HousingWire Editor-in-Chief Sarah Wheeler spoke with Paul Hurst, the company's chief innovation officer. The first American talk The challenges of attracting and retaining technology talent and how to know if your project has enough vision.
Sarah Wheeler: What are your thoughts on buying and building?
Paul Hirst: Before joining First American, I worked with a number of companies to determine this very question. My opinion is that you should be very calm about where you have the right to win. With enough capital, you can build a lot of technology. If you want to be the best in the world at building and distributing that technology, you should build it. For everything else, you'll need to collaborate with others.
At First American, we're focused on building in-house where we think we have a right to win, including digitizing and automating payments, investigation and review processes, and title determination. We look at everything else as a partner. RON is a great example. Only 15-20% of RON is generated in real estate, the rest is all generated in other industries. Even if we build it, we can only monetize 15-20% of it.That's why we partner with notarizeas a third-party company, can extend its monetization to multiple industries.
SW: How is First American leveraging AI?
PH: Generative AI has certainly been in the public eye over the past 18 months, but clearly AI has been around much longer than that. The company has invested heavily in AI over the years, and he holds more than 10 patents related to data extraction from public records data. So while generative AI doesn't change our strategy, advances in AI are like a turbocharger for all of these innovation priorities, allowing us to do things faster and cheaper across existing innovation areas. Helpful.
One new use case that has emerged specifically with generative AI is solving email knowledge problems. Like many companies, we have extensive knowledge of email systems across the business. How can insurance companies capture and organize that information so they can do their job quickly and effectively?
One of the things that First American is always aware of is the concept of original IP. We have a very good relationship with Microsoft and have worked with them frequently. Real estate companies may want to engage with AI and may want to use these tools. But we also need to think carefully about the value of our data. And how do you protect it?
A lot of people talk about AI in the real estate industry. “How do we reduce the number of his FTEs in the company?” I think that's a minimalist way of looking at things. I like to think about how much more business we could make if each employee focused on the human element of a transaction. How can these superpowered humans make more trades and make more money in the process?
SW: Cyberattacks against real estate and mortgage companies, including First American, are on the rise.
PH: Yes, we explained the details at the fourth quarter results briefing. For content specific to First American, I'm going to direct people there. On an industry level, the organizations carrying out these attacks appear to be increasing in sophistication, especially as AI advances. This is an issue that we as an industry have to find ways to protect ourselves from. .
SW: What keeps you up at night?
PH: The first is attracting and retaining the best talent. I spent 15 years at the intersection of technology organizations at several large companies. And what I've witnessed is that the difference between a great product design engineering team and a great team is actually exponential. So much of my time is spent working with the chief human resources officer to figure out how to ensure we attract top talent, whether it's by hiring top talent or finding talent internally. Masu.
As a company, our motto is “People First.” When it comes to incentives for technology teams, there's nothing quite like the kind of incentive you'd find in a startup company, where they're paid to encourage ingenuity. When you juxtapose that with a company that's publicly traded and making a profit, the excitement of payroll wears off. Large companies are less likely than startups to create life-changing wealth, even if the chances are very low. So we've worked really hard on the goals we set for our teams and the incentives we give them.
The second is prioritization of investments and resources. As a company like First American, we have a lot to choose from and invest in. My personal view is that real change doesn't come from making thousands of small investments, but rather by choosing a few very important areas to invest in and hold your team accountable. is. That's what we're doing with First American's innovation strategy.
SW: How do you make sure your team is working on interesting projects that will keep them interested?
PH: When you're trying to attract talent, they want to know they're working on something meaningful. They want to know that he works for a company that influences 25% of all real estate transactions done in the United States. This is about home ownership. And you have to make sure they're working on something big. The easiest way to see if your idea isn't big enough is to try hiring people for it. If you can't find good people, the idea is bad.
Once you've found the talent, the second thing is how do you create milestones and goals that give them appropriate compensation goals without giving them a softball. We've been running a lot of our own internal innovation efforts, a bit like a venture portfolio company. So if you're running a venture-backed company, it's not a perfect science, but a good rule of thumb is to hold board meetings every quarter and see how your company is performing against the metrics that define success. Discuss what it is. And about once every 18 to 24 months, he has something like a fundraising event. Have we hit the milestones we've talked about over the last 18 months? Should we continue to fund this?
We've tried to incorporate venture thinking and the way venture-backed companies operate into our internal innovation efforts.
SW: When you think about technology in the real estate space, why do you feel optimistic about the future?
PH: Those who come to the real estate industry for the first time realize that it's not like ordering a taxi or ordering groceries online. This is a trade that takes place once every 7-10 years, so these trades are very large and important, and because they are less frequent, changes take longer. right. First of all, we need to develop intestinal strength and discipline. Yes, he has a good idea, but it may take him more than 10 years before it is adopted. And you have to be able to exist for that period during the macro swing. That's why I think working for a company like First American is so appealing. Because they have the ability to innovate and have balance sheets that can tenaciously drive change over decades.
On an optimistic note, more than $50 billion in venture capital has been invested in proptech since 2017, and probably countless more if you include internal innovation within publicly traded companies in the space. invested. But when you look at real estate transactions, the number of transactions that an agent, loan officer, or escrow officer can handle in a month has not increased significantly. So I think there's still a lot of low hanging fruit and room for improvement in the processes that all of our employees do on a daily basis.
In fact, a lot of the groundwork we've done over the last five years is the first step in digitizing many of these processes, which is a necessary precursor to automating things. When you combine this with advances in AI, I think there is a lot of opportunity to complete the vision of efficient real estate transactions.
It may be a little counterintuitive, but I think the macro environment we're in these days is going to be good for innovation and real estate. A lot of money was being spent on a business model that probably wasn't as resilient as it could have been, or at least relied on low interest rates and capital-driven growth to succeed. And throughout 2020 and 2021, it was always a “rising tide lifts all boats” situation. So I think we're working harder now to make products and services that are truly better, faster, and cheaper. And I think it will be easier to distinguish between signal and noise. Our industry is always cyclical, and the resilience our industry has developed over the past 24 months will pay dividends in the long term, even if there is considerable pain in the short term.
