A Real Estate Career: Lessons Learned (2014-2015)

In 2014, my tax business was winding down, and during the summer I was getting anxious again.

As these things tend to happen, while randomly talking to a friend, he asked me if I wanted to join his hedge fund as an analyst.

Completely putting aside the fact the position was in Hong Kong, I accepted.  And for the next 18 months, I helped them analyze real estate and Korean stocks.

This was my first real job in finance.

When you work in finance, you get spoiled – especially if you’re on the buyside, and you have all sorts of service providers working for you.

Finance draws hard-charging, intelligent, and driven types, and when you have Ivy Leaguers and graduates of Asia/Europe’s top 10 universities as your service providers – your bankers, brokers, traders, accountants, and researchers, well, I’m not sure I’ll ever have that level of service again.  Emails were written to me in clear prose.  If there was a problem, I received a phone call explanation within seconds.  Things got scheduled, presentations were efficient, full of information, and if I asked for anything, things just got done.  No one passed the buck, and if they did, it was to actually find the person who could solve the problem, and these problems got solved in hours, if not minutes.

Sigh.  Maybe this is the daily reality for many people, but for me it was new.  This meant that literally all I had to do was focus on the thing I had been hired to do, which was to stay plugged into the markets, pore through financials and industry reports, think, and analyze.

Never before in my life had I woken up so early, before 6, to catch the bus into Central to start fielding the calls and get work done before the Korean and Japanese markets opened at 8am.  Never had I had so much energy as when I was plugged into the information flow and market chatter every day, hearing from analysts, companies, and brokers spanning Tokyo to Mumbai.  The financial markets are an arena where the biggest game in the world – the exchange of capital – is played out on a daily basis, against some of the smartest people, with huge sums of money at stake.

And looking back at that time, that’s what I miss the most.  There’s no feeling or job quite like working in the financial markets – the pace, the energy.  It’s like being plugged into an IV of chatter and information and raw sentiment.  You can actually feel, around town, when the markets are up or down.

Now onto the actual job.

Our fund had a value bent, which meant that we were looking for undervalued or overvalued companies to buy or sell.  Before joining, I had a romanticized notion that it was all about digging through data and research, coming up with some sort of brilliant, deviant opinion and using that to make money.

There is that.  But I learned I was quite naive, because identifying the stock to buy/sell is only a fraction of the job.

Being good at analysis, and picking the right name, is only one leg of the stool.  It doesn’t matter if you’re good at analysis if you buy in at the wrong time or sell at the wrong time.  It also doesn’t matter if you buy/sell too much or too little of it, or if you can’t or don’t have the conviction to hold during the hard times.  Also, since you’re never going to be 100% right, 100% of the time, you have to be constantly evaluating your own decisions, your decision-making process, your own thoughts, in context with the present and history of the market.

In short, not only do you have to be brilliantly analytical, you have to have the instincts of a gambler to size and time the bet, the temperament of a stoic to not let gains or losses affect you, and the introspection of a monk.

Only by getting all four of those things right, can you succeed in the job, and it’s why investing is so hard.

It’s always been my opinion that investing is the best interdisciplinary exercise you could ever conduct, or learn.  And one of the biggest reasons is for the last point above.

Constantly evaluating your own thinking and process for making decisions will serve you well not only in investing, but in life in general, and is the foundation for success in general.

At the fund, though, I found myself teetering on the edge of this.  If you’re not careful, endless introspection can lead you to have massive self-doubt all the time, and start going down epistemological rabbit holes, like ‘how do I know I know this’, or ‘am I sure that I know this, and with what probability, and how do I know this probability is even correct’.

In my job, I found a lot of parallels to surfing.  The financial markets do not have sympathy or other human sentiments, just like the ocean.  You can’t fight them, just as you can’t fight or force a wave to do anything.  You can only react to what’s given to you.  You can’t argue about rightness or wrongness.  The markets, and the ocean alike, do not care about you.

Working in the markets is one of the most humility-inducing jobs you can have, and those who get arrogant get crushed.

In many ways, the job gave me an appreciation for knowledge in general.  When you can sit in a room with extremely intelligent people discussing a company, and everyone has extremely divergent, completely opposite viewpoints and opinions on the company’s prospects, you begin to see that it’s hard to purport to ‘know’ or declare anything with certitude.

