The Garage and the Penthouse

When it comes to rent, entrepreneurs are sometimes too cheap for our own good. Up ‘til Redfin’s move last week, I’d spent the last 15 years in Grade B & C office space and, as a point of pride, looked forward to spending another 30 more in the same.

It was the only thing I knew. On my first day at Redfin, I sat in David Eraker’s apartment at a desk beside the bathroom, listening twice a day to Bahn and Savan work their magic. Our first San Francisco office was an un-air conditioned sweat-shop next to a pile-driver that made the floor shake every few seconds.

Redfin got low-rent places partly to save money – I still sleep on friends’ floors when I travel and none of us has an assistant — partly to avoid going soft, partly just to one-up our friends: entrepreneurs brag about controlling costs because it’s the one thing at a startup we can control. And we love the camaraderie — is there a more potent startup symbol than the garage? — of everyone working together in close quarters.

But I’ve seen startups take it too far, with eight people in a one-bedroom apartment working beneath the auspices of a Ho-Chi Minh poster. This sounds fun, but you get less done.

So when rents plummeted in Seattle last fall, Redfin went on the prowl for a better space. Now that we’ve moved to a little building by a farmer’s market, overlooking the water and a few mountains, the whole office is energized. People smile more. Since all the walls are glass, folks feel more approachable. We are more likely to work things out in person, which is faster than emailing. Since the building doesn’t turn the heat off at 5, we are more likely to work late.

Was it worth the extra juice? Let’s just do the math. Even for a hefty startup of 50 people, which requires about 7,500 square feet, the costs differences are small:

• Dump: $15 per square foot, $9,375 per month
• Not bad: $20 per square foot, $12,500 per month
• Pretty nice: $25 per square foot, $15,625 per month

You can adjust rents up 15% for Silicon Valley, and down 15% for Seattle. By comparison, once you add up benefits, taxes and equipment, each employee costs a company nearly $12,500 per month. The difference between a dump and a pretty nice place is half that — around $6,250 a month — or 1% of payroll.

It’s the Payroll, Stupid
So the question comes down to whether you’ll get an extra 1% out of yourself and your colleagues if the place where you work all day is a nice place to be. If you’ve hired an army of clock-punching dipsticks maybe not; your goal should be to treat them as poorly as you can get away with. But most of us are trying to hire artists, not an army. Artists work better in a happy place, with good spots for lunch, dinner and drinks close by, and plenty of light.

And these people, not rent, are a startup’s big cost. If James Carville ever saw a startup’s income statement, he’d immediately come to the conclusion that took me years to recognize: “It’s the payroll, stupid”  – and the rest is mostly symbolism. The best way to be cheap is to hire a handful of ninjas who get a terrifying amount of work done. This doesn’t mean you should rent the penthouse suite in some antiseptic skyscraper, only that it helps recruiting, retention and productivity to have a creative space.

A Startup Should Move Every 18 Months
One other thing that took me a while to figure out: if you really want to save money on rent, don’t focus on the traditional metric, dollars-per-square foot. Instead, get smaller spaces, and move more often when you grow. Moving’s a pain, but it’s easier now that most systems run in the cloud. A brief tour of Craigslist for sublets will tell you that the #1 way a startup wastes rent is by being stuck in too much space, for too long — when signing a lease, the company feels embarrassed to tell a landlord it might be out of business in 18 months, and a commercial agent make more on longer leases.

So here you have a company that prides itself on its scrappiness telling the world to order the steak – or the pot roast — because sometimes it’s cheaper than ordering more of the ground round than you can eat. I don’t know if Redfin would have ordered steak had it not been a blue-light special — we’ll actually pay less rent in 2010 because of the move — but what I never would have guessed is how much that steak has affected us so far.

(The funny picture of Ho Chi Minh comes from Wikipedia’s Creative Commons)

Why Isn’t There an Executive Master’s Program in Computer Science?

Two executive MBA students just came by the house to interview me for a class on entrepreneurship. Answering questions about the #1 quality of an entrepreneur, my #1 weakness, my #1 advice, I found myself translating true stories about what has worked for me into aphorisms that felt made up.

