Bravado: Just Like Sugar — Response to Eric Blackwell

I debated on writing this, since it kind of felt like a waste of time and energy to debate with someone who is so ill-informed as to what has been happening in the industry over the past few years. But at the start of Notorious ROB back in 2009, I did have a lively engagement with the Bloodhound Blog, and thought I’d make an exception. Especially since Eric appears to have returned to blogging after years of absence, and it is good to encourage more long form blogging in the age of Instagram.

I speak, of course, of Eric Blackwell’s post Zillow: Whatever you do. Don’t poke the bear. Lol. Poke! which is a direct response to my original post on not forcing Zillow into a corner.

Go over and read the whole thing, since Eric was also kind enough to tell his readers to come and read my original post.

Now, to quote Jules Winnfield from Pulp Fiction, well, allow me to retort.

What is So Practical About Turning Down Business?

The most curious part of Eric’s post is this “Main Street vs. Wall Street” theme he sounds throughout, starting with this:

I am not an Ivy League educated, MBA type. I am main street personified. So I look at things like Zillow’s announcement and the Notorious ROB’s response to it with a more practical and downhome point of view.

Entirely missing from the rest of his post, sadly, are examples of this “practical and downhome” point of view. Presumably, a point of view that is self-proclaimed as practical needs to have some… you know… practical advice to offer. You know, some of that downhome wisdom that would produce actual results.

For example, neither Zillow nor I have ever taken a single transaction away from Eric or his employer, The Real Estate Group in Chesapeake, Virginia. I know I haven’t, and I know Zillow has not since Zillow doesn’t do Zillow Offers in Chesapeake, Virginia. So neither of us Ivy League educated MBA types from Wall Street has affected Eric or his employer one bit in any practical way.

So who has actually taken transactions away from Eric and his company? Why, other REALTORS in Chesapeake, Virginia who one assumes are also not Ivy League educated MBA types, and who are also main street personified… except they buy Zillow leads, convert them, and take them away from The Real Estate Group.

Taking customers away from competitors is, one imagines, the whole point of marketing and advertising, which happens to be Eric Blackwell’s job description as the Director of Online Marketing.

And maybe I have a different definition of “practical” than does Eric, but doesn’t practical imply getting results? That one ignores ideological bullshit and do what gets the job done, which in this case means taking customers away from competitors, even if that means (horrors!) buying leads from the largest online real estate portal in the world? Like this guy who is now my favorite commenter ever on Facebook:

Is there anything more practical and downhome than “I’m here for money” and “I got loyalty to my wallet bro?” One imagines that the agents who work at The Real Estate Group aren’t doing it for their health, or as a nonprofit to help families achieve their American dream. One assumes that they charge a commission, and try to make money. If they don’t, I’d like to hear about that.

In the meantime, I have real questions for a Director of Online Marketing who refuses to buy “easy ass leads” from the largest online portal for real estate. Tell us all what is so practical and downhome about turning down business to pursue your own ideological obsessions?

The Concept of Buying and Selling

Then we get this gem:

It does not take a Phd diploma on the wall to quickly calculate that even with $2B in cash and assuming that they have to keep $200M to operate with…and at $300K per house that they can put in play about 6,000 houses at a time. And that they would have to prove that they were seriously profitable, not just rubbing zeros off of $20 bills like they have been. So when people Wall Street offers veiled threats couched as “well intentioned worry” forgive us homeboys and homegirls for not buying into the panic. 6,000 houses spread across 125 markets = 48 homes per market. Ok. Ummm, have at it. Scale it up boys. Actually the faster for you, the more we win…  (More on the defensibility of iBuying below)

I have to admit that I took courses on economics at Yale. But I also have to admit that Yale did not teach the concept of buying and then selling, because that was something all of us knew even at 18 years of age. We learned it as wee lads and lasses operating our first lemonade stand: you buy lemons and sugar, then sell the lemonade! What a concept!

In Eric’s practical and downhome world, however, apparently iBuyers only buy houses… and never sell.

