NIGEL DALTON IS PART thought leader, historian, geek, and agile promoter. Heading up the REA Labs in his new role as Chief Inventor he is at the forefront of technological change in the real estate industry. Samantha McLean sat down with Nigel to talk about the chemicals that bubble away in the lab and how they may be indicators of what the consumer will want next from the industry.
It’s impossible to know where to start with Nigel Dalton as there are a million questions that I want to ask him that I have attempted to summarise with a scribbled mind-map on a piece of paper. The best place to start appears to be talking about Dalton’s role as the chief inventor at REA, and what that means. Thinking we might start talking about the future, I’m surprised (and delighted) that he starts by giving me a cool history lesson. And I learn that history is something this inventor is passionate about: where things came from, how they got to be there often has indicators of where to next. “REA Group is known outside for being innovative and people come to visit us just to find out about that,” says Dalton, “It’s a little ironic to me, because the way that digital has replaced print as a media is a pretty old trend now; it’s a trend that our founders jumped on in ‘96. Back then it was very disruptive and an amazing innovation, because it was hard making the internet work in 1996, and making it work reliably. You tell someone who is 25 today, ‘The internet didn’t work all the time.’ We had to physically scan photographs that were mailed into us with handwritten descriptions of properties.”
INVENTION VS INNOVATION
“Back then, that was a tremendously innovative model,” Dalton continues, “no wonder people sort of lived in fear of it, and no wonder it was so successful getting into listings at the turn of the century. But today, that’s not really that innovative, so what we do are lots of incremental – what we call Kaizen improvements – to listings all the time. New products, new offers, more data, more science – those kind of things. But we started to realise there were a number of technologies that could take us to quite different places that people were reading about on the front of, say, Time Magazine. So could we get them from Time Magazine into the hands of our customers and consumers at a working stage and see how they might be turned into products? That’s invention rather than innovation.”
And the difference between invention and innovation is an important distinction. “Innovation happens in our realestate.com.au and real commercial businesses every day. We’re putting new features on these sites and apps every day, literally,” says Dalton.
THREE CHEMICALS: TIME, TRUST, TRANSPARENCY
With technology and ideas moving so rapidly, I ask how he chooses what to pursue and when to pursue it. “In REA Labs we think there are three chemicals in ‘the laboratory’,” smiles Dalton. “Time, trust, and transparency.”
In my own Editor’s Note from last issue, I wrote about technology in real estate and the idea that no matter what the label says on the can, most things are being invented in this industry are to save the consumer time. I’m flattered that Dalton refers to this as he talks about the same thing. “What you wrote about saving time for the consumer is bang on.” Then there is trust. “Trust is something Rachel Botsman called the ‘currency of the internet’ in her book What’s Mine Is Yours. She was right too; she was talking about the sharing economy and why she never dropped a towel on the floor at an Airbnb, but generally left it in the bath at a hotel. We’re talking about human behaviour changes in a world where you as a person have a transparent rating.
“Transparency, then is the sister of trust and time, in that people want to know stuff. They don’t want to have the value of properties hidden. So I draw those as three circles that overlap, and that’s kind of the recipe. Every technology we look at, we evaluate against time and trust and transparency.”
IS THE FUTURE ALL ABOUT VIRTUAL REALITY?
And so it’s time to move onto some of the specific things that Dalton and his team are working on, including talk of virtual reality (VR), robots (bots), and artificial intelligence.
“Virtual reality is definitely about saving time,” says Dalton. “If you add up all the time spent by consumers – it’s the mother with two kids who she got out of school or daycare because the open is at 4pm, in the rain, across Sydney. The kids are noisy in the back of the car, she gets there and the property looks nothing like the photographs at all. Then she thinks ‘I never would have come if I’d known this is what it looked like. It looked fine on the listing.’ So as an agent you just lost two children plus a mother. She probably had to take time off work. Then there is an agent or property manager who’s probably spent at least two hours in preparation, parking, turning up, ensuring the place is tidy. What could we save with virtual reality out of this? Quite a lot of time.”
But Dalton confesses that the uptake of VR hasn’t so far been stellar and the issue is not necessarily the application but both the hardware and the content. “Right now,” says Dalton, “nobody really has the headsets. Until the Google Daydream headset came out in November, which we were part of the global launch for, there really wasn’t a nice one that fitted your mobile phone, which mobile uptake is the critical aspect of technology for the industry.”
