When Disruptors are Disrupted

In case you haven’t heard the news:

Not a great time to be a disruptor.

Consumers and Behavior

For the better part of the last decade, I have been told that my days as a Realtor were numbered. 

If you have to lay off 50% of your people when the market drops by +/- 20% for a few months, then you really need to question your model.

In no uncertain terms, I have been repeatedly told that the consumer:

  • wants to simply click a button to buy a home
  • wants to download an app to get a mortgage
  • would rather have a lower cash offer than a sign in the yard

Perhaps that isn’t as true as the innovators would want us to think.

The Tide is Headed Out

Warren Buffett said it best when he said, ‘When the tide goes out, you can see who’s been swimming naked.’

That statement pretty much sums up the market right now.

When markets rise, especially for as long as the last one did, we tend to become enamored with innovation and forget about fundamental business practices and execution.

For years, it has been tempting:

  • to mistake those who are active for those who are brilliant
  • to celebrate those with rising revenues, not those with rising profits 
  • to toss around super-groovy tech terms like ‘user experience’ and ‘data mining’ and ‘capture rate’ –– not profit margin, capital reserves, and sustainable advantage
  • and of course, to put the young VC-backed hipster CEO on stage and encourage them to tell us about the future –– not the grizzled vet who lived through 1987 and 2008

Perhaps those who have been executing well for decades should get some stage time.

Revenues are not Profits

Sorry to state the obvious, but a business isn’t a business if it only works in an up market.

If you have to lay off 50% of your people when the market drops by +/- 20% for a few months, then you really need to question your model.

Appreciation, cheap money, and easy capital not only make a lot of questionable ideas seem feasible, but they also make a lot of bad business practices look visionary:

  • Revenues are up 60% year over year!
  • We captured 10M new users in Q4!
  • We bought 10,000 homes in Phoenix in 2019!

All of those accomplishments sound impressive until you realize the bottom line is still negative.

Risk is Hidden, Until it Isn’t

You see, risk is the great equalizer.

Risk lays low, plays the long game, and waits until we all forget that it even exists –– and then BOOM –– it shows up and demands to be paid for being ignored for so long.

Low margins? No differentiation? High debt? No profit? Risk would like to discuss the tab with you.

Low margins? No differentiation? High debt? No profit? Risk would like to discuss the tab with you.

The 2008 survivors know this all too well.

The New Normal

I get it, this damned virus has wreaked havoc on all of us –– and I don’t want to come off as giddy in the face of the people who have experienced real losses during this debacle.

COVID has cost us jobs, life savings, and sanity. And for some of us, it has cost us friends and family members.

At the same time, each time I see one of the celebrated visionaries of our industry backpedaling, I feel a bit more validated for focusing on the less sexy aspects of our business (advice, compliance, systems, workflow, redundancy) and aligning ourselves with other seasoned professionals.

What we built works well when the market rises, but it works even better when the market turns.

Am I saying that every ‘PropTech’ CEO is a bad person? Far from it.

I am simply saying that just because they hold the microphone, it doesn’t make them right.

While the ‘new normal’ is still as of yet, undetermined, I do know that the people and businesses that offer actual value will be the ones who come out of the other side on solid footing –– not the profitless ones with a gimmicky app promising to revolutionize an industry that doesn’t seem to need a revolution as badly as they thought.

Corona just offered all true professionals the opportunity to become the voice of our marketplaces again.

Follow your inner voice of reason, not the person on the stage.