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When TikTok exploded, Instagram had a problem. Short-form video was changing how people consumed content, and Instagram needed an answer.

Maria Zhang, now CEO of Palona AI, was part of the team working through that challenge.

“It was quite intense,” Zhang says. “TikTok just went wild.”

Zhang joined Facebook, now Meta, as vice president of engineering at Instagram. During her time there, the platform faced fierce competition from TikTok and launched Reels.

“It wasn’t a straight shot,” Zhang says. “We definitely iterated a ton and made tough decisions along the way.”

At the time, Zhang wrote a white paper outlining what she believed would help Instagram compete.

“To win against TikTok, the secret sauce is AI,” she says.

AI could understand user interests, identify trending content and emerging creators, and recommend the right content at the right moment. It wasn’t Zhang’s first experience seeing AI work at massive scale. Before Meta, she served as vice president of engineering at Yahoo and later CTO of Tinder, where she watched the dating app experience what she describes as “hockey stick” growth.

Her team at Tinder used AI for content moderation, matching, recommendations and ranking, earning an award for AI innovation in 2017. Later, at Google, Zhang worked on technology designed to improve developer productivity.

Each experience gave Zhang another look at what happens when powerful technology is applied to a difficult problem.

Now, she believes the industry is at the beginning of something much bigger.

“As a technologist, I see this wave of transformation as the most impactful,” Zhang says. “Many, many times — bigger than internet and then the iPhone came out, mobile internet.”

That left Zhang with a different question: Where could everything she had learned about AI make the biggest difference?

Building restaurant intelligence

After years of building technology at some of the biggest companies in the world, Zhang started thinking about where AI could make the biggest difference.

Google engineers weren’t at the top of her list.

“We can help Google engineers be more productive, but I think they don’t need a lot of help,” Zhang says.

Zhang and her co-founders wanted to apply what they had learned somewhere else. They chose restaurants.

“You guys are absolutely the hardest working people,” Zhang says. “And there are many, many of you guys.”

What Zhang found was an industry where employees serve the customer in front of them while answering phones, managing takeout orders and handling larger opportunities like catering.

A Father’s Day test at Cali BBQ showed how much activity could be hiding in those interruptions.

The restaurant let Palona AI handle incoming calls rather than sending them to employees. Roughly 350 calls came in that day.

“You’re like, ‘I never knew so many people call me,’ because the lines get busy and you never even picked up,” Zhang says.

Customers wanted to know about tables, hours and whether ribs and brisket were still available. Zhang says takeout orders doubled and Cali BBQ finished the day with 18% year-over-year top-line growth.

But the experiment exposed another problem.

“A lot of the calls were actually for large orders,” Zhang says. “Catering.”

Catering inquiries can involve budgets, guest counts, proposals, changes and follow-ups. Zhang saw another place where AI could take work off a restaurant manager’s plate.

Her team built an AI catering manager to handle those interactions. Zhang says one restaurant chain generated $5,800 through the system in a single day.

For Zhang, that gets back to why she left Big Tech. The opportunity wasn’t simply to build more AI. It was to find places where technology could give people back time to focus on work that still needs a human.

About Restaurant Influencers

Restaurant Influencers is brought to you by Toast, the powerful restaurant point-of-sale and management system that helps restaurants improve operations, increase sales and create a better guest experience. Toast — Powering Successful Restaurants. Learn more about Toast.

Restaurant Influencers is proud to have PepsiCo as a sponsor of this episode. Partnering with PepsiCo Foodservice helps restaurant operators drive sustainable growth through smarter digital experiences, AI-backed menu optimization, and tools designed to create more profitable online orders. Check out PepsiCo Foodservice

I’ve had conversations with so many people who have built software in the past year, and I’m not just talking about engineers. I’m talking about people across a variety of professions and walks of life, many of them with no formal engineering experience beyond their own curiosity and experimentation.

A few years ago, that would have been unthinkable. But AI has completely changed what’s possible and who it’s possible for. If I could sum up the change in one distinct sentence, it’d be this: AI has collapsed the distance between idea and execution.

When it comes to everyday people vibe-coding a fun app into existence, this is a truly exciting development. But it’s also forced us to re-interrogate one of the most central questions at the heart of business technology: Should we build it, or should we buy it?

That question is one of the many things that AI has changed forever.

The build vs. buy conversation, then vs. now

For most of my career, build vs. buy was mostly a capability question. Could your team actually construct and launch the software you need? Did you have the engineers, the time and the technical depth to pull it off?

