The Pomp Podcast - #1342 Trevor Bacon | Crypto Will Let You Day Trade Real Estate?!

Episode Date: April 15, 2024

Trevor Bacon is the Co-Founder & CEO of Parcl, a decentralized real estate trading platform. In this conversation, we talk about where they are getting real estate data from, how they want to help you trade on real estate prices, the impact of real time real estate data, and more. ======================= Introducing Espresso - the world’s most interactive portable display. They have a portable screen that is incredibly light, comes with a nice stand, and the user interface is very easy. Anyone who listens to this podcast can go to ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠us.espres.so/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. They have a brand new offer waiting for you.  ======================= BetOnline.ag is a proud sponsor of the the Pomp Podcast. Use crypto to bet on sports, play poker and enjoy casino games at BetOnline. Visit https://promotions.betonline.ag/pomp and use promo code POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline boasts no crypto transaction fees, and processing is anonymous, instantaneous and secure. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Trevor Bacon. He is the co-founder and CEO of Parcel. In this conversation, we talk about where they're getting all this real estate data from, how they want to

help you trade on real estate prices without actually having to buy or sell real estate, and what the world will look like as real-time real estate data comes to the market, trading becomes more popular, and something like Parcel ends up becoming more successful. It's a fascinating conversation that lives at the intersection of technology, real estate, financial markets, investing, and the macro environment. All those things are things I'm interested in and many of you are as well. So I cannot wait to hear what you all think with this conversation with Trevor Bacon. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments.

You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Espresso, the maker of the world's thinnest portable display. Now, listen up. If you're like me, you feel like you are at a command center when you sit down at your

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You'll love the Espresso screen, and I think it'll make you more productive. Go check them out today by clicking on the link in the description. This episode is brought to you by BetOnline. Do you like making a profit from sports betting? Well, set yourself up to take home the most profit possible using crypto to fund your sports betting, casino, and poker account at betonline.ag. You can avoid costly transaction fees, get your payouts lightning fast, and do it all securely and anonymously with the highest deposit and withdrawal limits in the industry. If you want to get in on the action, do it the smart way with crypto at betonline.ag. Head to the website, sign up with promo code POMP100 to get a 100% bonus on your crypto deposit today.

If you go and you deposit, they'll give you 100% bonus if you use promo code POMP100. BetOnline. The game starts here. BetOnline.ag. Go check them out today. All right, guys. Bang, bang. I've got Trevor here with me. Trevor, the data sucks coming out of all of these real estate and government organizations. It seems like they are, one, delayed, two, inaccurate at best, and three, being used to make really, really important decisions. So when you look at all of the data environment when it comes to real estate, why is it so bad? Is it just that entrepreneurs haven't yet attacked this space or what's going on?

I think, well, first off, thanks for having me. I think the main reason, there hasn't been a reason to have real-time accurate data for real estate. Obviously, transaction times in real estate can take months. decisions are lengthy. And Parcel Labs was initially created to be the underpinning of a trading platform that allows people to get exposure to real estate price movements in cities and neighborhoods in the U.S. and across the world. So that requires data that is trusted, accurate, and real-time. And that is what Parcel Labs is built to do. So we'll continue to build on that trust and provide more transparency into the real estate data space.

So talk about this trading idea. You're basically saying that people can trade on prices, but not actually have to take possession or ownership of the actual assets themselves? Yeah. So my prior life, I was a portfolio manager at a couple of hedge funds trading in technology stocks. During COVID, there's a ton of real estate volatility. And the idea came to me and one of our co-founders, Kellen, was, you know, I wish I could get long Miami and short New York without actually having to buy and move and relocate. And so that's where the idea of Parcel came to be. Effectively, Parcel, the application, is a blockchain application, a decentralized application where you can get exposure to real estate and basically bet long

and short using the Parcel Labs price fees as a reference price. So if Miami is $560 a square foot based on Parcel Labs data, that price goes onto the blockchain. And you, if you are bullish on Miami or Barish, you could express a view. That's effectively what it is. The reason why it's really attractive is there really are... So real estate's not surprisingly the largest asset class in the world. There are no truly liquid derivatives to hedge exposure, gain exposure, whereas effectively every other asset class has a way, corn, orange juice, oil. Every asset class has some form of derivative. It's just, it's strange how the largest asset class is not. And that's what the problem that we're attacking. And is the argument, the derivatives and the financial

