Heard on Broad Street: “Zillow.com may in fact be reinventing — and perfecting — Capitalism”

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Back in the 19th century, when the stodgy New York Stock Exchange was already ensconced in the lap of luxury, the traders who would one day form the American Stock Exchange were stuck out in the rain.

Literally. Stock brokerages that couldn’t afford a seat on the NYSE instead rented offices on either side of Broad Street near Exchange Place. Clerks hanging out of windows would communicate bid and ask prices by hand signals to the traders working outside on Broad Street. Rain, sleet or snow, the traders effected their exchanges.

Last Summer I poked fun at Zillow.com’s CEO Rich Barton for a vision he had of a 19th century marketplace. This is Barton’s quote:

“I see an old-style marketplace formed, a city market like Pike Place Market. I actually dug up an old photo — Pike Place Market at the turn of the last century. People were gesticulating. People were buying things. People were gossiping. Negotiations were happening. Big billboards were advertising things above the marketplace. That’s the picture I have in my head.”

Give the man his due. I’m thinking Zillow’s Mortgage Marketplace is more like Broad Street than the Pike Place Market, but it definitely is a true bourse — the maximum flow of information between buyers and sellers with the minimum of friction — or even overhead!

I wrote last month that Zillow.com is leading us toward the realization of Capitalism’s promise. Everything we claim as a defect of Capitalism is in fact the confluence of two other systemic defects:

First, a small few people want to behave badly, which fact permits other sleazy people to malign honest traders who are themselves innocent of all wrong-doing.

And second, physical impediments to the flow of information prevent the overwhelming majority of overwhelmingly honest people from distinguishing the innocents from the crooks.

Software systems like Ebay and Zillow’s Mortgage Marketplace mitigate the second defect, leaving the bad actors fewer and fewer places to hide.

The Mortgage Marketplace is a small thing, so far, and, as with everything in the RE.net world, it looks much larger to us than it really is. But consumers — and lenders! — have choices today they didn’t have yesterday.

Lenders will have to compete fiercely to get the business, but the competition is not all about rates. Zillow’s reputation management system will give the best performers a strong advantage, and there is room all through the process for good salesmanship to work its magic.

And consumers now have a one-stop-shop to discover everything they need to know about obtaining a mortgage — with true apples-to-apples comparability.

Are abuses possible? No doubt.

Are abuses likely? Probably less so than by any other means of connecting borrowers and lenders.

Will abusive behavior persist through time? Only if Zillow goes over to The Dark Side.

In other words, if Zillow.com steadfastly enforces its own Code of Conduct, persistent systemic abuses of consumers will be impossible, and the bad actors will be banned from Zillow’s free leads system forever.

All that and no one has to stand out in the rain on Broad Street!

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