Real estate and asymmetric information

Back in 2015, I wrote a post titled Taxis, Uber, asymmetric information and disruption. This may be my most popular post ever. I admit it contains some catchy buzzwords. But more interestingly, it’s also one of my favorite posts.

Information asymmetry is a fascinating concept. It drives communication (we know what we want to say but we don’t know if the other person understands us), many industries (CRE is built on brokers and landlords knowing more about the market than their clients), even technology (Amazon knows more about our online habits than we know ourselves).

You can build your brand around open sharing of information or you can build it by hoarding knowledge and information. These two approaches will lead to different sales approaches as well as significantly different customer experiences.

Given the fact that I write a blog, it probably isn’t surprising that I come down on the open sharing side of the scenario. Asymmetric data is great to maximize profits over the short-term as you force people to use you if your information is valuable enough. Over the long-term, you tend to irritate your customers because your value is simply the fact that you exist as you don’t help them build any value on their own.

When presenting anything, it’s important to think through which side of this you should be on. Are you teaching and sharing or just telling someone what to do?

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Always be learning

Learning isn’t something that you do in finite bites of time, it’s a lifestyle choice. Many people think that they should schedule their learning opportunities. They seek out a specific book about a subject. Or they watch an educational video.

When you schedule your learning, you miss out on most of life’s lessons for you. You can learn as much from watching Modern Family as you can from a Biography of Winston Churchill. You can learn as much from reading Harry Potter as you can from an educational video on Business Intelligence systems. Sure, if you want a specific lesson, the latter choices may be optimal but day-to-day choices are more common.

Experience is the best classroom. The amazing thing about experiences is that they come in so many unique little packages. Watching the interactions of others on TV can be a good proxy of interactions between people generally. Reading a light novel can pass along tidbits of the author’s experience and expertise.

Open yourself up to always be learning. Use every opportunity and every situation.

More effort very rarely equals more output

Productivity has been the hot topic in business and workplace strategy for decades. The first person to figure out how to design a workplace that can guarantee higher productivity would win as much work as their heart desired. Yet, somehow, no one has figured it out.

Why has productivity failed to fall into a definable realm? There are many reasons, but the main one comes down to defining productivity. Sure, it’s easily defined as the cost per unit of work output. But in a typical business, what does that mean? If you sell more without hiring new staff, did your productivity suddenly enhance? What if an office is all back-office functions, do you really want to measure the number of invoices processed per person? Wouldn’t that create an incentive to generate more invoices?

On some level, we know that workplace design impacts productivity. If you make everyone work with a 13″ monitor at a 2-foot wide desk, morale and productivity will plummet because you’ve made it difficult to work. However, there’s some tipping point where you make work easy and any improvements/investment above that level may not add any additional value.

Having people work more hours or “work smarter, not harder” does not usually improve net productivity – especially over the long-term. Productivity is a function of:

  • Business model effectiveness
  • Back-office process design
  • Culture and employee morale
  • Effective tools and work environment
  • Alignment of skills to roles

Real estate and workplace can only impact parts of two of those bullets. The rest fall squarely under business operations. Having people put more effort in, sometimes decreases output.

There’s a gulf between “balanced” and “best”

I keep harping on the theme that real estate is hard. Today’s thought on the topic is about all the times that I’ve heard people say that the goal is to build the best workplace possible when it comes to design. I’ve heard it from PMs, Architects, Interior Designers, Brokers, Consultants, you name it. Everyone is trying to sell “the best workplace possible.”

Here’s the thing about the word best: it’s fuzzy. Best has no meaning of its own. You are asking the person you are talking with to fill in the details. They will likely jump to their personal definition of what the best environment for them looks like. When you talk to a business manager, best to them means lots of things because each of their people works differently.

Balanced, on the other hand, means dealing with the tradeoffs and opportunity costs that are inherent in a workplace. If money was no object, then each person in the office could have anything they want. But money is always an object. Tradeoff number 1 is always about managing to a budget. Tradeoff number 2 is about designing a workplace that doesn’t have to be redone every three years because you made it so specialized for how people work today that is unusable if the business changes even slightly. Tradeoff 3 is about who gets to own the design. The business has a set of criteria, real estate has a set, business leaders may have a different set, colleagues have another. No one will have quite the same definition.

When you strive for “the best” of anything, you will always fail. Best changes with the times and has an ephemeral answer. You can’t do it with consistency or over time. Setting that as the standard cannot work.

A few thoughts on sustainability and real estate

Sustainability has been a buzzword for a couple of decades at least. Each year it grows in scope and breadth as more and more concepts attach themselves to the buzz. In an organization, two of the biggest sources of carbon are travel and real estate. It makes sense that the conversation tends to make its way toward our little CRE corner of the world.

The problem with sustainability and real estate is that so much of it is non-controllable (utilities, core building). There’s a broad subset that is high attention and entirely voluntary around things like plastic straws, recycling in the office, office supplies, coffee, etc but they do not add up to a lot on their own. Utilities are in direct proportion to the amount of space you own or lease. The more space you choose to have, the higher your utilities. Sure, you can buy offsets or procure renewable energy where it’s an option, but it’s again not likely large enough to move the needle.

Sustainability and real estate go hand-in-hand on the surface. Unfortunately, real estate will always struggle to move the needle. IT and Travel have a higher degree of controllable sustainable metrics but they also tie back to corporate direction.

At the end of the day, if sustainability is not a C-level focus and directive, there is not going to be much movement on the issue across a company. It’s tough to make material movement, while it is possible to make some cosmetic moves around recycling and office plastic.

You can’t sell your CRE Tech because you don’t understand CRE

One of the best writers in CRE, Mr. Duke Long, has run three posts in a row about selling CRE Tech (shortening the cycle, who makes the decision, ending with the sales pitch). They are very worth reading for anyone that is either planning to buy or sell CRE Technology in the foreseeable future. However, there are a couple of thoughts that I think are worth adding on top of his for those interested.

I deal with a lot of different CRE technologies from startups to legacy vendors. The single biggest differentiator that I come across is whether the team representing the software actually understands the requirements of a corporate user. Too often they either understand the needs of a broker or have some half baked idea of what an actual corporate user needs. If the salesperson comes in and tells me how my portfolio works and the picture they paint doesn’t even come close to matching reality, I’m going to discount their tool pretty quickly.

Corporate real estate is hard. I’ve said it a lot but it really can’t be said enough. This is a hard industry. No two companies take the same approach to real estate. It’s not even consistent which area of an organization that real estate rolls up to! A CRE team reporting to HR runs differently than one reporting to finance than one reporting to operations than one tied to technology.

It’s not easy to find good salespeople for technology. It’s even harder to find one who is good at CRE technology. It’s even harder to find someone who is great at it.

There’s a difference between the levers you can pull and the outcomes you want to achieve.

When planning out your actions for the year, it can be very easy to confuse outcomes with actions. Saving money is an outcome, not an action. Changing service levels is an action, not an outcome.

Working through this differences is the gap between success and failure in your actions throughout a year. It’s the difference between a great doctor and bad doctor. Great doctors know how to figure out what is really wrong and what they are capable of doing about it. Bad doctors just treat you for whatever obvious symptoms you show up with – usually they’ll be right but they will be wrong often enough to be noticeable.

The difference between good and great often comes down to a few things you do throughout the year. Yes, simply going the extra mile can make a difference. But the biggest impact you can have is by doing work that matters versus doing work that is obvious.