And that states of the world are best expressed in probabilities, and the smartest people are always questioning and changing their minds.  They’re comfortable with uncertainty, and don’t let it paralyze them.

I learned a lot on the job, but that might have been the greatest lesson for me.

A Real Estate Career: Lessons Learned (2010-2012)

The optics of business school are great because being a student gives you a halo – you appear to be “studying”, hard at work, transforming yourself.

Whereas if you took two years off to just actively look for, recruit, and interview for jobs in a new industry it would raise eyebrows, if you instead pay vast sums for the privilege of doing so, while paying even more in opportunity cost / lost income, it is more professionally accepted.  Ironic and backwards, but that is the imprimatur of business school.  That’s what people pay for.

Also, it’s a good two year break that looks good on a resume.

I entered Haas because I wanted a break.  I also wanted to be close to home, and the counties where Property Tax Advisors was appealing cases.  I wanted to be on the West Coast, because most of my consulting clients were in Asia – and I would have to fly there from time to time.  In case it wasn’t obvious, I still wanted to work part-time.  And also, to seal the deal, Haas gave me a scholarship, which combined with what Gary still owed me, made it an all-expenses paid, tax-free, two year vacation.

But I don’t want to make it seem like I didn’t take the whole experience seriously.  I did want to learn.  I wanted time to read books again.

The first thing I did when I arrived on campus was sign up for Mandarin classes, which I took with undergrads.  And then I signed up for some advanced real estate classes to try to figure out WTH had just happened in the world.

I took real estate classes every quarter.  And I read books on real estate history outside of it, outside of the classes.  At the end of it, I’m not sure I came very much closer to understanding the mechanics of what had happened, but I did gain an appreciation of how fragile things are in the world.

For our final project in a real estate financing class, we had to analyze a CMBS prospectus (commercial mortgage-based security), you know, those products that had helped bring down the global financial system.

I remember little about the product except that its supporting document was about two hundred pages.  Five of us pored through it for weeks.  All of us had come from real estate development, banking, or brokerage backgrounds.  One of us actually had a real estate lawyer for a father so we ended up asking him about the finer points.

But the prospectus was written so as not to be comprehended.  It was written in legalese, even though it was describing what should have been a fairly straightforward series of waterfalls in Excel.

And in the end, it couldn’t be modeled, because it was worded so ambiguously.  It was another lesson in what I had long suspected, which was that in business, maybe a small fraction of people know what they’re talking about, and the rest are just pretending.

I guarantee the bankers selling the junk we tried to model were in the latter camp.  Some of them were probably in business school at the same time as me.

Business school was also an opportunity to experiment.  I tried out different careers.  I interned for a hedge fund manager in San Francisco.  The first time I had a conversation with him, my mind almost exploded.

We began talking about a gold mining company, and his process of thinking out loud led the discussion into energy consumption requirements of the world, and caloric intake of Africans.  It all had a logic, but it was just beyond my grasp.  Just like, say, a college lecture that is beyond your head will make you fall asleep, this conversation had all the trails of making sense, but it was beyond my comprehension.  Struggling under the mental strain of it, I had to go home afterwards and just lay down for a few hours.

They say investing is the last liberal art.  It is the best cross-disciplinary, systems thinking training that anyone can get, I truly believe that.

In the summer, I interned for GE Capital Real Estate, the first big company I had ever worked for.  It also turned out to be a mistake.  Not the company or job itself.  As part of the Global Valuations Team, for the first time, I worked with people who were all exceedingly kind, competent, and able to regulate their emotions.  I had never worked with such nice people before.  I also had a boss that summer who was the best boss I had ever had up to then, and since.  She was patient and a great communicator.  I saw in all the ways what I had been missing by working only at small shops and with extreme people.

But at the same time, in order to take the job, I turned down offers from a resort development company (US-based), and a Mongolian conglomerate that wanted me to help them create a business plan for yurts, in Ulaanbataar.  There is no way I would have that kind of opportunity again.  It was a mistake to turn down adventure when I was still single and should have taken those kinds of “risks”.  It remains one of my regrets.

But the job was a revelation to me in other ways.  I came away from the internship and my classes at school with a more profound realization about the world.  Mostly, about the fragility of it.