We have begun to think of entrepreneurialism as this discipline, this science, this profession, as if startups succeed via a formula, when the whole point of a startup is to do things differently not the same. We can teach people to paint the Mona Lisa by numbers, but it won’t be art the second time around. And we can dissect entrepreneurialism like a frog, but the frog usually dies in the process.

This is probably why the students’ questions made me feel like the disappointingly ordinary Oracle in The Matrix. When Neo asks if he’s The One, The Oracle says, “But you already know what I’m going to tell you?”

“I’m not The One?” Neo says.

“Sorry kid,” The Oracle says. “You got the gift, but it looks like you’re waiting for something.”

What these very intelligent, eminently fundable MBAs were waiting for was an idea, and the belief in themselves to follow it through. I wanted to tell them that the whole reason to start a company is to be yourself, not to imitate someone else, especially not me. Their program won’t help with that.

The world would be a much better place if all the folks in an executive MBA program would master a creative skill instead. Why isn’t there an executive master’s program in computer science, design or materials science? I’d enroll today.

We need to educate people who have already begun a career because too many miss their chance in college. The number of students studying business has steadily increased over the past decade, to more than one in five undergraduates, at the expense of the creative arts and sciences.

For life after college, a whole new genre has emerged of self-help for entrepreneurs. By Amazon’s count, more than 12,000 books on entrepreneurship have been published in the past decade, at a rate of three per day, every day.

Many of those books and programs are inspiring and useful; I have organized a few, contributed to some, and benefited from more. But if I had to say what needs more emphasis, it would be the product, not the process.

Outside of Paul Graham and Eric Ries, many entro-pundits have little interest in actual products. The worst purveyor of gimmicks is Malcolm Gladwell, who argued in last week’s New Yorker that entrepreneurs are predators who succeed because of their business acumen at driving hard bargains. Gladwell based this theory on two unlikely boots-trappers: a silver-spooner who inherited a massive media empire and a Wall Street trader who bet more than $100 million that the housing bubble would burst.

Both of Gladwell’s role models are very good business people, but that doesn’t make them entrepreneurs – even if one of them, Ted Turner, later developed into one — creating a news network he loved so much that he compared its eventual acquisition to female circumcision. But Turner started his business career the old-fashioned way: getting the better of somebody on a deal. It’s a zero-sum game that doesn’t create anything or delight anyone. And creating something is what entrepreneurs do that the MBAs sometimes don’t always seem to get.

This isn’t to say that entrepreneurs are better than MBAs. In fact, the problem I have these days is that what makes you successful as an entrepreneur may limit you later on as a business person, a topic we’ll have to take up next week. In the meantime, if you know of any good executive masters programs in computer science, or any boot-camps with that emphasis, leave a comment and let us know.

If I Can Change, and You Can Change, Everybody Can Change!

There’s plenty of talk on Twitter and the web about my saying in an interview with the Globe & Mail in Toronto that the real estate industry is still “screwed up.” I first said this a long time ago on 60 Minutes, in response to a question I’d been asked over and over again.

I was asked again last year at an Inman keynote if I still felt that way. I said that I regretted my tone, and was grateful to those in the industry who’d forgiven me for it. The moderator, Brad Inman, persisted: “is the industry still screwed up?” Well, I thought to myself, I sure can’t say no, the industry is just fine. So I said that respectfully, politely, humbly yes, the industry is still screwed up.

In recounting that discussion last week to the Toronto journalist, I emphasized how Redfin had changed, how the industry has changed, and how I have tried, with varying degrees of success, to change: to be more collegial and constructive, focusing on customer service as well as technology, blending what has always been good about the industry with what we like about our approach.

It has been a tough balance. We want to be honorable members of our industry, and a good partner to our fellow brokers, but we also want to be an advocate for the consumer, and for the industry to keep getting better. The whole dialog blows up when self-critical statements about how harsh I used to be are recycled as new opinions.

