Latest / NOISE vs SIGNAL by Inman / Why Side CEO Guy Gal Believes Real Estate Will Always Come Back to Local Brokerages

Transcript

Why Side CEO Guy Gal Believes Real Estate Will Always Come Back to Local Brokerages · NOISE vs SIGNAL by Inman

0:00
At Inman Connect San Diego, I had the opportunity
0:02
to sit down with Guy Gal from Side. He came
0:05
out with some hot takes, including that the future
0:08
of the real estate industry is all about the
0:11
smaller, independent boutiques and that the large
0:14
brands are destined for failure. Take a listen.
0:17
You'll be interested in hearing about this one.
0:20
Hey, everyone. This episode is brought to you
0:22
by Lofty, the agentic AI operating system for
0:25
real estate. Lofty's AI doesn't wait to be prompted.
0:28
It works proactively on behalf of your agents
0:31
to uncover new listing opportunities, engage
0:34
leads, schedule meetings, and drive more transactions.
0:38
Lofty turns every agent into a top producer.
0:41
Visit lofty .com to see how agentic AI can put
0:45
your business growth on autopilot. Everybody
0:48
in the business of home has a pitch. Almost nobody
0:51
gets asked a hard question. This show fixes that.
0:54
Welcome to Noise vs. Signal. I'm your host, Inman
0:58
CEO Tom Bohn. Each week we sit down with the
1:01
top producing agents, industry CEOs, prop tech
1:04
founders, and the people shaping the future of
1:07
the business of home. Then we break down the
1:10
week's biggest headlines and decide what's noise
1:13
and what's signal. Let's get into it. Welcome
1:18
to the show. We really appreciate it. Noise versus
1:21
signal. I've been looking so forward to this
1:24
conversation. I remember when you were still
1:25
trying to decide on a name for this podcast.
1:27
We had a whole conversation about it. I did.
1:29
Do you remember the original? Was it the hat
1:32
one? No cap. No cap. Yeah, no cap. And I got
1:35
vetoed out for no cap because everyone said I
1:38
was a child. I like no cap. That's because you
1:39
and me both share a fondness for caps. I do.
1:42
We share a fondness for a lack of hair, too.
1:44
It's a style choice. It is a style choice. And
1:46
I'm proud of it. That's what you were about to
1:47
say. You were about to say it was a style choice.
1:49
100%. 100%. We're going to talk about a lot of
1:51
stuff. We're going to talk about our partnership.
1:52
But I want to talk about Side First. You guys
1:55
have been saying for as long as we can remember
1:58
you've been doing this, that the future is about
2:01
boutique, independent. Yes. Realtors. Much like
2:05
the past. Talk to me about it. We literally had
2:07
a conversation this morning and we had a couple
2:09
of people on stage say it's going to be two people,
2:12
two companies left, three companies left. And
2:14
you're like, it's going to be dozens of companies.
2:15
Well, I said 3 ,000. 3 ,000. All right. Talk
2:18
to me about that and why you think that's the
2:19
future. Because that's the past. And when you
2:23
look at the nature of real estate and how and
2:28
when it functions best. which is to say that
2:32
when it best serves its community, when the agents
2:35
within the company best serve their clients,
2:38
it's when it's boutique and local and community
2:41
oriented, not when it is corporate and one size
2:44
fits all. And that's not theory, that's history.
2:51
Isn't that any industry though? Yes and no. There
2:54
are some industries where it makes sense for
2:56
there to be more corporate consolidation, especially
2:58
if it's an industry that deals in commodities.
3:01
So if you're selling like a beer, there's going
3:04
to be consolidation because there are only so
3:06
many permeations of what that product can be
3:08
and can become. But when you're dealing in real
3:11
estate, it's different on every transaction.
3:13
Every market has its own characteristics and
3:17
properties that make it distinct and unique.
