“Technology” is not a valid substitution for “Process”

Any sufficiently advanced technology is indistinguishable from magic. -Arthur C. Clarke

It can be very easy to think that a new technology is going to solve your process problems. This is a drastic mistake. Technology can do a lot of things, but it cannot remove the human element entirely from any problem it is being put toward.

Many systems have developed a reputation for solving process:

  • Slack solves the communication process.
  • Google solves the search process.
  • SAP solves the finance process (or just makes it worse?).
  • Oracle solves your database processes.

Slack can actually lead to new and more complex communications issues. Google still requires you to know what you are searching for and type in phrases that will give you the right results. Finance is not a process that can be solved by technology. And Lord knows, databases are not clean or easy.

Process involves everything before, during, and after the particular actions being performed by technology. Process includes the humans involved in clicking buttons, submitting data, or running reports. Process includes understanding the outputs and making sure things are happening as intended.

Technology can do a lot but it is always a mistake to believe that Technology is the same as process.

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“The system has detected no errors other than the type is was programmed to detect”

It is not uncommon for systems to return an “All Normal” status even while things are going down flames all around it. Just because a system reports 100% success for the things that it was taught to track doesn’t mean that the real success rate is anywhere near 100%.

This is because a system can only do what it was taught to do. If you build a system to count the number of lines of data submitted, it will count the number of lines of data that it receives. However, it cannot count the number of lines of data that it never receives. If the process fails due to an external cause, the system cannot report it. The system will believe that it has successfully processed all data but in reality, it has only processed the data which is actually received. Somewhere in a room far removed some poor user is screaming at their computer for not doing what it is supposed to do.

As a rule, I have limited trust for any automatically generated system reports. I’ve seen systems which don’t correctly log user log-ins because it had an incorrect handling of usernames. I’ve seen systems with audit reports that multi-counted everything because it tried to audit itself recursively. I’ve seen processes that were highly manual but the reporting only covered the system side of things.

(Most) Systems can only do what they are told to do. That doesn’t mean that we actually understand what the system is doing. Sometimes the code is incorrect. Sometimes the handling of a situation is executed differently than planned. Sometimes the process has evolved to no longer align with what the system was designed for.

If data improves but the technology doesn’t, what’s the impact?

I’ve been in this industry for over a decade now (yes, saying that does make me feel a bit old). In 2007, the hardest part of solving real estate problems was getting all of the data necessary to make a well-founded decision. In 2018, the hardest part of solving real estate problems is getting all of the data necessary to make a well-founded decision.

Ironically, there is more data available for making decisions than ever before but it is still extremely difficult to aggregate and validate. The problem is that the technology that is collecting this data is largely the same as existed 10 years ago. CRE technology has evolved not at all but the extreme demand for data has led to a significant growth in data that is available.

Here’s the thing, CRE technology has no definition. It’s either too big or too little. The Goldilocks Principle is in full effect in this space. Do you design a system for a specific use case that meets the needs of 10% of organizations or do you design a system that meets the broad needs of organizations but is rarely perfectly applicable?

The single biggest issue with CRE is the lack of global standard processes. What information should be kept as part of Lease Administration? What is the connection between CRE and corporate finance? How are CRE costs allocated back to the business? How are transaction/projects managed and controlled?

Until there are standards, it will be hard for any evolution of technology to happen in this area.

Building out technology is like nothing else in an organization.

It’s said often enough that it has become a bit of a catch-phrase but technology development/implementation is different. You cannot simply take someone who understands an operational process and have them run a technology implementation project – let alone lead a development effort. Technology has certain requirements and needs that you have to really understand at the start of the effort.

There’s a reason that a good Product Managers make good money. Being able to talk to both the technology side and the operations side is a very, very, very difficult skill. Not everyone can do it and even those that can do it may not have the organizational skills to pull it off successfully.

If you have a technologist running an implementation project, you typically end up missing the operational nuances that are necessary for the business-as-usual operations. They either end up including too much, not enough, or the wrong things entirely because they don’t understand the interplay between the people, systems, and processes.

If you have an operational expert running an implementation project, you typically end up delaying the technology implementation because the hand-off of requirements is imprecise or unclear. Someone who understands a process intuitively often has difficulty explaining the steps in a way that can be implemented in a system.

Bridging the gap between this either requires someone that can live in both worlds or a strong project management approach that connects owners from both sides with clear inter-operational goals. Technology is hard.

Systems and data have no ethics or morals.

There’s an intriguing article up at Quartz about AI self-replication. In the middle of it, there is an interesting tidbit about AI adopting the biases and flaws of its developers. Basically, an artificial system will accept whatever data and rules are programmed into it and become reinforced through new data inputs.

It may go without saying but data and technology don’t come with built-in morals or ethics. If you analyze a spreadsheet that has incomplete or inaccurate data (whether you realize it or not) you will have inaccurate results.

Ethics and morals (and yes, they are different) are human constructs. They are based on our views of the world, culture, right, and wrong. Never assume that the systems you work with have these constructs.

The way I think about Bitcoin, Ethereum, and the like.