Dalton continues, “The next barrier to virtual reality not being an exploding media today is the content.” And again we look back at the lessons of the past to gauge what the future might be. “Content is the most interesting blocker to me. Take television, for example; when television exploded in the US from the ‘30s to the ‘50s, it became about owning the ‘complete stack’. You had to own the camera, the studio, the news reader, the broadcast network, the aerials on the roofs of houses, the retail store that the family bought the television from; you owned the whole thing. But by the 1950s that had become kind of fragmented and other people could make content. That’s the time when television exploded in America, when people started making cowboy westerns and things as specialist content makers. That’s the next bottleneck after we all get a headset: what do we watch on it?
“So there’s a huge opportunity right now to create that content. We’ve got a couple of thousand properties in real estate VR in Australia today, but we’ve got 50,000 listings. So it’s a fraction.”
CONTENT GETS RICHER
Clearly, Dalton is excited about what technology might bring to the real estate industry in years to come. “I wasn’t in the industry at the time when professional photography took off in real estate in Australia. Those original photos in the ‘90s were taken by the agent and sent off to the pharmacy, to be printed and posted in an envelope to realestate.com.au.
“Now you look at the capability of people like Diakrit, who create beautiful professional photos which have been photoshopped and optimised for online.”
While Matterport technology appears to be the leader in 3D scanning for VR applications, there are many other up-and-coming methods of creating richer content, says Dalton, and they are coming fast. “They start from just popping your iPhone inside a very simple motorised tripod, as an inexpensive option. Google right now have the technology at street level on an app called Street View, where you can create photo ‘bubbles’ and submit them to Google to be part of their image library. And a thing called Google Tango is coming, where phones will be equipped with an even better technology for taking shots inside buildings. So we’re working on robots for that, because we think there’s a higher-quality, lower-cost way of doing it.”
INCREASING THE TRUST FACTOR
Dalton also says that his pick of the content types is still video and even he admits it is a bit of a strange pick. “Video died on real estate portals in Australia because it’s hard to transmit over 3G – 75 to 80 percent of our consumption’s now on mobile phone. You try getting a video across 3G. The content was terrible, because content production is costly with video.” And then there was an even bigger tragedy, says Dalton. “The agencies chose to join the photos together with a bit of stock music. Our research showed that if you did that, that’s the last time a consumer would look at your listing. We still have a few people doing it but hopefully, they’re going to stop!”
Videos would be far more successful, says Dalton, if they could get back to storytelling about the neighbourhood, the families in the home, why they are leaving, the cafe owners, other people. “With 5G coming to the big cities in Australia, it will easily trend, with virtual reality playing a role alongside the agent to demonstrate trust and transparency in the viewing of the property.
The increasing trust factor, says Dalton, and is the primary reason listings with VR are getting engagement. “You the buyer are not being ‘directed’ into particular rooms. You don’t have only 15 minutes to look at the property. You can go through at your own leisure and see all of the faults, go back, share the experience with a partner or who you might be buying it with. It’s like, ‘wow, I’m allowed to look around myself’.”
But, he adds, people won’t engage in a 3D tour until they have mentally shortlisted a property. “With that understanding, it’s important that we don’t interrupt consumers in the process of their scan or search. People are extremely efficient with our app. They’ve got a saved search. They have either already got proactive alerts coming to them or they’ll just hit their saved search over a glass of wine and scan down. The computer that is their brain is stunning at image recognition. ‘Oh, I haven’t seen that one. Oh, I saw that one.’ Those kinds of things.
“Whether they’ve saved them as favourites or not, they’ll look at a 3D tour or video or more photos only on their favourites.”
BETTERING THE BEST
Dalton admits a number of different VR applications have already been tested by him and his team in the labs, including thinking about making an entire site of virtual reality things. “When we design products we do huge amounts of consumer research, and the bonus is we learn.”
And that is the other thing: while the REA workplace is well-known with their hack days and collaborative work practices there is never a shortage of ideas. But this dichotomy reflects the fact that not all good ideas ever reach the light of day. “I’ll tell you the secret at our place,” says Dalton. “Any invention I create has a big hurdle to pass to get into the innovation stream within realestate.com.au. I have my own product to better; I have to have a better ROI, in either providing people coming to the auction or leads for new listings, than the realestate.com.au mobile app. That’s a huge hurdle.” But, says Dalton, he is okay with that. “I accept the challenge,” he laughs.
IF NOT THIS NEIGHBOURHOOD, WHICH NEIGHBOURHOOD?
There have been many innovations at REA over the past 12 months, including things like Energy Scores for listings, I ask Dalton what might be coming next. “I still think storytelling around neighbourhoods is ‘undercooked’ at the moment,” he says. “One of the ‘human truths’ of the real estate industry is that people don’t actually willingly move neighbourhoods very often. People are very tribal, and we discovered this by asking the same question in America, about ‘how often do people move from one zip code to another’; and it’s rare. It’s single digits.
