Opendoor: it's the data, stupid; Remote: APIs for employment
Buy the rumor, sell the news
Opendoor: It’s the data, stupid
Political strategist James Carville, the ragin’ Cajun, coined the phrase “It’s the economy, stupid” in 1992 as a pithy way to convey to presidential candidate Bill Clinton that his message need only focus on the economy to resonate with voters. Bill Clinton is a famously smart guy, and smart people often have an uncanny ability to convince themselves, and their interlocutors, of the correctness of their views.
I relate all of this because we can say, of Opendoor, “it’s the data, stupid.” When a lot of intelligent industry experts tell me that a new entrant in their market can’t or won’t work, I pay attention. Because they’re often wrong. Industry veterans often don’t see how their industry is subject to attack from the outside.
Opendoor nominally operates in residential real estate, and a lot of established industry players have reacted to its arrival with a mixture of incredulity and skepticism. But Opendoor strikes me as a data science play more than it does a real estate play. Real estate is just the particular asset it is looking to layer algorithms atop. There’s nothing revolutionary about that proposition: data, and its byproduct, algorithms, has disrupted many different industries.
The interesting question for me is not its stock price (down since it went public) or how it went public (via a controversial SPAC). The interesting question for me is how effective its algorithms are. The effectiveness of its algorithms lies at the intersection of its data and its data scientists. Its stock price is a derivative of that algorithmic effectiveness. If you assume that Opendoor is continually refining its algorithms as it collects more data, then over time, its financial performance ought to improve, and, so, too, its stock price.
It remains to be seen whether Opendoor is successful. But its success or failure will have little to do with real estate and everything to do with data collection, its analysis, and the application of that analysis. In fact, if you do a Google search for “Opendoor data science,” you will find a whole slew of links about data science positions at Opendoor, data science interview processes at Opendoor, etc.:
You can view Opendoor’s Series A deck here. They’re pretty explicit about their focus on data collection and algorithmic insight extracted from those data:
Their Series A raise is essentially a pitch to venture capitalists: give us money so that we can acquire more data, refine our pricing models, and increase the efficiency of our operations. And—that’s really it. If Opendoor can acquire enough data, and use that data to build effective algorithms, it can own its market. It’s Moneyball applied to residential real estate.
Remote: APIs for employment
The rise of remote work during the pandemic has been rather astonishing. There’s a lot of debate about whether and how it will stick around post-pandemic. At least one company, called, appropriately enough, Remote, is betting that it will stick around. In addition to serving remote employees, Remote’s own employees are all fully remote and distributed across the globe.
As with many fully remote companies, it has a publicly accessible Handbook. One section of the Handbook gives its elevator pitch:
Remote is creating more remote jobs in the world by making it possible to employ people in every country. Not as a contractor, but as a fully legal, local employee, with all the benefits that come with that. Think Stripe for employing people.
The last sentence is my emphasis, and is the subject of this post. Stripe is, of course, a payments company. But it is a payments company which has created enormous value by creating dead simple APIs that developers can use to knit together payments services from Stripe for hundreds of thousands of applications across the globe. Stripe has taken APIs and created an ecosystem out of them. Any developer, anywhere, who wants to integrate her app with Stripe need only avail herself of the correct API. Here’s an article from Harvard Business Review, explaining why APIs are so powerful for businesses:
You don’t have to be a tech company to reap the benefits of APIs—the opportunity exists in every industry. Some sectors are being compelled to offer APIs due to regulation (like healthcare and banking), whereas others are prompted by industry interoperability (like telecommunications) or disruption (like retail, media, and entertainment).
A transformation toward APIs would particularly benefit small to midsize companies that now struggle to reach digital audiences through saturated and tightly controlled ad networks and ecommerce markets. APIs would position them to more easily offer products and services through emerging platforms, unbundle and re-bundle their core competencies, and offload non-core competencies to third-party providers (like Lyft’s use of Google Maps, Stripe, Twilio, and Amazon Web Services).
Taking Remote at its word, then, Remote envisions a world in which APIs allow any employer to quickly onboard any employee or contractor globally, and remain in full compliance with the employee’s home country’s labor laws. Imagine what this means for the small to midsized companies mentioned in the HBR article. Imagine you run a small marketing firm in Dubuque, Iowa. And you really want a machine learning specialist who can help you automate some of your marketing tools. But you can’t afford a Silicon Valley employee’s salary and you can’t find anyone in the midwest with the requisite skills. But you find someone through Upwork, located in Bulgaria, who will work at a rate you can afford, and who is whip smart.
You want to bring him on full time and let him work from his home in Bulgaria. How do you do that? You have at least two options: (1) set up a Bulgarian company and employ him through that company, or (2) contract with a company like Remote, which operates in Bulgaria.
And if all of that can be done via APIs—all the better. Stripe for employing people.
Thanks for the nice write up, Dave!
Thanks for the nice write up, Dave!