3:20
Somebody who sells in the county. next to yours
3:23
if they're a really good, productive, experienced
3:24
agent won't sell in yours because they understand
3:27
how much of a difference it is. Even if it's
3:29
like... 30 miles between you, that really does
3:32
make a difference. So if you look at the history
3:35
of America to start the premise that you put
3:39
forward, which is, isn't that every industry,
3:41
it's always been a story of two great American
3:44
innovations, right? The small business and the
3:47
corporation. And to the degree that small businesses
3:50
are formed, they are always formed in community
3:52
locally. That's what the nature of a small business
3:56
is. And the only way for them to succeed and
3:58
thrive is to create more value than they ultimately
4:00
are able to capture. And the nature of corporation
4:03
is such that they buy up those small businesses
4:07
and consolidate them into something that is at
4:09
more scale. And they ultimately acquire that
4:13
business because they believe that there's more
4:15
value to be taken and extracted than what has
4:18
been before. And then that fundamentally changes
4:20
the nature of that business because it goes from
4:22
creating value for the community to extracting
4:24
the value from the community and exporting that
4:27
out to wherever headquarters it is, which is
4:30
usually New Jersey or New York. Every industry
4:33
subject to it, some lends more and better and
4:36
serves more of a purpose than others. In my opinion,
4:38
in real estate, it doesn't. Hale and real estate
4:41
being national, international, having this much
4:44
share, that much share doesn't confer or provide
4:48
much of any value or benefits to agents or their
4:53
clients. It exists independent of them. I look
4:57
back and I use that to inform the future because
5:00
I'm not someone who believes in history repeats,
5:02
but it definitely does rhyme. It repeats. Elements
5:05
of it do. Yeah. Elements of it do. So, you know,
5:07
if you look at real estate, you've had several
5:09
waves, three waves now, big consolidation, prudential
5:12
back in the day, like Sears, which became Sendin,
5:15
which became - Yeah, Coldwell. Anywhere, Realogy,
5:19
anywhere. which bought Coldwell, all those, you
5:22
know, home services, Berkshire Hathaway. None
5:24
of them have been successful to the degree that
5:28
they managed to consolidate things. They couldn't
5:29
sustain it to a point where they became the ones
5:31
consolidated by someone else. So now there's
5:34
another company trying to do the same and whether
5:36
or not they'll be successful, we'll know in a
5:37
decade. Yeah. That's when you'll know if they'll
5:39
be the first ones to actually be successful at
5:42
sustaining in a consolidated corporate. structure,
5:46
or if the gravity that is local in real estate
5:49
will continue to pull down on those corporations
5:54
in the way that it does persistently and slowly
5:57
over time. It might take 100 years for a castle
6:00
built of brick to disintegrate, but eventually
6:03
it falls to gravity as well. So that's how I
6:06
view the industry. The value creation happens
6:10
at the local level, and therefore everything
6:12
comes back ultimately to local. And even most
6:15
of the folks that represent these big national
6:17
brands are actually local franchisees that are
6:20
in affiliation. Let's talk about that, Frank,
6:23
because here's my take on this. Not that everyone
6:24
gives a shit about my take on it, but I'm going
6:25
to share it anyway. I like your take. So here's
6:28
my take on the whole thing, right? These bigger
6:30
brands or these national leaders, it seems like
6:33
they're saying things that are not mutually exclusive
6:35
or are mutually exclusive, actually. They're
6:37
saying that this is a hyper entrepreneurial industry.
6:41
Everyone's a local entrepreneur. Everyone's a
6:43
small business owner. And then they're saying
6:45
that it's all going to consolidate into two or
6:47
three brands. I just don't see how those two
6:49
things work together. They don't. But that is
6:52
the telltale sign that what's happening is not
6:55
strategic. It's not innovation. It's desperation.
7:00
And it's really about value extraction. You can
7:04
tell something is that when they'll say anything
7:07
and everything, no matter what, they'll say whatever
7:11
it is that they have to say to try and check
7:14
whatever boxes that they need to check. Companies
7:17
that are in the business of value creation, missions,
7:21
organizations that are in the business of innovation.
7:24
are very particular about what they believe and
7:26
what they don't. It's really high contrast. It's
7:29
really disciplined, and it's really consistent
7:30
over long periods of time. It doesn't change
7:33
with the wind. Our industry in particular is
7:36
very susceptible to that, to saying whatever
7:40
it is that needs to be said to check the box
7:43
that needs to be checked. You've grown by double
7:46
digits in terms of number of agents. In the past
7:48
year or past two years, what does that look like?
7:49
Interestingly enough, I personally don't pay
7:52
too much attention to that because Cite is not
7:54
a company that orients around becoming the largest
7:58
by agent count or having the most quantity of
8:01
agents on platform. That's not how we think about
8:05
things. We're in the business of helping people
8:08
start new real estate companies that did not
8:11
exist before. Or sustain the ones they've already
8:14
started and help them do even better than they
8:16
were doing before. But you do have groups flipping
8:19
to you. There are agents and agent teams that
8:22
decide to start their own company because they're
8:25
already running a business inside of somebody
8:28
else's brokerage. And they get to a point where...
