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Ben Miller Bio
Show Notes (cont.)
- Ben Miller talks about lens for risk (2:30)
- Think about scenarios that “could go wrong” (2:45)
- World class downsider
- What if the developer goes bankrupt?
- Planned for downturn
- In 2017 he thought it was too frothy
- Seth Klarman thinking (3:45)
- Inversion thinking- What’s the worst that could happen? (4:10)
- Dynamics in private market are different than the public markets (5:00)
- Process of investment (5:50)
- Invest as a secondary or preferred lending investment- 55%-80% (6:30)
- Preferable to invest in equity on a wholly owned basis (7:30)
- Not interested now in JVs as alignment is not in focus (7:50)
- Aim to have a direct relationship with developer/owner (8:30)
- Fundrise only a 1% fee
- JV structure of 90/10
- Real estate deal is much more efficient now due to marketing to perfection (10:00)
- Vertical integration efficiency is the optimum (11:45)
- The most vertically integrated companies are most “antifragile” (13:00)
- Benevolent Dictatorship (15:00)
Real Estate Market Perspectives
- Avoid cyclicality of specialization (16:00)
- Staying in one product type is a flaw (17:10)
- More multifamily developers (18:00)
- Have to be “on trend” and look at the future to invest (18:50)
- Difficult for developers to be agile among product types (20:30)
- Not normal in real estate to be flexible (21:15)
- Core Office and luxury apartments are the next “suburban office” and will decline in value (21:40)
- Multifamily is mostly neutral in performance (22:40)
- Core customer doesn’t want to be in small units except due to cost (23:00)
- Shift away from small spaces will cause it to suffer (23:45)
- What does customer want? (25:10)
- Move south (25:20)
- Not in major cities
- Spreading to whole different regions (25:50)
- What happens when technology devalues location? (27:00)
- It’s easy to see what deteriorates but not easy to see where it appreciates (27:35)
- Adopt the work from home model (28:10)
- Iterate first hand opportunities to work from home to test it out (28:30)
- Ride the trend and figure it out
- Customer wants to be successful without doing harm (29:45)
- Wouldn’t sacrifice return to benefit society
- Last mile industrial (31:25)
- Last mile data- 5G will be everywhere in 24-36 months (31:40)
- Infrastructure (32:40)
- Real Estate slips into the background (32:50)
- Most real estate has been built for Excel Spreadsheets (33:10)
Fundrise Team and Platform
- Iterate on team (34:10)
- Smart people
- Low Ego
- Attitude to “dig the ditch” (34:50)
- Knowledge less important
- Desire to learn-
- Intelligence is “smarts minus ego” (35:30)
- Discount your desire (36:15)
- Recruiting and hiring is a privilege (36:30)
- Learn and listen to find out internal motivation (37:00)
- Look for candor (37:30)
- Platform success-
- Luck and chance (38:10)
- Getting on the right trend (38:40)
- Software engineers make company think differently from other real estate investment (39:40)
- Stress Test Analysis of Portfolio– 3/31/20 (40:00)
- Looked at portfolio granularly and tested it with downside scenarios (41:55)
- Share with customer test of worst case scenarios
- .2% of portfolio loss if pandemic lasts 12 months (42:30)
- Most businesses don’t want to be as transparent (43:00)
- Create trust through transparency
- Project went bad and the lawsuit was settled and result was published to entire customer base (43:40)
- Statistics of customer base (44:50)
- 135,000 investors
- Late 30s to early 40s average with range of 20 to 90s in age.
- Modern investor- mobile investors (45:30)
- $1.1B in investments under management (45:30)
- $4B in real estate
- Average of $10,000 of investment
- Funds have 50,000 investors each (46:00)
- Looking for “outcomes” (47:00)
- Basket of investments (47:30)
- Investment advisory product (48:15)
- Broad diversification (48:30)
- 3 Outcomes with varying baskets of investments depending on market conditions (48:50)
- Advised product for the end customer (49:30)
- Technology to manage millions of transactions (50:00)
- 1M 1099s
- 100,000 K-1s
- How we connect with people
- Team that addresses questions from 1M users (51:00)
Life Priorities
- Silver lining from pandemic is that Ben Miller is not as much of an workaholic (52:15)
- Work from home is actually better than working in the office (52:45)
- If done right, it is better than the old model (53:10)
- Having a rich family life while trying to make the world a better place
- Work all of the time
- Focus on customer to the point of “giving” back the service to them (54:10)
- Build a product to be value driven (55:20)
- Wins, Losses, Surprises
- Win- Team that has evolved together (56:15)
- Loss- Figure out how to do business with family issues (56:40)
- Surprise- The way the business played out- success came from different ways than expected…comes from “flow” (57:20)
- Advice- “Know what you want.” Decide how to do it. (59:10)
- Billboard Answer: “First ask “what is the conflict of interest?”(59:30)
- Leaders are not rising above their “conflict of interest” (1:00:35)
- Let other people be right. (1:00:55)
Postscript (Tom Amos)
- Vertical Integration (1:03:00)
- Aim to scale his investment strategy to make it more efficient and less costly for the investor
- Developer perspective of vertical integration
- Touch points of properties
- City living vs. suburban living (1:08:00)
- Office and retail most affected
- Multifamily less affected
- Technology devaluing location
- Social aspect- The New Geography of Jobs- Young talented people want to be near other young talented people
- Countercyclical events
- Do people need to be together physically to do business?
- Less “chance” meetings, more intentional meetings
- Disruptive aspect of Fundrise (1:15:00)
- Evolution of real estate investments into a consumer marketplace
- Different than other private equity firms with cost and approach
