the popular Notorious R.O.B. real estate blog and Managing Partner of 7DS Associates).
“It’s not enough to just resist disruption, to resist change, and then say we’re going to say the same. What we actually want to do is embrace this change. This shock, this disruption lets us get better and helps us to improve in whatever way that is. However you think of it, it improves. So, the old way was pretty great, but it could have used improvement, right??”
Rob shares with Lynette Keyowski his perspectives on how COVID has affected the real estate industry, shares his thoughts on what the future may look like and what the industry needs to strive for personally and professionally in the time to come.
Full Transcript of the Show
Lynette: Today I have with us, the esteemed pleasure to welcome to our podcast Mr. Rob Hahn, the notorious Rob. So, Rob is a “no-holds-barred-pull-any-punch” type of figure in the real estate sector. I’m really privileged to have gotten to know Rob over the last few years and consider him a friend and a colleague in the real estate sector and highly respect your views and your opinions, because they are just that; they are well-educated, well-researched, well thought through pieces. And so, you say what you think, but you’re also not afraid to back track and say, “Well, I have new information and so what I thought yesterday, doesn’t really apply today, but this is why.” I would really love to welcome you to the podcast. Thank you for doing this.
Rob: Oh, thank you for inviting me. And by the way, the feeling is entirely mutual because Lynette Keyowski, is pretty damn amazing and speaks her mind as well! Although, you do have a few more political restrictions, I think…
Lynette: Well, that’s why I hang around with you, I’m hoping I can learn how to relax those a little.
Rob: It’s real easy, just get really comfortable with unemployment. Especially since I’m a consultant, I wake up every day.
Lynette: Awesome, so Rob, just to kick us off, again, your relatively well-known South of the boarder. In a lot of different sectors, primarily in the real estate space, and all different verticals of that it includes, but maybe lesser known in Canada. But I think the other piece we’re hoping that our podcast really fills a bit of a void on the commentary and the intersection of real estate, technology, and capital in Canada.
Lynette: So, we’ll likely hit a wider target than just the real estate sector up here as well, so we’d just love for you to share a little bit of your origin story, what your background is.
Rob: Oh, boy. You know, we could take the whole podcast for that, so let’s give you the readers digest version.
Lynette: Sounds good.
Rob: I’m a lawyer by training, who decided I didn’t like money, so I took a job as a magazine investor, but I knew the internet before there was internet, so I started a company which I then sold to USA Networks. Went to work for Sci Fi, left there, went to work for a start-up, then 9/11 happened and the start-up went down. But then went into real estate industry starting in the commercial state so it gives me a bit of an interesting perspective. Worked in realty for four years, then went to a small data company and then went out on my own. And I’ve been doing strategy consulting since 2009.
Rob: So, I’ve been unemployed since 2009.
Lynette: Officially unemployed.
Rob: The other word for consultant is we are “con man.” Con-sultant…
Lynette: You know, I always seem to see you with a high-end cocktail and a good meal, so [inaudible 3:01].
Rob: Yeah, it’s been good. It’s been fun and you know, I stay in the real estate industry mostly, but obliviously I’ve crossed sections over into technology. Been doing more and more stuff with the finance world as I’ve started to… and we’ve talked about this before, I’ve talked about it at presentations. I think we’re entering the age of capital. Covid, I think is a bit of a curveball, so I’m thinking through a lot of those things as well. And yeah, like you mentioned, for whatever reason I’ve been fortunate where I can just speak my mind.
Rob: And that’s good, because I don’t know how to do anything else. I find it very difficult to…you know…say things I don’t believe in.
Lynette: Yeah, and first of all, I wish more people would take that approach. But again, what I’ve always appreciated about your approach is that you do think through things, and you inform yourself. You rely heavily on research and thought, and really your connections. This is where I love to kind of start honing in, and you mention a couple of things. You mentioned your current thinking on the age of capital, and I would love to circle back on that and tie that into the whole conversation around Covid, and how that’s shifted. But what I’d love to lean into the conversation is really around your focus on connecting yourself with the people, to learn their perspectives. So, your research isn’t just “go and research papers, and write papers, and see what others are saying,” it’s literally connecting with the people on the ground, getting perspectives, connecting those dots. And it’s what I’ve appreciated about your approach is it’s a very practical approach. So, I’d love to hear from your perspective, and obviously the whole world has shifted over the last few weeks, and it’s impacted people across the board. I think more so, maybe than any other time in history. It’s categorically impacted the world.
Lynette: So, I’d love to know from your point of view from these conversations you’ve been having, what is the vibe out there? I’d hate to say it’s all dismal, but is it categorically dismal, or are there pockets of bright light?
