Example: From Laborer to Real Estate Tech
Naval
Naval Ravikant
4.8 • 2.4K Ratings
🗓️ 26 April 2019
⏱️ 5 minutes
🧾️ Download transcript
Summary
The continuum from laborer to real estate tech company goes from low accountability to high specific knowledge, accountability and leverage.
• Laborers get paid hourly and have low accountability 0:19
• General contractors get equity, but they're also taking risk 1:20
• Property developers pocket the profit by applying capital leverage 2:14
• Architects, large developers and REITs are even higher in the stack 3:16
• Real estate tech companies apply the maximum leverage 4:05
Transcript: http://nav.al/laborer-tech
Transcript
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| 0:00.0 | The Tweet Storm is very abstract. It's deliberately meant to be broadly applicable to all kinds of |
| 0:06.6 | different domains and disciplines and time periods and places. But sometimes it's hard to work |
| 0:11.4 | without concrete example. So let's just go concrete for a minute. Look at the real estate business. |
| 0:16.9 | You could start at the bottom. Let's say you're a day laborer. You come in, you fix people's houses, |
| 0:22.0 | you know, someone orders you around, tells you break that piece of rock, send that piece of wood, |
| 0:26.3 | put that thing over there. There's just all these menial jobs that go on the construction site. |
| 0:30.9 | If you're working one of those jobs, unless you're a skilled trade, like say, a carpenter or |
| 0:35.6 | electrician, you don't really have specific knowledge. And even carpenter electrician is not that |
| 0:39.5 | specific because other people can be trained how to do it. So you can be replaced. So you get paid |
| 0:43.8 | your 15, 20, 25, 50. If you're really lucky, $75 an hour, but that's about it. You don't have any |
| 0:50.0 | leverage other than from the tools that you're using. So if you're driving a bulldozer that's better |
| 0:54.0 | than doing it with your hands. So day labor in India makes a lot less because they have no |
| 0:57.9 | tool leverage. You don't have much accountability. You're a faceless cog in the construction crew |
| 1:02.3 | and the owner of the house or the buyer of the house doesn't know or care that you worked on it. |
| 1:07.2 | One step up from that, you might have a contractor, like a general contractor who someone |
| 1:12.8 | hires to come and fix and repair and build up their house. That general contractor is taking |
| 1:17.5 | accountability, they're taking responsibility. So now if let's say they got paid $250,000 for the job, |
| 1:22.6 | sorry, I'm using barrier prices. So we got to go rest the world prices. $100,000 for the job to |
| 1:27.6 | fix up a house. And it actually costs the general contractor all said in done $70,000. Well, |
| 1:33.2 | that contract is going to pocket that remaining 30. So they got the upside. They got the equity. |
| 1:37.7 | But they're also taking accountability and risk. So if the project runs over and there's losses, |
| 1:42.1 | then they eat the losses. But you see the just the accountability gives them some form of additional |
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