Exponentiality not linearity is the way forward for proptech.
This is our second article on how the power of data will change the real estate investment landscape. In the first article we explained how ownership data can connect finance and property markets. Here we discuss how connecting the four quadrants of real estate could create what is essentially a tech company. Let us start by exploring the concept of exponentiality vs linearity.
“Seven and a half years into the Human Genome Project, scientists announced they had decoded only 1% of our genetic code. The project was budgeted for only 15 years. Sceptics said it wouldn’t work; it would take a century to complete. Ray Kurzweil – inventor, philosopher, futurist – had a different reaction. He said the genome was practically solved. And indeed, the mapping was completed in another seven years. The amount of data sequenced each year practically doubled […] This was because Ray Kurzweil realised the process was exponential rather than linear.”
–“Ray Kurzweil and Exponential Growth”, Russell Steinberg, 24 July 2014
This same concept of exponentiality applies to real estate data. When constructing a transaction database, it speeds things up if the asset, the buyer and the seller already pre-exist in the database. So just as with the genome project, time and effort invested in building these asset and investor tables makes adding each new transaction record more efficient.
You will all be familiar with the term ‘the quadrants of real estate’ – private, public, equity and debt. These are often illustrated in pie chart format. We prefer to see it as a balance sheet with fixed assets (private) and liquid assets (public) on the asset side, and equity and debt on the liability side. Of course, the crucial difference is that whereas the company needs to have its balance sheet items rigidly connected, the depressing reality for real estate is that these four quadrants are currently anything but connected.