Inc. Magazine just did a profile on Opendoor, which is a company that we have, of course, talked a lot about on this blog and that I continue to follow closely. It's interesting to read about some of the challenges that they've been having as a result of their frictionless open houses. Since all you need is a smartphone, the company has been having the ongoing problem of people camping out in their listed homes. Sometimes for weeks. They've been working to address this by restricting the hours (6AM to 9PM) and by installing motion detectors. I am sure they will figure it out. The company is also having to be careful in terms of how it positions itself alongside realtors. There are many livelihoods at stake here. Here's an excerpt from the article:
During interviews, Wu has chosen his words carefully when discussing Opendoor's potential to replace Realtors. "The reality with Realtors today," he said on stage at the Startup Grind Global Conference in Silicon Valley in February, "is their role is shifting from project management--especially in our ecosystem, where we're automating a lot of the processes--to advisement."
Fred Wilson (venture capitalist) has argued many times before on his blog that
Inc. Magazine just did a profile on Opendoor, which is a company that we have, of course, talked a lot about on this blog and that I continue to follow closely. It's interesting to read about some of the challenges that they've been having as a result of their frictionless open houses. Since all you need is a smartphone, the company has been having the ongoing problem of people camping out in their listed homes. Sometimes for weeks. They've been working to address this by restricting the hours (6AM to 9PM) and by installing motion detectors. I am sure they will figure it out. The company is also having to be careful in terms of how it positions itself alongside realtors. There are many livelihoods at stake here. Here's an excerpt from the article:
During interviews, Wu has chosen his words carefully when discussing Opendoor's potential to replace Realtors. "The reality with Realtors today," he said on stage at the Startup Grind Global Conference in Silicon Valley in February, "is their role is shifting from project management--especially in our ecosystem, where we're automating a lot of the processes--to advisement."
Fred Wilson (venture capitalist) has argued many times before on his blog that
business model innovation
is far more disruptive than technical innovation. I think it's valuable to keep that in mind in the context of this discussion. Opendoor continues to charge a commission fee (sometimes a higher one than is typical), but it also makes money on the flipping of homes and it has plans to vertically integrate other aspects of the real estate business. Will that do it?
Benedict Evan's most recent blog post, called "Amazon as experiment," draws some interesting parallels between what Amazon is doing today (and experimenting with) and the beginning of mass retail, namely the invention of the department store. He also talks about some of the shortcomings of Amazon's model, which isn't at all focused on (or good at) things such as "pleasure" and product discovery. Here are a couple of excerpts:
On the other hand, it’s interesting that Amazon seems to be doing as much experimentation as possible around the logistics model—from stores to drones to warehouse robots of every kind—but much less around the buying experience, other than small-scale tests of the Four-Star stores. After all, historically, department stores were about pleasure as much as they were about convenience or price. They changed what it meant to "go shopping" and helped turn retail into a leisure activity.
This has always been the gap in the Amazon model. It’s ever more efficient at finding what you already know you want and shipping it to you, but bad at suggesting things you don’t already know about, and terrible whenever a product needs something specific—just try finding children’s shoes by size.
This is probably inherent in the model. For Amazon to scale indefinitely to unlimited kinds of products, it needs to have more or less the same commodity logistics model for all of them. That’s the line it’s never been willing to cross. Amazon doesn’t do "unscalable." And yet, while we now know there is nothing that people won’t happily buy online, not everything will fit that commodity model. So maybe that’s the real test of Amazon’s pride: can it work out how to let us shop, rather than just buy?
is far more disruptive than technical innovation. I think it's valuable to keep that in mind in the context of this discussion. Opendoor continues to charge a commission fee (sometimes a higher one than is typical), but it also makes money on the flipping of homes and it has plans to vertically integrate other aspects of the real estate business. Will that do it?
Benedict Evan's most recent blog post, called "Amazon as experiment," draws some interesting parallels between what Amazon is doing today (and experimenting with) and the beginning of mass retail, namely the invention of the department store. He also talks about some of the shortcomings of Amazon's model, which isn't at all focused on (or good at) things such as "pleasure" and product discovery. Here are a couple of excerpts:
On the other hand, it’s interesting that Amazon seems to be doing as much experimentation as possible around the logistics model—from stores to drones to warehouse robots of every kind—but much less around the buying experience, other than small-scale tests of the Four-Star stores. After all, historically, department stores were about pleasure as much as they were about convenience or price. They changed what it meant to "go shopping" and helped turn retail into a leisure activity.
This has always been the gap in the Amazon model. It’s ever more efficient at finding what you already know you want and shipping it to you, but bad at suggesting things you don’t already know about, and terrible whenever a product needs something specific—just try finding children’s shoes by size.
This is probably inherent in the model. For Amazon to scale indefinitely to unlimited kinds of products, it needs to have more or less the same commodity logistics model for all of them. That’s the line it’s never been willing to cross. Amazon doesn’t do "unscalable." And yet, while we now know there is nothing that people won’t happily buy online, not everything will fit that commodity model. So maybe that’s the real test of Amazon’s pride: can it work out how to let us shop, rather than just buy?
Fred Wilson wrote a post this morning about the "certainty of close." He was talking about fundraising for startups, but similar parallels can be drawn to other aspects of life and business. The point Fred makes is that if you can live with the "bird in the hand" economics and if you have a comfort level with the humans/partners you're getting involved with, it's hard to go wrong and it's often the right approach for early stage companies where fundraising speed is critical.
The tension that usually gets weighed against this line of thinking is one of maximizing economics, which often sits part and parcel with a fear of "leaving money on the table." Should I take the deal in front of me or should I push and/or wait to extract every last dollar? This can lead to indecision. Oftentimes, as Fred mentions, these decisions aren't particularly black and white. Few things are.
While every deal and situation is unique, there is nothing inherently wrong with a fair and reasonable price if the the economics make sense for you, and your investment and return criteria are being met (or whatever criteria you have set for yourself). It is "satisficing" vs. "optimizing." The latter may appear most favorable, but there are countless benefits in moving as quickly as possible and in getting things done. I am a fan of doing.
Fred Wilson wrote a post this morning about the "certainty of close." He was talking about fundraising for startups, but similar parallels can be drawn to other aspects of life and business. The point Fred makes is that if you can live with the "bird in the hand" economics and if you have a comfort level with the humans/partners you're getting involved with, it's hard to go wrong and it's often the right approach for early stage companies where fundraising speed is critical.
The tension that usually gets weighed against this line of thinking is one of maximizing economics, which often sits part and parcel with a fear of "leaving money on the table." Should I take the deal in front of me or should I push and/or wait to extract every last dollar? This can lead to indecision. Oftentimes, as Fred mentions, these decisions aren't particularly black and white. Few things are.
While every deal and situation is unique, there is nothing inherently wrong with a fair and reasonable price if the the economics make sense for you, and your investment and return criteria are being met (or whatever criteria you have set for yourself). It is "satisficing" vs. "optimizing." The latter may appear most favorable, but there are countless benefits in moving as quickly as possible and in getting things done. I am a fan of doing.