You could see this clearly because GE Capital was such a high-level investor and manager.  By high-level, I mean that they invested in properties that were worth hundreds of millions of dollars, and purchased portfolios that were in the billions of dollars.  When scale gets that large, numbers become abstract.  When you’re evaluating a portfolio of hundreds of properties, the individual properties themselves also just become pieces of paper holding different lease terms and cash flow logic, encumbered by loan contracts that are themselves just other pieces of paper.

I looked at the stack of hundreds of pages we were poring through, which represented the several billion dollar portfolio we were buying.  And that was it.  Although we weren’t buying the pieces of paper, the pieces of paper held the agreements that held this entire thing together, all the terms and clauses and logic that would be transferred, on other pieces of paper, from a different owner to us, moved like you would a large boulder, carefully, so that at the end, someone could print out another, similar stack of papers with our name on them instead, and magically all the obligations and claims would belong to someone else.

Yet what was contained on these stacks of paper allowed us to borrow more money against it, allowed us to engage service providers and managers to service it, and served as the basis for the valuation of our company.  All around the world, balance sheets were being rearranged, title was being rewritten, people were moving, getting hired, fired.

You might note that this is just a larger scale, of the same type of transaction you would undertake when buying a car or getting a loan.  It’s true, but just think about those transactions too.  Do you ever read every word in a contract?  Do you really know every implication of every clause in a contract?  I doubt 99% of the world does.  Similarly, there were things in the contracts of our portfolios, and the leases, that if you read them carefully were questionable, or ambiguous at best.

But the whole thing was wrapped together by a system of trust.  Trust that people down the channel, the title officers, the lenders, the managers, the agents, the lawyers, everyone, was doing their jobs correctly.  No one at GE Capital was going to have time to review every single line.  Internally we all had to depend on each other, and us as an organization also depended on our service providers, suppliers, the governments and cities in which the real estate was, etc, to do their jobs.

At a scale that enormous, no one person has the whole complete picture.  And if you telescope out to the national economy, the world, it’s the same thing.  No one person has the complete picture.  It’s held together by trust.  And when that trust breaks, the system breaks.

And that, I think, was the main lesson I learned at GE Capital, and probably the main lesson of the financial crisis for me.

After my summer in Connecticut, I moved again.  Business school offered a semester abroad.  And I was going to study abroad in Hong Kong.

Living and studying abroad has been the source of some of my deepest relationships and experiences.  After studying abroad in Hong Kong, I decided I would have to live there.

Also, one night while eating hot wings at a place that prided itself on the scoville (spiciness) levels of its food, I found myself dry heaving, tingling, and in tears after half a bite of their vaunted apocalypse wings.

I began rubbing my eyes, which was a mistake because for some reason the XXL-killer-apocalypse-suicide hot oil had spread to the back of my hand, and now I couldn’t feel my face anymore.

It was at that moment, with fluids draining out of my face, that a girl in a white and black dress walked in smelling of spring, and sat down with me and my friends.

A few years later, she would become my wife.

A Real Estate Career: Lessons Learned (2006)

After about a year at the brokerage, I moved across the courtyard of our office-industrial complex to a smaller shop where I became a monk at the temple of Excel.

In retrospect, before I left, I should have tried to become an agent and at least do a deal or two and actually deeply understand everything from the lead stage to closing.  I understood it better than most, but not as much as I could have.

But I didn’t do these things.

It’s hard to articulate my thinking at the time.  I was naive and arrogant/blind.  I mentioned before that because of the tremendous amount of money some were making, they either felt guilty or like it wasn’t theirs.

For me, looking at the tremendous amount of money others were making, sometimes working 5 hours a week, it gave me the impression that money was abundant, and that to earn it required little skill, and more like random optionality and knowing the right people.

I also should have tried to learn more from the actual hard-workers in the office, like my boss Greg.  But partly because he was never in, and partly because I was arrogant and blind, I didn’t.

So now officially, I became an analyst at Del Mar Equity Partners, a TIC sponsor.  This means nothing to anyone outside of real estate, but it suffices to say we were basically an investor looking for good deals, and syndicating them out to a range of other investors.  Like doing a group-buy of real estate.  And making some money in the process for being the originator.

