All “OldSchool” Does Is Produce Results Every Time It’s Tried — And Everywhere We Look

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As a teenager in the 1960’s it seemed the world was tryin’ to make too many sea change pivots at once. We don’t seem to really become consciously aware of the world outside our neighborhood, school, and specific ‘kid’ stuff ’til we’re in jr. high school. Heck, now it’s not even called that — it’s middle school. That decade has since been referred to as ‘The 60’s revolution”. The kids born a mere 3-8 years before me decided long held values, principles, conventions, and almost everything else was outdated.

Many have learned the hard way that OldSchool got its name the hard way — by producing solid results every time it’s tried.

Don’t get me wrong about this. Long ago I made a promise to myself. I’d adjust to new technology, new and better ways to do things, and change in general. I did so as a result of watching the consequences dealt to those who didn’t. Adjusting to change is one of the most difficult challenges in life. The trick though, is to develop the ability to wisely discern what change is real, truly beneficial, and has ‘legs’ — and what is change merely for the sake of change.

An example of inexperienced, misguided leadership making long lasting, principle-defying decisions for an entire industry, is real estate brokerage. That’s not a topic for this site, but it illustrates the difference between real change and change pretending to defy gravity. The last 40+ years the industry has been almost exclusively run by the ‘agent-centric’ business model. Translation: The tail wags the dog. The last decade or so, real estate ‘teams’ have almost universally opted for the OldSchool ‘broker-centric’ business model. Teams have been producing profits embarrassingly higher and more consistently than even their broker employers. It’s an irony I’ve quietly appreciated for awhile, possessing OldSchool DNA and all. 🙂

Sports is the best, most visible illustration of Old vs New ‘School’.

In team sports, it’s axiomatic that a team with a buncha me me me players, who couldn’t spell ‘team’ if you spotted them the t-e-a, will almost always lose to a slightly less talented, but unselfish buncha team oriented players. It’s been recently proven again with just one NBA team. The Knicks have two bona fide superstars. Yet after the first 22 games of this season they’d won just 7. Then, as if the OldSchool gods were bored and in need of some comic relief, those two superstars were simultaneously removed from the team due to injury and a death in the family. Enter a kid who couldn’t be more of an OldSchool throwback — Jeremy Lin. The next 8 games had them losing just once. Those from the ‘watch me’ group went nuts. He’s only winning cuz they’re playin’ bad teams. One of their stars returned, not the prolific scorer, mind you, just in time to face NBA’s defending champs. “You’ll see now, many said. Reality is about to rain down on Jeremy Lin and the Knicks.

Jeremy Lin and the Knicks ‘schooled’ the champion Mavericks. Not only that, but the Mavs gave Lin the best compliment they could, by assigning last year’s MVP — a 6’11” stud of a superstar in every way — to guard ‘little’ 6’3″ Lin. Lin calmly sank a 3-pointer over the lunging giant. Are the Knicks as talented as the Mavs? No objective fan would say so out loud. But a better TEAM beat ’em.

Change, adhering to proven principles is almost always very beneficial.

An excellent example is the airplane industry. Passenger planes powered by gas engines turning props, lost out to jet engines with no props. They both obeyed the laws of gravity, thrust, and lift, the laws governing flight. The change from prop driven to jets was the natural progression. We all adjusted fairly easily to the change.

The same can be said of the sea change in cars. When fuel injection replaced carburetors, no principle of internal combustion was violated. It was literally better in virtually every possible way. It’s probably safe to say their isn’t a mass produced car in the world sportin’ a carburetor.

OldSchool — change — and real estate investing.

I’ve seen the many changes in real estate investing since I first understood the concept back in the day. The principles still hold true. Principles tend to do that — much to the chagrin of those who choose to ignore them. Like gravity, what I’ve always called the physics of real estate investing work every time they’re tried — and, sadly at times, every time they’re tested or ignored.

Defy the law of location quality long enough and you’ll pay the price, one way or the other. Those who cavalierly ‘break’ this law without penalty, are so many times the ones who pay the most when it finally comes home to roost.

Ignore the law of leverage — that is the real law of leverage, not the size of a down payment — and your investment capital will pay the price. It’ll happen in much the same manner as water turns into steam and disappears when it reaches the boiling point.

Decide to appropriate cash flow years, sometimes decades before its time, and you’ve ignored the basic principle of what cash flow is. It’s nothing if not a simple yield on a given amount of capital. The larger the pile of capital, the bigger the yield in terms of dollars. The ‘percentage’ is more or less the same for small or large capital amounts. Why on earth would people purposefully employ a strategy guaranteed to prevent a large cash flow exactly when they wanted it most? The principle there is ‘capital growth before cash flow’. 

There are many more principles/laws of real estate investment. The key is to understand when innovation is actually a beneficial leap forward, a real improvement. The ability to correctly discern the difference between positive change, and change that purports to successfully defy gravity, is more than just crucial. For most it’s the difference between discussing which cruise to take, and gettin’ up in the morning to go to work when you’re 71 years old. Or 80.

The speakers scheduled for the BiggerPockets Summit

The speakers Josh Dorkin has signed up for BP’s first ever Summit, are pretty much OldSchoolers. The common denominator found in today’s methods and back in the day’s methods, is the strict adherence to sound principles. There will not be anyone there expounding on theory. Nobody’s there to sell their books or tapes or seminars.

What you’ll get from these speakers is nothin’ but what works. They won’t be tellin’ you how to get rich by July 4th. They won’t be legitimizing silly strategies concocted to excite and amaze, based upon Barnum ‘n Bailey’s infamous axiom. Instead, you’ll hear explanations of timeless principles. About laws that ruthlessly govern the results dictated by whether or not we respect, and yes, obey these principles and laws.

OldSchool Definition: Where folks go to learn how to produce predictably positive results in a given discipline.

Josh calls it The BiggerPockets Summit.

Hope to see ya there. I’ll be the BawldGuy.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

3 Comments

  1. Great post Jeff. When you said “Defy the law of location quality long enough and you’ll pay the price, one way or the other”, this statement really stands out for me.

    In my city, I am seeing large numbers of investors that have done just that and are now paying the price. They bought 50-100 properties that were what I call “disposal houses”. They were cheap, in bad neighborhoods, but they had great cash flow at the time (when the tenant paid). Now they are stuck with houses that have virtually no value, are in worse shape than ever, and tenants that no longer are paying the rent due to the economy. Even this level of tenant doesn’t want to live in these crappy houses. Things would be so much different if they had only chosen a different path.

  2. Jeff Brown

    Hey Sharon — My clients and I were able to completely ignore the location quality law for 40 years, while in San Diego. The quasi guaranteed cycle which ALWAYS included appreciation, allowed us to buy pretty much anywhere in that market. The appreciation was the tide that floated all boats. Once the origin of that rising tide was eliminated, the law of location quality ruthlessly regained control. All those ‘Donald Trumpers’ became conspicuously absent at Happy Hours around the county. 🙂

    Really liking your description, “disposal houses”. It’s perfect — except their new owners probably can’t give ’em away in many areas.

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