The Week: House flipping, apes and crypto mysticism
Plus: more metaverse nonsense
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The automation of the real estate industry is the north star for a lot of tech guys. After all, it seems ripe for deep technological disruption, given it is a market that is ultimately just about connecting sellers with buyers. The Zillow story is a fascinating story about when that goes awry.
For those who haven’t been following, these are the basics. Zillow, along with other platforms in the US like Opendoor and Offerpad, has been participating in a process called iBuying1. What that boils down to is deep-pocketed, tech-enabled real estate companies buying up homes with the intention of flipping them later for profit. As one professor told MarketWatch, there is an arms race in the US to become “the Amazon of real estate” through automated purchases and sales.
Zillow, the most popular real estate platform in the US, thought it could leverage its deep pool of pricing data to make significant profit in the iBuying space. The company would use its data to identify homes to flip, buy the homes from the sellers, make whatever alterations were necessary, and quickly flip the home for profit. This is appealing to sellers because it means they get to skip the painful process of selling a home through a realtor. Zillow’s algorithm spits out a good price for your home and the company hands you the cash — easy. The idea is that they’re buying at a slight discount (for the convenience) and selling at a slight premium. It’s not a high margin business.
This was all based around these magical estimates (annoyingly called ‘zestimates’). You could log onto Zillow and get it to spit out a zestimate for your home, which was all very flashy from a technological standpoint. But the company would actually make offers on homes at that price point, and it wasn’t great at staying accurate in a wild US housing market.
Anyway, it didn’t end up working, and now Zillow is trying to flog about 7,000 homes it paid too much money for to institutional investors like BlackRock. From Bloomberg:
The first sign of trouble emerged on Oct. 17, when Bloomberg reported the company was pausing new home offers for the rest of the year. While the company blamed a labor shortage, it quickly became clear Zillow had struggled to read the frothy pandemic housing market – overpaying for homes that it would later be forced to sell at discounts.
From there, the collapse was swift. Bloomberg reported Monday that the company was marketing about 7,000 homes for roughly $2.8 billion to institutional investors. And a day later it was all over, with Zillow telling investors that it would stop flipping homes, write down existing inventory, and reduce its workforce by 25%. The company had roughly 8,000 employees as of Sept. 30.
Just a couple of months ago, a real estate agent went viral on TikTok alleging that Zillow was actually engaging in housing market manipulation through its iBuying model. It’s unlikely this was the case — or that it had a real, measurable effect on the US housing market at those volumes — but I think it definitely shows that people are inherently weirded out by the idea of automated homebuying, specially in an era where runaway housing prices across the developed world are locking people out of ownership. It just looks like another avenue of financialisation of human life, and the sense that everything is just different algorithms talking to one another, through us.
(For those in Australia wondering whether this model would ever take off here — here’s a decent writeup about why it’s less appealing, at least right now.)
The return of the king
I don’t have a lot to say about this Ozy return video apart from the fact it is super weird and I urge you to watch it and the series of other similar truncated videos on the company’s Twitter feed.
It’s like a language model absorbed a corpus of 2010s digital media startup rhetoric and gave it to a robot to recite. I plan on saying the whole thing verbatim if I ever get cancelled.
Since Facebook — sorry, Meta — decided it was going to rebrand as a metaverse company, everyone else is coming out of the woodwork. There’s Microsoft making its pitch, which is very much focused on a bold new future of showing up to Teams meetings as some glassy-eyed 3D avatar.
It’s another incredibly weird example, much like Meta last week, of companies pitching a completely alien version of the future and saying, “Do you like this?” I don’t think any of these companies have articulated what the metaverse is in a way that 90% of the population would understand, and yet it’s being sold as some inevitable next phase of human development that is going to completely colonise the way we live and work.
Only thinky tech guys were even talking about the metaverse two months ago, and now Satya Nadella has to get up and say that it’s your job now. Strange vibe.
If you want further evidence of how buzzy the concept has become: Tinder owner Match Group says it too is building a metaverse:
Now, parent company Match Group is detailing its longer-term vision for Tinder and Explore, which will expand to include exclusive, shared and live experiences and a virtual goods-based economy, supported by Tinder’s new in-app currency, Tinder Coins. In addition, Match spoke today about its broader plans for a dating “metaverse,” and avatar-based virtual experiences that may later roll out to apps across its portfolio, including Tinder.