8:32
they are ready to hang their own shingle and
8:35
compete under their own banner. And that's the
8:38
point at which they contact side and the point
8:42
at which we help them transform from a team inside
8:46
of some traditional brokerage or somebody else's
8:49
brokerage into a company that's all their own,
8:52
where we act in the capacity of a brokerage partner
8:55
and handle all that back office work. But we
8:59
do that as a... service provider to them, not
9:03
as the company that they work for. They are our
9:08
customers. They are our partners. The brands
9:11
are theirs. They define how it is that they market,
9:14
their service standard, their approach to clients
9:17
and to growth. We just have the amazing privilege
9:21
of facilitating their transactions, conveying
9:25
all of that, supporting them around it, making
9:28
sure that That part of their business is working
9:32
really effectively. That's how we think about
9:35
what it is that we do. It's not about how many
9:37
more agents on the platform. It's how many more
9:39
companies have we helped create and how many
9:41
companies that already exist have we helped sustain
9:44
and helped succeed more than they would have
9:47
been able to if they were doing everything entirely
9:50
on their own. The only metric for us, Tom, that
9:54
really matters is productivity per agent and
9:57
inside. Our community, the folks we get to work
10:01
with, by the numbers, have the highest productivity
10:04
per agent in the country. What stops a great
10:07
team from flip and decide tomorrow? Is there
10:09
anything like, it sounds great. Why not more?
10:13
Why not faster? Unfortunately, it's almost always
10:16
contractual. Okay. Because there are very few
10:18
top producing teams inside of other people's
10:22
brokerages today that can move their license.
10:29
or move on from that relationship without them
10:33
being responsible for hundreds of thousands of
10:37
dollars, if not millions of dollars, in breakup
10:40
fees and clawbacks. Ah, okay. Is that pretty
10:44
typical in the industry? It used to not be the
10:47
case at all. It was more so of a local phenomenon
10:50
that you saw in New York City. It was a more
10:54
common practice there that does sort of been
10:57
introduced by the former large consolidating
11:01
corporation in the space that was then borrowed
11:04
and made common practice nationally by the more
11:11
current. consolidator in the real estate industry
11:14
today. So that was very much Compass is doing.
11:17
And because they started to do that where every
11:20
agreement with every agent now has meaningful
11:22
clawbacks that are tied to things called incentive
11:25
splits that agents aren't particularly aware
11:27
of and are only oftentimes surprised by at that
11:31
point where they decide to do something different
11:32
and are confronted with their repayment obligations.
11:36
Other brokerages had to follow suit because that
11:38
became the new standard. So more often than not.
11:42
So it is more common now. Now it's become more
11:44
commonplace, but that's the way that it has become
11:46
commonplace. So today, the principal thing that
11:50
will prevent a team from coming out of somebody
11:52
else's brokerage and stepping, taking the business
11:54
they already run and stepping into owning that
11:57
business is that they might be on the hook for
12:00
three, four, five, six hundred thousand dollars
12:02
in paybacks. that they're not anticipating or
12:06
are budgeted for. And that is a fair amount of
12:08
capital. It tends to keep folks in place. Side,
12:13
to the degree that that's become very commonplace,
12:15
has had to set up what we call our agent emancipation
12:20
fund. So you actually have a fund to deal with
12:23
these types of things. How does that work? Very
12:26
simply, there comes a point where we become aware
12:28
of how much it is that that team owes back, is
12:31
going to owe to reclaim their freedom. And then
12:35
we advance that to them on a no interest basis
12:39
and then very patiently over the course. No interest?
12:42
Yeah, because we're not trying to perpetuate
12:44
the problem. Can I throw my mortgage in it? I
12:48
asked that same question, Tom, and our CFO was
12:51
like, that's probably illegal. And I told him
12:54
that was a risk I was willing to run. But apparently,
12:58
yeah, the accounting team, not a risk they're
13:02
willing to take. I mean, that's a major door
13:05
opener then to be able to say, hey, we understand
13:07
you've got all these fees potentially in our
13:09
clawbacks, but we have an ability to help smooth
13:12
that path for you. Has that changed the kind
13:14
of the nature in the game? Look, it's a practical
13:16
matter of connecting two disparate dots when
13:19
there's someone that wants to. starting a new
13:22
company and the thing that's preventing them
13:24
is that they're indentured into somebody else's
13:26
unwittingly and have a really big debt that they
13:31
have to settle on the way out for us to say,
13:33
we can be a partner to you on that, advance you
13:38
the money to square that away and then collect
13:41
it back from you interest -free over the next
13:45
several years. So that you owe nothing to no
13:48
one and are in a position where you can determine
13:51
your own destiny, your own fate, your own experience.