Ever since I told people I have started dabbling into bitcoin I get asked about it all the time. People are curious about this thing that is more and more frequently showing up in headlines. For simplicity, I’m going to reference bitcoin throughout but it’s largely shorthand for altcoins (excluding ICOs which is a whole thing unto itself that I won’t currently touch with someone else’s free money).

Questions generally come in a few flavors:

  1. What do you mean you’ve bought some bitcoin? I think I’ve heard of it but it seems out there.
  2. Ha! You mean you’re one of those suckers that have gotten conned into that bitcoin thing?
  3. Bitcoin, I’ve heard of that. Isn’t it an investment?

I have yet to have anyone ask out of jealousy of missing out on the spike through this year. I have also yet to meet many others who have bitcoin that want to talk about it. Most of the conversations turn theoretical fast for one good reason: you can’t really do much with bitcoin yet.

But for the rest, here are my answers to the common questions I get. This may help you decide if it’s right for you or maybe just give a few more people a comfort level with this new-fangled technology.

I think I’ve heard of it but it seems out there. It’s perfectly fine for most to have not heard of bitcoin but it still feels surprising. Buying bitcoin the first time is a bit daunting. You have to sign up for an account to purchase it through, you have to make it through big disclaimers about private keys, you have to worry about accidentally losing everything. But never fear to ask for help, there are more and more people that have gotten into it over the past twelve months. You must definitely do your research if you are going to jump in though.

Sucker that got conned. I get this a lot. Many, many people (possibly a majority?) think that bitcoin is like the tulip craze: here today, gone tomorrow. I get a lot of joy out of answering this particular question because most people don’t understand the current US (or global) financial system. The US Dollar is based on trust, central control (opaque), and a couple centuries of track record. Bitcoin is based on trust, decentralized control (open source), and a 9-year track record. Look back at the first few decades of US currency and see how it behaved. This leads to:

Isn’t it an investment? Bitcoin is NOT an investment because it is based on something different than a typical investment instrument. For the most part, there is nothing you can go out and spend your bitcoin on that you can’t more easily buy with your Visa card. And with the current growth path of bitcoin, few are clamoring to spend bitcoin when they can buy things some other way. The price of bitcoin (as far as I can figure) is based on a combination of (in order of impact on pricing):

  • Speculation that bitcoin will be worth more in a month than it is today.
  • Speculation that bitcoin use cases will begin to be deployed at scale over the next 12 to 24 months.
  • Investors that don’t understand what bitcoin is but want to be part of it.
  • Technology companies building companies around altcoins.
  • People that want to put their money in a place uncontrolled by the traditional finance industry.
  • People in countries facing currency crises and needing a safe place to put it.

(For what it’s worth, I fall into the first two buckets and sometimes the third.)

Bitcoin still doesn’t have the technical maturity to make it something I’d recommend to someone that isn’t jumping to get it. It’s hard, easy to screw up, difficult to understand, and definitely not a typical investment. But while not for everyone, it’s not going anywhere anytime soon.

Why the death of Net Neutrality is important within the CRE space.

As you may have heard, the FCC recently announced a vote in December to gut their net neutrality regulations and essentially let telecoms do whatever they want with the internet. For those not aware, these rules were put in place in the ancient days of 2015 because it was becoming clear that the lack of competition in the space was driving improper behaviors.

At its core, net neutrality ensures that telecom providers (Verizon, AT&T, Comcast, Spectrum, etc) must treat all data on their network the same way. It doesn’t say they have to price access to their networks at a certain rate or force them to make upgrades. It simply makes the principle clear that data is data.

It seems obvious on the surface, why would anyone treat some data differently than other data? A great example is that AT&T now owns DirecTV. Without net neutrality rules in place, AT&T could put in place pricing that streaming DirecTV over their network is free (as long as you pay for the package) but streaming any other television related data costs an additional $100 per month. Essentially they are using their market position to arbitrarily limit competition from other TV providers.

Net neutrality ensures a level playing field for large and small companies. Under the current rules, Google and Facebook cannot go to Comcast and pay for faster connections to their services. Without net neutrality, Google could pay Comcast (or others) for the privilege of making YouTube a preferred service that streams for free at 4k while all other video services only get low-quality streams. Suddenly start-ups in the video space are forced out of business because their customer base is disincentivized from using anyone but Youtube.

Removing net neutrality rules simply gives big telecom providers new, artificial ways of making money off the backs of their customers without adding any value back.

So why is this important to CRE? Because our technology sectors are just beginning to take off with none of them really big yet. CRE Tech is truly a start-up environment and without net neutrality, all start-ups will immediately be at a disadvantage. Groundbreaking CRE Tech is not going to be low bandwidth, it’s going to involve AR, VR and high-quality video. It’s going to require large amounts of data. It’s going to grow like crazy over the next decade.

With net neutrality in place, there are no barriers to this growth and all companies will get to compete on their merits. Take net neutrality off the table and suddenly it’s not necessarily about who has the best product, it’s about who has the best relationship with Comcast and Verizon.

Personally, I want the market to decide winners and losers. Comcast can’t be trusted to do right by customers of their own services, why let them decide the future of CRE Technology?

What can you do? Contact your representatives to tell them to protect the current rules either through direct legislation or through applying pressure to the FCC. The current rules are not perfect and could use some improvement but getting rid of them is not the answer.