The reason to build it yourself was simple: You’d be able to configure the software to fit your company’s hyper-specific needs.

The alternative, buying software from a trusted vendor, was the faster and safer path. You might not get a tool that’s been 100% custom-fit to your company and your company alone, but you got a solution you could rely on — one that wouldn’t take months to deploy and exorbitant costs to maintain.

In short, the “build it ourselves” path used to be a long, arduous one, full of hurdles that some companies were willing to navigate for the tailor-made solution waiting on the other side. 

Now, the road looks a lot less daunting on its surface. In most cases, AI has answered the “can we build it?” question for you. The harder question is now “should we build it?”

I’ve seen a lot of companies make a critical error when they answer this question. They see how much smaller the hurdles to deploying homemade software have gotten. And they underestimate the risks that running their homemade software creates.

What building it yourself can cost you

The capability question may be settled, but the responsibility question isn’t. And before you decide to build software internally, you have to consider the financial and reputational costs you’ll be responsible for.

First, there’s the issue of reliability. Your homemade solution might perform perfectly in a demo. But running software that customers rely on is a different story. It has to keep running perfectly at three in the morning, every night, for as long as your business exists. It needs to hold up under unexpected volume. It requires entire teams of people whose job it is to make sure nothing goes down, and other teams ready for when something does.

Because when something inevitably does go wrong, you won’t have a vendor to call for help, with their own dedicated teams who fix problems 24/7. You’ll only have your own people and your own resources.

Then there’s the ongoing cost of maintaining what you’ve built. Using AI to build a product might seem easier than it used to be, but running a serious AI-powered product isn’t cheap. And that cost doesn’t stop the day you ship.

Then there’s a much subtler cost: You lose the compounding value of everybody else’s experience. If you use a vendor’s product, that product will improve because thousands of other customers are using it, hitting edge cases, raising new questions and giving unique feedback. Build it yourself, and you’re on your own island, evolving only as fast as your own team can identify areas for improvement.

And last but certainly not least, there are the worst-case scenarios that none of us like to think about. You build your own software, and something goes catastrophically wrong — like your database getting corrupted or even completely deleted by some misconfigured AI. This isn’t a hypothetical; these stories have happened. 

As the CEO of a software company, I know firsthand that trusted vendors have a rigorous and expensive process for ensuring their data, and their customers’ data, remains safe, secure and protected from the aforementioned scenarios. If you build something yourself and don’t take the same steps, you’re risking catastrophe.

Customer-facing systems are a different category of risk

Of course, not every build carries the same stakes. I’ve seen teams have great success building things like internal dashboards: low-risk, custom-fit to exactly how they work and entirely internal. If something breaks, the blast radius is exceptionally small. They fix it as quickly as they can and move on.

Customer-facing technology does not offer that kind of grace period.

I run a company in the CX space, where the stakes are high. If you build your own customer service tool and it fails, it doesn’t fail quietly. It fails for the customer who needed help and didn’t get it, at the exact moment your business was supposed to show up for them. That’s not a bug you patch overnight or a mistake you chalk up to a “learning experience.” It’s trust you never get back.

The question isn’t just whether you can build something that works. It’s whether you can build something that never fails, because you can’t afford it to.

Today’s build vs. buy debate requires specific rules and guardrails

None of this means your teams should stop building things themselves. AI has opened up a genuine world of experimentation, and your engineers should be encouraged to explore it. But freedom without guardrails is how companies end up in trouble.

The rule I’d offer is simple. Experiment and build for the things that are low-stakes and safely contained inside your own walls. Many of these experiments will break. And when they do, the damage stays small, and you learn something in the process.

Customer-facing technology requires a completely different philosophy. The safety of your customers’ data and the trust they have in your business is at stake 24/7. 

A trusted vendor with its own security, compliance and infrastructure teams has spent years, and a lot of money, proving it can carry that weight. You can’t replicate that kind of trust with a few weekends of vibe-coding or even a few months of dedicated engineering time.

The companies that get this right are the ones that know where to draw the line. They’re the ones that encourage internal innovation within safe guardrails. And they also know when to rely on proven vendors who can not only customize solutions to their needs, but also bring the reliability, security and hard-earned trust that customer-facing technology requires.

I’ve had conversations with so many people who have built software in the past year, and I’m not just talking about engineers. I’m talking about people across a variety of professions and walks of life, many of them with no formal engineering experience beyond their own curiosity and experimentation.

A few years ago, that would have been unthinkable. But AI has completely changed what’s possible and who it’s possible for. If I could sum up the change in one distinct sentence, it’d be this: AI has collapsed the distance between idea and execution.

