Facts Matter: Confidence in a conclusion

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Good decisions in the real estate industry are based on facts.  Facts come from many sources (such as government, consultants, proprietary, …) but not all facts are equally important.  Some facts would have a big effect if they changed while a change in other types of facts have little to no effect.  This posting notes that some facts are unimportant because, even if they were to change, it is not clear whether the change is real or random.  Randomness introduces another reason to attach weights to facts.

In part, the importance of a fact depends on how much you can rely on it.  Facts as numbers are more reliable since (mostly) they are governed by the rules of statistics.  Facts as words are more slippery since the reliability of the fact depends on who is saying it and on whether the words can mislead.  Weighting facts is a way to recognize these considerations.  Continue reading

Some facts should be given more weight

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One of the messy facts of life about facts (bad pun intended) is that they are hard to work with.   There are many reasons why facts do not reveal everything you want to know about consumer tastes, price trends and anything else that success in business depends on.  These problems will not shrink in the future as Big Data takes hold and as smart buildings throw out so much information in real time.

Fortunately, a simple idea shows how to deal with much of the messiness.  All facts matter but not all facts are equally important: different sources of facts imply different weights for a fact.  I will focus on facts as numbers since, except for the added slipperiness of facts as words, as conversations, as rumours and as written reports, the same concepts applies.

Several different perspectives reveal why attaching weights to facts reduces the confusion.  In a series of posts, I will talk about weighting and context, weighting and precision of data, weighting and trade off and weighting and communication.  Here is the first: Continue reading

Teachable moments: Learning Ethics

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Ethical awareness affects people involved in the real estate industry.  There is a lot of money at stake and, because investors are separated from their real estate by distance or expertise or uncertainty, lots of exciting operational challenges.  Research has shown that these same features also create opportunities to mislead or to be misled.  So, operations and ethics in the real estate business cannot be separated.

Being ethically aware is a good thing.  Many industry associations have codes of conduct or courses which include an ethical dimension.  Unfortunately, it is hard to teach a 20 year old how to be ethically aware, especially if the “good answer” seems obvious in a two-hour test.  60 year olds have more life experience and know that distinguishing “good” and “evil” is not so simple.

So, the discussions about potentially unethical behaviour by the next president of the United States represent a teachable moment about an important topic. Continue reading

What is new about Commercial Real Estate in Canada, and what is old?

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Last week, I attended an interesting breakfast meeting which launched a new book.  If you are new to the commercial real estate business, I encourage you to read it: it is published by REALpac and is an updated version of their most popular publication.  This comprehensive resource will be useful as you discover your position within the industry.  (Full disclosure: I will not get a commission for saying such nice things.)

As with most meetings, the most stimulating part is not what was listed on the official program but what happened during the conversations.  I was fascinated by a conversation on literacy and the challenges it poses for everybody.  Continue reading

Negotiation Skills

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The real estate business is interesting because illiquidity means that the messy bits of the market process are messy for reasons not usually explored in textbooks.  Thus, there is a lot to learn.  (One of these days, I will be allowed to teach a course on Negotiations, but not this year.)  I receive mailings from a group that specializes in it and, at the end of last year, they sent me some interesting messages on what happened last year.  Here is some help with your negotiations this year. Continue reading

Curiosity and real estate

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The start of a new year is a time of new beginnings.  2017 will be an interesting year, even if we do not yet know why.  With that in mind, I encourage you to make a resolution to be more curious.

Two items in particular attracted my curiosity during this Break and I encourage you to check them out. Continue reading

International studies and real estate

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The headlines show the many ways in which international events affect Canadian real estate markets.  For example,

  • Will Trump’s election cause too many Americans to move to Canada?  (And, will Canadians want to stay in a Trump-branded hotel?)
  • How will foreign buyers react to the new tax in Vancouver (and will its effect be bigger than the effect of the on-going anti-corruption campaign in China)?
  • How do the tastes of recent immigrants to Canada differ from those of long term residents?  (And do the tastes of first generation immigrants differ from those of second or third generation immigrants?)
  • Will the competing initiatives on infrastructure in Canada and the US cause more investment in Canada or in the US?

