Notorious R.O.B.

In Part 1, I explored how large law firms and big brokerages are similar, based on the forthcoming paper by Glenn Reynolds, a law professor and blogging pioneer.  Then in Part 2, we looked at how they’re different in some fundamental ways, particularly compensation models, that makes the size of Big Brokerage appear to be all of the disadvantages with none of the advantages.

In this Part 3, I would like to explore how size could be made relevant again.  There are still areas where size does matter, even in real estate.  And the future of the industry really depends on how big brokerages respond to the rapid changes in the social and economic marketplace.  Up to this point, most have been extremely slow to react, believing that a strategy of evolutionary adaptation makes more sense than a risky revolutionary act.  I no longer believe, if I ever did, that slow evolution will get the job done for the giants in our industry.  The window of opportunity is closing, and quickly at that.  Unless something fairly dramatic is done, and soon, I believe that by 2020, the large brokerage as we know it will be a thing of the past.

So, with that Cassandra moment out of the way, what are the areas where size still matters?  And how might big brokerage respond to make size matter once again?

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In Part 1 of this series, I examined a scholarly paper by one Glenn Reynolds(aka, Instapundit, who is a law professor, the author of Army of Davids, and one of the most important and influential bloggers in the United States today) about the future of big law firms and drew some lessons about how big law firms and big real estate brokerages are similar.

In this part, we focus on how they’re different.  And before you say, “Duh, Rob” (or since you’ve probably already said that, before you say it again), of course lawyers are not realtors, and law firms are not brokerages.  But there are lessons to be drawn from some of the fundamental differences as they go to issues of business models.

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Pocket Hercules (Photo by Sam Greenwood/Getty Images)

Aaaaand I can hear the tee-hee’ing going on in Costa Mesa from here.  While I’m not above making cheap jokes in order to erect a logical argument about brokerage performance, business dysfunction, and customer satisfaction, this post is actually about serious issues in real estate, technology, and marketing.  So stop giggling.

We begin with a question: does the size of a brokerage matter in real estate?

I have argued in the past that the Big Broker holds the key to the future of the real estate industry, and that small independents and boutiques will end up surviving on the good graces of the various titans in their markets.  Of course, that argument was counter-factual at the time I made it (over a year ago now) and I conceded that as the industry was then, big brokerages were boned.  What I argued then, and still believe to some extent, is that the Big Brokerage with the will to change has the resources to do so.  But in the almost year and a full quarter since I wrote that post, I don’t know that I’ve seen too many examples of such visionary brokerages.

Meanwhile, technology continues its remorseless march.

Then comes this paper by one of the pioneers of the blogosphere: Glenn Reynolds, aka, Instapundit, the Beauchamp Brogan Distinguished Professor of Law at the University of Tennessee.  If you’re at all interested in the impact of technology and of the Web (and its offspring, social media) on the real estate industry, I urge you to read it in full.  While it is a scholarly paper published in a law review, it’s written in plain English for the layman, and does not deal with legal issues as much as it does with business and social issues.

The implications are profound, and the questions Reynolds raise are significant.  And insofar as law is the epitome of professional services, and one that many realtors look to as an example of client-driven professional services, changes in the legal business model are something we should pay close attention to.

This will be a multi-part post, as the topic is large enough and complex enough to warrant breaking up into bite-size pieces.  This first part focuses on understanding Reynolds’s argument as it applies to law firms, then extrapolating similarities to real estate brokerages.

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Vive La Resistance! (Members of French Underground, WWII)

In my past writings, I’ve written about the seismic shift going on in the real estate brokerage industry from the perspective of Big Brokers and Big Brands.  You can find those writings here (and the parts linked there), here, here, and here.  At the same time, I’ve always wanted to write the other side of the debate, because the victory of Big Brands is so reliant on a major assumption: that they embrace major change, including putting new blood into the top executive positions, and changing the culture of the organization.  This is never easy, but nearly impossible while senior management is preaching the message of, “Batten down the hatches and get back to basics!” whatever that means.

While the Big Brands are struggling to figure out a strategy for moving forward, however, the Kristian Soldiers are hard at work trying all manner of new things, new strategies, new thinking, and changing the face of the industry.  They are winning far too many battles today, and may ultimately win the war.

This, then, is a series of thoughts on how the Real Estate Insurgency can out-maneuver, out-innovate, and ultimately defeat Big Brands.

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