Is It Time To Re-Invent Our Real Estate Business?

So, I was reading an article from Warren Buffet (YouTube) today regarding his thoughts on the current financial condition of the world.  One of the observations he made was, “Only when the tide goes out do you discover who’s been swimming naked.”  He made a further comment, “The tide went out a couple of years ago. It still has not come back; many of you are “naked”; and it is time to get proactive with reinventing your businesses – immediately.”

Jose Perez is the president of PCMS Consulting.  He made similar comments today in RISMEDIA.  Mr. Perez made a great point that most in the real estate industry are not being proactive.  Mr. Perez said, “Brokers and Realtors are so concerned with their survival that they can’t see beyond tomorrow or next week. Unfortunately, that’s just not going to work anymore in our real estate industry if it is going to be successful in the new and completely different environment that is the new reality for our industry.”  Mr. Perez suggested that we look at three examples of industries that made decisions to do nothing but continue what they had done in the past; the U.S. auto industry; Print media; and the Travel industry.  He asked in the article if we could see any similarities between the real estate industry today and where those industries were at their seminal moments 10 or 15 years ago?  GM and Chrysler are in bankruptcy, print media is suffering and will soon be extinct,  and who of you still use a travel agent?

The typical business structure of the real estate industry today is a “brick & mortar” model of thousands of offices, lots of desks and overhead, and debt. In good years and bad years, Warren Buffet and his partner, Charlie Munger,  have focused on the same eight principles during their partnership at Berkshire Hathaway.  These are guides for any industry that is committed to thriving no matter if there is a “high tide” or a “low tide”.

1. Keep a huge amount of liquidity, short term debt that is modest, and dozens of sources of earnings and cash.  Never borrow money.
2. Widen the “moats” around their operating businesses that gives them a consistent competitive advantage.
3. Keep an eye on long term horizons.
4. Acquire and develop new and varied streams of earnings.
5. It is critical to network within a group of trusted peers.
6. Expand and nurture the variety of outstanding operating managers of the companies we own who, over the years, have delivered to Berkshire Hathaway exceptional results.
7. Look for opportunities to give back to the needs of the world.  ( Warren Buffet contributed $32 billion to Bill Gate’s foundation because Bill is finding very effective ways to impact critical needs of the world.  Mr. Buffet trust Bill’s decisions and he and his wife are is doing this job full time.)
8. At the end of the day, your word and your reputation is all you have.  If we keep our word our reputation will be worth having.

As an example, Mr. Buffet said, “Just as Adam and Eve kick-started an activity that led to six billion humans, See’s Candy has given birth to multiple new streams of cash for us. (The biblical command to “be fruitful and multiply” is one we take seriously at Berkshire.)”.  His opinion is in order to thrive in any economic condition businesses need to grow organically and operate for a long time.  If that is not possible, sell it immediately.

In the book Working Identity: Unconventional Strategies for Reinventing Your Career,  Herminia Ibarra presents alternative ways of changing a business and a career.  Ms. Ibarra has distilled nine unconventional strategies for the reinventing process: 1) Act, then reflect;  2) Flirt with your selves;  3) Live the contradictions;  4) Make big change in small steps;  5) Experiment with new roles;  6) Find people who are what you want to be;  7) Don’t wait for a catalyst;  8) Step back periodically but not for too long; and,  9) Seize windows of opportunity.

My guess is that my posting may create one or two comments of diverse opinions as to what needs to done to reinvent our industry.  I,  Jim Walberg,  look forward to all of them.  Until next time…your East Bay lifestyle detective remains on duty.

Related posts:

1. East Bay Real Estate Market Watch
2. East Bay Real Estate Blog Site Owner Selected By Viscape University For October 6th Teleconference!
3. East Bay Real Estate – Rumor…Keller Williams-Danville Is Moving!

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Filed Under: Blog, News, Real Estate

Tagged: Berkshire Hathaway, Charlie Munger, east bay real estate, Herminia Ibarra, Jim Walberg, PCMS Consulting, RISMEDIA, Warren Buffet