6,000 houses put into play with $2 billion are then sold for $2.02 billion, so they can put 6,006 houses into play, which is then sold for 1% more… and so on.

This is just the most obvious illustration suggesting that Eric hasn’t kept up with the literature in the industry around iBuying, which is understandable. He’s been busy. But I’m not sure what’s so practical and downhome about being ignorant of the very topic on which one opines. Every single one of the practical and downhome folks I know from Texas to South Carolina to Nevada actually know the shit out of the topics on which they offer opinions, and try not to speak on topics they don’t know.

I won’t even bother with Eric’s whole section on “defensibility” of iBuying since you all, as readers of Notorious, are far better informed as to what’s really going on there, including seeing numbers from actual iBuying operations of Opendoor, Zillow and Offerpad. But I can’t help but note an amazing sentence:

The truth is that technology wise iBuying is not difficult to replicate.

Ahhahahahahaaha. *breath* Hahahahahaahha. Okay.

I look forward to reviewing The Real Estate Group’s own iBuying technology. Apparently, Opendoor and Zillow and Knock and Flyhomes and Offerpad have been wasting hundreds of millions on all those data scientists and CompSci Ph.D.’s from Stanford. Stupid Silicon Valley tech companies and their stupid Wall Street backers!

The Misplaced Bravado

But ultimately, why I chose to respond to Eric is this:

One last thing from Main Street that would be wise for people to factor into their analysis. We look to compete. We do not look to monopolize. Anyone with a $22 Billion valuation HAS to monopolize or lose market cap. On main street we compete for business locally. With VALUE vs price alone. We focus on Expertise. Personal Service. Our Sphere. Those things won’t go away. And our industry has the tools to compete with the Zillows using whatever the Call to Action of the day is.

This is not only silly, but actually a bit dangerous as it leads brokers and agents to misunderstand what’s going on. You can have all the bravado in the world, and talk about beating Wall Street and so on, but you do have to understand a true picture of reality.

The key issue is what I’ve already touched on above: neither Zillow nor I have ever taken a single transaction away from The Real Estate Group. Not a single Wall Street investor has ever gone on a listing appointment, or driven buyers around.

The people who are taking transactions and listings and deals away are other REALTORS. They are just as Main Street as you, and they also compete for business locally. With VALUE vs price alone, though some of them also compete on price. They also focus on Expertise, Personal Service, and Their Sphere. Those things won’t go away, no, but neither will the REALTORS who also focus on all of those things.

So the question is two REALTORs, two brokers, who both focus on all of the same things, work their respective (and overlapping) spheres… but one decides to make money on online leads, and the other does not.

That is entirely a personal business decision; “the industry” has nothing to do with it. Like Charlie Onumonu said above, some will keep paying for easy ass Zillow leads, and others will not. Time will tell who made the wiser decision.

Who’s This “We” Kemosabe?

So let’s actually examine “the industry” and what its role might be.

One gets the definite assumption from Eric (and others) that “the industry” is comprised solely of traditional brokerages. That strikes me as… narrow minded… and problematic.

It’s narrow minded because it ignores the fact that there are hundreds, if not thousands, of brokerages who are not traditional. In fact, every dominant brokerage today started out as a rebel, then became more accepted, then became the mainstream. RE/MAX was absolutely hated when it was introduced in 1974; it is now part of “the industry” right? The broker-centric companies of the 50s and 60s fought 70/30 splits forever, until they didn’t. Keller Williams was called all sorts of names for years and years; now it’s part of “the industry.”

There are hundreds of 100% fee-only brokerages today. We have newer models like Side and Real. We have disruptive brokerages like Homie and REX. And Opendoor and Zillow are now helping thousands of buyers and sellers.

None of them are part of “the industry”? Who died and made you king of what the industry is and who is and is not in it?

The whole notion is problematic because it truly raises the specter of illegal group boycotts, since it implies that some brokerages are part of the “in-group” and other brokerages can be put down and thrown into the cold… which results in an investigation by the DOJ. That’s something I warned against in my original post, because I really don’t want to see the DOJ get involved more in the industry.