13:55
So you still are a tech guy. Are you worried
13:58
about, because obviously, you know, some of your
13:59
biggest strengths is your tech stack and your
14:01
tools and those types of things. Are you worried
14:04
right now? Because like in my pocket. I've got
14:07
cloud design and I could pop up an app or an
14:10
application in a couple of minutes. Are you worried
14:12
about how quickly that's accelerating and how
14:14
it can maybe take away from your advantage? No,
14:17
I understand why people would be and some should
14:21
be, especially in real estate. A lot of the software
14:24
companies, the companies that develop tools,
14:28
particularly for agents that address marketing
14:32
needs and more front office needs. Those are
14:36
typically poorly built. They're not excellent
14:41
products and they don't work very well. And generative
14:46
AI does present as a risk to businesses like
14:48
that because you can make something on your own
14:52
that's not very good with AI because it won't
14:55
be very good. It'll maybe be functional, but
14:57
it'll be buggy. It'll be inconsistent. It'll
15:00
be unreliable. There's a lot more to it. It'll
15:04
be sloppy. It'll do those things. But if you're
15:07
the only user or it's just like you and your
15:09
team that are the users, you can manage through
15:12
that because it's not the end of the world and
15:15
you're operating at a particular scale where
15:17
you can intervene. And it's pretty much as good
15:22
as the thing you were paying $5 ,000 for. So
15:26
all things being equal, why not? Side, from a
15:30
technology perspective, we deal in the weeds
15:34
of transaction and payments and compliance, and
15:36
that is all regulatory. That is all fiduciary.
15:39
The standard for errors is 0%. Expectation is
15:45
perfection. Mistakes are costly in all respects,
15:49
in all respects to that word. They're costly
15:51
from a risk perspective, a user experience perspective,
15:55
a legal point of view from, you know, your closing
15:57
transactions. We're a billion dollars in commissions
16:00
are trading hands every year. So we're facilitating
16:02
every year at a billion dollars in commissions.
16:04
Those things have to be built in a way that's
16:06
robust and enduring and very reliable, what I
16:10
call enterprise grade. And so the consumer, the
16:13
prosumer type tools and tool sets you have in
16:17
real estate, maybe those things come under fire
16:19
when you're solving for high stakes, high risk
16:23
scenarios and use cases. got to build something
16:28
of real quality and of real value. And that's
16:32
why Side has 14 patents on what we've built.
16:35
Our invention, our platform, our autonomous brokerage,
16:40
because it had never been done before. It's taken
16:44
us over nine years to get to a point where we
16:47
actually are finally feeling like it's excellent
16:50
and over $100 million in capital. And most of
16:53
that was done with machine learning, which is
16:55
what we used to call AI before it became fashionable.
16:58
So that's my general perspective. I think if
17:01
you're an individual agent, you're a team, you're
17:03
a small company owner, you can get a lot done
17:05
with generative AI. And that could be interesting.
17:08
It can help you take some cost out of your business.
17:11
But you are trading off. You know, you're turning
17:13
around and paying that in tokens. Especially
17:15
if you're doing runtime applications. So a lot
17:18
of things are built on the back of the big AI
17:20
platforms, right? Yeah. So just completely aside,
17:24
which do you think is the strongest one out there
17:25
right now? AI? Yeah. Okay, I'm going to make
17:28
a confession. I've never used any of them and
17:29
I never will. Wow. Yeah. That's a hot take right
17:32
there. Yeah. No, I couldn't tell you because
17:34
I've never used Cloud. I've never used ChatGPT.
17:37
Gemini. They all keep trying to get me to use
17:39
them. Yeah. But I really enjoy thinking critically.
17:43
Yeah. And I was a history and philosophy major.
17:45
So we researched up second nature. I liked my
17:48
primary sources, keeps my faculties intact. We
17:52
as a company, obviously always embrace what is
17:55
new and innovative. We have a large engineering
17:58
team. So I come into contact with those things
18:03
all the time, but as an individual and as a person,
18:06
I've got less than zero interest. and augmenting
18:11
myself with artificial intelligence. Did you
18:13
hear Zach, the keynote speaker? I did, of course.