Rob: First of all, I appreciate your praise; I’ll take it! But yeah, a lot of it comes from the fact that…. I know people think I’m an expert, right? I think I’m an expert in some ways, but the more you get to know something, I feel like the more you realise you really don’t know anything. So, I’ve never been a realtor, I’ve never sold real estate, my wife has. But I know things about business, I know things about business cycles, or corporate finance. I know a lot of different things. I try to be as humble as possible, if you will, because what you said is true. I have strongly held opinions, but they’re based on information and facts. If those change, then I’m going to change opinions, because then I’m wrong. I’m happy to be wrong, but what I’m not happy about is people just kind of do the PR, and the spin. Like, stop. Let’s just start with the facts, if we disagree, we disagree and that’s totally fine. So, from that standpoint, when this thing popped, I know I’ve had a certain perspective and how things would happen and how things would be, but I’m not on the ground. I’m not a broker, I’m not an agent, I’m not seeing that. So, the only way to correct that, is to try and get that. Data helps, so I try to look at the showing time data, I try to look at MLS data, I try to look at all the data, but I felt like early on, the thing to do was to talk to agents. Talk to people on the ground, now. I took a very particular slant to this. By the way, I’ve been interviewing 16 of the top agents and brokers that I could round up in a very short period of time. This was probably the second week in March, right after these lockdowns were sort of coming. And I just sort of got their perspective on it. And I wrote a report based on that, and I’m modifying that report so it can be sent to the industry, because I wrote the report for the finance world.
Lynette: Ah, okay.
Rob: Yeah, for the investors. They appreciated it, but now I’m going to modify it and do it for industry folks. So, the things I’ll say is because I chose to speak to top producing agents, and top brokers, the perspective I got was rather different. It’s not dismal at all.
Rob: I think it’s actually a lot more positive and optimistic. So, that’s helped me think about what I think is going to happen based on their feedback. Now, if I had spoken to a wide cross-section of real estate professionals, I might have a very different perspective on it. So, I just want to caution that. Everything is based on folks who are really at the top 1%. We’re talking about really big agent team leaders; we’re talking about dominantly local brokerages; people who are really smart and who really know what they’re doing. So that changes things a bit.
Lynette: So, let me poke on that a little bit. It’s does come back to one of the theses that you long held, and that is “who really makes up the practitioner population.” So, correct me if I’m wrong, there are 1.4 million realtors in the US.
Rob: Roughly, around 1.4 million.
Lynette: Roughly, 130,000, 140,000 in Canada. And you and I have had multiple conversations on this, and on what makes a realtor, which has a real brand behind it, and needs to demonstrate some quality behind that, to retain that trademark. And the different between real estate agents, or people that hold a real estate license.
Lynette: So, I just want to qualify that that’s the conversation that we’ve had, so it’s interesting to me that you’ve talked to the top 1% of agents, teams, brokers. Tell me why you took that tactic instead of a cross-section.
Rob: So, my reasoning was, and this came out of the fact that I was starting to see some of the real early survey results and pulses and so on. And seeing people be like, “this is a disaster, we’re all going to go out of business” and all of that. And I kind of felt like, what’s the point of talking to an agent that does three deals a year? Because if they lose one, that one third, their income is gone.
Rob: So, you know, it was sort of like that. And again, you and I have talked about this many, many times. I’m fairly convinced that somewhere between ten and fifteen percent of the agent population does 85% of the business. I’m fairly convinced of that. Now, it’s interesting to me that we don’t have any actual data behind this. I think it’s driven by politics, because MLS’s don’t want that information getting out, but it’s out there. We all know it, right? If you’re in the industry, you know it, so it’s like, why aren’t we talking about this? So, given that, if I want to know what’s really happening on the ground, I need to talk to the people who are doing the transactions.
Lynette: Fair, yeah.
Rob: You know, people who are doing four to five hundred transactions a year, not four. Right? So, when the four to five hundred people say, we’re going to lose 10%, 40 transactions. That’s something.
Lynette: Right. So, then tell me about this. So, thank you for clarifying that, because I think that’s an important distinction as to why that’s your sort of test population. I think that’s really helpful. So then, tell me a little bit about what you’ve learned from those conversations.
Rob: So, what I’m learning is essentially, the top producing agents, the top producing brokers, they are… I mean they’re worried, they’re concerned. But they are far more optimistic than they are pessimistic. They all think they’re going to gain enormous market share through this.
Lynette: But why? Why do they think that?
