Dog and butterfly – playing poker: Anatomy of the iBuyers’ anathema.

Run that by me again…?

“Understanding #iBuying: As an investment analogy, the #iBuyers’ quest for success would be like an ordinary millionaire buying an apartment community as a loss-leader in order to gain access to the precious on-site vending-machine concessions.”

I wrote that a couple of days ago, but I’m not all the way in love with it. It’s plenty stupid, which is certainly a necessity for understanding the current state of iBuyer thinking. But it’s just stupid, not stupidly predatory. And it is very far from the ideal of all ideals: Pointlessly stupidly predatory.

So as I watch Zillow declare its “incumbency,” I also see it jacking up prices everywhere – a sure sign of financial stability – typically from free to lots. I haven’t seen this yet, but I’m told Big-Z is now charging $10 a week for rental listings, and it somehow thinks buyer and seller ‘leads’ that yield in single-digits are worth 35% of the gross sales commission at Close of Escrow.

That stinks, but it’s a better business model than iBuying: Some fools will pay, and some of them will get addicted to paying. This is how predatory businesses work, from every kind of sales-lead brokerage to porn to nicotine to gambling to heroin: Probe for the weakness, cultivating it where that is most propitious. All of this is evil: It is never an honest man’s job to talk the other guy into making a mistake. But Evil 2.0 is undertaken by TOS, and the suckers don’t even know what it is they are selling when they beg to be despoiled.

So who might love to pay $10 a week for a Zillow rental listing? How about a landlord who is in the applications business, not the rental business? Rented, a nice suburban home might pull $40 a day. But never rented, yet always for rent, it could be worth hundreds of dollars a day in completely-hopeless applications coughed up by the click-load from Zillow.

Does anyone shear sheep that way? At the bottom of every credit score, there is a gaggle of gonophs eager to take your last few bucks and then turn you down yet again. That is, if they don’t get you to pawn your car – or your house!

But that’s a better way of understanding iBuying: Churn, baby, churn! You think all this mishegoss is about housing, when the profit-seeking is all about the things you are neglecting, while the housing is a freemium – a trinket – deployed to distract you.

The initial inquiry itself is a deep data dive, I’m sure, and every subsequent contact increases the self-revelation. Need a mortgage for the next place? Jackpot! The product is you, suckerbait. They only buy one out of ten? I’ll bet they’re planning to prey on the financial details of ten out of ten.

So iBuying is more like the crooked landlord than the addlepated millionaire: It’s not about housing, and it’s not even really about churn, it’s about harvesting and reselling the financial information stirred up by the churning. Side deals? Sure. Resell the worked-over ‘leads’? Why not. But they’re interested in everything their customers ignore, even as they neglect and mis-manage the six-figure assets they claim are the product.

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Is that a business? Who cares. It’s no fit work for a productive human mind. It yields no new value, it simply creates waste in order to feed on it – like ants farming aphids. But if rent-seeking is vile, inducing the events that will result in rent-seeking is worse. And setting matters up to be inescapably recurring despoliations – as with a heroin dealer – is diabolical.

The Nazarene said, “Do not bind the mouths,” and the MBAs ran right off and invented the science of mouth-binding. Predatory business is different from ordinary crime in two essential ways: First, none but me dare call it crime, since it wears such nice clothing to the larceny. And second, the ideal is not to skin the sheep and then feast one time, but to shear them again and again.

Real estate brokerage is a good example of a predatory business: Big brokers don’t sell houses, they sell big dreams to dumb agents – some of whom sell houses. The broker’s business is milking gullible new agents for the year or two it takes them to go broke, all the while recruiting new suckers to milk. The victims of this abuse end up ruined financially – which cannot be a surprise to the brokers, who oversee an 80% failure rate year after year. Instead, the one-in-a-hundred who can actually do this job well is paraded as the poster child to recruit still more gullible suckers. That’s the whole of the big-brokerage business model, minus all the ancillary nickel-and-diming.

Web 2.0 scales that style of predation in innovative ways. As an example, Über connives its drivers into destroying their health and their own vehicles for almost no return-on-investment, net-after-everything. They have built a billion-dollar business out of gulling fools into under-valuing their own time and vehicles – their business assets. This is sharecropping scaled, and Zillow is emulating it when it puts a 35% referral fee on endless, boundless, useless ‘leads’. The ultimate ideal of the predatory business is the heroin addict: The sucker who cannot ever stop paying.

There are errors-upon-errors in all of this thinking, hardly any of it new to iBuying, but the error that matters most is a special instance of the Static Market Fallacy:

“Sharecroppers never rebel.”

In fact they do. You’re soaking in it.

I’m in the process of showing sellers, buyers, flippers and agents how to take best advantage of the iBuyers’ vast ineptitude at real estate. The sellers were first to figure them out, to be fair, followed by a few aggressive agents. In a year’s time, iBuyers will buy and sell very predictably – buying above FMV and selling below it – because well-educated consumers won’t let them get away with anything else.

There’s more, though. Pandemic moral hazard can be seen as a sharecropper rebellion. So, too, with suicide, addictions, morbid obesity, childlessness and every other red-lined demographic metric. Day by day, more and more people are sick – literally to death – of having their mouths bound by pontificating gonophs underwritten by Wall Street. When you have overtly and blatantly taken a man’s life away, gulling him into buying it back from you over and over again, he will find a way to escape your torment – to the grave if necessary.

The Bloodhound Way is an epistemic praxis: More than a way of knowing, it’s a way of knowing better – over time. It consists of breaking an idea down to its strategic essence, then rebuilding it from there. Qua praxis, every new result is referenced back to the theory, with performance optimized and perfected with each iteration. If the theory truly is of the essence, so should be the results.

I think about everything this way. Have for all my life, long before we adopted the dog that gave my way of working a name. I don’t buy bullshit – could you tell? – but I don’t mimic it, unwittingly, either. If I don’t understand a claim all the way down to its underlying strategic objective, I’ll keep bloodhounding away at it until I do.

I told you how Thalia imposed herself on my thinking, and I like the two of them, Odysseus the bloodhound and Thalia the butterfly, working together: She finding interesting notions to sniff at and he sniffing relentlessly. That makes for a good team, if only in imagination, but it makes for a good way of seeing everything all at once, I think: Tree, trees, forest – nothing exaggerated, nothing omitted.

So: A dog and a butterfly are playing poker against a growing crowd of very dumb whales. For now, I can show people how to extract maximum profits from the whales, all while choosing the to-be-slain among the iBuyers who won’t learn real estate. More than that, I can show how to streamline everything they are doing now to cut their DOOP – the number of days they own non-producing properties – dramatically. Still more, I can reinvent key parts of the real estate transfer process to make DOOP approach zero. But far beyond all of that, I can envision a way of effecting commerce that all-but-eliminates eliminates moral hazard.

The iBuyers suck at real estate, but traditional real estate sucks, too: It milks desperate, under-trained, under-supervised suckers into unwittingly bilking their clients – blessedly rare and few for most agents. But everything of debt-repayment stinks pretty badly right now, even in a healthy economy, and the prognosis is nothing but worse.

Sharecroppers never rebel?

How much are you willing to bet on that proposition?

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