“Postal codes are slightly larger than neighbourhoods, but this underpins a human truth that we have in Australia as well. People, given the choice, would not move between neighbourhoods. It’s no coincidence agencies work in neighbourhoods.”
But he also acknowledges that with property prices jumping, not everyone can afford to live in the neighbourhood they grew up in; and consumers will look to find neighbourhoods where the asking price is less, but the vibe will be similar. “I love my neighbourhood, Bayside in Melbourne, and people love eastern Bayside. But young people, as they go through their life cycle, they maybe can’t afford to buy in Brunswick. So they’re looking for the next Brunswick. What are the markers of a Brunswick? Cafes, school, the types of families who live there, the diversity, those kinds of things. That intelligence is worth gold. If not this neighbourhood, which neighbourhood?”
And the next ‘Brunswick’ will need fast internet if it is going to appeal to the younger generation. “My measure of what the future demands are going to be is my 15-year-old son, and he doesn’t even recognise the names of neighbourhoods. His mental map of the world is based upon the speed at which he can download things on the internet. The value of properties inside areas with fast internet, whether it’s 5G or the NBN, that will definitely be a thing.”
WILL AGENTS BE REPLACED BY ROBOTS?
Dalton will be taking to the AREC stage in May this year to discuss some of the things we have been talking about, but as there has been much talk of robots taking over the industry he says he will have a couple of his ‘friends’ along for the ride.
“I’ve got my two little 50cm tall robotic friends that hopefully will be well-behaved enough to come on stage with me. If not, then they’ll be on the stand. I think what we want to do is, in a humorous way, in a light way, confront people’s worst fears. I mean, you name your fear, it’s kind of like you can control it.”
The title of Dalton’s keynote is ‘Robots in Real Estate: Friend or Foe?’ and right now he says they are not that intelligent and can be a slight ‘pain in the ass’.
“At REA we have what is called a ‘Turing test’, named after Alan Turing. He was a codebreaker at Bletchley Park in the UK. He broke the Enigma code which the Germans were using to talk to their submarines, which were attacking the fleets from America and Europe bringing food to Britain in World War II. Turing cracked the code. So the Turing test is this, that if you have two conversations and if after 10 minutes you can’t tell which one’s the computer, it’s done, it’s passed the test.
“Computers have passed the Turing test. We think by 2020 either Google, with OK Google, or Microsoft with Cortana, or Apple with Siri, will have passed this test.”
But it’s not ready now, and Dalton demonstrates this by asking Siri on his phone if there are any good houses in Bondi for sale. And Siri replies,”Interesting question, Nigel.”
With his point made, Dalton says that Siri right now, is not that bright. “Siri needs to know who Nigel is. Well, it at least figured it out that Nigel owns the phone. The nuances now of what a human being means by ‘good’, by ‘Bondi’, ‘available’, ‘for sale’… Am I an investor, a renter? That’s the critical thing. It has to know so much.
“I think you’ve got to imagine by 2020 a world where you don’t actually take the phone out of your bag or your pocket. You’re wearing glasses and the glasses are projecting onto holograms in the space in front of you all the screens of information you need, and you’re talking to them. I will talk to my glasses, and the glasses will come back with Siri or Cortana or whoever it is, will come back with, ‘Yes, there’s two properties that I think you would like.’
“But right now, the only computer in the world that can do that is in the top three inches of your head,” says Dalton.
COMPLEXITY VS DISRUPTION
And it’s this very complexity where we find that the low-cost disruptors may strike a problem. I ask Dalton what he sees as the difference between a technology-based sales service and a human; there is, once again, some well-thought-out science behind his response. “Where everyone usually goes wrong is misdiagnosing the problem or the issue.
“Here’s how I think it will play out. And I’m going to use a nerdy technical problem-solving tool we use for tough computer problems to illustrate.
“Let’s imagine there are a couple of different kinds of issues; there are simple issues where the answer is obvious and there are complicated issues where the answer is a whole series of things that, in a linear fashion, one thing leads to another – cause and effect. And there are really complex issues which look more like an ecosystem in nature; so you change something here, it impacts four other things, three of which you didn’t predict.
“The real estate industry as it stands is not a simple problem or a complicated problem, particularly buying and selling; it’s a complex issue. It’s an ecosystem of humans and contracts and laws and mortgages and emotion. Property is at the foundation of Maslow’s hierarchy of needs. Shelter over your head; you can’t get on with the rest of your life until you’ve sorted that out. That’s proven to us every day in research. As an aside, we have one really important research question for people who got through the home buying process. We ask, “What’s it like now you’ve got that done?” The scariest phrase we hear is, ‘I’m so grateful to have my life back’.”