Rob: Because they’re better run; they have cash. So that’s the other part of this right, and maybe that connects the whole agent capital thing. Every single person I’ve spoken to, well, not every single person, but just about every single one I’ve spoken to has been like, we are just fine. We have more than enough cash, we’ve got lines of credit we can tap if we have to. They’re not laying off staff, they’re cutting the “nice to haves” everyone is doing that. But these people are saying, “listen,” and now I’m just giving an example. I spoke to a broker in Atlanta, who straight up said, “If you’re cutting staff, if you’re laying off staff, because of this, I’m going to eat you.” I mean, that’s basically what they said. “I’m going to buy you out and if you don’t want to sell to me, I’m going to take your market share.” And his reason made perfect sense to me. Now this is a gentleman who had been through the last bubble, so 2008. So, he remembers what happened, but what he says is, and this is so… this is the kind of stuff that I feel like you can only get by talking to actual practitioners on the ground. What he said essentially is, “the hardest thing that you do, as a real estate broker or team leader, is hiring people.” Because you hire the right person, then you have to train them up, get them in the culture, get them productive. He’s like, that’s the hardest thing to do.
Lynette: It’s a huge investment.
Rob: Right. The easiest thing you do is write checks. So, his thing was, is I’m just not writing checks. I’m going to keep my staff, because when we come out of this, and we will come out of this. Because that’s the other point that people have said, is that this was not a real estate problem, this wasn’t a general “the economy is turning sour” problem. The economy is booming! I think we had the best first quarter, potentially in history, up until this hit.
Lynette: Absolutely, absolutely.
Rob: So, yeah, this wasn’t a real estate problem, this wasn’t a demand problem, this wasn’t an economy problem. This was a pandemic and then the government reacted to the pandemic, and that’s caused this cascade. So, we’re going to come out of this, and what all of these guys are saying is, “When we come out of this, I’m going to have all of my staff, I’ll be able to hit the ground running while my competitors have to go and think about trying to rehire those people, who have now been out of work for three months. Oh, and those people that you laid off, they resent the hell out of you.”
Lynette: So, I actually don’t want to go down this rabbit hole, because this could be another hole we get into. So, what I’m going to do is, at the end of our recording, I’ll get you to tell people how to find you. But you’ve just wrote a great piece around open-door, and their decision to have to let people go. [inaudible 13:56] and what those implications might mean. So, I’m going to encourage people to check out that piece because you’ve nicely articulated what’s kind of this point around hiring people. But, you’re absolutely right, this does provide a nice little Segway into the conversation into the age of capital and what this means. Because, I think two points out of what you just articulated really hit on my radar. One, is that 2008 wasn’t that long ago in memory for a lot of the people that are in this space.
Rob: That’s right.
Lynette: I think the difference though, that you also highlighted, is that this isn’t the economy going sour. So, this is literally just a “shut the lights off.” The economy is going to have to almost stop, almost essentially, and I know I’m over emphasizing that. But it is again, categorical. So, I’m curious, sorry, one more thing I want to weave in there. In 2008 we also didn’t have this mass injection of capital in the real estate technology sector that we had experienced over the past, 18 to 24 months. Talk to me about that and how that could be differential, and how that could maybe benefit the sector coming out of this space? How capital is going to react to this, and does it help or hinder?
Rob: Yeah. That’s such a good question, because… alright. I’ll try and answer it this way. So, I actually think that real estate technology is in deep trouble. With a few exceptions.
Rob: So, let me talk about all this capital that went into real estate tech. I mean, most of it is venture capital. And the problem with venture capital, and just by its very nature, venture capital’s invest in unproven companies. Otherwise, they don’t need venture capital, right? I mean, they’re proven, what do you need venture capital for.
Lynette: True, yet, they made a big play in that regard.
Rob: That’s true.
Lynette: There’s a lot of foolishness around unproven technology.
Rob: That’s true, that’s true. So, what I think’s going to end up happening, let me try to answer the question first, and then I’ll talk about it. I think it’s going to help. No question about it because we are moving into this new world, and it’s…who the hell knows what’s going to happen. But right now, it’s looking like we’re moving into a world where society is finally leveraging a lot of these technology tools that we’ve had for a while. Like, Zoom’s not new.
Rob: Internet telephony is not new. Slack is not brand new. It’s just because of this crisis, we’re having to utilize it.
Lynette: And they’re there and they’re available, and they’re widely enough known that they can easily proliferate.
