Consumer Responsibility At Center Of Mortgage Lunacy

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What I can never get over is the hubris of markets.

I remember people talking during the tech boom about how all old economic knowledge was dead and that a new economic business model with no downturns was the new norm. What a bunch of baloney.

The same is true now. Mortgage lenders talking just months ago about how the industry was self-propogating, how house flipping and exotic mortgages were the new era and as long as people could refinance there would never be a downturn again. The loan options people were being offered and taking were bizarre: interest only loans, negative amortizations, and (my personal favorite) the “pick your own payment” loans.

You can read other people’s lements on the state of the market. I’m here to place blame on the one group of people that no one else has the guts to blame: the consumers.

All I hear is how the mortgage industry misled people, the government let it happen, builders were pushing for it. All is true. But the bottom line in this entire fiasco is that consumers took these ridiculous loans without batting an eye. I was taught that when a deal seems too good to be true, it is. Companies offered this absurdity and consumers ignored this wizened proverb and grabbed for gold.

Of course, none of this matters. And you know why? Because we — the banks and brokers, the planners and agents — are going to get the blame for this mess. And the only way to get out of it is to educate, educate, and educate some more.

It is our responsibility to make sure the consumer understands the financial ramifications of the deals they are taking. That’s why products like powerOne exist, because it helps you educate your clients, making them better and smarter buyers.

The market will rebound — it always does — and it will most likely be a stronger market when it returns. The question is what are we going to do to ensure it doesn’t happen again.

Random Quotes from Random Minds

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I was reviewing my notes from Real Estate Connect and noticed a couple of quotes I wrote down that I thought was interesting.

“We are focused on real-time real estate.” – Lennox Scott, CEO, John L Scott Real Estate

I said in my last post that I think real-time is interesting. That’s what people buy mobile computers for anyway, right? Piece of data from a report done by the WAV Group says that “78% of the time, consumers will work with the first agent that gets back to them.” It goes on to say that the typical realtor responds in 2 to 52 hours while the average consumer expects a response within 30 minutes. Oops.

I have to wonder, by the way. Wouldn’t it be nice if business was really that easy? Generate a lead, respond immediately and the deal is mine 4 out of 5 times. Me thinks there is something missing in the translation!

“The web is about people connecting. The difference between today and 20 years ago is the speed.” – Alex Perriello, CEO, Reology

A presenter at the show (not Alex) commented that his parent’s generation (baby boomers) would buy a house and then tell their friends while his generation would tell his friends, solicite feedback and then buy the house. Ah… the social networking crowd.

The speed part is true, though. It is changing everyone’s business. Here at Infinity Softworks we are taking steps internally to be able to handle support from a BlackBerry. Hey, we sell mobile products. Why shouldn’t we be mobile? But most importantly, it allows us to respond very quickly to enquiries. All this blather about how to make customers more loyal. Easy answer. Make useful products, charge reasonable prices, treat customers with respect, respond quickly and accurately when they ask a question. Doesn’t seem so hard.

Another aside — I wonder if social networking will be as popular as these late teens/early 20-somethings get older. I find I barely have time for my handful of close friends and family, let alone 100 other associates on the web. A different kind of friendship, I guess. My day consists of work, wife, daughter, sleeping and eating, not necessarily in that order. For the other five minutes…

“At the end of the day, [business success] is all about perseverence.” – Russ Capper, Prudential Real Estate

The show wasn’t huge. There were maybe 1,000 or 2,000 people there so I would see the same people walking the halls. One person I noticed was walking around with crutches. I’m assuming he had cerebral palsy or MS or something similar. But he was there, attending seminars, talking to vendors and making the most of the show.

At one point, he was walking between a couple of people talking and a sign, got a little close to the sign and tripped over it. The sign was on a light-weight stand. For most of us, we would have knocked the sign down but for him, he lost his balance and went straight down.

The two people talking stopped, went to help him up and then stopped when they realized that he was going to help himself. The man grabbed his crutches, stood himself up, said something polite to the two people and kept going. He wasn’t embarrased at all. The whole event happened with more dignity than I could have mustered.

As he walked away, all I could think of was Mr. Caper’s comment.

Searching For Answers, Finding More Questions

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I just returned from Real Estate Connect, a conference in San Francisco that focuses on connecting real estate with technology. There is an awful lot going on in this market. Traditional control resides with Multiple Listing Services and the National Association of Realtors. They set the terms by which buyers and sellers communicate, including the listings themselves. Now this control is being slaughtered by online companies (see Zillow, Trulia, and Redfin, just to name a few). As the record industry found out, the control of content is quickly moving to the web (in this case, the listings themselves).

