Centralization Is A Bug

Dec 17, 2007 Michael Wurzer

Centralization is a bug · Bill Joy: “Wherever you work, most of the smart people are somewhere else.”

The reason the Web worked so well is that nobody had to ask anybody’s permission to build a browser or a crawler or a search engine or an auction site or a dating service. Anything in the system that requires central authority, that’s something that holds you back.

This is from Tim Bray, in a blog post called “Message from the Web” following an address he gave to a group of accountants and others working on XBRL, the XML standard for business reporting.

These seem like words the real estate community should heed as the MLS is transformed over the coming years. Make no mistake, the MLS is being transformed, and the decisions for that transformation are being made right now.

Last Friday, I posted about the discussions beginning in Minnesota to share data among all the MLSs in the State. My reading of the group was that the inclination was to create a central repository of the data, to which all the MLSs would contribute. Whether or not to centralize, however, did not seem to be a big question, and yet it’s one I think needs to be asked and discussed much more.

There certainly are benefits to centralization. Although in my earlier post I say in the video that monopolies are not efficient, I really should have been more specific and said they are not efficient at innovating. Certain monopolies are more efficient, like the power company, because of the huge infrastructure that can’t easily be duplicated.

Is this also true in the MLS world? Not likely. First, there already is a distributed model in place, and the inefficiency from it is in the lack of standards, not the distribution. In fact, I think a strong case can be made that more or greater distribution is actually the best answer for the MLS industry. Just last week, there was a ton of blogging press about the upset at Point2, a company that provides syndication services and a so-called National Listing Service. One of the benefits of Point2 is that it gives brokers control over where their listings are advertised. This model has a great deal of appeal but what it lacks is the benefit of the aggregation the MLS structure provides. I’ve written before that the true value of the MLS has nothing to do with technology but rather is the agreement to aggregate data fostered by the cooperative model of the MLS. Among such fierce competitors as real estate brokers and agents, this cooperation is nothing short of miraculous and, for that, some centralization is required.

Yet what the quote above reminds us is that the success of the web is due to a lack of centralization. The success of the web is the massive innovation fostered by a simple standard, and such innovation is not likely in a centralized environment. The monster question for the real estate industry today is whether centralized data management is the only way to standardize the data or whether a simple focus on standards like RETS will be enough to move the industry into a period of massive innovation.