Even now that the journalist published a transcript of his notes, the focus is on our saying that there’s a problem, not on whether there actually is a problem, let alone the solution.  If we stop arguing over whether there’s anything wrong with real estate, we can start talking about how it could become better. Here, scribbled down during breaks in a conference, are a few ideas:

1. Pay agents in a way that doesn’t creates a conflict of interest with their customers, particularly when the customer is buying a home. Paying for a closed deal regardless of whether the customer is happy tends to maximize closed deals at the expense of customer happiness.
2. In fact, dump the whole coffee-is-for-closers culture, which makes brokerages feel like the Coyote, and our customers feel like the Road Runner, pecking at listings then running for cover. As I’ve come to know brokers better, I’ve been surprised at the genuine pride brokers take in their service. But I’ve been surprised too at just how deeply ingrained the sales mentality is in our culture. Before Redfin, I’d always thought that attitude was a relic of the 1970s, a caricature from Glengarry Glen Ross. But even now at industry events, I feel like a sissy when I say our agents are customer-service people, not salesmen. The audience sniggers. Outside of real estate, it’s hard to find a business with hundreds or thousands of employees without a published set of values or mission statement. Yet that’s sometimes the norm at brokerages. As a new generation of agent strikes out on Bloodhound Blog, Active Rain and Agent Genius to build her own, service-oriented brand, this attitude will change.
3. Spend money on technology, not lead-generation: The reason Redfin charges half what most other agents do isn’t because our agents make less: almost all the agents negotiating deals for Redfin in 2009 earned six figures, with benefits, vacation and all their dues, telephone bills, and travel costs paid. We just spend a lot less time and money buying leads and chasing customers, so we have more for ourselves and our clients.
4. Thin the herd: brokerages often make money by hiring the most agents, not the best. For real estate to be a profession like law or medicine, we have to profess to an ideal, to put our customers’ interest ahead of our own, and then ruthlessly exclude people from the profession who don’t uphold that ideal. Historically, we’ve excluded almost no one. But now that the number of agents has dipped, I’ve heard brokerages for the first time boast about agent quality. Let’s run with that idea. It’d be better for everyone if we had 500,000 well-paid agents, not a million half-starved ones.
5. Invest in the rest:  you can only get agents to commit to what a brokerage stands for if the brokerage makes a commitment to the agent: providing for fundamental needs like health-care, offering as best we can some basic level of financial security in hard times, creating a team-oriented atmosphere, delivering high levels of training and career development. To get the best young people to launch a career in real estate, we have to begin to compete with employers like Google and Zappos, who have made a cult out of treating their employees well.
6. Get religion about publishing data. We’re indignant that 4 of the 5 most-trafficked real estate websites show only a fraction of the homes for sale but it’s our own fault for being ambivalent and persnickety about sharing data. It is abundantly clear that consumers want data; we should be the ones to give it to them. The DoJ-NAR settlement opened a floodgate, but there are still plenty of rules around how many listings we can show on a page and how consumers register. To compete against Google, we need the simplest and smallest rulebook possible.
7. Be transparent about agent performance: consumers should be able to shop for agents as well as houses on our websites. Redfin surveys every customer, and publishes every response on our agent’s online profiles. The Houston MLS does the same, with some limits. Plenty of brokerages want to do this, but worry their top producers will walk over one bad review. Let ‘em walk. There isn’t another consumer product or service in the U.S. — and certainly not one that can cost a consumer $50,000 — that isn’t subject to some kind of consumer review. The truth will set us free, from lame billboards and late-night TV ads and all sorts of hucksterism.
8. Stop bickering and focus on the customer: the industry can’t fix its relationship with consumers because it’s still so busy arguing with itself: about what agents should pay brokerages, about what brokerages should give agents, about who promotes whom. Every time I start to think that real estate will sort itself out, I go to a conference of brokers and panic, because I’ve never seen so many professionals invest all their passion in topics that have nothing to do with the customer. If we focus on the customer, we’ll be unstoppable.

So those are some ideas on how the industry — and Redfin, too — can change for the better. Except the ideas aren’t really our ideas. Late at night, over drinks, most everyone in the industry seems to agree that some day we need to have fewer agents, focused on the right things, and kick-ass websites of our own for connecting consumers with reliable  information. The only difference of opinion is how long we wait to begin making those changes. We think the time is now.