instruments don't exist because the data is not available to make them. So it's almost like you're getting to the root cause by trying to go get the real-time data. I think that's one of them. You know, the current standard, and there actually is a contract on the CME, which is based on the Case-Shiller. So the Case-Shiller is widely cited as kind of like the gold standard for house price indexes that updates once a month, but on a two month lag. So obviously a lot happens in that timeframe, you know, in both economic and crypto, you know, that's like 10 years. So a lot happens. So at the time of update, it's almost irrelevant. So I think that is one of the best cases for why it hasn't taken off. Additionally, we leverage something called

perpetual futures on the trading platform, which is something that is enabled by blockchain and it is an elegant way to implement something like this versus a standard data future. When we see these housing data providers and people who are kind of publishing this stuff, it seems like we're just ignoring what's actually available. I always joke that the government tells us one data point, but then I can go on and look at a Zillow or a Redfin or any of these platforms, and they have, I don't know, 100 million data points that are changing every single day by the minute being updated. How do you think about what data sources you guys go and look for? How do you evaluate whether they're accurate? What is real time to you guys? Just talk a little bit as

as to, like, where are you getting the data from and how do you actually decide, yeah, this should be included and this shouldn't be? Yeah, it comes from hundreds of different sources. I think, you know, from a – the government records are important to us, so we do use those, except those are lagged. So, you know, if a house is sold, it could take up to six months to actually have that recorded at the county level we use that more as a reconciliation layer

and then you can collect real-time listings across the web and so the one difference I guess to your point on like cleanliness is like we have every property in the country and in parts of Europe right now uh indexed at a parcel id level such that they're not reduplicated because the when people are in inputting um there's just a lot of different definitions so four bedroom or studio studio b apartment b like things are double counted all the time so part of the the data cleaning process that parcel labs undergoes is uh to make sure that there's address resolution across a single unit so there's no double counting um so you know in short that's that's basically how we make sure that the data is right and what is your vision for like what people are trading

is it just pure speculation like i want to go long new york short miami or vice versa or is it actually like a hedging component where people within a city may use these instruments you know to kind of protect themselves yeah um i i look like i think the beauty is in the eye of the beholder right like the part of our thesis is just like do you think that derivatives or exposure should exist on real estate right and and so far uh there's been a lot of interest from a variety of players where uh there are um some hurdles to actually entering the us uh and we're kind of waiting clarity but we've received interest from institutions um so you see people with some exposure uh to real estate people wanting to hedge their rents um you know obviously at the end this

kind of leads to institutions being able to um hedge their exposure of on the ground real estate much like they hedge every uh you know their stock portfolios or or commodities etc so uh that's where it ends i think um which is institutional exposure to real estate derivatives um and you know there's a ton of other things you could do with it like you could offer it as a product a wealth manager can offer as a product to people you can have rent like over time we'll have rental price fees so if you think your rents are going up you can get long on on rents on parcel um you know there's a million ways you can slice and dice it once you actually have it you could have insurance right like you could uh insurance uh on on real estate as well so um yeah you know we just recently

crossed a billion dollars of volume traded so you know that's like the first milestone to getting into institutional, just in the eyes, in the eyesight of institutions. And then we'll begin, we have some partnerships coming up that will open those doors further. And recently, there's been a lot of, I think, attention on prediction markets and, you know, a number of these things that almost feel like they're tangential to what you guys are doing, but they're in either different sectors, or they may have kind of different ways to express certain opinions. How much of this do you think you can build out? And it becomes, you know, really kind of true trading. And the reason I started thinking down that path is like,

well, if you get this like free market and people are actually expressing their views in it, that is a data point, like that can actually inform a lot of things. And so like, is there a world where local governments start looking at what's going on and saying like, why is everyone short our city? Right. Like maybe we should make changes or like, you know, how do you almost think of like the, the data points and the output and the information that's generated from the trading that then could be used for a variety of things. Yeah, I mean, once you're big enough,

you are the price, right? So the more liquidity that comes on, the more traders, the more mind, share and trust that we have, the more it can be part of the psyche in terms of both pricing of real estate, right? That's important. You could actually use it, a realtor, someone could look at it to say, what's the sentiment now?