Over the years, we have found that a number of our clients are in the real estate space. Customers include real estate agents and brokers, mortgage brokers and loan officers, and real estate legal experts. They have all had a need to perform what-if scenario analysis in the field. So we went to this conference hoping to understand the shifting sands and see how we might fit in even better.

We learned a ton and believe it will have a huge impact on our future businesses. Given that, there was an awful lot of discussion about getting the customer involved in the process but very little discussion on how mobility plays a part. A lot of the emphasis was on blogging — realtors connecting to their clients and community through blogs, social networking sites aimed at familiarizing oneself with the potential buying neighborhood, and mash-ups (for instance, combining maps with listings).

I, however, want to know more about a topic that was briefly discussed: real-time real estate (or just-in-time real estate). It seems to me that this is what our customers are buying powerOne products for — to get an instant answer to a complicated question that helps close the deal now.

So… we have more work to do and more to learn. And I’m sure looking forward to it.

Looking Back Before Moving Forward

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In our last episode, I wrote about the changing face of Infinity Softworks and promised to post the “eulogy” I wrote on my way home from vacation In January 2007. I want to make sure you understand that my intention in sharing this information is to reinforce my belief that staying alive is a big chunk of the game. I hope I can write about amazing success stories for Infinity Softworks in the future. While we have only reached modest revenue, we have had plenty of successes in our past.

Without further adieu…

10 years feels like ages. I started Infinity Softworks in January, 1997. Of course, it wasn’t called that then. I was writing code for a handheld software publisher with no intention of creating a commercial company. I wanted programming experience as I realized, within 5 months of college graduation, that being an accounting major was not for me. In May, 1997, I graduated with a degree in accounting and minor in CS. By July, my business partner and I split with the publisher over creative rights and went out on our own.

My partner, I believe to this day, saw it as a way to pay for graduate school and gain some experience. While I agreed at first, I saw it as a business and continued to see opportunity even after he and consultants brought on to help left me alone to do what I wanted with it. I survived – another two years before I was convinced once again that the time was right to expand the company and grow the business. Infinity Softworks, the small seller of software financial calculators, was going to revolutionize the $1B calculator business. It was not to be. Instead we split our attention away from our chief customers who were in financial fields, trying to make a business out of something we had little experience in. Some months I felt as though I was adrift in the wind, desperately trying to find daylight… anywhere. It was not to be as we continued to shift in the hurricane force winds that were the handheld market. Personally, I was decimated and exhausted even by this time in 2003. Everything we tried failed. Selling handhelds with our software… Attracting major partners in finance fields to bundle a retail product… getting buy-in from major trade organizations particularly in real estate… partnering with hardware vendors to go after the high school market… getting buy-in from the College Board for a handheld with our software on the AP exam. How much can one person take? But through this all, and with continued cash flow decreases and only a glimmer of hope for more funding, I kept a small team together and kept going.

If the answer isn’t handhelds then maybe it is the web. Web services to schools that need better ways of teaching mathematics. But, in my second big blunder, I overestimated school’s interest in our software as an integrated tool. (My first big blunder was the overestimation of the handheld market’s near-term growth potential and our ability to get in front of and remain attractive to those customers.) By the time I realized this second mistake and realized that I couldn’t raise money, our time was up. The money was gone. We tried to adjust, yet again, but ran out of time. Most of my developer’s are now gone. I am left with rapidly depreciating assets, a slowing revenue base. It is enough reality to try my sole. And yet, on this flight back from Florida after a week off when I hoped the reality of my situation and what I should do about it would be visible to me as if a sign from God itself, I still contemplate mortgaging the home and ensuring its continuation for another 4 months while the situation sorts itself out. I can salvage one developer! I can keep the office open! I can try a little longer to make sure my investors are repaid even though I have, in the end, created such little value in the company. And in particular there is basically no value left for the reasons people invested in the first place – to revolutionize the world of software calculators in a very mobile world.

At what point does a CEO who has tried with all his might say enough is enough and move on? I have tried so hard to listen to my head and listen to my heart. I can’t tell anymore which is saying which. Should I fight on? Should I give up? Is my personal make-up such that I can give up? Can the conflict that rages in myself be quenched or will that conflict leave me with nothing but what-ifs and regret and holdings on. I know I have tried my best. To me, that is not the issue. It is not even a matter of what-ifs for what has happened in the past, but instead what-ifs for what the future could hold. What if I do let everyone go but keep fighting, keeping trying to drive the deal that turns the corner and then hire a team to make it happen? What if I learn Java and progress the project the way I see fit while I look for that elusive deal? What if I mortgage the house and keep a developer or two and still don’t have enough time to get a deal in place? Am I too early for this opportunity? Do I have the right skills, the right people, and as much as I want to believe it, determination and perseverance to overcome the brutal reality of the market? Do I have the energy to program again, to learn a “new” language from scratch and advance a company lock-stock and barrel as if it is 1999 all over again? Will I spend my days trying to do marketing and support and new development all the while living in my own world without input from elsewhere?

