Who’s Your Goliath?

My dad is and always was a fan of underdogs.

Before sports went berzerkly corporate, and all the New York team owners felt that it was their Manifest Destiny to use zillions of dollars to wrest championship rings from their wearers in other towns and bring them to the Big Apple, my father parked his loyalties solidly behind the longshots like the pre-Dave Debusschere Knicks against the Bill Russell-led Celtics, and the 1964 football Giants with a creaky Y.A. Tittle at the helm, and a new baseball team called the Mets.

So I got it from him.

Click for more info on Malcolm Gladwell

Click for more info on Malcolm Gladwell

Which is why Malcolm Gladwell’s piece in the May 11, 2009 issue of The New Yorker was a must read. As is Gladwell’s typical article approach, blending historical research with a latter day examplar of a noteworthy phenomenon, it’s a scholarly deconstruction of a twist of fate, “How David Beats Goliath.” 

For two reasons, the story should interest those of us whose fortunes or loss of them tie to the new residential construction market.

The first is that the central theme of the story relates to the plight of many organizations who make a living or not in the world of housing. They are David. Foremost, Goliath–the Philistine warrier whose defeat is almost inconceivable–is a real estate market and general economy withering in their effect on combatants large and small.

Gladwell’s yarn–backed by political science data on the number of wars won by undermanned, less powerful armies through history–tells how an underdog gets the upper hand. First thing they have to do is recognize they’re weaker and choose an unconventional strategy.

“When underdogs choose not to play by Goliath’s rules, they win.”

Think Lawrence of Arabia; think Rick Pitino, or if you’re my dad, think Digger Phelps’ Fordham University [no name] Rams against a U Mass team led by Julius “Dr. J.” Erving. The unconventional approach often involves surprise and speed, causing confusion in the ranks of a more potent foe.

Surprise and speed, for home builders, translates into cash. Let everyone else remain paralyzed in a market debatably still deteriorating [or as the Caculated Risk blog asserts, "correcting"], and girding for further waves of foreclosure hell. Don’t play by the rules of the game that you have to price a new home to market. What’s the equivalent for home builders of a full-court press? Is it an Open Series or any number of the other companies’ new, more affordable floorplans that break previously ironclad rules about replacement costs? How do you change your company’s culture so that it can adapt and change its structure?

The other reason to read the article might just be to come to a new understanding of who Goliath really is. Certainly, at the moment, the barbaric, dreaded enemy in most of our minds is a marketplace of still halting consumer confidence, corporate fear of investment, and massive government overcompensation for the ills of free enterprise.

Interestingly, though, a subplot of the article focuses on another kind of David. In this case, it’s Vivek Ranadive, a Silicon Valley software developer who revolutionized data analysis by moving from “batch” collection to real time collection.

What has led and will likely lead many a real estate and residential construction company down the road to ruin is the absence of reliable data to say what is actually going on in the market. There are too many lagging indicators and undependable metrics that allow analysts to assert “the fundamentals are strong” and the “subprime damage can be contained.”

So, in a sense, Goliath is not only an outside force in the marketplace, but an enemy within. Data that is as local as the Census tract you’re competiting in and as instructive as a clock with the correct time is something most real estate players haven’t gotten around to developing or developing a belief in.

Some times, rules that need breaking are ones we’ve made up for ourselves.

Until a megalomaniac named George Steinbrenner came along, my father’s one exception to pulling for the underdog was his love of the New York Yankees. He knew lifetime and year-to-date averages and ERAs of most of the Yankees from about 1935 through The Mick and Whitey Ford.

But even when they were dominant, the Yanks had kind of an underdog’s salt of the earth sense about them. After all, one of the best of them said this. “The future ain’t what it used to be.” Bet you’ll never guess who.

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