most people are short, maybe we should lower our listing price, et cetera. It becomes part of the psyche, much like it should be included in inflation numbers, right? Like the real estate is like, or shelter is a large component of inflation, but it's hyper lag. So, and then policy decisions are being used

or made off of that lag data. So once it's in the psyche, it can inform both like the actual physical real estate market, as well as policy, both from maybe a federal government perspective, as well as state and local being like, you know, once enough people have vested interests, especially renters, because they don't own,

you start to get a little more equity in the markets, right? Because you actually care if you're invested, even on parcel in Chicago, you know, you're financially aligned, if you're expressing a long bet for that to go up. So you want good things to happen in Chicago. There are perverse incentives on the way down, But you could really understand from a social sentiment perspective, maybe on Twitter or

something like what's trending and why we get that sometimes now, you know, people will short Chicago for X, Y, and Z reason and then someone's like, oh, I'm short my whole city. You're short my whole city. Like, you know, there's a great banter meme that can go on with it. But I do think if once you're big enough, you know, you can really own the narrative from a real estate perspective. One of the most interesting developments in real estate and kind of trading that intersection in recent years was in New York City, the L that goes to Brooklyn was going to be shut

down and they were going to do improvements. And so where the L kind of entered Brooklyn and people could get off, a lot of those units and real estate was tanking in price because people were like, hey, for the next year and a half, two years, people aren't going to be able to use this line. And so there's this huge problem. as most things in new york uh the plan did not go according to uh what was outlined and so they end up saying hey we're not going to shut it down and all of a sudden prices jacked back up very quickly and i remember matt levine from bloomberg writing a piece being like wait a minute there's a bunch

of transactions that occurred right before that announcement are people quote-unquote like insider trading on information and his conclusion basically was like look it doesn't meet the criteria of material, non-public information, blah, blah, whatever. But man, it is a tough thing. If you have this piece of information, you want to express a view, you got to go get real estate deals done. Yeah, exactly. You need a lot of capital, right? It's like a ton of capital. And then which ones do you buy? Like escrows, getting the debt. It's just very hard. And so it feels like what you guys are building, once you get all the regulatory approvals and all this kind of stuff kind of fit into this need where people may actually be able to use information

that they have just in their daily life or paying attention to the local government or whatever and express views without all of that friction. And if you can get there, I got to think that's a pretty liquid market. And there's a lot of people who'd be interested in doing that. Yeah, totally. And then if you could, I agree. And then if you can start to get more micro, which is possible uh it becomes a little more um you know as so we have new york city for example you can have uh i think that deal that you're talking about was like the upper east side so you could carve the upper east side out right and then uh that could be the instrument in which people are betting or hedging against and it would actually start to indicate probably like uh the

odds of the l getting you know completed or not in a in a backward way um so yeah you know i think again like once you can once it's more liquid you can actually get a little more um granular uh such that you can get a like more of the micro economies even within new york city is a little bit unique in this case but there's because each neighborhood is totally different but um you can start to bet on uh like you know hudson yards would be a good example of of uh head you know hedging or you know um so um yeah i think once it's liquid enough the possibilities really um are endless how do you think about uh risk so there's like i'll call it like tech stack risk including getting the data cleaning the data you know presenting it etc and then there is like risk

with what people are doing with the the data and insights that you have so like how do you guys uh try to mitigate any of the risks that you've already identified yeah risk is very very important you know it's like the it's probably the the most important thing to to mitigate from uh especially around security so uh on both sides uh parcel labs again is the the real estate um data arm of parcel uh recently so we effectively um only make that data available to the blockchain in which we interact and then we continuously undergo audits for security uh so there's that um you know from a internal policy perspective no one on the team is allowed to to to use the data or um trade on the platform on the platform itself uh they're

just continuous audits so if if anyone's familiar with blockchain you know it's it's our products a smart contract based product so on the smart contract you continually undergo audits uh we've gone through two we'll do another and just continue to to undergo security audits and then anything with code that is used in the product on the blockchain undergoes an audit so um that that's one of the bigger risks uh or if not the biggest um for what we're doing is smart contract risk now um i know that you guys are working with resi club and uh lance lampert over there he absolutely loves the fact that you guys have such nuanced data which makes me think um there's kind of this weird world where trading and media actually have a lot of the similarities