In practical terms, this meant I moved from an office of a group of 15 young hooligans doing eating competitions, boxing matches, arm-wrestling and push-up tournaments everyday, to a sedate environment where I worked with only two other people – my boss, Martin, and an administrative assistant.

This provided much less pandemonium, and less time devoted to psychological analysis of extreme humans, but things were no less entertaining.

Since agents and brokers around the country knew we were a source of capital, we got bombarded with deals.

Some of these deals showed up unsolicited in the mailbox in the form of postcards and too-good-to-be-true brochures.  Others showed up in my inbox, with rent rolls attached and scarcely any explanation to them.  Some of these deals made sense.

Others did not, like deals where you were supposed to invest, and you got no money or any return for a few years, and then at the end you got an unspecified return on the appreciation of the property.  Like a zero-coupon bond.  Except even riskier, and again, no guarantees on what your principal was worth at the end.

And sometimes people called.  Sometimes I would get calls from guys who sounded like they were working in boiler rooms.  Some guy with a wiseguy accent would call and ask me if I wanted to hear about an opportunity.  Then if I said yes, he would ask me if I was ready, if I really wanted to hear about the opportunity, if I was really ready or not.  It sounded like these fluffers were trying to get me to stay on the line until they called the real closer over, but I never stayed on the line.

Anyway, for the next six months, I became a master technician of Excel.  Not a master real estate analyst, understand: a master technician.  More on this later.

My job was to model out the deals we were getting pitched.  This meant I had to model a few dozen a week.  Now looking back at it, I spent those months doing what I thought at the time was ‘analysis’: filtering dozens of deals a day, modeling them, and recommending the ones that ended up with good returns.

But what I was actually getting good at was not analysis, nor real estate evaluation.  It was Excel.  Partly because of the sheer volume of deals, and partly because of the sheer time I was spending with the program, I became obsessed with Excel itself.

I started slowly by implementing functions like dynamic rent bumps, and probabilistic Monte Carlo simulations on rents when the leases rolled over.  I implemented arrays and quintuple nested functions referring to INDIRECT and OFFSET cells.  I had macros that pulled in information from demographic sources to update assumptions.

It had become my goal to model the behavior and performance of a building, to recreate it in a small file sitting on my laptop.

This wasn’t analysis at all, and this Excel work itself didn’t actually help me become a better investor.  What I was doing was ascribing Excel with an intelligence it didn’t have, and hoping to imbue this construct with decision-making and analytical capabilities.  It was intellectual laziness, in a way.

If I could have this period back again, I would: conduct more interviews, do actual on-the-ground research, talk to owners, brokers, shopowners down the street from the building, in the name of articulating a thesis on different markets/types, and then test these theses continuously.

What I’ve realized ever since, is that in real estate, doing an initial filter on a deal is not some arcane exercise of testing 100 different assumptions.

It’s an exercise in evaluating maybe 5 core ones, like cap rate, rents, growth, supply, and expenses.  A good investor will probably only spend five minutes on the back of an envelope filtering a deal, and if it passes, then spending 95% of the time testing these core assumptions with research.

I didn’t know any of this yet.  I didn’t have a filter system so I was looking at every deal like it was some sort of abstruse puzzle that could only be unlocked with my magical tool, Excel.

What I was lacking was critical thinking, big picture thinking, and thinking from first principles.  Anyone can learn or be taught to become a technician.  Becoming an actual analyst requires you to think.

I didn’t know how to think yet.  I didn’t have a view of the analysis I should be doing, and because I thought that just “doing Excel” was the whole job, I was bored, frankly speaking.

And so I left this job too, six months after joining.  We did two deals when I was there, out of the hundreds I had scoured.  In retrospect, that’s a lot for six months.  But in my naivete, I thought it was too little.

Also, one of the deals was literally nothing more than an off-market property that we flipped within a few months, sight-unseen.  This deal just about sums up both my experience there and the spirit of the time.

I left because in a sense, I thought there was no more growth opportunity for me.  And I believed it for a while.  Only in recent years have I realized it couldn’t be further from the truth.

In any kind of job, there is a wide range of ‘winging it’.  Because I had only worked at small companies and everyone kind of did everything, I thought (at the time) that this prevented me from falling into a ‘winging it’ mentality.  After all, I did what was assigned to me and did it well.  But I was still in a lazy zone.