(Photo credit: Canadian Pacific on Flickr)

Movin’ on Up

Redfin’s on the move! As the intrepid John Cook reported last night, today is our last day in the Dexter-Horton office building we’ve occupied for years here in Seattle. Our new office is at:

2025 1st Avenue, 6th Floor
Seattle, Washington 98121

We moved for a couple of reasons:

• To save money: we’re subleasing the space from Hasbro at a lower rate, and it’s slightly smaller than our current space too. When the sublease expires in a few years, the rate will go up, but for now it’s a very, very good deal. We would encourage any startup in Seattle whose lease is up to look at other spaces before extending a lease. We originally toured other offices as a tactic in our negotiations with Dexter-Horton, and ended up calling our own bluff once we saw what was out there.
• To work together better: Dexter-Horton is an old building, divided into fingers so everyone had a window to open on hot days. Now the windows are painted shut, and we spent the past two years staring at one another across a sunken courtyard. I worked alongside the engineers in the middle finger, flanked on either side by our real estate agents.  Being the middle finger wasn’t an ideal configuration for collaboration, and collaboration after all is what we hope will make us great: having agents and engineers work together to develop a deeper, more local understanding of the entire home-buying process.

We’re a little embarrassed to say that the new place also has jaw-dropping views, which I never expected to get at a startup, and probably will never get again — don’t worry, we won’t lose our scrappy spirit! – and it’s just around the corner from the Pike Place Market, the Virginia Inn and Serious Pie, good for late nights and happy hours. We’re packing up tonight, and hope to have the office ready late tomorrow morning.

Starting at 7 a.m. Pacific Standard Time on Friday, our fax line will return a busy signal while we move, and our agent telephone numbers will forward via Google Voice to their cell phones.  The fax should be back in action in an hour or so; our agents are distributing alternate fax numbers as needed.

All of our other systems, including Redfin.com, e-mail, our main office number, our customer database and our commerce tools — already run in the cloud, so there should be no interruption in service.

One final note: anyone looking for a great commercial real estate agent should consider Clay Nielsen at Washington Partners. He’s the only commercial real estate agent I’ve worked with who understands that startups need short leases for unpredictable growth and unsteady cash flow, he’s a bulldog in negotiations, and he knows everything that moves in the downtown market, usually well before it hits the market. No one else would put up with such insufferable cheapskates, again and again and again.

(Photo credit: D & E Hutchinson on Flickr)

Daniel Phommathep, Rest in Peace

Dave Selinger, Redfin’s founding CTO and now the CEO of RichRelevance, contacted us today with news that one of the original developers of Redfin’s website, Daniel Phommathep, passed away this morning. Below is Dave’s soulful tribute to Daniel. May Daniel rest in peace.

Friends and Fans of Redfin,

This morning Daniel Phommathep, one of the great original sources of energy that brought Redfin from amorphous ideas and sketches to a reality, passed away after losing a two-month battle with cancer. At only 30 years old, his passing is a tremendous loss for the Redfin community and a tragedy for his entire family including his wife and three beautiful children.

Daniel was one of the ten software engineers who moonlighted to develop the original website during the summer of 2004. We each worked our day-jobs, grabbed a quick dinner and then banged away on laptops and servers in my Harbor Steps apartment late into the evening—frequently past 2 or 3 o’clock in the morning. Daniel was a constant source of energy for the team and a motivator when we needed an “oomph” to push ourselves that extra mile (when even 3 Cokes, 2 Mountain Dew’s and a Redbull weren’t quite enough). We all worked for stock with no monetary compensation that whole summer because we believed so strongly in the vision of Redfin—we became a team and a family bound not only by our work, but by our passion. Through all of this, Daniel became one of my closest friends.

The Redfin site and experience that we’ve all come to know and love is in large part a tribute to the legacy of Daniel Phommathep. Today, let’s take a moment to honor Dan and his contributions to our lives, to say a prayer for his family, and to remember how utterly fragile our lives are and how precious each moment is in living.

First the Novel, Then The Essay, Now The Link

The web has turned every writer into a modernist poet.