and that they're trying to find data they're trying to express views um there is a new hedge fund i don't know if you saw this but there's this new hedge fund that came out uh it's a media company and it's a hedge fund and what they are going to monetize media since media companies are struggling so much to monetize is the investigative reporters will go do investigations they will write the articles they will send it to the hedge fund the hedge fund will put positions on and then they will publish the articles and so uh again you can imagine there's a lot of debate and controversy over like yeah that sounds whatever so uh i won't ask you if you guys are going to do that but um the data is really interesting it's like is there a world where actually yeah you

have a trading platform but like you do have insights that probably would be pretty interesting from like a data and a content or a media and a content perspective have you guys thought about what to do there or is that part of a marketing strategy or how can you use this you know from like an insight uh base uh perspective yeah that's a great question uh we we've had um our content actually is is how we've um reached many many many people um and the the team uh puts out content that basically showcases the data that is how for example lance eventually uh you know we formed a partnership with resi club uh i think for distribution like that uh we'd rather like like empower someone like Lance,

who is probably the best real estate journalist and media person that we've come across. So we kind of empower him to, he has an audience that we know is interested in real estate. We can distribute through someone like Lance. There's other types of, not on the media side, but there's other partnerships like that

where you're distributing the data and kind of showcasing what you can do. i do think there's a an opportunity to align uh the real estate data with trading more you know just like uh um we probably wouldn't have recommendations given that i i'd say like we need to remain neutral but you could see you know just like wall street banks all have equity research why do they have equity research both for banking like new ipos and um an m a but also to drive trading volume uh they upgrade downgrade stocks every day uh and then eventually you know call their clients with those calls and then hopefully drum up some some business so i could

see as some like maybe not us but but uh you know as we continue to grow uh businesses being built on parcel basically you can have people creating research reports for uh various cities and trade ideas, try and monetize that or get people to invest with them in some sort of fund capacity where we're just providing the data and the platform and an ecosystem and economies being built off of that. And when you start to see that billion dollars of volume has already been traded, like you've got kind of information, insights, you know, media, et cetera, you obviously are trying to build out the trading side, like who are these people and what other data are they

using to trade with? The amount, so over 300,000 people, so it's pretty vast. You have people that are just trying out the product for the first time or using, the way in which they're using data is kind of a black box to us, given that we don't track that per se. we have done some pretty detailed user interviews with like the largest traders and you know their use cases vary uh it could be that they actually own properties and are hedging and and you know if they own properties they also know that area better so you could you could see someone um you

know accumulate more trading volume uh so yeah that's it's very broad i don't have a great answer for that uh you know the goal is for uh the trading platform and the parcel labs api over time to become more integrated uh such that there's more free uh free-flowing data communication between the two to allow traders to make more informed decisions and then what about uh like the real estate uh agent community are they tapped in yet do they realize like this could potentially be pretty valuable for them and something that they can use or is that still an area where you guys got some work to do to kind of convince them yeah you know it some work to do i would say that they uh the real estate industry as as a whole is a little more um slow slow moving um and you

know convincing of new data sets or uh you know new offerings um takes time so uh that's why it's right now it's about uh the the the first step is is proving that uh our data is the most accurate real-time transparent we also are unbiased right like i think a lot of um other data producers have some some sort of um some sort of uh uh like they they want the market to go up right uh or they want transactions to happen if it goes down transaction slow they don't get paid so we're completely uh unbiased um which i think over time engenders trust uh so yeah it's funny because um as i've learned more and more about the real estate world uh definitely there are some people who i've literally been in meetings and people have been like we do not talk about market slow

downs yeah i mean if if you're getting paid on transactions right like i've never seen is that like a zillow's estimate that's like down ten percent like they're always not like nothing against them but like it's like down one percent at worst because if you said over the next year the prediction's down ten percent i'll wait a whole year when it's cheaper and then nothing would happen in that market for a year right everyone would just wait it's like so um yeah that it's fed off of it's it's a flywheel it's a pretty resilient i will i will say that it's been really resilient what um on the regulatory front like what are the things that you guys need to do in order to um kind of get to the world that you want inside the united states obviously