In any job, there is a level of performing the job that is beyond just doing the job.  This level is thinking like an owner, like you have something at stake.  Thinking like an owner will open your eyes to new opportunities, because you’ll understand the opportunities and constraints, and how decisions are made.

In the years since I’ve worked these first two jobs, I’ve come to believe that unless you start thinking like an owner, you have no real knowledge about your business or industry.

And the way you know whether you’ve grown as far as you can grow in a job is, can you do the owner’s job?  For me, the answer was no, for both jobs.  Therefore I hadn’t tapped out my growth potential.

But back then, I didn’t realize any of this yet.

I quit and for a time I was jobless.  And a little directionless.

I interviewed at a surf company.  I remember walking into their Orange County office in business casual and drawing stares, because everyone else was in t-shirts and shorts.  Talk about a game theoretic exercise: do you dress down for a job interview at a surf company, potentially disrespecting the interviewer, or do you dress up, and run the risk of looking clueless?

Anyway, I didn’t get the job, but the interviewer did give me a new wetsuit as a sort of compensatory prize.  It was a little small for me but thicker than my existing one, and better for winter surfing.

Now we were in the summer of 2006.  After a few months, I was going to be in for a real treat.

A Real Estate Career: Lessons Learned (2004-2005)

I graduated from Penn in 2004.  I had no job or any prospects to speak of, so I moved back home to LA after spending a summer in Philadelphia fruitlessly looking for a job.

Back home, I saw that the majority of my high school class had become loan brokers at names like New Century Financial, Countrywide, and Washington Mutual.

I grew up in the San Gabriel Valley, which among other things was famous for suburban pot farms, and I also noticed that a not-insignificant percentage of my high school class had gone in the marijuana business.

One guy I knew from high school told me point blank that he liked the mortgage business because it “was like drug-dealing: you give people a fix, and they keep coming back for more.  They can’t resist.”  I remember that he used to drug deal in high school, too.  I guess he had chosen the more lucrative route.

It’s hard to express the sentiment of that time.  Everyone was getting rich off real estate.

I remember the fact that some of my friends who hadn’t even gone to college, were giving no down payment loans to people and making $20,000 a month, did give me pause about how the world wasn’t the way I had learned it to be.

But I liked the idea of real estate because it was tangible.  My senior year at Penn, I had interned for the largest campus housing landlord, and they all seemed like a bunch of easy-going, Philly wiseguys.  I liked that.

When you graduate from Wharton, half the class goes into banking.  I heard stories about how you worked 120 hours a week in banking.  And I didn’t like that.

And with a lack of prospects, no interviews, and no jobs to speak of, I made the decision to go into real estate.

At first, I thought I might like going into the public sector.  I interned at Senator Feinstein’s office in San Diego and researched the economic impact of military bases.  The internship paid no money, so I worked as a picker in a t-shirt factory part-time.  In the other remaining time, I surfed.

But most importantly, I rented a room from a woman, who I’ll call Lucy, who had no discernible job.

My lasting memory of her was of her sitting on a couch, eating ice cream, and watching tv – both when I left for work, and also when I came home.  And it was during one of her ice cream-eating sessions that we struck up a conversation and she mentioned to me that she was in real estate.

When I asked what she did, she said she bought houses.  She had three already, she said.  It was so easy, she said.  She was planning to buy a few more.  Because all you had to do was take out loans and wait for the prices to go up.  In fact, her agent was one of her best friends and later moved in to my room when I moved out.

Midway through the internship, I decided that the public sector was not as fast or impactful as I had imagined.  I wanted to see some action.

So, I applied for a job at Marcus and Millichap, the real estate brokerage.  Almost immediately, I was invited to an info session where I was witness to a presentation that should be enshrined somewhere in the historical annals.

My lasting memory from that presentation was towards the end when the agent put up a slide.

The slide was a grid whose rows were Years 1-5, and whose 3 or 4 columns represented duds, high performers, and rockstars.  In the cells were numbers that represented the incomes that each of these categories of people in the world, stood to make at Marcus and Millichap.

I noticed that the duds started at $80,000 and climbed their way north of six figures in the second year.  The rockstars started in the mid-six figures and were making millions by year three.