If you attend the Real Estate Forum in Toronto at the end of November, you will see suppliers from many other countries talking with potential clients.  You will also see many levels of government supporting international business links.

The real estate business is no longer all about “location, location, location”.  So, the question is how to get ahead of this wave?  Continue reading

Teachable Moments: 2 Lessons from the US Election

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Well, that was an interesting election.  It also adds special significance to a comment made by a student in my Real Estate Market Analysis course: the job of an analyst seems really difficult.  Or, more poetically, “Prediction is very difficult, especially if it’s about the future.” (Nils Bohr, supposedly).

When expectations differ from reality, somebody is surprised.  In this election, the media have settled on the word “stunning”.

Being a long term investment, the real estate business is full of such stress.  The outcome, and sometimes the best business strategy, depend on unknown market conditions.  That is why market analysis is both difficult and unavoidable.

Election night in the US offers two memorable examples which should remind you of best practices.  Continue reading

DT Teachable Moment: Numeracy

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Politicians and journalists are two professions that are known to be easily confused by numbers.  The consequences of that confusion are on full display during this election cycle in the U.S.  Real estate people cannot afford to be confused by numbers, either because lenders will not allow them to go over budget or because the personal costs of getting the numbers wrong is scary.

This post uses some examples of the more annoying examples of innumeracy to show that, although a math class does not look like a class in literature, numbers convey meaning.  That meaning is enhanced by making good comparisons. Continue reading

DT Teachable Moment: Does “character” matter?

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The interests of real estate businesses intersect with the interests of governments, often, although they are not necessarily aligned.  The presidential campaign of Donald Trump offers a teachable moment which shows why character matters, for at least three reasons.

The evidence says that Trump insults others frequently and making “them” into an enemy of some kind.  His campaign shows that you can go a long way by insulting people.  It also indicates that insulting people also makes enemies of people, which reduces the chances of success.

This is relevant since a common test of the character is the Golden Rule: treat others as you wish to be treated.  So, it is instructive to see how he reacts when others insult him.

Character matters, in politics and in real estate, because so much of getting things done is about groups of people doing things together.  Important projects are complicated and involve many people.  Thus, it is easy to get lost in a swamp of details, petty insults, to forget that goal and to react badly to somebody else’s behaviour.

Whenever real estate business intersects with government, as it often does, voices may be raised.  Often everybody is unhappy about something.  Insults may fly even during friendly negotiations.  If that were the end, nothing would happen.  That consequence matters in politics especially because governments rarely operate as a top-down or hierarchical organization.  Success often depends on finding allies.

Character matters because allies are important, and allies rarely like being insulted.

I have listened to discussions during this American election and I am impressed at how closely it matches a 20 year old movie The American President.  Its story contrasts the verbal insults of a presidential wannabe with the high-pressure decision-making environment of a sitting President.  I think that its pivotal speech is amazingly relevant to many topics debated today.

Politically popular decisions are usually obvious. A dilemma is that, for any issue, different advocates can give good reasons why their preferred solution would be popular with others.

But the popular decision is not necessarily the right decision.  Being popular is easy.  It is harder to tell somebody that they are wrong.

By their nature, important decisions are hard decisions, where the consequences may be in the distant future and affect people whose names are not known.  The discussions concerning sustainability is a recent example: Should the government impose a carbon tax of some kind?  Using ideas from NetZero and LEED, should builders target more sustainable buildings?  The immediate costs are usually obvious and the people who bear those costs usually express their opinions loudly.  It takes a strength of character and some skill in persuasion to move forward on something which is unpopular currently.

In the real estate business, as in politics, character matters because the benefits of good decisions are felt for many decades after.

PA