Rob: Correct. So, I do think that’s going to help in that sense. But, on the other side of things, there are a lot of companies that have started in the last four or five years, I’d say. They’re venture backed, and they have a great idea, and they need to prove it. I don’t know that those guys will have the runway to prove it. And I’m basing that, based on those interviews with those 16 people. Cause again, those are real optimistic, aggressive, “I’m going to take market share” type of people. Event they’re saying I’ve cut every sort of speculative technology product. That doesn’t have a clear ROI, even those people are saying that. So, they’re keeping it if it has a clear ROI, in their mind they can look at this piece of technology and say, “This is generating 3x what I’m spending on it.” They’re keeping those, but “Hey, I wanted to try this new, whatever, AI big data thing to see if it’s going to work.” All of that is getting cut. And I’ve heard from some of my friends and colleagues who are in the technology vendor space in residential real estate, who are telling me that all new orders are dropping off.
Rob: No more new orders. And all of their existing customers are asking for deferments or asking to renegotiate. So, we’re not hearing that right now, too much, because let’s face it, real estate tech is like, this big. And you know, no entrepreneur is going to come out and say, “Yeah, so our revenues are down 82%” I mean, nobody is going to do that, but it’s stuff that I’m hearing. On the flip side, there’s a flip side. The bigger tech companies that have substantial capital.
Lynette: CoreLogic, Zillow, [inaudible 18:22].
Rob: Redfin… I used to count Open-Door in that mix, but….
Lynette: [inaudible 18:32]
Rob: But with new information, I have to revise my opinion. This is the example, of “Hey I was wrong, I didn’t have the information.” Maybe a company like Compass. Those guys are going to be such big winners out of this, it’s hard to wrap our heads around, and I think that’s kind of where the industry is right now. Like, everyone wants to sort of say, “Well, look, Redfin laid people off, so clearly it means they’re on the way out.” I’m like, Redfin has 400 million in cash. You don’t. And they only laid off 7%. You’ve got to look at the details.
Lynette: I totally get it, but here’s the question that I have: If the proportion… so if I think of a Zillow, or a CoreLogic, they’re not going to venture capital.
Lynette: I mean, they’re internally capitalized; great. And they’re going to do well because they have, and they have the infrastructure, they have the market share, and they have the runway, to your point. So, some of these…the companies that venture capital is engaged with, may or may not.
Lynette: So, how will this massive direction of capital into this space help the sector? Not just through and survive, but where do you think this sector goes after this? In some way, and is technology a piece of it? Or is technology going to happen despite it?
Rob: I think the way I think about that is, I don’t think it’s really all that worthwhile to talk about technology, as some sort of a separate thing. And what I mean by that is every company is a technology company now. Do you know what I mean?
Lynette: Yes, I totally know!
Rob: Yeah, so it’s talking about well, this technology is going to be… it’s almost like saying, well our office space is going to… It’s just part of the deal. Like you cannot be a company without technology.
Lynette: Right, so really then the question, and this was a bit leading, because I wanted you to categorically say that, right?
Lynette: Capital, you know, all of this VC money, or whatever…
Rob: Or private equity or public funds, yeah.
Lynette: It doesn’t matter. The fact that it’s important to the sector doesn’t necessarily mean it’s driving technology. So, I’m curious, from your perspective, where is this capital on the same trajectory or is it going to be rediverted? Drawn back? What’s going to happen?
Rob: So… nobody knows.
Lynette: What? Rob Hahn, could you even take wild guess?
Rob: See, I’m going to give you a wild guess, I have opinions, I’m just putting out that nobody knows. I don’t care who you are, if you’re Ray Dallio, if you’re doesn’t matter to me. You could be the most successful venture capitalist in the world, nobody knows, because we’re still in the midst of this government enforced lockdown. So, keep that in mind, and the capital markets are in turmoil right now. But my guess is this, when I think ahead, when I look say, two years out, three years out, we’re past this, something happens. What I kind of envision capital doing is I think we’re going to see a massive restructuring of the industry, and a massive wave of consolidation.
Lynette: So, go ahead and talk about that.
Rob: So, right now, it’s so cheap to buy companies because they’re going bankrupt, it’s fire sales. So, anyone that has capital right now, you’ve got to be going like, “this is a buying opportunity like there is no tomorrow.” If you have capital, and the issue is, do you have to have capital?
Lynette: So, potentially, this capital is a short-term opportunity that’s presented itself. Which you’d have to have capital to redivert, at least in the short term.