When it comes to everyday people vibe-coding a fun app into existence, this is a truly exciting development. But it’s also forced us to re-interrogate one of the most central questions at the heart of business technology: Should we build it, or should we buy it?

For most investors, the “market” is whatever shows up on the CNBC ticker. But that “visible market” is only part of the story. Today, more than 99% of U.S. companies are privately held, and many of the most transformative businesses of the last two decades created substantial value long before they ever reached the public markets — if they reached them at all.

That shift has changed the way many entrepreneurs think about investing. Increasingly, founders and business owners aren’t just looking to public markets to grow wealth. They’re looking toward private capital — not only as investors seeking returns, but as operators who understand firsthand what it takes to build enduring businesses.

And while private capital has historically been associated with large institutions and ultra-wealthy families, the underlying principles behind it are surprisingly straightforward. At its core, private capital is about patience, access and active value creation.

Why are more entrepreneurs investing beyond public markets?

One of the defining characteristics of private capital is illiquidity. Unlike public stocks, private investments are often held for seven years or longer. That may sound like a disadvantage in a world obsessed with flexibility and instant liquidity.

But illiquidity can also create opportunity.

Markets have historically rewarded investors willing to commit capital over longer periods of time. In finance, this is often called the “illiquidity premium” — the idea that investors may earn higher returns in exchange for giving up daily access to their money. Entrepreneurs intuitively understand this concept because they’ve lived it.

No founder expects to build a meaningful company in a quarter or two, or even a year. Building enterprise value takes time, discipline and the ability to weather volatility without reacting emotionally to every headline.

Private capital investing often rewards the same mindset. And the math of compounding can become meaningful over long periods. A modest return advantage sustained over decades can create dramatically different outcomes for families, foundations and future generations.

What do private capital investors look for before investing?

Many people assume private capital investing is about searching for the next Nvidia. In reality, experienced investors often spend just as much time thinking about downside protection as upside potential. The best private market investors tend to focus on a few core questions:

What makes a private company attractive to investors?

Great private investments are often less about excitement and more about resilience. Investors want businesses that can survive economic cycles, adapt to change, and continue generating cash flow under pressure.

That’s one reason many long-term investors avoid overly speculative sectors or businesses built entirely on momentum.

Why does management quality matter so much in private markets?

In public markets, investors typically buy shares and hope management performs well.

In private markets, investors frequently have influence or control. They can improve operations, strengthen leadership teams, optimize capital structures, or help businesses scale strategically. That operational involvement is one reason private investors believe they can generate returns above public market equivalents.

How do investors evaluate whether a market is overheated?

One of the paradoxes of investing is that once everyone becomes excited about an asset class, returns often compress.

Private credit is a good recent example. Tremendous amounts of capital have flowed into the space over the past several years, creating more competition and, in some cases, lower prospective returns.

Experienced investors constantly ask not only whether an opportunity is attractive, but whether too much capital is chasing the same idea.

Why does manager selection matter in private equity and venture capital?

Manager selection matters enormously in private markets.

Unlike public investing, where performance differences between managers may be relatively narrow, private market outcomes can vary dramatically depending on who is deploying the capital. The challenge is that many top-performing funds are capacity constrained or closed to new investors altogether. Access, relationships and diligence become critically important.

Why are entrepreneurs often strong private capital investors?

Entrepreneurs often have an advantage in understanding private capital because they understand how businesses are actually built. They know growth is rarely linear. They know great businesses often look messy in the early years. And they know meaningful value creation usually happens quietly, long before broader markets recognize it.

That perspective can make founders particularly thoughtful long-term investors.

Many entrepreneurs are also increasingly motivated by something beyond returns alone. They want to invest in innovation, help emerging businesses grow, support sectors they believe in or create opportunities for the next generation. In that sense, private capital can become a way of paying forward the entrepreneurial ecosystem itself.

Key takeaways for first-time private capital investors

Private capital can be compelling, but it also requires discipline. For investors considering the space, a few principles matter:

Private investments should complement a portfolio — not dominate it

Illiquidity is manageable until it isn’t. Even sophisticated institutions occasionally discover they’ve committed too much capital to long-duration investments. The strongest private capital strategies are integrated thoughtfully alongside public market exposure, liquidity needs and long-term family goals.

Diversification matters as much in private markets as it does in public ones

Private investing is not about finding one perfect company or one breakthrough technology. It’s about building exposure across managers, industries, vintages and asset classes over time. The best private capital portfolios are typically built patiently and intentionally — not opportunistically.