18:14
Did that resonate with you? Absolutely, yeah.
18:17
It felt very familiar. Those are things that
18:19
I've been saying for some time now that I believe
18:23
sincerely and deeply. There are values in those
18:25
tools and people will derive value from them
18:28
and great. They're going to unleash and they
18:33
already have a lot more creativity and a lot
18:35
more value creation. I believe in all of those
18:37
things. I'm by no means... skeptic for certainly
18:40
not a cynic just in an individual spirit and
18:45
a person it is not something that is of interest
18:51
to me but i do love that it's made all the folks
18:55
that work outside in service of all the agents
18:58
and companies that we work on behalf of more
19:01
productive great Wonderful. You talked a little
19:04
bit about, you know, governments and regulations
19:05
and rules. Right now, one of the hot topics is
19:08
private listings. Right. And we had two speakers
19:10
come up on stage. So uninteresting. Yeah. We
19:14
talk about Lux. We had our Lux Connect and they
19:18
went into a deep dive. It was actually a very
19:19
spirited, great conversation and debate about
19:23
the pros and cons and the whys and whys nots.
19:25
Where do you stand on some of that? Private listings,
19:28
from my perspective, is. a solution searching
19:31
for a problem. It's not actually solving a problem
19:35
for anyone or anything. And I've challenged many
19:41
people who have a lot of enthusiasm about private
19:43
listings to be very specific about the problem
19:46
it's actually solving and for whom. The way that
19:49
real estate works in America is the envy of the
19:54
entire world. We lose sight of that here because
19:58
It's very easy to control the real estate narrative
20:01
in the US and best people have particular interests,
20:05
vested interests and agendas, and they control
20:07
it in the way that best suits those interests.
20:10
But from my perspective, if you're ever creating
20:12
anything or building anything, investing in it,
20:15
certainly making noise about it, talking about
20:18
it should be something that's solving a problem
20:20
for someone and creating value in some particularly
20:23
meaningful way that. is independent of it just
20:26
serving the bottom line of a company who's trying
20:28
to maybe capture more transactions on the buy
20:31
side of its listings. Yeah, yeah. Or is really
20:34
invested in steering more buyer interest to part
20:39
-time agents who will pay the brokerage more
20:41
and therefore are figuring out schemes, programs,
20:46
and initiatives to satisfy that objective. Beyond
20:50
that, I don't understand what the point of private
20:53
listings are. That could benefit celebrities,
20:56
judges. Well, they already happen. That's sort
20:58
of the point. The point is that if you're someone
20:59
who for the last hundred years has been someone
21:02
who's had a need to sell privately, you have
21:04
been able to and you have. Yeah. And you've done
21:05
so successfully. Okay. With no problem or value
21:08
loss. True off markets and true privates don't
21:13
work in the way that private exclusives are being
21:17
done now. It doesn't go into like a database
21:19
where 300 ,000 agents can see it, but not a million
21:22
agents can see it. There's nothing private about
21:24
that. A real private listing is when I get a
21:27
phone call from an agent that we support and
21:30
work with and they're like, hey, I've got this
21:32
pocket in Beverly Hills for $38 million and I
21:36
can only tell three other agents about it because
21:38
it's truly off market and private. And I was
21:42
just wondering who you know, because I'm going
21:44
to tell you about the details of this in your
21:47
market in San Francisco that might have a buyer
21:50
for something like this because they're the ones
21:52
that I'll. and won't even disclose the address
21:56
to. That's a private listing. That's an off -market
21:59
listing. An off -market listing, a private listing
22:02
is not over creating an entirely separate market
22:05
that is almost as large as the whole market.
22:09
That's only private in name. It's not actually
22:11
private in practice. People who really seek and
22:14
need privacy would never use that product. Got
22:16
it. OK, so let's talk a little bit about our
22:18
relationship. OK, you are. We have a relationship.
22:21
We have a good relationship. Yeah, yeah, yeah.
22:23
Bald guys have to stick together. The beginning
22:25
of one. But we actually just kind of put together,
22:28
I think, something that's really unique and cool.
22:30
You are actually known for not spending a lot
22:33
in terms of marketing and that type of stuff.
22:35
Right. You're very careful. You're very measured.
22:37
You're very. Yeah, we suck at marketing, so we
22:39
don't do it. We don't. I mean, that's good. I
22:42
mean, you're really good. Why? Why this partnership?