Rob: Yeah, so I kind of think of it this way, remember when ’08 happened? Blackstone and BlackRock all of these private equity funds start saying, “Hey, we can buy all these single-family residents and turn them into rentals.” I could see some smart fund managers going, “Hey, you know, real estate is super fragmented,” because we know this, right? It’s hyper-fragmented. We think there’s going to be a cleansing; we think a lot of these companies are selling for pennies on the dollar because of their cash crunch. Why don’t we fund a really great company, with really great management, give them a hundred million and see if they could buy out 40% of their competitors. Because then the economics change on the other side of that, right. So, I mean I can see something like that happening. I could see tech companies just getting gobbled up. Venture capitals could be like, “okay, we’ve valued this start up at 25 million, and gave them 2 million bucks.” They lost all of their customers.
Lynette: [inaudible 23:22]
Rob: New orders have dropped off the cliff. Old customers are saying, “we want to renegotiate.” Zillow comes out and says. “Ahh, we’ll give you 2 million for that company.” The investors are going to go sell. I mean, they’re like, “get me out of this position.” They don’t care. So, I could see something like that happening. And you know, to the extent that new technologies are… I guess we’ll call it transformative. I could see that actually getting… so as an example, Blockchain.
Rob: Look, I think Blockchain is ten years out, who the hell knows, right? Because there’s all these other things around Blockchain. But is it a transformative technology? Of course, it is. Could some capital, you know some well-managed funds, look at that and say, “Hey, with all the turmoil going on in real estate, let’s invest in Blockchain.” And throw 50 million at it, throw 100 million at it. The thing to keep in mind about this right, and I know your audience is more than industry people, but I do have to make this point. We in the real estate industry, really have very little idea of what big capital is actually like.
Rob: We think like, “Oh my god, so and so company raised 20 million. They’re like this big new star now!” I’ve talked to fund managers where they’re like, “If the investment is not like 500 million, we’re not interested, because it doesn’t do anything for us.”
Rob: So, yeah, it’s crazy. So, you got to think bigger.
Lynette: Totally, and you and I have had this conversation, and we’re on that page. I think relatively speaking though, when you look at this sector, it’s a baby in terms of capital and investment, and where big money actually flows and the impacts where big money can really have. Which frankly has always kind of blown me away, given just the asset class that real estate is globally.
Rob: Correct, correct.
Lynette: So, I think in general this is where the sector was feeling pretty good coming into the pandemic. Thinking, “Wow, the investment into our sector is finally starting to pick up, you know, starting to evaluate the asset class that we represent.” Then this kind of hit, so I think it’s going to be interesting to see here it goes. One of the other notions that I know you have really been reporting over the last number of months is the transformation of the industry and what that really looks like. And are we on that trajectory, and what’s that going to look like? I’ve read a couple of your pieces lately, and I’d love to hear you articulate in your view what that’s going to do to some of that transformative change that’s already going on.
Rob: Sure, so my theory on this is that what Covid does; what this pandemic does, is it just accelerates all the trends that were visible before that. So, I’ll give you an example. I think one of the biggest restructurings in the industry that we will see, is agent teams will completely dominate residential real estate. So, I’ll step back. A lot of folks in the industry in the last 10 years or so, even today, are still talking about these big tech companies want to put real estate agents out of business. So, it couldn’t be further from the truth. What they’re going to do is empower select agents, and then have those agents put everybody else out of business.
Lynette: And we see that with examples like Zillow, not their premium agent, but when they’re selecting the agent teams to represent their I buy program.
Rob: The “Zillow Offers” for example. But here’s the thing, that’s on the tech company. If you look at the ground level, at the local markets. What you’re seeing is the agent teams are increasing their market share before any of this happened by double digits ever year.
Rob: Meanwhile, the average realtor is doing like, seven transactions… So, I’m saying okay.
Lynette: [inaudible 27:30]
Rob: So, that trend is already in place. What Covid says, is “Do you have cash?” Agent teams have cash. A lot of agents don’t. I mean, a lot of agents here in the US are applying for unemployment insurance for the first time because of changes. Like, okay you’re not going to come out of this investing and start you know, it’s just not going to happen. So, what’s that going to do? I’m saying the restruction comes, maybe we go from something 80/20, 90/10 to something like, 98/2? I mean, that doesn’t seem completely unrealistic to me. It could go in so many different directions. But that fact to me, that’s the most important disruption that’s come out of this. That’s the most important trend that’s happened in the last 10 years in real estate. Everyone’s focused on technology and CRM and the biggest fundamental transformation over the last 10 years is the rise of the agent team.
Lynette: And again, I know you’ve talked about that a lot and really, what that has, to your point around Covid accelerating some of those transformative changes, I think really what I’m hearing is, across all sectors, cash is king. Whoever has cash, whoever has capital at every level is going to be the winner in this. And it’s simply a waiting game, it’s waiting this out, and who’s able to finance the down period the best.