Take the strange little masterpiece that is Tom Scocca’s essay on the martyrdom of Gilbert Arenas. Scocca’s idea — Arenas was banished from the NBA not for his guns but his jokes about guns — is good enough, and his writing is fine, but what makes the piece a joy to read is its dozens of snarky, cunning references: the essay includes 31 links to stories about people defecating in one another’s shoes, urinating on each other’s legs, firing guns at topless bars, hypocritically hyping athletes accused of doping, and all sorts of other glorious scuttlebutt. Scocca’s little catch-me-if-you-can crytpogram has more random cultural references and score-settling inside jokes than a T.S. Eliot poem.

Links are now an essential part of any creative effort, and any casual web reader can’t help but notice — and appreciate — their proliferation. Like Frank Rich of the New York Times — who routinely embeds more than 20 links in each of his columns, often to rumors that the Times itself would never deign to substantiate — Scocca’s links aren’t merely a facility for connecting one web page to another, but a way to incorporate dozens of arguments, jokes, ironies, anecdotes, tangents, historical footnotes, attacks, sometimes doubts that the writer barely has time to make. You aren’t even supposed to click all the links; they are simply a license for someone like Scocca to issue one intriguing statement after another. Every essay is now an iceberg, mostly submerged beneath the surface.

The result is so different that it is almost a new form — like the dramatic monologue invented by Browning, the essay itself invented by Montaigne or the novel by Apuleis — one invented by everyone writing link-happy posts. What was once a simple exposition of an idea is now a wholly intact world-view, a roller-coaster ride through the farthest corners of someone else’s trivia-stuffed brain, a David Foster Wallace essay that doesn’t wear you out. I find it exhilarating, mostly for its sheer speed: you don’t have to explain that Michael Jordan may have retired from basketball the first time around so as to avoid a gambling inquiry; you merely have to make a cryptic reference to stars with out-of-control gambling habits. Who can resist following that rabbit down its hole?

This is a better way to tell a story, and it’s an example of how technology isn’t just changing the communication of information, but the information itself: how we write and how we think. In the most recent issue of The Atlantic, the great Michael Kinsley complained that newspaper articles need to dispense with the laborious context and extensive citations that make an article about health-care reform such heavy-sledding — let’s do away, he says, with all the verbiage about “a sweeping overhaul of the nation’s health care system” or the clumsy references to ”Representative Louise M. Slaughter, Democrat of New York and chairwoman of the Rules Committee” — and just get to the point.

But it doesn’t seem to have occurred to Kinsley that we don’t have to remove the context, we just have to link to it. Journalism shouldn’t always be diminished by the Internet; once we move to an all-digital format, it can actually be improved.

Of course, the issue is broader than just journalism. Am I the only who wonders how the hyper-link will affect longer works of art, such as novels and histories? When people talk about the Kindle, they invariably focus on the reading experience: what will happen to the book’s musty pages, rolled up paper-backs, fragrant glue? But I’ve wondered how the writing experience will change if book authors too begin to publish exclusively electronically, in a format that favor links and constant updates. For some silly reason I often find myself wondering how Shakespeare, or the Apostle Paul for that matter, would have written differently if he could have used HTML.

My fear is that writing will become more provisional, more “this-is-what-I-have-so-far” if the finished product isn’t type-set and committed to paper a million times over. What I need more than anything else from a writer is a commitment, to make up her mind about what she really means. In writing as in life, only an impending sense of finality can ever bring out our best effort.

This is true not just of mere mortals, but of the greatest writers of our time. One of Saul Bellow’s editors — did you know that Bellow did five-minute yoga head-stands while editors pored through his work? — complained that it was only in the proofs that Bellow really began honing his craft: “Just read that,” an editor who never liked him is reported to have said about one of Bellow’s late-breaking revisions. “Read it! He took a perfect sentence, the bastard, and he made it even better.” Not something we’re likely to do here!

Case-Shiller Data Shows Fifth Consecutive Price Increase Nationwide, Weakness in Northeast

Happy holidays Redfinnians!

The Case-Shiller data for October came out this morning; looking at the seasonally adjusted data as we always do, we see the fifth consecutive monthly increase nationwide, but weakness in Atlanta, Chicago, Boston, New York. After four months of gains, New York and Boston declined for the second straight month in a row, whereas Seattle saw its first increase in 28 months:

DC has been especially strong. We’ll add a graph and provide the usual context in our newsletter, due out later today.

