The Amazon Model of Zero Physical Infrastructure: Real Estate — You’re Next

The Amazon business model has shown that the first to zero infrastructure stands the best chance at survival; apparently, this holds true in the Real Estate complex

eXp World Holdings, better known as EXPI, has been absolutely disruptive to the Real Estate Complex in having created the first zero infrastructure, completely cloud-based brokerage firm; taking a page out of the Amazon playbook

Five days ago I published a Medium in which I interviewed eXp World Holdings, Inc.’s CEO Glenn Sanford. The interview was comprised of a series of basic questions I put together in an attempt to better understand 1) Sanford as a manager, 2) eXp as an enterprise, and 3) [maybe most importantly] the dynamic of the Real Estate Complex. I note #3 as being “maybe most important” in that as nice as the idea of eXp might be, if in execution the Real Estate Complex 1) isn’t ready to be disrupted [by the eXp model in execution] or 2) can be defensive [to the potential disruption of the eXp model; i.e. if it has the agility to be reactionary and evolutionary] I simply would NOT be interested.

There’s a big difference [almost immeasurable] between being disruptive enough to have a few good years’ run [to which eXp has definitely had] and being the next 100X returner [in equity appreciation terms]. To be the latter, you have to be truly disruptive and truly evolutionary. I needed to know if eXp was the former or if it was the latter.

After having been introduced to eXp [better known by its trading symbol “EXPI”] I’ve been enamored with both the idea of EXPI as well as the execution of the EXPI business model; which, again, are two very different things. I always loved that Sanford & Co. took an alternative, modernized approach to one of the oldest institutions in American business — the real estate brokerage model — but I’m growing to love how Sanford & Co. are executing the model. The execution, if you haven’t read through the interview I published and/or if you haven’t spent time digging through the EXPI public financials, includes an alternative compensation structure [inclusive of offering share-based compensation in the publicly traded vehicle] as well as providing an “always on”, global, cloud-based support structure. In both data-based findings as well as anecdotal interviews I’ve performed, these items matter greatly to the talent [i.e. to the real estate agents looking to join and/or having already joined EXPI]. Agent growth, for those wondering, is one of the most transparent and immediately reflective indications of brokerage health. To be clear, EXPI’s agent growth has been explosive and is something that the company prides itself on. According to many at the company, EXPI expects to continue to be able to poach top industry talent as a result of its model; but also, mostly as a result of the two items just outlined [and exampled in the screencasts below].

I want to also state that I’m beginning to think that, in time, EXPI can be as disruptive to this slow moving, tech-averse institution [the Real Estate Complex in general but specifically the real estate brokerage model] as Uber was to the Transportation Complex. I realize that using Uber as a “reasoning by analogy” reference is as en vogue currently as it is “sexy”, but I think this is one of the few occasions where it’s appropriate. Or rather, I might compare EXPI to another publicly traded company — Amazon.

I think that outside of EXPI using its status as a publicly traded company, in offering agents share-based compensation [and by way of this offering to allow the agents to participate as owners in the upside of the firm], that there’s very little that EXPI is doing that is all that different from what has always been done in this niche. BUT, by way of deploying its cloud-based model — which is EXPI’s true differentiation — it is doing things differently. The above mentioned “always on” support system is one example. Breaking away from the “fraternity”/ “sorority”-like environments created in the real estate business, often created by hosting groups of agents via physical-infrastructure tethered offices, is another. I mean, something as simple as allowing the agents to be true entrepreneurs rather than faux-entrepreneurs that are always competing with each other is a serious game changer. Outside of the virtual campus provided by EXPI [shown in the screencasts below] the agents are left truly to themselves; free from the competitive pressures of being housed and/or tethered to a physical infrastructure. I’ve talked with tens of agents [presumably covering the spectrum of personalities], all have uniformly said this is something they dislike about their jobs.

It’s in these subtleties that EXPI has seen the above mentioned explosive agent growth. It’s in these subtleties that EXPI has established itself as a brand in a vertical with so few brands. It’s in these subtleties that EXPI has been able to streamline processes that, prior to EXPI, had a hundred years of time telling us that they were streamlined.

But it isn’t the subtleties of EXPI where the investment thesis lies. Oh no. It’s in the blunt differentiation; again, the lack of physical infrastructure. Outside of the above listed ancillary positives, the absence of infrastructure allows EXPI to be the “low cost producer”. Take it from a guy who’s core investing focus is in finding technologies that create low cost producers [i.e. in finding commoditization and buying the lowest cost producer], that matters. Oh boy, does it matter. Amazon has shown the world that being the low cost producer matters; and Amazon has shown us that, eventually, technology advances will always require optimal production costs. Put simply, Amazon has shown us that everything, one way or another, comes down to low cost production . EXPI, because of its lack of infrastructure, will [I believe it currently is] the low cost producer in the niche. At least that’s a bet I’m about to make [once I’ve completed my due diligence; if everything holds true to my current assessments].

All the other stuff [as outlined] is great. But, for me, I’m simply wanting to bet on the winner of a War of Attrition. If EXPI can win this war, which so far I’m leaning towards that it can, I’ll bet on it. If it can do this while also poaching top talent and creating an ownership base of its PubCo that happens to be made out of this top talent — great. We’re that much better off together. But, at the end of the day, I’m about the winner of the War of Attrition [because EXPI is bringing a War of Attrition to the Real Estate Complex that has never been brought]. I think EXPI might be just that winner.

So, without further delay, I present several screencast walkthroughs of EXPI’s virtual campus: its own version of the Amazon Model; its own disruptive, War of Attrition spark. Sometimes disruption is something truly evolutionary; something truly new. Sometimes it’s a team of innovators simply bringing a modernized approach. This, to me, is that modern approach for the real estate brokerage model. [Stay tuned for a financial breakout to come out over Medium in the next few weeks].

Walking to the Auditorium: I take an initial walk through the EXPI virtual-campus in heading to the training and presentation auditorium with CEO Glenn Sanford; a CEO I’ve grown to admire greatly
Training Day: EXPI CEO Glenn Sanford provides a quick demonstration of the training capacity within the virtual campus; illustrating how EXPI found a way to save millions in T&E expenses while losing nothing of employee training efficacy
Training Day: A few extra comments from Sanford
Optimizing the Model: I get a chance to chat with the operational team at EXPI — which was lovely; learning just what they are doing to attract the talent they are attacting
Agent Services: I end my day at Agent Services, chatting with the team that is tasked with onboarding new agents as well as making sure that the new agents can hit peak-productivity as fast as possible


[1] None of the companies/enterprises/entities mentioned in the above note were involved in any aspect of the above note preparation or in any aspect of the preparation of any data or information presented.

[2] I have not received compensation from any of the companies/enterprises/entities mentioned in the above note nor any other party for the writing of this note; and/or any other note written prior [regarding any of the companies/enterprises/entities mentioned in the above note].

[3] I may or may not have received compensation for providing research and/or consulting regarding one or more of the above companies/enterprises/entities mentioned in the above note from third-parties at some point prior to writing this note and/or I may receive compensation for providing research and/or consulting regarding one or more of the above companies/enterprises/entities mentioned in the above note at a later date. This includes providing subscription-based research and/or consulting services to both institutional and retail-based capital market participants.

[4] Dallas Salazar: I own, or my family or company owns, or I have influence over some amount of the outstanding shares of one or more of the following companies mentioned within this note.

[5] The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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