It is not 1999 anymore. I was so excited, even as my first business partner was walking out the door, about the handheld market. To me, it was a foregone conclusion that EVERYONE would carry a portable computer and do things on it. It was just a matter of figuring out what they would do and be the best person providing it. But reality caught up with me. Too much development burned me out. Again, up to that point, I chased deals I could not get, first with Intuit and then Microsoft, and then decided to develop a finance management solution even with out them. Where was it going, I think now? Wouldn’t I have been better off developing something new [that hadn’t been invented before] that would bring me more customers not the same ones over and over again, the same ones that would buy finance calculator and investment software and money management and expense tracking and every other finance application on the face of the planet. And the situation got out of control. I hired a developer that did a lousy job. I burned myself out trying to run a company, do the sales and marketing and write the majority of the code. I failed to enjoy any of the money that was flowing in nor the time I was afforded running a nice, profitable, small company out of my house.

It is not 1999 again. It was an experience I craved. The riches being tossed around took me in, the dot com craze that carried over into a mobile craze. I flew all the way to NY to raise money! For a first meeting! What a joke. It took me two+ years chasing money, trying to build a plan, losing focus on running the business and making it successful. By the time I came back, we had spent big chunks of the money we raised, the handheld and dot com crazes were over (as well as the excellent economy) and we were struggling to make payroll and build a sustainable business. In retrospect, it was all a nice, little idea. A business that could make money and pay two to three people well. So I am left with this aftermath. The attempts to move into other markets, the desire to build a company big enough to be sold, big enough to make sure my investors get their money back. I have been accused of thinking small, probably true to a certain extent. I have found it so hard to think big when I am wondering whether I am going to survive the next three months. I have been conflicted for years – focusing on the details to make sure they get done, the things that didn’t get done while I was away raising money, and trying to craft and execute a vision for the company. In the end, I am doomed by my own inexperience and inability to build a company that at one point had raised close to 600,000 dollars.

I have gained far more than I have lost over the past 10 years. While I have lost hair and gained weight, I have also gained wisdom, two degrees, a living wage, a wife and daughter. It was a nice, little business that didn’t satisfy my need to learn and grow individually. Then it became a struggle –thanks to recession and quickly changing seas in the handheld market. We were squeezed – by Palm, cheap competitors, and new incompatible operating systems. But we fought. For way too long we fought. We tried finding markets where we could sell handhelds, we tried shaking up the management staff, we tried new markets, we even tried leaving handheld computing.

So here I sit on an airplane on my way back from Florida after a week with family. I have no better clue now than I did before I left a week ago, or a month ago when it became clear we were going to run out of cash in February, or in October when the realization that we didn’t have an education business that would sustain us, or in August when the pending sale fell apart.

The Next Era Has Begun

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Last night, I was going through some computer documents and happened upon a stream-of-consciousness I wrote in January on a return trip from a Florida vacation. That trip culminated the end of Infinity Softworks II. Two weeks later, we had started working on Infinity Softworks III — but I didn’t know that yet.

Let me explain. Infinity Softworks I culminated the years 1997-2001. During that time, our main focus was on financial applications for handhelds: calculator, money tracking, investment tracking, etc. The company was run like a commercial shareware business. There were never more than three or four associated with the company, and for a chunk of the time it was just me.

Infinity Softworks II ran from 2001 through 2006. During this era we built a business plan, raised money, grew the number of employees and focused on verticalizing our business. We spent some time focused on real estate but never really committed to it. We spent most of this time focused on education. Most of this era was spent in handhelds but the latter two years was focused on web-based products for math education.

Our time ran out in December, 2006. We were running out of cash and no longer had a clear business vision. Infinity Softworks III began in January, 2007 as we 1) received the largest order in the history of the company, 2) decided to develop a BlackBerry version of our software, and 3) streamline and improve the existing Palm OS, Windows Mobile and Windows applications. We are set to dig into this new world of connected devices.

While the Infinity Softworks III era has just begun, I am starting to see some very interesting possibilities. I have been asking questions like, “How do our customers interact with their customers and how can this relationship be made more efficient?” It seems to me that the value of carrying around a small, connected computer is two fold: it helps me work and it helps me work more efficiently. But it seems that we are forgetting the efficiently part and focusing on the work more part.

Next week I will post the eulogy I wrote on that long flight home. I think it ties into my post on success and longevity and will give you some insight into this company. I hope to share more about this new future with you over time.