We Blew Up the Call Center (And We Launched Atlanta)

The world’s best real estate brokerage came to Atlanta today, increasing the number of active listings available on Redfin’s site by a whopping 30%. But better than the Atlanta website is the team behind it, starting with the guy we hired to run our Atlanta business, James Marks.

From the moment James explained to us that he once ran a big customer-service team at Best Buy — and made sure every single car-radio installer set the clock — he had the job. James has been an Atlanta broker for six years. He has a gentle southern accent, a deep service ethic and the kind of humility you don’t see every day but what’s most striking about him is that he could probably destroy, seduce or charm any wild animal in a hand-to-hand encounter. He’s very resourceful and determined.

James will be offering our direct service in the Alpharetta, Buckhead, East Cobb, Intown, Perimeter, Suwanee and Woodstock areas. We’ll work with partners to serve West Cobb, Gwinnett, Peachtree City and Lake Lanier areas.

Redfin Invests in Local Teams
More important for our customers nationwide, we’re rolling out local real estate teams for every market we serve. This is a major service upgrade designed to give you the intimacy and personal service of a small team while still ensuring you always have someone to help you, seven days a week.

An agent runs each team, assisted by a coordinator for scheduling tours and handling the closing paperwork. Two or three field agents help you get into homes all over town on short notice. You work with the same folks throughout the process and one person — the agent — is responsible for your happiness. There’s technology behind the scenes to route service requests and phone calls to the right person on different days and at different times, but that’s only so it’s all simple for you.

It’s a big shift for us. The way it used to work, the agent was your main advocate, but you had to call into a Seattle call-center to schedule home tours. This allowed us to offer service every day of the week morning, noon and night. But it turns out local expertise was also really important to our customers.

So why didn’t we hire local teams before? Well, one reason is that we just didn’t have enough business. When you start out getting two or three offers per week for customers across Seattle, you don’t have enough business to hire a bunch of local teams. Getting local is easy for traditional brokers, because their agents are contractors, but Redfin hires employees.

Which brings us to the essential conundrum of an online brokerage. The online part scales very well, as you naturally want to bring the world’s greatest real estate search site to every market you can, as fast as you can. And the brokerage doesn’t scale so well, as it’s expensive to hire a team for every neighborhood, particularly when you’re finicky about quality and consistency.

But everything that works against you when you’re first starting out starts to tip the other way as you grow. Redfin serves Palo Alto or Newton or Santa Monica much better than we used to, just because our business has gotten big enough to support local teams that know those areas.

Of course, we still struggle when we open a new market, but even that’s gotten better, first of all because traffic in every new market grows faster than it did in the prior market. And second because we’ve stopped trying to take on an entire market on our own. Rather than covering all of Atlanta just with James’s team, we work with partner agents to handle the outlying areas so James can stay close to home.

We think teams is another big step toward becoming a mass-market service that blends the best of the traditional world with new technology, and a commitment to serving customers rather than chasing commissions.

What About All the Other Features?
As with every release, Redfin also included the usual grab-bag of goodies, starting with email alerts on recent past sales:

Whenever a property you’ve marked as a favorite sells, we’ll let you know by email. To get the photos, prices and other details for all the homes  that sold in your neighborhood, just click “Email Me New Listings” in the box that appears top left:

Now visit My Redfin, click on Saved Searches, then click the “Email Options” link to ask to be notified when “Listings Are Sold.”

You can make the same adjustments for any listing alert.

We also began collecting reviews on the local lenders that our agents recommend, relying on Rob McGarty to publish them to our site. Over time, we’ll automate this, but for now you can trust to publish every review, good or bad, for every deal, just as we do with all of our agents:

We also link to other lender marketplaces, so you can keep our recommended lenders honest on price. We don’t make any money from our recommended lenders because we haven’t figured out an ethical way to do this. When and if we do, we’ll let you know.

And that’s the new website! Happy holidays, and thanks to the entire team that worked so hard to deliver this release. It’s gorgeous! As always, we’re excited to hear what you think.