Unlocks the alluring possibility of dating, and possibly having sex with, Mark Zuckerberg’s lanky metaverse avatar.
A vision of a dark future
NFT Whale Alert is one of my favourite Twitter accounts to follow. It’s an automated feed which triggers whenever there’s an unusually large sale on OpenSea, the most popular NFT marketplace.
Firstly, I like it because of the simple pleasure/horror of seeing large numbers being bandied around in association with some truly unpleasant art, like whatever is going on there with that buxom chimp. If the future is going to be big-time weird, I like seeing that weirdness with granular detail.
But also it shows one of the great contradictions of the NFT and crypto world. It’s all remarkably transparent, in that every transaction — like the payment for that ape — is visible on the blockchain for anyone to audit. But that transparency occludes a dizzying array of possibilities. Did someone actually pay that much in the belief that it was a reasonable speculative investment? Was it just a flex by a crypto whale with a lot of money? Or was it someone ‘buying’ it from themselves or a friend to inflate the price? Were the creators of the collection involved somehow? Perhaps most sickening in terms of possibility: does someone think that a Desperate ApeWife is simply a good thing to own?
Even after digging through all the conversations about token #1400 in the project’s Discord I don’t feel much closer to a definitive answer. It’s all theoretically open, but that openness occludes deeper truths.
While we’re on the digital monkeys: I wrote about a million-dollar ape heist for subscribers this week, which raises further interesting questions. Also: the Bored Ape Yacht Club had The Strokes play at their meetup, which sort of just reifies the early 2000s vibe of the whole enterprise:
He hath spoken
One more from the crypto world. For those who like to think of the whole enterprise as a cult, there are few aspects more amenable to that reading than Satoshi Nakamoto, the anonymous bitcoin founder whose whitepaper and subsequent posts and writings are pored over by acolytes as if they were religious texts. Even amusing ones like this:
Obviously the crypto space has evolved enormously since then, but I always find it interesting how so much of its thinking is anchored around how closely developments in the space cohere with this mysterious prophet’s original vision. It gives the whole thing a much more mystic feel than if you were talking about an identifiable person. I liked this piece from JP Koning (of the above tweet) about whether the founder’s original thoughts around payments have borne out:
In one sense, Nakamoto missed wildly. Thirteen years in, Bitcoin isn’t used much for payments. Rather, it is almost entirely used as a speculative vehicle — one that offers a tantalizing potential for price appreciation (and depreciation). There was nothing about speculation in Satoshi’s white paper.
But if Satoshi didn’t anticipate bitcoin being mostly used for speculation, he was right about one thing.
Unlike many bitcoin enthusiasts, Satoshi did not think his electronic cash system was destined to replace regular money. The card system works “well enough for most transactions,” he admitted in the white paper. Rather than overthrowing the system, Nakamoto seems to have envisioned bitcoin occupying a back-up payments role for online merchants.
Great story in the NYT Magazine on the dream research that took place during the pandemic. Kind of spooky actually.
Twitter now displays Instagram embeds again. Kind of basic, but it belies a huge tech power struggle that has gone on for years.
Interesting on the major effort by the crypto industry to lobby in Washington, spearheaded by venture capital firm Andreessen Horowitz.
Google was scared off defence contracting with the Pentagon because of an employee revolt — now it’s giving it a crack again.
A good bit on creepypasta and digital myth at the Financial Times.
Thought this was good: “OK, but What Should We Actually Do About Facebook?”
Weird rec: I’ve been really enjoying Eli Roth’s podcast History of Horror Uncut. It’s based on his Shudder TV series, and is basically just the unedited talking head interviews which are used to fill out the documentary. As a result, it’s one of the more interesting celebrity interview podcasts I’ve listened to, as it mostly involves Roth’s uncharismatic producer asking straightforward (but great) questions and then letting the interviewee just talk uninterrupted for an extended period. Really liked the eps with Ari Aster (Hereditary, Midsommar) and Mike Flanagan (Doctor Sleep, Haunting of Hill House). If you like horror, I very highly recommend it.
It means ‘instant buying’, but the abbreviation is extremely naff and makes it sound like an early 21st century Apple parody.