These numbers all sounded great, and I decided to sign up.  But there was a catch.  Unfortunately, they said, the job was commission-only so they recommended that you have a savings fund of at least six months to live off of, while you “learned”.

This sounded a lot like school, so I passed on that opportunity and told myself the numbers were probably all fake, anyway.

I moved up from San Diego and stayed with a friend who was in his final year at UCLA.  There, while looking for jobs, I opened the newspaper and spotted a posting with Marcus and Millichap in the El Segundo office.  It was paid.

That paragraph makes me sound ancient, but trust me, there were online job posts and applications back in 2004 too.  Maybe it was dying out, but still.  That’s just how things happened.

I interviewed and got the job.  My salary, if you can call it that, was $12/hour with no benefits, and my job was to maintain the internal database.

At the end of 2004 and during 2005, money was falling from the sky.  And that’s what the theme of those years was: money.  Money, so much of it, that numbers became meaningless.  Hundreds of thousands, millions, and NBA superstar money, being earned by agents in their 20s and early 30s for essentially, making phone calls.

And before you get the wrong idea, the money wasn’t going into my pockets.  I was still at $12/hr.  I was poor enough and without benefits that sometimes in restaurants, if people at the tables next to me left food untouched, I would eat it.  Sometimes after they left, and other times I asked nicely.

My job at the Harris Group of Marcus and Millichap was to maintain and ensure the integrity of the database of leads.  This meant a lot of searching online through other databases to validate information.  It was boring, so I quickly asked for other things to do.

And so over the next year, while helping maintain that database, I also helped underwrite and package deals totaling maybe more than a billion dollars in nominal value.

For a long time afterwards, this entire experience working on the “sell-side”, so to speak, at a real estate brokerage, made me skeptical almost to the point of cynical, about actually investing in real estate.

In my naivete, I first thought that the prices we were going to sell buildings for, were what they were worth.  So I pored over rent rolls and looked up market averages for rates and prices.  What I learned instead, what that there is no such thing as anything actually being ‘worth’ anything.  The sales price is what a broker wants to sell it for, and all the numbers surrounding it are the supporting props that have been artfully arranged to convince you that this price is the right and true one.

And if you think the price is too high, based on the market comps, you are entitled to your opinion, and may be mathematically correct – but if someone else comes by, who is using a tax advantaged scheme to roll out of a previous property and is under a time crunch to park their funds in something else and so snatches up this expensive property, at or higher than listing price because of a false perception that they are competing, then…what was it actually worth?  Who’s right?  You or them?

On our packages, we sometimes photoshopped gangsters out of the roof of some of our building photos, and photoshopped luxury cars into the streets in front of them.  And sometimes I would discover mistakes I had made in the modeling, much later – and it didn’t matter, because the deals had already sold anyway with the buyers scarcely looking at the cash flow.

During a bubble, money becomes divorced from the effort required to earn it.  In our office, there were agents who worked an average of two hours a day, three days a week.  There was one who was making a million dollars a year from having landed a single big-time client on a lucky phone call.  And sometimes these agents would go into the offices of the harder-working agents and steal leads off their desks and make six figure commissions.

Even though my job was to maintain a database of leads, that last reason is why sometimes people sabotaged my work by trying to pay me on the side to not do my job, or to give them contact information for their own use.  In reality, not many people wanted me to share the hard-won contact information for potential leads across the whole office.  They wanted it for themselves.  This is when I learned about misalignment of incentives.

I don’t want to give the impression that no one in the office worked.  The Harris Group was named after Greg Harris, who was and probably still is, a legendary superagent.  Greg’s stare was of the laser beams shooting out of his eyeballs variety, and he was always on the phone, always in that rapid-fire staccato voice that hammered poor clients down out of their illusions of paying less for a building than it was ‘worth’.

One of my lasting impressions of Greg is a time I walked into the men’s room and saw, under the stall doors, someone sitting on the toilet with pants around his ankles, doing a real estate deal at full volume.  It was Greg.

His work ethic was legendary, and when he was first starting out, I heard he hired interns even younger than he was to drive him from his home to the office at 4 am – no one else was up at that time, except the elderly landlords and investors who he would be calling, and who would remember that he had been the first to call them that day.

And this is also when I learned about money.  They say money makes you more of what you already are.  That is true.

