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Great points and perspective, thanks for sharing! Totally agree. Having grown up in a family that runs a real estate firm, I can say the ratio is about the sa

Great points and perspective, thanks for sharing! Totally agree. Having grown up in a family that runs a real estate firm, I can say the ratio is about the same - about 1 in 20 real estate agents are decent human beings who desire both to help others and make a living, and the rest are highly self-interested. What I find interesting is the VC stories along the lines of "X VC really worked with and helped/saved us!". I haven't encountered such stories about any bank.

tptacek 3y ago
What tripped me up with real estate agents is how socially skillful they are. It's a survival skill, so as a cohort they're all anomalously good at building rapport and, from there, trust. If you don't know what you're doing, and what they're doing, and you rely on them as the domain experts, there's a pretty decent chance you're not going to be happy with the outcome. Their incentives aren't perfectly aligned with yours, and if you're not providing a structure to engagement, they are, and that structure will serve them. But the flip side of this is that what feels like mercenary behavior is also useful for the actual job of making real estate transactions happen, so if you optimize for the most trustworthy, least self-interested real estate agents, you're also not going to get the best outcome (and you're going to bounce off of lots of non-altruistic real estate agents in the process). It's going to leave you with grim feelings about the entire business about real estate. Which: fair enough! There's lots not to like about it. But you, personally, as a consumer of real estate services, will feel better and have a better experience if you learn to understand and adapt to how real estate actually works. And a lot of mercenary real estate agents are perfectly lovely people, just doing what it takes to do a job well. As with real estate, so with investing, I suspect. Great example: every VC you meet is going to tell you they're interested in investing and that they want to move the process forward, and they'll keep giving you hoops to jump through as long as you let them without ever intending to invest. That's incredibly aggravating, until you know what's going on and learn to read the room. I'm not good at any of this stuff and would get gutted like a fish trying to raise a round myself, but I've had the benefit of seeing it done well firsthand now, and talking to others who've done it well, and it makes a lot more sense to me now.
- wolf550e 3y ago
  Can you please share a link about understanding "what's going on and learn to read the room"? For real-estate and venture capital.
  - tptacek 3y ago
    I just mean, a real estate agent wants the transaction to happen and shifts in price that make a big difference to you make almost no difference to them, and a VC partner is going to fund one company in a whole year, is mostly concerned about missing out on the one company that 15x's, and will take as much optionality as is on offer.
  - csomar 3y ago
    For real-estate, assuming you are the seller: Let's say you bought a house with $500K and now looking to sell it. The real-estate agent finds a buyer for $550K. That's a $50K profit for you. The real-estate agent could work a little bit harder and find you are $600K buyer. That's a 100% gain for you. However, the agent is getting paid a fixed percentage of the total sale. For him, it's only a 9% increase; and that does not justify the extra-work. The incentives are highly not aligned. If you do not understand that, you'd be disappointed. If you do understand that, you'll see where your agent is coming from.

tptacek 3y ago

What tripped me up with real estate agents is how socially skillful they are. It's a survival skill, so as a cohort they're all anomalously good at building rapport and, from there, trust. If you don't know what you're doing, and what they're doing, and you rely on them as the domain experts, there's a pretty decent chance you're not going to be happy with the outcome. Their incentives aren't perfectly aligned with yours, and if you're not providing a structure to engagement, they are, and that structure will serve them. But the flip side of this is that what feels like mercenary behavior is also useful for the actual job of making real estate transactions happen, so if you optimize for the most trustworthy, least self-interested real estate agents, you're also not going to get the best outcome (and you're going to bounce off of lots of non-altruistic real estate agents in the process). It's going to leave you with grim feelings about the entire business about real estate. Which: fair enough! There's lots not to like about it. But you, personally, as a consumer of real estate services, will feel better and have a better experience if you learn to understand and adapt to how real estate actually works. And a lot of mercenary real estate agents are perfectly lovely people, just doing what it takes to do a job well. As with real estate, so with investing, I suspect. Great example: every VC you meet is going to tell you they're interested in investing and that they want to move the process forward, and they'll keep giving you hoops to jump through as long as you let them without ever intending to invest. That's incredibly aggravating, until you know what's going on and learn to read the room. I'm not good at any of this stuff and would get gutted like a fish trying to raise a round myself, but I've had the benefit of seeing it done well firsthand now, and talking to others who've done it well, and it makes a lot more sense to me now.

wolf550e 3y ago
Can you please share a link about understanding "what's going on and learn to read the room"? For real-estate and venture capital.
- tptacek 3y ago
  I just mean, a real estate agent wants the transaction to happen and shifts in price that make a big difference to you make almost no difference to them, and a VC partner is going to fund one company in a whole year, is mostly concerned about missing out on the one company that 15x's, and will take as much optionality as is on offer.
- csomar 3y ago
  For real-estate, assuming you are the seller: Let's say you bought a house with $500K and now looking to sell it. The real-estate agent finds a buyer for $550K. That's a $50K profit for you. The real-estate agent could work a little bit harder and find you are $600K buyer. That's a 100% gain for you. However, the agent is getting paid a fixed percentage of the total sale. For him, it's only a 9% increase; and that does not justify the extra-work. The incentives are highly not aligned. If you do not understand that, you'd be disappointed. If you do understand that, you'll see where your agent is coming from.