Real estate versus tech as a career

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Had dinner with a friend last night who is in the process of gracefully winding down his start-up. Found myself vividly recalling how I felt when I realized that CAZT, the tech company I started with my brother, was never going to be large enough to be my career and that I would have to do something else.

The problem with doing a tech start-up is that you are taking a while bunch of business model risk. By definition, you’re trying to do something no one has done before. That means there’s a reasonable chance that the problem you are solving is not really a problem people will pay money to solve. So, you can spend years and lots of other peoples’ money and fail.

The downside of failing at a venture like this is something people don’t often discuss. If you, like many founders, you start a company around age 30 and then work like hell at it for five years, you can easily find yourself at 35 with little to show for all your effort.

I had the good fortune to start my first company at around 26 (actually, my second – I helped start an even dumber on one in college). By 28, it was clear that it was not going to be a huge success and I was able to transition by 29 into doing real estate deals full time.

Why real estate? After all, it has much less upside than starting a tech company.

The truth is that I fell into doing real estate because my family had dabbled in it, a good opportunity arose, and I had the good fortune to have access to capital.

In retrospect, however, I have realized there’s one gigantic difference between real estate (particularly residential / multifamily) and tech: There is NO business model risk in real estate. Everyone needs somewhere to live. And there are plenty of rich people who understand this and therefore want to invest.

So, while it’s unlikely you’re going to make a billion in five years in real estate, there is zero chance you will work hard for five years and have nothing to show for it.

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