I also think money, in some deep way, also reveals your deepest held beliefs.

The agents in our office were split into two camps.  The ones who worked two hours a day, bought nice cars and homes, partied mid-week in Ibiza and Miami, and had no compunction or even deep thought about living through a bubble of historical proportions.

We had other agents who made just as much money but who were deeply terrified of the state of the world and felt that something was deeply, utterly wrong, and sought to serve penance for it, in a way, by working even harder.  These agents, I think, sometimes felt guilty.  Like when they did deals that caused market rents for an entire town to double.

But if I really think about it, the two camps weren’t so different, fundamentally.  The first camp spent their money as soon as it came in, like they were laundering it.  Perhaps from feeling like it wasn’t really theirs.

During this job, I also learned about the power of sales.  Selling is storytelling, and sales is an art form that needs to be taught in school, because the basis of our shared reality as humans exists as a series of beliefs and stories.

I learned that during a bubble, the best salesmen are the people who deliver their message with absolute conviction, no matter how outrageous it is.

Actually, the more outrageous, the better to catch your attention.  Because during times like that, peoples’ beliefs are being tested.  And during periods when peoples’ beliefs are being tested, they want to listen to people who sound like prophets.

At the time, real estate cap rates of 4-5%, even on trophy properties, were considered unbelievably low.  And sales prices of $200,000/unit on multifamily residential were considered high.  In any case, the actual figures don’t really matter.

What matters is that the best agents in our office were the ones who could talk about cap rates of 4% and prices of $250,000/door as if they were universal constants like e or pi – and often, I noticed, the less the agent actually knew about market conditions, the lower his doubt, so the higher his conviction, the higher his credibility, and the higher his closing rate.

Meanwhile, those who overanalyzed (like me), stood by in disbelief.  In times like those, the best storytellers don’t even need a firm grasp of English.  Just belief.

And my last point is that when you’ve worked around people in real estate for a long time, you’ll pick up a pattern of speaking.

This pattern of speaking is whereby crazy claims are stated boldly as to make others doubt, waver, to ultimately put them at a disadvantage.  This is a variation of the anchoring effect/bias.

This technique absolutely ravages weak souls, conciliatory/nice people, and those who are unsure of themselves.  Let’s say you’re trying to sell me a car and we meet, go through the pleasantries, and after I look at your car, the first thing I say at the top of my lungs is that I’m going to offer 20% of your list price for it because the bumpers of your car model cause cancer.

Now if you’re inured to this type of speaking then you’ll just shake your head no or tell me to GTFO.

But if you’re a nice person, or out of practice with this type of aggression, you’ll start doubting yourself.  Your initial reaction to the 20% was shock and disbelief, but you’ll start thinking…maybe I did price it too high.  Your initial reaction to the cancer claim was the same, but now you’re thinking about it – maybe the metal or the paint in it does cause cancer, but the incidence of cancers from bumpers is very, very low.  What you’ll do is start to explain this it depth and try to argue it logically.  Now you’ve lost because you’re playing my game.

You’ll try to bring reason into, and analyze/dissect a fundamentally illogical and absurd claim.  Congratulations, you’ve lost.  The discussion will go into the finer points of airborne carcinogens and colors – and you’re in a hole because you’re tacitly implying there may be some truth to the cancer claim instead of making ground in the other direction.  And with the doubt of the price lingering over your head, the price will slowly creep down to my target.

I mention all this because this was the prevailing way we all talked to each other in the office, whether discussing foods, sports, real estate, or even pets, the latter of which actually led some people to start believing that such a thing as a pig-dog (a cross between a pig and a dog), existed.  And this is the way of speaking that during a bubble, or times of distortion and change, lead people to believe insane things, like that prices will keep going up forever.

The only way to counter this technique is to: a) recognize it immediately, and either b) counter with an equally insane, but opposite claim so the discussion grounds still stay somewhere in the middle, or c) drop it and walk away.

I also note that our current president (who is a real estate guy, by the way) has taken this technique all the way to the top.  He says outlandish things and has the other side/media actually take it seriously and try to refute his claims by logic.  If you do that, you start playing the other person’s game so you’ve lost.

As I see it now, the Democrats seem to have stopped their full-fledged losing campaign, and moved from c) the outraged dismissal phase, to b) full communism.