Strategic hypocrisy and management by anecdote

Of course, you’ve read about the dust-up in Boise at the CMLS conference, where Craig Cheatham, CEO of The Realty Alliance (TRA), alerted MLS executives that the big brokers in TRA are fed up with their MLSs and are working on a project to shake up the industry and presumably the MLSs. I’ll leave speculation about what TRA is planning to others. I’m interested in talking about the likely genesis of the list of complaints to which Craig alluded at CMLS, and which has been published elsewhere. I’m working from the list Gregg Larson (no relation 😉 published on the Clareity blog in October.

I’ve been thinking about this list and talking with folks in the industry about it for the last several weeks, and I suspect it’s at least partly the result of two problems that also plague local MLS boards of directors, problems I call “strategic hypocrisy” and “management by anecdote.” I want to explore them a little in this post, both for the light they can shed on The Realty Alliance’s statements and for what they can teach leaders of local MLSs.

Strategic hypocrisy

Market leading brokers are often strategically hypocritical. If there is some kind of innovative practice emerging in the market, the big broker will oppose it—unless the big broker is the one doing it. In the first instance, the broker will bad-mouth the MLS if it does not take “regulatory” action; in the second instance, the broker will bad-mouth the MLS if it does. I remember doing research for The Realty Alliance back in 2002 on the question of virtual office websites. I surveyed and interviewed many market-leading brokers and reached the following conclusion: TRA’s members believed that they should be able to operate VOWs, but that undefined “others” should not.

Consider also the initiative sponsored by TRA under which its broker members can use MLS data from their home MLSs to generate automated BPOs (effectively, AVMs) for sale by the brokers through TRA’s partner Collateral Analytics to the real estate vertical (including mortgage companies and others). TRA brokers are flabbergasted that some MLSs don’t want to provide data feeds for this use of MLS data. But if someone else had come along proposing to do it three years ago, let’s say, those same brokers would have protested quite vigorously. In fact, in one of our MLS clients, the MLS executive presented the TRA proposal and local broker’s request for data feed without identifying the broker requesting it; one of the MLS’s board members protested it vigorously… until she learned it was her own company making the request. Of course, then it was OK.

I know the term “hypocrisy” comes heavily value-laden, and I don’t want to rag on the big brokers or TRA. I love big real estate brokers, and I want them to be happy and rich. (I’m hoping they’ll spread it around a little!) And note that strategic hypocrisy is behavior perfectly consistent with rational self-interest. If you can get a competitive advantage and keep it from others, or if you can keep others from getting a competitive advantage that you can’t enjoy, it makes sense to do what you can to achieve that.

MLS boards, however, don’t have the luxury of catering to only one or two large brokers. They have to balance such needs with those of other brokers in the market. Furthermore, under certain circumstances, acceding to big broker demands can result in antitrust hot water. (Consider NAR’s fight with the DOJ over VOW policy after adopting changes urged by some larger brokers.) MLSs have to maneuver to deal with strategic hypocrisy when it arises. It’s a hard job.

Management by anecdote

The second phenomenon is much more common. Management by anecdote is the identification of a problem and demand for a solution based on a single instance of the problem situation. I can’t count the number of times I’ve advised an MLS not to make a new rule after an exchange of the following sort in a board meeting:

Board chair: “Is there any new business?” 

Board member: “The other day, my agent A interacted with company B, resulting in terrible consequence C! I think we need a rule that prevents companies like B from causing consequences like C!”  

The board: “Rabble, rabble, rabble!” 

The problem here, of course, is that (a) the board does not have all the facts, and (b) no one knows whether this “problem” has happened more than once or is ever likely to happen again! It’s just an anecdote. If you’re lucky, the board will take no immediate action, and everyone will forget about it by the next meeting. If you’re mildly unlucky, the board will direct the MLS exec to talk to counsel about implementing such a rule. (Counsel will likely recommend against it.) If you are quite unlucky, the board will adopt a policy on the spot. Woo hoo!

As I look at the list of TRA member gripes, I see what looks like a list of things that some MLS, somewhere, once did to the dissatisfaction of one TRA member broker. It may not even have happened to the broker who wanted to put it on the list. But someone, somewhere, sometime did it, so they are on the list. This would help to explain the seeming contradictions of some of the complaints and repetitiveness of others.

I want to point out that some of these complaints, if true, are gravely disturbing. For example, an MLS that makes a broker opt out of IDX in order to opt out of listing syndication is probably violating NAR policy (if it’s NAR-affiliated) and is certainly violating common sense. But the fact is that several brokers I’ve spoken to, including some members of TRA, say that they are having none, or hardly any, of these problems with their MLSs. The brokers who are having problems appear to be operating in multiple MLSs, and they seem to be most concerned that some of the smaller MLSs they deal with “just don’t get it.” These are problems the industry must address; but if the description of the problems has hyperbole ladled over it, it’s harder for the folks who should be listening to take it seriously.

Lessons for local boards

Two lessons here, one for brokers interacting with local boards and one for boards dealing with all brokers (not just larger ones):

Brokers: Your strategic hypocrisy is easy for other brokers and association and MLS managers to see. If you want to have maximum influence at your MLSs, you must recognize that they have to make rules at work the same for everyone. If you want a single brokerage firm (yours) to be able to “veto” the provision of a service by MLS, you should expect that other brokers will want the same power. If you oppose other brokers’ requests to X or Y without any policy justification, you should expect other brokers to do the same when you ask. On the bright side, most of our MLS clients want good relations with their large brokers; and they are willing to respond to principled arguments about products and services.

Local board: Your large brokers may be your life’s blood, but you have responsibilities to all your members/participants/subscribers that require you to take principled stances on the issues that come before you. You can’t ignore the big brokers, but you can’t kowtow to them either. If a big broker says, “I want X,” the broker should be able to articulate a rational category of things into which X falls and acknowledge that other brokers who want that will be able to get it, too. If the big broker says, “I don’t like Y,” it should be prepared to articulate a rational category of things from which Y comes and then explain why things in that category are inconsistent with MLS’s purpose.

I’m curious what you think (whether you are MLS or big or small brokerage)!

And by the way, Merry Christmas, Happy Holidays, etc.!
-Brian