Rob: That’s right. That’s right. And everyone’s come to realize that, and that fact in turn then has consequences because for 10 years we’ve had the hottest real estate, non-stop expansion. And brokers and agents, a lot of them just have not realized the importance of cash flow. Look, I do consulting for a living. I work with brokers often, and I’ll get a broker call me and I’ll say, “So, what’s your balance sheet” and they’ll be like, “I don’t know.”
Lynette: “I don’t have one.”
Rob: “I think my accountant knows.” And I’m like, really? So, then I look at their balance sheet, and we’re talking about some pretty sizable brokerages, like over 1000 agents. They have like two weeks of cash in the bank. I’m like, how do you operate? You have two weeks of cash! “Oh, well look at our accounts receivables.” Yeah, but you can’t pay the bank with accounts receivable. And what we’re seeing is stuff like, deals that were under contract, fall out because the buyer lost his job. Now what? Now that cash that you were expecting is not going to show up, now what? So, it’s things like that.
Lynette: So, do you think this is, and I’m just watching the time and I’m wanting to be respective of your time, so we’ll wrap this up, but I have one more question before we go. Do you think this is just an opportunity and maybe a forced opportunity, for everybody across the sector, to sharpen their pencil? Like, is this really about sharpening the pencil and deciding what’s really important versus what we would like to have? And maybe starting to, and again, this divide in my mind has always been so massive. The value of the asset class in this sector, versus how sophisticated the sector looks at their own investments at every level: At the agent level, at the broker level, at the association level. There’s something very colloquial and unique around this industry of likeminded people; almost kind of like that family approach and the co-competition approach. Versus, there is massive opportunity to be had with those that actually want to get real. Do you think this is going to force the industry down this path?
Rob: I think so, but here’s what is unknown right now. Because to me, one of two things will happen. One, we are going to, because of changes in psychology, changes in culture, changes in government, changes like in these big, big picture stuff. All of these things that we consider fundamental in real estate, will no longer apply.
Lynette: Give me an example.
Rob: So, I’ve just given an example; the idea that relationships. Real estate has existed for about 100 years, and it’s all about relationships. Relationship, relationship, relationship. We don’t know if that’s going to be the case going forward, because, right now, we’re all living through this, 24/7 messaging that other people are bad for my health.
Lynette: Being around other people are bad for my health.
Rob: Right. Other people are bad for my health. Does this change how consumers react to this notion of relationships? I don’t know, right? Nobody knows. Things like, the best way to sell a house is the traditional route: you find the agent, they go list it, then buyers have a buyer’s agent, then the buyer’s agent brings those people… I don’t know how many sellers are going to want 50 strangers walking through their home going forward. I don’t know, right? So, either things are going to change fundamentally and we’re going to have to look at restructuring the value proposition, the way things get done, etcetera, etcetera. Or, they’re not going to change. Because human beings don’t like change. So even consumers, once we’re out of this, this is going to be a short-term little blip, and we’ll all forget about this year from now, and things will kind of go back to the way we’ve always done things. I actually don’t know the answer to that, nobody does. And anyone who claims to know, I’m calling bullshit, because there’s no way to know. Having said that, my opinion right now leans more towards the fundamental change side, because I think the thing that’s changed is psychology. Like, yes, you’re spending trillions, yes, all of this is horrible. To me, the bigger impact is psychology, and it really reminds me of 9/11. That is was a one-day thing. We were attacked once, but the reverberations of that, the psychological change, that’s raught in the American people, and really, globally. It’s like Canadian’s are not affected by it. It’s been fundamental. So, I kind of think we are going to see some real massive changes.
Rob: As the trends that have been going accelerate, then these real massive changes happen, the end result to me feels a whole lot like even more domination by the agent teams, even more domination by the big, large, well-capitalized companies. I mean, 10 years from now… because real estate is the kind of thing that there’s no start-up capital required, you just have to hustle and have a sphere.
Lynette: Right, that’s right.
Rob: I don’t know if that’s going to be the case 10 years from now, do you know what I mean?
Lynette: Well, I think we actually already have seen that change, right?
Rob: Correct. Trends!
Lynette: The trends, right? And to your point, does this accelerate some of those trends. I think that’s what’s going to be interesting to see is, if it does, and then how it does. That’ll be pretty cool. Okay, two last quick questions.
Rob: And I do what to leave this for the hopeful upbeat note by the way.