22:45
on Inman 2 .0 and why now? My voice and my perspective
22:48
on the industry has always been very consistent
22:50
for a decade now since I, as someone that came
22:53
from technology into real estate, had a particular
22:56
point of view that compelled me to come into
23:00
this industry and work to serve it and solve
23:03
problems for people, deserving people within
23:06
it. It's been very consistent, but it's been
23:09
very quiet because that's my personality. I'm
23:13
not a real estate person. I'm not a marketer.
23:15
We're builders. We're nerds. We're geeks. We're
23:19
technologists. We're sociable. We're not antisocial,
23:22
but we're not boisterous and we're not comfortable
23:25
making lavish claims. I've often been accused
23:28
of being too of substance and too little of style,
23:31
trying to work on that, you know, less hoodies,
23:34
more t -shirts. It's a process. Over the last
23:37
year and a half, the last two years, as the industry
23:39
has been going through another consolidation
23:41
cycle, There's been a lot more uncertainty, a
23:44
lot more people seeking clarity. What I've noticed
23:48
is that the prevailing narrative of everything
23:52
real estate has been dominated by a singular
23:54
voice, singular corporation. And to the degree
23:59
that my voice, my perspective, that asides our
24:01
mission stands in stark contrast to that. To
24:06
that, it wasn't something that we were... putting
24:09
out there outside of the conversations we were
24:11
having one -on -one in qualitative settings,
24:15
the ground roots level with people who agreed
24:19
and were aligned and got it and understood and
24:23
believed the same, but don't have a voice in
24:27
industry and can't have a voice in industry because
24:29
they're not acting in a collective way and they're
24:31
not some big giant corporation that has the ability
24:35
to communicate as. actively and consistently
24:39
and frequently and loudly. So we felt that with
24:43
you all evolving in the way that you are and
24:46
that this was a great time to make an investment
24:49
in highlighting those voices, not just our own,
24:53
but the one, not just of the voices of all of
24:56
the great owners and agents within the site community,
25:00
but all the great... owners and agents outside
25:05
of the side community who really believe that
25:07
real estate is done best at the community level,
25:11
at the local level, with distinction and specialization,
25:16
not with a one size fits all generic. Yeah. Like
25:23
everyone looks, feels, talks the same approach.
25:27
We wanted to create space for those voices to
25:29
come through and be heard and provide an alternative
25:32
to the prevailing narrative. You all approached
25:37
us at a time, we crossed paths at a time where
25:39
that was already of interest to us and it felt
25:41
very destined, aligned, and the right timing.
25:46
We're very excited to work with you in partnership
25:50
to highlight what we believe is a different way,
25:53
better way, a more qualitative way. Love it.
25:56
And some of the tools we're building, I'm starting
25:58
to see some of the early things, the prototypes.
26:00
I mean, the ability to compare teams versus other
26:03
teams, productivity versus productivity, all
26:05
within that independent and boutique market.
26:07
It's going to be a pretty interesting thing.
26:09
And I think widely used. Well, what's really
26:11
interesting is we talk to broker owners, team
26:15
owners, team leaders. All the time. And there's
26:18
so much consistency with respect to personality
26:21
types, characteristics, values, attributes, approach.
26:25
But what everyone struggles with in almost universal
26:28
ways, they don't really know what best practice
26:31
is. So if you're an owner of a brokerage that's
26:35
closing a billion, three billion, five billion
26:38
dollars a year, you don't know if you're doing
26:41
that best in class or substandard. There's no...
26:45
place for you to reference what that is and to
26:48
gain clarity. And oftentimes those folks come
26:52
our way because they start look to site as a
26:55
benchmark. And we're very happy about opening
26:57
up how it is that we do what we do, how we run
27:00
brokerage and what the outcomes of that are with
27:03
respect to agent experience and satisfaction,
27:06
you know, like payment rates, NPS scores, margin
27:11
profile, like how much. The gross dollar is actually
27:15
translating into net down to profits. And in
27:18
that way, we make friends because we're able
27:22
to collaborate, which I think is a much more
27:24
powerful, creative and constructive force in
27:27
real estate than competition is, frankly, as
27:30
opposed to compete. And it's going to be a lot
27:32
of fun to do that now with more consistency,
27:36
with more exposure vis -a -vis. the in -man relationship
27:42
and the partnership that we just established
27:45
that I know Tom will make for a wonderful relationship
27:49
that we're now just beginning. I think it's actually
27:50
going to be one of the most popular tools on
27:52
the site. So I'm looking forward to that. Yeah,
27:54
I would, I would think so too. It's very interesting.