Therefore, says Dalton, right now it is the most complex of complex problems – so not that well suited right now to robots or code or programs.
UNCHAINING THE BLOCKCHAIN
So the question is when buying and selling property go from complex to simply complicated here in Australia? “The trigger is probably taking out some of the legal and contractual components of the transaction,” says Dalton. “The mortgage settlements, the title and the lawyers. Property Exchange Australia, PEXA, have been giving that a good crack for five years. They’ve come a long way but they’re not there yet. The adoption by lawyers, because it threatens their role in the ecosystem, is lower than they’d anticipated and their change management’s higher than they anticipated. But they (PEXA) are very, very patient.”
Dalton is also one of the first to think more in terms of the blockchain technology when considering disruption in the property market – most often discussed when talking Bitcoin, as it was the first implementation of a blockchain-distributed ledger system. Referring to Blockchain, Dalton says, “It’s a great way of illustrating that you don’t suddenly need to have one very big central account with a true record in it. Everyone can have a copy of all the accounts, and it distributes very quickly across a high-speed internet. It’s not a legal tender, it’s not a promissory note of any kind. It is basically the title and the mortgage. And maybe, in a Victoria Section 32 type of agreement, you need a foolproof way of ensuring they are connected to each other; as one leads to another, money leads to a settlement leads to a title, it all goes through and comes out in your name. Blockchain, with its distributed ledgers and the security involved in it, is a technology that could do that, no question.
“Imagine a world where all of these things that are super hard, all that goes away. Processes become much more simplified. The question will remain as to whether the rest of the transaction, the emotional component of a family looking for a new place to live because the kids are growing up and going to a school, and an agent who can cater and facilitate that deal … Will that go away? We’re not sure. My bet is no. I think a human being will solve the complex transactions. What we just have to get used to is even for some people who are pretty confident selling their home this is a complicated transaction.
“I’ll talk about at it AREC. “Even my very, very brightest data scientists and engineers could not write an algorithm or a piece of code that can do what a real estate agent does.”
CAN ‘AGILE’ APPLY TO REAL ESTATE BUSINESSES
Prior to joining REA, Dalton was also known as the ‘Godfather of Agile’ in Australia; Agile being a set of principles where software or code is developed rapidly through collaborative cross-functional teams, where they are readily able to adapt to changes. I ask him if these principles can also have application to real estate businesses who continue to grapple with the change or disruption that may be around the corner.
“Absolutely,” he says. “We have so many visitors through our Church Street Richmond headquarters from the industry; it’s fabulous because I always get lots of feedback. A lot of those visitors can see the visual aspects of an Agile work management system where teams are collaborating closely, talking daily, talking hourly and working hard to build the highest-value things. We don’t chase agility, interestingly. Our secret is that we chase resilience. Agility is how you run a factory that is highly resilient. You have methods of work that are about people collaborating together, talking and adjusting to change in the roadmaps quickly.”
In terms of real estate businesses, Dalton says, “Management and leadership are still critical factors, so having a strategy, having an inspired team, just being well-organised is a critical difference between failure and success. You end up with some resilience. It’s personal resilience; we talk a lot about that in the industry, about your fitness, about your ability to bounce back, your mindfulness. Let’s face it, there’s a lot of rejection in our industry that people have to deal with. So individual resilience still needs to be a topic in real estate.”
But looking to the future, Dalton says it’s going to be more about teams. “My prediction is that we’ll see a lot more of a teams-based approach. Our industry has been very individual superstar-oriented. Who are the famous people in our industry? There are some absolute rainmakers. I think in the future, in 2020, it’s going to be about hot teams. I’ve seen it emerge already in some of the outlying areas, some of the more creative areas, where the younger people are running agencies. We’ve always had assistants, so a superstar will have an assistant of some kind but be more like five people on a team.”
Given our earlier conversation about the content of the future including photos, videos, 3D and more, Dalton believes the team will need to include a supreme storyteller who will need to be an all-rounder. “Curating social media, creating content, building networks, keeping all of that data together. And then partnering with people like us to get where we can provide the most value, that’s the future.
“Consumers will no longer ‘freak out’ about finding the best agent. They’ll want to find the best team. An agency will contain maybe five crack teams and do an amazing job. Being a team player, it’s a very different skill to being an amazing individual contributor. That will be a big thing for people to learn and adapt to.”
Nigel Dalton will be speaking at AREC 2017. For more information and to book tickets visit arecconference.com. (This is the extended version of the interview that appeared in Elite Agent Issue 16).