internationally you guys are making a lot of progress but in the us like is there certain organizations that just got to give you a thumbs up or how does that work so on the blockchain side there's just not a lot of clarity uh you know um there's some bills that have been hung up in in uh in congress it seems like they're still not making progress uh but basically you need some sort of framework so what we we are considered or the the parcel protocol is considered d5 or decentralized finance the way that we're thinking you know the etf on bitcoin got passed that makes sense right it's half of the whole market so you know a trillion dollars or more is bitcoin so that's like the first chunk that they took out like the biggest market the next one seems like

stable coins that's all that's should be barely i don't know if the probability that gets done i think it's like in the middle um it is it should get done but that's straightforward it's dollars uh you know so that's not so crazy d5 is more complex there's decentralization elements uh there's teams and um that have you know ownership but also are decentralizing in a progressive fashion uh so there's a lot of complexity so it makes sense that it's it's the the last but as of right now there's no rule set to really comply with uh we'd love to comply obviously uh whatever that means if it means bringing down leverage or having kyc or whatever in the us uh we'd be happy to um but right now it's just not even at the point where you can

have the discussion so whenever that discussion is open we we'd love to to have it and and offer a product that's suitable uh to us users and then uh you mentioned leverage uh what are people doing internationally uh and the international is up to 10x leverage um so 10 down at home in in other words uh you know us but uh you know we can raise that higher i think in the us it'll to be under regulation will be lower yeah i mean i think that makes sense right it's like people expect the united states to be quote unquote more regulated uh both in terms of what they allow from a limitation standpoint but also just uh the hoops that you're gonna have to go through to uh to get approvals um also the just on that note like the uh the the us consumer is is less they're like

risk seeking kind of but they wouldn't want like 100x leverage i don't think it's a very small upset they want like trusted and safe so it's funny when i do a search on uh on twitter or x uh for parcel um there it i mean there's incredible excitement and i obviously can't tell like who's in the us who's not because most of the people don't have like their locations or whatever um but it is uh fascinating to see something as quote unquote boring as like real estate data yeah meeting the like like literally i was looking at one of the tweets and he's like me and my boys waiting for the parcel drop yeah yeah yeah like those two worlds colliding in this like very unique way yeah it's fun you know like you know the the blockchain community yeah we do kind of

have both of those elements like data you know modernizing real estate data and then the web3 community is is fascinating um and they're great like you know it keeps us on our toes every day they're fun funny and demanding because you're always building in public right so we have 50 000 plus in the discord always asking questions which is great uh and we love them um but it keeps us on our toes and and you know crypto is 24 7. so uh you know where it it's uh it forced you to to grow and adapt quickly uh my last question for you is the parcel intern oh i've i've seen that shout out yeah is that you guys or is that somebody else no it is actually we won't say his name but so i i spoke at the uh the everyone thinks it's us but we're not you know

we're we're all right but he's really good um so i spoke at a university's blockchain club um he reached out and then uh to for me to speak there and then he he would just hound me he's like i want to interview own interview i like wouldn't get back and you know he just made it happen and and he became the intern and then he basically interned this summer and then he's he went back to school and just decided to create the intern account and then he he does this that's actually him and he like checks in on on uh you know what to say and what not to say but he's very like he's He's a self-starter. So we'll have the drafts ready

and we just have to approve. But yeah. He's tweeting multiple times a day. Like he's in it. Oh, all day. Yeah. Luckily he's abroad. So right now he's studying abroad.

So, you know, you wake up and he'll have everything set for the day and he'll be responding. But, you know, great, great. Highest ROI investment I think we've had. One of. Amazing. All right.

Where can we send people to find you on the internet or if they want to find out more about what Parcel's doing? Yeah, so Parcel, P-A-R-C-L, is the Twitter handle. Parcel.co is the kind of like the brochure site or the main website. The application is app.parcel.co. For Parcel Labs, it's ParcelLabs.com.

Parcel Labs Twitter is Parcel Labs. And then myself, it's TrevorJBacon on Twitter. Awesome. I'm super excited with what you guys are doing. The data alone is fascinating, but then you add in kind of all the trading and everything. I think there's a lot of opportunity here. So I appreciate you doing this

and we'll do it again in the future. Thank you so much for having me.