27:56
I have two schools of thought to this. I think
27:58
as a business, it's interesting to compare how
28:01
you benchmark against other companies because
28:04
you can learn a lot from that. I think as an
28:06
individual, there's no use really comparing yourself
28:08
to other people because. Individually, we're
28:11
all so different and we all walk our own paths.
28:13
We all have different goals. Yes. And we all
28:14
have different objectives. Yeah. We're going
28:17
to do this part now of every show where we do
28:18
basically noise versus signal. Okay. I'm going
28:21
to throw out a couple of topics. Okay. And you're
28:24
going to tell me whether it's noise or whether
28:26
it's signal. Right. And maybe why, depending
28:29
on how hot the take is. All right. Yeah. All
28:31
right. So the first one, NAR's best years are
28:34
ahead of them. Noise or signal? I'd say that's
28:36
noise. Really? NAR's best years are ahead of
28:39
them? No, their best days are behind them. And
28:43
I'm a big supporter of NAR. I don't say that
28:45
critically. I just say that objectively. And
28:48
the reason I say that is because... NAR has the
28:52
misfortune of collecting too much money every
28:54
year. And as long as they're collecting a lot
28:57
of revenue, they're always going to be on the
29:00
receiving end of a lot of frivolous lawsuits.
29:02
It's just a structural dynamic in America, right?
29:06
If you're a company that has a lot of cash, you're
29:08
going to be a company that's being sued a lot
29:09
for that cash. Association and organization,
29:13
whatever the case may be. So I think NAR is going
29:16
to continue to be the incredible and important
29:19
and significant association that they are when
29:22
it comes to policy and advocacy, which is what
29:25
founded that organization. They do a great job
29:28
with that. They do an incredible job. They just
29:30
do a poor job of communicating out what they're
29:33
doing and how important it is. And they need
29:35
to become more of a media company in that way
29:37
so that their voice in industry is heard more
29:40
loudly and more clearly and more frequently than
29:42
it has been the last few years, where they've
29:45
been constrained by a lot of things, including
29:46
being on the receiving end of lawsuits. But they're
29:50
going to continue to be on the receiving end
29:52
of a lot of frivolous lawsuits because there's
29:55
a lot there to be gained from people suing and
29:57
from seeking settlement. I hate that they have
30:01
to deal with that because they're wonderful people.
30:03
It's going to be challenging times ahead for
30:04
them. less relevant the caveat i think with the
30:07
leadership team they have in place now if they're
30:09
able to take their strategic plan and really
30:12
solidify it and do the things that they want
30:14
to do i think they can have a really damn good
30:17
run yeah i think hypothetically you know if the
30:20
stars align yeah it's like a tuesday in lightning
30:23
strikes yes i just think it's highly unlikely
30:27
because of the governance structure of nar it's
30:32
just highly bureaucratic independent of having
30:37
a great team which they do huge supporter and
30:40
believer of their team structurally it's a lot
30:45
to overcome and it's going to be really challenging
30:48
to surmount in spite of their best efforts their
30:52
resources and their intentions i hope it's what
30:56
happens yeah i really Absolutely do. And to the
30:59
degree that I individually or side as a company
31:02
can be supportive and helpful, we will continue
31:04
to be. We're not enrolling the company in alternative
31:08
associations. We're not encouraging our community
31:11
to divest the $120 that they pay NAR every year
31:14
in dues because we think they get great value
31:16
for it. So many people within our community volunteer
31:19
and participate in NAR and other association.
31:24
initiatives programs and events and that's an
31:27
amazing and important thing but there are a lot
31:30
of challenges ahead for them that are structural
31:33
and very very very complex and difficult to overcome
31:36
unfortunately okay noise or signal we will go
31:41
from over a million realtors to less than 500
31:44
,000 never gonna happen never gonna happen no
31:47
noise entirely noise noise all right because
31:51
Everyone in this industry with very few exceptions
31:53
side amongst the exceptions has a highly vested
31:56
interest in proliferating part -time agency.
31:59
I mean, Compass has built their whole private
32:01
exclusive strategy to support part -time agency.
32:05
So you're talking about companies pouring tens
32:08
of millions of dollars of investment into proliferating
32:11
more part -time agents because part -time agents
32:13
pay 50 % and full -time agents pay 15%. on the
32:18
exact same transactions. And almost 70 % of all
32:22
closings nationally every year are facilitated
32:25
by agents closing less than three deals per year.