Lynette: That’s okay, that’s what I’m hoping! So, here’s my first question: Rob Hahn’s predictions for the top three opportunities that come out of this?
Rob: Okay, okay. Number one: Teams, that should be obvious. Expand like crazy. Number two: I actually wrote a post about this, and it’s public so you don’t need to subscribe or anything like that, so go check it out. I really believe what this is going to do is the rise of the ex-urbs. Because again, we’ve gone from a situation before Covid where you had to get in a car, and drive to work. Which meant that you wanted to live within a certain distance of your office.
Rob: There’s going to be a lot of jobs where you don’t have to do that anymore.
Lynette: We’re already in that! Like, some people are now saying, “Why do I have to go to my ‘workplace?’”
Rob: Correct. And it almost, more importantly, the bosses, the owners are saying, “Why am I paying 2 million dollars a year for rent?” So, if you no longer have to drive to work every day. Even if you have to go into the office once a week, periodically. Now all of a sudden you can live three hours away. So, you take major metropolitan areas like Vancouver, like Toronto, and you say, “Okay, now I can live three hours away. What does that open up?” It opens up some amazing properties.
Rob: An acreage, with mountains, and streams!
Lynette: It’s almost the reverse urbanization.
Rob: Correct. But I think in my mind, they’ve skipped the suburbs.
Lynette: That’s right.
Rob: Like, you go from city, to country.
Lynette: Right, the ex-urbs.
Rob: Because, again, the way I think about it is I picture myself at thirty-two. Newly married, have a young baby and a second one on the way, lived in the city. “Oh, it’s so convenient; it’s awesome, close to dining, culture.” We need to move somewhere. So, we moved to suburbs, because I have to be close to work. If I could have just telecommuted, I’d be like, let’s move two and a half hours away, where my backyard is a mountain, not 5000 square feet of whatever. I think that’s an opportunity that people are kind of missing out on. So, what should I do? If I’m an ex-urb in the city, I’d start marketing in cities like crazy! If I’m an urban agent, I’m going to want to build some relationships with some people out in the ex-urbs, and say, “Hey I might send you some clients, can I get a referral?”
Lynette: Yeah, I like that.
Rob: So that’s opportunity number two. Opportunity number three. Ahh, this is just real speculative, and who the hell knows, but I think there’s going to be a major opportunity around the MLS, because the MLS systems are really old, really creaky, really ancient, and really bad.
Lynette: So, are we talking the MLS as the organization, or are we talking the MLS as the technology?
Rob: Well, let’s put it this way. It’s kind of neither. What I’m saying is real estate data. And if the organizations technology do not support what the overall economy is going to need, and especially what these top tiered teams, these institutions that will come to dominate real estate. What they’re going to need for their own purposes, then they will get replaced. So, to me, the smart thing to do is get ahead of that curve, think through what does someone like a Redfin actually need in terms of real estate data? Are we providing that? If we’re not providing that, you’re going to get replaced.
Lynette: Well is this the category of ex-urb real estate and how do we really support that?
Rob: Correct, correct.
Lynette: What do we put in place to make certain that our agents are relevant.
Rob: Right, and so the problem with that and why I’m kind of hesitant about it is because, I mean, you know this as well as anybody, we’re steeped in tradition. We’re steeped in existing infrastructure; we’re steeped in this investment. Which is emotional investment, that MLS and associates are talking about we exist for the benefit of every single member. Really? I mean, you exist for the benefit of the part-timer who does one deal every three years. I mean does that even make sense? Like, those tough questions are going to have to get asked, and my point is, if we’re moving to an environment in the industry where we’re going to have fewer larger, more institutional, more professional companies; which I include agent teams in, kind of dominating, and you’re not providing services and data and whatever they need, at some point somebody is going to come in and fill that gap. To me, like I tell my clients who are MLS associations, let’s get ahead of that. Let’s start thinking now about what they’re going to need, and what do we need to do, in our service for what they need. So, we’ll see what happens. I think there’s massive opportunity there because if, let’s take Canada for example, because you guys are a tenth of our size, and we’re dominating by certain urban areas. If you could have a single real estate data slash rules organization, what’s the value of that organization? It’s in the billions.
Lynette: It’s a lot bigger than even the sum of the collective today.
Rob: Correct. It’s in the billions! Like, that becomes one of the most important data companies in the world because, like you pointed out, the underlying asset class is so valuable! And giant, multi-billion pension funds are making big bets based on that asset value. If there’s a company that could say, “we know everything there is to about this asset class,” that company is worth enormous amounts of money.
