Rory Sutherland

Why estate agents aren’t dying out

Relational capitalism will keep them going – at least until the coming of the driverless house

Why estate agents aren’t dying out
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I don’t like to make business predictions, but — barring some apocalypse — I suspect there will be plenty of estate agents around in 2065, and occupying prominent high-street shopfronts just as they do now.

This may seem an absurd prediction: after all, almost no one now uses an estate agent to find a house: we go to property websites instead. And, since we all assume the purpose of an estate agent is to find buyers for a house, a role usurped by Rightmove and Primelocation, we think the remaining days of the estate agency are few.

However, perhaps the principal role of an estate agent is not to find us a house so much as to be a scapegoat if the house we buy proves to be terrible. When you pay Messrs Knight Frank, what you are actually buying is a form of reputational insurance to pass on to the new owner of the house in the form of reassurance. The estate agent is the local man who remains in place to be vulnerable to reputational and legal redress. He has ‘skin in the game’, as Nassim Taleb calls it. The plate-glass windows are no longer there to display property: they are there for me to put a brick through if my new house turns out to lie on a flood plain.

To understand this, you have to understand an idea first expressed by, I think, Jacques Attali: that fundamentally there are only two kinds of industry. There is the insurance industry, to protect us against something going horribly wrong, and there is the entertainment industry, which distracts us from the fact something will soon go horribly wrong. Everything else is just an elaborate variant of one or both of these two businesses.

It is for this reason (what I call invisible insurance) that I always buy a car from a local dealer. Most of the time, I get a slightly worse car for the money than if I bought from a chap called Dave with a suspiciously fluid pay-as-you-go mobile phone number. I know this. But the likelihood that a reputable dealer will sell a truly ghastly car is lower, since he is vulnerable to reputation risk. I sacrifice contrasting leather piping for the reduced chance the engine will blow up.

Many predictions made about digital disruption are wrong, because they understand only transactional capitalism and not relational capitalism — and the unwritten and unspoken understandings underpinning most commercial relationships. When Uber prices (perfectly logically) rocketed during the Sydney siege, they suddenly realised they had breached one of these unwritten rules: ‘Do not exploit misfortune for personal gain.’ In many cases the intermediary is not redundant — they are part of a feedback loop that keeps businesses trustworthy. The anonymous trading of commodities looks efficient on paper but is a disaster in practice. Even the Soviet Union eventually made factories stamp their name on their rivets.

No, if there is one technology that should scare estate agents, it isn’t the internet, but Elon Musk’s new battery, which makes it possible to live off the grid or off solar power for long periods. You see, both Google and Tesla have so far failed to spot the real disruptive technology of the future: it’s not the driverless car, it’s the driverless house.

In 20 years’ time, rather than paying £20 million for prime London residential property, I plan to convert a driverless, electric double-decker bus into a luxury home (£250,000?), and program it to spend the week cruising around the best areas of London at low speeds, repairing to the seafront at weekends — like a hi-tech -Genghis Khan.

‘Where do you live?’ ‘Berkeley Square, mostly’. ‘Oh, me too — clockwise or anticlockwise?’

Rory Sutherland is vice-chairman of Ogilvy Group UK.