32:28
That is the profit center for all the major brokerages,
32:31
all the big corporates, all the branded ones.
32:34
It's the profit center for all the multi -level
32:36
marketing brokerages because a company like eXp
32:39
doesn't generate its profits on transactions.
32:41
It breaks even on those. It loses money on them.
32:43
In fact, if you look at their last quarterly
32:45
reports, where it makes their money is on 100.
32:47
How many agents are there? 50 ,000, 100 ,000
32:50
paying $100 a month. That's $100 million in free
32:54
cash flow every year. Most of those agents don't
32:56
close a lot of business. There's always exceptions.
32:59
There are great agents everywhere across all
33:00
companies, really are. Most company, real estate
33:03
company models in real estate, whether you're
33:06
an association or a brokerage or a company selling
33:09
software licenses is driven. Or Inman. Or Inman.
33:15
It's driven by quantity, not by quality. You
33:18
need numbers. If there were half a million less
33:21
agents in the industry, that would be $100 million
33:25
less to NAR. They're never going to be a party
33:28
to that becoming the reality. It would be $50
33:31
million less to EXP or companies like it. They'll
33:36
never buy the hand that actually feeds. It'll
33:41
be less money to the company selling you software
33:43
licenses. So that's why I say it's never going
33:47
to happen. The barrier to becoming an agent,
33:49
a licensed agent is very low. The industry to
33:52
proliferate and support that is very high. So
33:55
it's always going to be the case that there will
33:58
be a lot of agents that are unproductive. And
34:01
that's a challenge and a problem, but everyone
34:04
has to start somewhere. Some people have to,
34:06
you know, you got to be new at some point. to
34:09
become more experienced. But I think that's noise.
34:12
All right. Last one. Noise versus signal. And
34:15
you're a tech guy, okay? So this is not just
34:17
for real estate. You've heard Elon Musk and everyone
34:19
out there talking about it. Most jobs are going
34:22
to go away. There'll be a guaranteed minimum
34:24
income. And we'll all sit around doom scrolling.
34:27
Noise versus signal. I think there's noise and
34:31
signal in that. All right. Tell me. The signal
34:33
in that is that... Much like every major innovation
34:36
of human civilization, a lot of things humans
34:41
used to do, they stopped doing. Machines started
34:44
doing them instead. And a whole new crop of work
34:49
that needed to be done was introduced that people
34:53
then went in to do instead. And yes, those transitionary
34:57
times may have been characterized by turbulence,
35:00
challenge, more suffering. depressions, et cetera.
35:06
But on the balance of human civilization and
35:10
history, they were for the better and the outcomes
35:13
ultimately outweighed the creative destruction
35:16
that had to take place in order for those things
35:21
to come into fruition and existence and broad
35:24
availability. Today, we live in a world where
35:27
each one of us took a hot shower this morning,
35:29
at least. Here at this conference, everyone took
35:32
a hot shower this morning. A hundred years ago,
35:35
there were maybe 40 people in the world that
35:36
could take a hot shower once a week. We advance
35:39
and AI will have that impact. Absolutely. It'll
35:43
create a lot of consumer surplus. And whenever
35:45
more consumer surplus is created, there's more
35:48
economics to support more basic, you know, things
35:53
like basic income. Yeah. That could become more
35:56
of a thing. But where I disagree with you, I
35:58
think it's noise is I don't think that. that
36:01
directly connects to, oh, well, it's going to
36:03
be like a WALL -E type world where we're flying
36:06
around on little scooters, like flying scooters,
36:09
watching TV, eating food all day. I think that
36:13
unleashes a lot of human creativity, a lot of
36:16
human ingenuity, a lot of human expression, art,
36:20
science. It's going to be a renaissance in that
36:24
respect. It already is starting to be. There
36:26
will be, in contrast to that, a great deal of
36:29
folks who decide to opt out of participating
36:32
in creation. But I think that will be more transitionary,
36:37
not something that endures long -term. Guy Gal,
36:42
no Wally World coming. A renaissance is on our
36:46
way. I always love talking to you inside. Appreciate
36:49
you being here. My pleasure. I'm looking forward
36:51
to what's next. Thank you, sir. Thank you. Thanks
36:54
for listening to Noise vs. Signal. Follow us
36:56
on Instagram at Inmanews for more conversations
37:00
and industry insights. Be sure to subscribe wherever
37:04
you get your podcasts so you never miss an episode.
37:07
I'll see you next time.