The only valid role for “the industry” as a whole to serve is to think collectively about how each and every one of its various members does and does not help the consumer. That means things like setting and enforcing professional standards, sharing best practices, doing effective advocacy, collecting and sharing data and information, etc. etc. And in that role, “the industry” includes everybody who is doing any of those things, or even helping those who are doing those things, like lawyers, appraisers, mortgage professionals, and yes, even Ivy League educated consultants.

It does not mean enforcing price floors or ceilings, or isolating a few companies and going after them, and playing high school mean girl games.

Bravado: Just Like Sugar

So when you get through all of Eric’s post, what you get is some kind of a rallying cry for Main Street and fly-over country to stand against Wall Street and the coastal elites:

Main street is not going to be scared by Wall Street. We can innovate as well. My point is this. If the consultant who was paid by Zillow to help them understand REALTOR response and plan theirs shows you a picture of a scary bear who says “OMIGOSH don’t poke it!!”, there are a bunch of us in fly-over country here in the Midwest smiling and more than happy to poke it. With good reason. We have decades of experience of knowing that they show us pictures of scary bears when they want us to “behave” and we know what to do about it.

I guess that’s fine, especially in the crazy election season we’re in. Except none of us, myself included, are doing electoral politics. We’re looking at changes in the business environment.

Note that I never said “don’t poke the bear.” What I said was, don’t force the bear into a corner… because you’re not going to like the results.

This isn’t defending the American way of life from Critical Race Theorists, or capitalism from Antifa socialists. Not one person reading this, or who read Eric’s piece, is doing real estate because of religious beliefs or deeply held personal convictions; he or she is doing real estate to make money.

As a result, the bravado of Eric et. al. is seriously misplaced. It makes you feel good about yourself for a bit, but it doesn’t add a single dollar to your top line or your bottom line. If whatever you plan to do, whatever your innovation is, makes you more money, power to you! Great strategy! Implement it right away! Tell us all about it, I guess, if you feel like sharing… but… who gives a crap about your decades of experience with scary bears, unless that makes you more money?

If that means not spending money with Zillow, then don’t! If it means focusing on sphere, do that. If it means opening up an iBuyer business, do that. If it means opening a coffee bar, do that!

But it also means that Charlie is gonna keep paying Zillow for the easy ass leads. And when you talk shit about Charlie’s decision, then we have to ask why. What’s in it for you to crap on somebody else’s business decision?

I opine on real estate topics for fun, but my business is consulting with business owners. I have yet to recommend a strategy guaranteed to lose them money, and when I do strategy work, it’s always focused around who you are, where you are, what resources you have, what your SWOT is, and what course of action is most likely to make you the most money. As long as a company’s strategy is legal and ethical, I have zero issues with whatever strategy it implements. But I do tend to look at the world in terms of, “How will this benefit you in the short and the long term?”

If Eric’s post was simply about, “Hey, building out your own marketing channels will make you more money over the longterm,” then that’s a fine post. Not exactly new, but it’s a good message for everybody. Bravado and chest-thumping and “us vs them” bullshit don’t improve that core message; they detract from it.

So let’s leave it at this: if poking the bear means you make more money, you go right ahead and do that. But it really would help if you knew what the bear was, how big it was, how far you could go poking it, and what exactly is going to make that bear charge you, and what exactly you can do about a charging bear. If you got a ton of bear spray, a 6.5 Creedmoor rifle to put the bear down, and hardcast bullets in .454 Casull in case shit goes sideways, well… go for it.

If all you have is a knife… I wouldn’t advise it. But you do you.

All I am doing with the original post, with this one, and frankly, with most of my writings (because none of that is client work) is to try and point out to various people and organizations what the bear is, how big it is, and what they have in terms of anti-bear measures, and might want to think about acquiring.

And to everyone enjoying the sugar high of the bravado, enjoy the treat! It tastes great! Love the emotional high and the feeling of “We’re #1!” and all that. But just like sugar, bravado isn’t nutrition. It doesn’t make you strong; it just makes you fat. Be careful how much you consume.

-rsh