A Media-Tech King Contemplates Anarchy

Michael Arrington published another hum-dinger of an essay this morning, this one on the future of blogging and journalism in a world of rampant theft: one writer takes another writer’s story, hardly bothering to rewrite it, and posts it somewhere else, with the Internet portal and search engines richly rewarding the copycat rather than the creator. “The rise of fast-food content is upon us,” Mike writes, “and it’s going to get ugly.”

Mike blames everyone for it, including the New York Times, citing a conversation he and NYT editor Damon Darlin had before last summer’s Naked Truth, when Damon said he reads Michael’s writing every day. Mike appreciated the compliment, but in today’s essay he worried that it easily leads to the New York Times’ taking a TechCrunch story and re-writing it for the NYT’s broader audience. I am not sure this is theft — when an article appears in the New England Journal of Medicine or in TechCrunch, the New York Times can reasonably conclude that my mother didn’t see it — but we can all agree with Mike that theft is wrong.

A few moments later on that day last summer, I asked Mike why stolen music, stolen images, stolen television didn’t bother him when presumably theft from TechCrunch would. Mike didn’t miss a beat. He said stealing from TechCrunch was fine so long as there was attribution:  spammers often take TechCrunch content word-for-word and re-post it under their own name, as if they had written it. I smiled, because it was an argument based on pride, not money: sometimes I think Mike is an artist posing as an entrepreneur. Even when you steal U2, Mike argued, you know it’s U2. It was a good point, but I still wondered if artists less wealthy than Bono would agree that this is the main point.

Now it seems that Mike, one of the most influential thinkers in technology and media, has broadened the scope of his concerns, to journalists who re-write his essays, not just those who re-post them. The problem, Mike now says in this morning’s essay, is that quality and originality are irrelevant when the “portals and search engines” “force feed” people whatever content is most profitable to display.

The argument that these Internet portals and search engines hold all the power has been dismissed as so much whining, even by TechCrunch earlier this month. In this morning’s essay, Mike cites AOL for linking to its own sub-par content, often re-written based on original reporting from TechCrunch and elsewhere. But he may as well talk about Google too, which only links to content that drives Google’s content-must-be-free business model (in Google’s defense, it’s algorithm rewards quality whereas AOL does not). In both cases, Mike can’t afford to opt out of AOL or Google, and bravely says he would rather use the Internet’s fire than fight it.

Hear, hear! But just noting that we should use that fire for good — and not cheer as it burns down everything in sight — is a huge step in the right direction. For years, artists, photographers, film-makers, writers and musicians have made less money so YouTube, EZNews, Napster & Boxee can make more. Sometimes we have been distracted by debates about whether once-bloated newspapers deserved to live or die, which allowed us to avoid the fundamental question of whose side we’re on: the creators or the distributors.

Theoretically, when Blogger eliminates the printing press and YouTube eliminates the movie studio, writers and directors should make more money, directly from their audience. It can still work out that way, and I believe it will, but the first step is to admit that it’s a problem that those who create are getting fleeced — to a greater degree than the publisher, record producer or studio executive ever could fleece them — by the technologies that distribute their creations.

Another way of saying this is that if AOL keeps screwing Mike, he’ll eventually stop taking the time to write such good stuff. And when he does that, the world will be a much poorer place… not just for Mike, but for all of us readers and for AOL too. My guess is that before that process is complete, the best and brightest in tech will start working for the artists, and not just the aggregators and distributors. A little balance in this regard will do us all a world of good.

(Photo credit: Randy Stewart, blog.stewtopia.com)

Grey is Every Theory, Green is the Tree of Life

On the last Tuesday of every month, I get up at 5:45 a.m., pour myself a bowl of cereal, and begin hitting the refresh button on my browser, waiting for the Case-Shiller data to come out on the housing market. Once the data go live, we crunch the numbers, make some charts and publish a newsletter summarizing everything that moved in the market over the past 30 days. We try to stick to the facts: foreclosures, mortgage interest rates, housing starts, sales volume, price indexes.