Complexity is part of the tradeoff

Private investments often involve capital calls, K-1s, delayed reporting and long holding periods. Investors should enter the space with realistic expectations about operational complexity and liquidity constraints.

There is also real risk in chasing trends, overpaying for growth or investing in overcrowded sectors where too much capital has flooded the market. Private capital is not a shortcut to wealth. Done well, it is usually the opposite: a disciplined, long-term process.

Patience is often the real differentiator

Perhaps most importantly, private capital investing requires emotional discipline. These investments are designed to compound quietly over time, not provide daily feedback. That can feel uncomfortable in a culture conditioned for constant visibility and instant results. But some of the most meaningful opportunities in investing — and in entrepreneurship — exist beyond the visible market.

For most investors, the “market” is whatever shows up on the CNBC ticker. But that “visible market” is only part of the story. Today, more than 99% of U.S. companies are privately held, and many of the most transformative businesses of the last two decades created substantial value long before they ever reached the public markets — if they reached them at all.

That shift has changed the way many entrepreneurs think about investing. Increasingly, founders and business owners aren’t just looking to public markets to grow wealth. They’re looking toward private capital — not only as investors seeking returns, but as operators who understand firsthand what it takes to build enduring businesses.

And while private capital has historically been associated with large institutions and ultra-wealthy families, the underlying principles behind it are surprisingly straightforward. At its core, private capital is about patience, access and active value creation.

Apple’s “Surprise and Shine” event on Wednesday is shaping up to be one of its busiest launches in years. 

According to Tom’s Guide, Apple will reportedly introduce three new iPhones at the event. The centerpiece could be Apple’s long-rumored foldable iPhone, widely expected to carry the iPhone Ultra name. The phone is rumored to use a book-style design with a 7.8-inch internal display and 5.5-inch outer screen. It will allow Apple to enter a foldable market that Samsung and other Android manufacturers have already spent years developing. 

The Ultra could be a major statement product but is likely an expensive one. Tom’s Guide reports estimated prices ranging from $2,000 to $2,500 and warns that availability may be limited at launch.

The other two iPhones Apple is expected to introduce are the iPhone 18 Pro and Pro Max. Both models are rumored to run on Apple’s upcoming A20 Pro chip. The phones may look similar to the prior Pro generation, but with a smaller Dynamic Island and a better front-facing camera.

Expected price hikes

A report last month from Counterpoint Research predicted that the iPhone 18 Pro models would cost $250 to $350 more than the existing iPhone 17 Pro lineup. The current iPhone 17 Pro Max costs $1,599; the iPhone 18 Pro Max could cost between $1,849 and $1,949. 

“A price increase on the new iPhones is inevitable,” the Counterpoint Research team wrote in the report. “The question is not whether Apple passes it on, but how large the final price bump is.”

Bloomberg recently reported that Apple will not introduce the standard iPhone 18, iPhone 18 Plus and a new iPhone Air at the “Surprise and Shine” event. Apple is reportedly reserving the event for higher-priced devices, while saving lower-priced models for a later release date. 

Other product updates

Apple will reportedly launch updates to the Apple Watch at Wednesday’s event. The company could show the Apple Watch Series 12 and Apple Watch Ultra 4, with faster chips, new health features and possible design changes. The watches will likely come with new colors and ceramic cases. 

Apple is additionally rumored to announce a new generation of AirPods. Tom’s Guide reports that possible upgrades include a newer chip, on-ear volume controls and health-oriented sensors.

According to Bloomberg, Apple is gearing up to release new devices and enter new product areas this year, including a new smart home hub with a 7-inch screen. Apple is also planning to introduce a new version of the Apple TV 4K streaming box, which hasn’t had an upgrade since 2022. 

A new chapter

Apple has a new CEO, former head of hardware engineering John Ternus, who took over on September 1. Ternus will lead the event on Wednesday. 

In a leaked memo to staff on his first day as CEO, Ternus said he was “so excited about everything we have in store.”

“We have a huge launch next week that’s going to be phenomenal,” he wrote. “Thanks for everything you’ve all done to make it possible.”

Apple’s “Surprise and Shine” event on Wednesday is shaping up to be one of its busiest launches in years. 

According to Tom’s Guide, Apple will reportedly introduce three new iPhones at the event. The centerpiece could be Apple’s long-rumored foldable iPhone, widely expected to carry the iPhone Ultra name. The phone is rumored to use a book-style design with a 7.8-inch internal display and 5.5-inch outer screen. It will allow Apple to enter a foldable market that Samsung and other Android manufacturers have already spent years developing. 