Lynette: I love it. So, you know how I didn’t ask you what your predictions were, just for the [inaudible 41:20].
Rob: That’s right. None of these are predictions because nobody knows!
Lynette: [inaudible 41:26] exactly, because the opportunity has to be followed up by the action, it has to be executed on. And you know, I would agree with you that at least on your number one and three, two I hadn’t considered, but it’s a great one. That there are massive opportunities that this opens up, and frankly the period of time that we have is also unprecedented, where we actually do have a moment to catch our breath and really contemplate, where we’re not in the midst of the hustle, right, and the cycle. And I think that’s a piece that people have either taken for granted, or not recognized. You know, you don’t have to hold your breath and wait, you can actually be productive in this time and there’s a lot of productivity about envisioning and imagining and putting all of those pieces in place for the eventual piece of time when we come out of this. You know, that’s the one thing that I continue to support is, are we thinking about the world and how we want it to look. How we want it to look, as opposed to just waiting and seeing how it’s going to look.
Rob: I mean, I would agree with that, but I would just add one other thing. Because this has been a consistent theme of most of my presentations, and a lot of my writing. What I think a lot of folks in the industry want with the world that they want, is the world that we had.
Rob: In other words, they want to defend this shock. Like, “Oh my god, this Covid thing happened. Pandemic shut down. Let’s just survive it, let’s just defend against it.”
Lynette: Had it not happened; we were already going to be so amazing over here.
Rob: Correct, so they just want to go back to what we had. And I think my point is, we’ll be much better with that concept that I talked about with Toronto, for example, anti-fragile. That team [inaudible 43:17] thing. It’s not enough to just resist the disruption, to resist the change, and then say we’re going to say the same. What we actually want to do is, this change, this shock, this disruption lets us get better and helps us to improve in whatever way that is. However, you think of it, improves. So, the old way was pretty great, but it could have used improvement, right?
Rob: So, is there a way to get that? From whatever your perspective is. If you’re a traditional 70/30 split broker, who I happen to think is in deep trouble, or do you look at this and say, “Listen, does this opportunity, does this crisis, give us ability to go to 50/50 split brokers somehow.” Explore that then! Just whatever it is, think about how do we improve as we come out of this, not just how do we get back to the good ‘old days of the way things were. That’ll be the one thing I’ll say about.
Lynette: Thank you for making that point, because I 100% think that, that is the missing piece that a lot of people are going to regret when looking back at this piece of time is that. Did we think creatively enough about how to move out of this even if we liked where we were? That gave us the moment to take a breath and really consider is there an opportunity to do better, so I appreciate that. Okay, so last question for you.
Lynette: A year from today, you are on Inman stage, or at Realtorquest in Toronto. You’re on any stage. What are you talking about?
Rob: The fact that I’m there, because it means that physical conferences are back. Ha-ha!
Lynette: Ha-ha! That’s a good point. And are you missing those?
Rob: I mean, look, I don’t miss the travel, but I do miss seeing friends. Like it was such a pleasure to see you at the REA event. Such a pleasure. So, I mean that part I do miss. A year from now, what am I talking about? You know, I hope I’m talking about all the things we just kind of mentioned, and how we’re starting to see it come true. How we are seeing a wave of consolidation. How we are seeing that we went through an incredibly painful period and jobs were lost, and things were restructured, not to mention the lives that were lost. It was a real tragedy what this disease is doing to the world. But, having said that, I hope I’m talking about looking at all the amazing opportunities that are coming out from innovators and in people who are adapting. Real estate is filled with those people. Like, I don’t want it to seem like real estate is all conservative. No, it’s filled with innovators, it’s filled with people who are always asking, “How can I make this better? How can I provide a better experience? How can I do those things?” So, hopefully we’re talking about that.
Lynette: Love it. I love it. Thank you so much my friend. I really appreciate it.
Rob: You’re so welcome! Thanks for having me.
Lynette: Before we close off, I’d love for you to let people know who are listening where to find you, where to find your work. Rob has a ton of amazing commentary.
Rob: The best place is my blog, “The Notorious Rob.” You can google it, I’ve finally have started ranking above this rap blogger who’s also named notorious Rob, so now I’m ranking above him. But you can find me on Facebook, you can find me on Twitter.
Lynette: We’ll put all of your handles and the link to your website in the show when we post it! Well, I appreciate it so much, take care.
Rob: I appreciate you, Lynette. Take care, stay healthy!
Lynette: Yes, you too!
— End of Podcast —
Beyond the Box: Conversations with real estate executives, venture capital partners and technologists on what lays ahead for the real estate industry in a world after COVID-19.