And then, because we are sensitive creatures who live for praise, we wait for the responses… When the market was going down, Realtors would complain that the newsletter was fanning the flames of an already catastrophic market while consumers said it was a breath of fresh air. Given Redfin’s history as a consumer advocate, this didn’t bother us. As Franklin Roosevelt would say about industry fat-cats, “They are unanimous in their hate for me, and I welcome their hatred.”

But now that our newsletters have taken note of a market up-tick in some areas, we get all sorts of outraged screeds from bubble-bloggers and market-vultures. Here’s one of the briefer responses to this month’s newsletter:

The NRA  [likely a reference to the National Association of Realtors, not the National Rifle Association] obviously your Master.

p/s i wonder about your resume.

Enjoy your turkey

And here’s one from last month:

Dear Glenn,

How stupid do you think we are? Housing prices aren’t rising anywhere. 10% of houses in America have delinquent mortgages. If we didn’t buy yet, how are rising prices going to get us to pull trigger? Face it- the market has run out of stupid people. You are actually going to have to tell your clients to lower their prices to make a sale, especially when rates go up.

BTW- Spreading rhetoric like this has made me decide to never be a Redfin customer. I thought you might be different than NAR but I guess not.

-Kyle

We’ve seen the same tone on our forums. Yes, by all means, let the fur fly. There’s a very good argument to be made that prices will decline further, and it’s largely hosted on Redfin’s site.

But it’s hard to understand complaints that we’re the ones boosting the market. Most of the screeds cite the huge number of foreclosures as evidence the market will keep dropping  (whereas we tend to think that a big increase in interest rates is the most important swing factor). But every Redfin newsletter already discusses foreclosures at length, using words like “scary” and “bottomless.” Here’s what we said about foreclosures last month:

What has been preventing any type of serious price recovery has been the seemingly bottomless pit of foreclosures. And the problem may be getting worse. Nationwide, foreclosure filings increased 5% in July – September as compared to April – June… Bank re-possessions increased 21% in the third quarter as compared to the second.

And here’s what we had to say about foreclosures in the latest newsletter:

But we don’t think inventory will drop much over the next three to six months and it will probably increase starting next year. As usual, we’re worried about the number of foreclosed homes banks will try to sell this winter and next spring… 14% of all home loans had at least one payment past due in the third quarter; 3.4% are 120 days past due as of October, up from 3.2% the month before. Michelle Meyer, an economist at Barclays Banks, does not expect foreclosures to peak until mid-2010.

For the bubble bloggers, it is not enough for Redfin to recognize that trouble lies ahead. We must also suppress any evidence that that good news has occurred in the past. The primary source of this good news has been the Case-Shiller index, which shows a price increase in most areas over the summer.

Anyone looking for bias in the Case-Shiller index is looking in the wrong place. The Case-Shiller index is the most well-respected, academically rigorous index in the world, created by Robert Shiller, aka “Mr. Bubble,” the only economist credited with predicting both the tech and real estate bubbles. Case-Shiller economists painstakingly cull sales records for months in order to throw out sale prices inflated by kitchen-remodels and the construction of big new houses.

When we report on the Case-Shiller data, we aren’t providing a projection on the future, much less our own opinion, neither of which we tend to offer in our monthly digest of market news. In fact, the only projection we’ve offered on real estate prices was last month, and it was the kind of projection designed to tell anyone buying a house now to wait six months: A research report published by First American CoreLogic — and touted by the Wall Street Journal — predicts that nationwide U.S. housing prices won’t bottom out until March 2010…

Like a broken clock that’s right twice a day, either one of those opinions is bound to be right sometimes, and bound to be wrong other times. As even the perpetually depressed philosopher Albert Camus once had to concede, “happiness is inevitable, too.” The truth is more complicated than any one ideology allows, but people need to hear it.

So we’ll put together a panel of enthusiasts and skeptics to talk about where they think the market is headed, and maybe that will provide a more balanced view of a very complicated subject. And we’ll keep assembling all the facts. If you’d like to be on the panel, send us your credentials. If you feel we’re suppressing important facts, let us know what they are and where to corroborate them, and we’ll include them in the next newsletter. And by all means, keep posting, commenting, arguing and writing us emails. We love the debate. We just want to keep it civil & fact-based.