The Ultra could be a major statement product but is likely an expensive one. Tom’s Guide reports estimated prices ranging from $2,000 to $2,500 and warns that availability may be limited at launch.

This is the first piece in a series I am calling The University Intrapreneur. I have spent 20 years inside innovation programs at companies and universities on six continents, and I have watched the same failure happen every time an institution waited for permission it was never going to get.

AI is disrupting education. Most institutions have not caught up, and I put the reason down to arithmetic. A new degree program can take up to 18 months to move from proposal to approval, and a tenure-track faculty search runs 9 to 12 months from posting to a start date. Those timelines protect quality, and they were built for a world where the job a graduate walked into looked the same at the end of the process as at the start.

That world is gone, and no policy closes the distance, because policy moves at the speed the institution already moves. Only people can close it, the ones willing to build inside the cycle while the cycle is still running its slow vote.

Who drives innovation inside a university?

The university intrapreneur can be anybody. The role usually lands on a mid-level faculty or staff member who found a real problem and built a working answer on borrowed time, but it carries no fixed title and no fixed department. The org chart does not account for that person, the budget has no line for the work, and the institution’s ability to change depends on them anyway.

Gifford Pinchot III coined the word intrapreneur in a 1978 white paper written with Elizabeth Pinchot, and called them dreamers who do. Pinchot was writing about corporations, and the university version carries more weight now, because the distance they absorb is wider.

Anyone can be this person: faculty, staff, a department administrator, someone in the library. Most of them already have the talent. What they need is a name for the role, a tool built for the problem in front of them and an institution willing to give support and then step out of the way.

Can a university actually move this fast?

Yes, at a scale that should embarrass anyone who says a campus cannot move. The GI Bill put about eight million veterans through education, and by 1947, half of American college students were veterans.

UTeach, the smaller version of the same instinct, started as one faculty-built route at the University of Texas at Austin in 1997 and now runs at more than 40 universities, years before anyone wrote it into a plan.

Why can’t this wait another year?

More than a third of entry-level jobs now require AI skills, according to the National Association of Colleges and Employers, nearly triple the share that said so in the fall of 2025. That did not take five years. It took two semesters, one hiring cycle, the length of a single academic year.

A university that reviews curriculum on a seven-year cycle cannot answer a demand curve that moves that fast through a committee. It can only answer it through people already inside the building who build before the committee meets. Every graduate walking across the stage this spring is being measured against a bar that moved twice since they declared their major.

I hear the same objection from the hardest AI skeptics on every campus, and I take it seriously: A tool is not a strategy, and adoption numbers are not the same as judgment. They are right about that. But this argument has never been about the tool. It is about whether the institution around the tool can still change shape when the world outside it does. A university that cannot produce people willing to build ahead of policy will lose to one that can, with or without AI in the room.

What can you do this month? 3 moves, in order.

1. Name the role, then find the people already doing it, and name them where others can hear it. Nobody volunteers for something with no name, and nobody keeps building something nobody has celebrated. They come from anywhere: faculty, staff, students. Look for the unofficial tool half a department relies on, the pilot that outlived its funding, the student club that solved something the provost’s office is still studying.

2. Build the channel before you build the lab. One shared, visible place, open to faculty, staff and students alike, where builders say what they are working on before it is finished. Communication is what actually connects them: The campus that talks to itself catches two departments building the same project in parallel before either runs out of runway. Keep the bar to enter low, and give whoever uses it air cover — a named senior sponsor and one sentence you will repeat unchanged when someone objects.

3. Put money behind experimentation, not just permission. AI has cut the cost of standing up a pilot low enough that a department can fund one out of its own discretionary budget instead of waiting a year for a line item. Name a person who can approve that spend without a committee, and put a decision date on the calendar beside their name. A review date lets everyone postpone without feeling like they said no; a name attached to a date forces a yes or a no.

I learned this winning recipe directly, working on measuring AI impact within the California State University system, the nation’s largest public university system and its largest AI deployment, 22 universities and more than 471,000 students. The CSU surveyed its own community in the fall of 2025, with more than 94,000 respondents across students, faculty and staff, the largest study of its kind in higher education. Ninety-five percent of respondents had already used an AI tool. Eighty-two percent of students called AI essential to their profession, and the same share worried about their job security.

Nobody assigned that adoption. It happened because individual people decided the wait was more dangerous than building ahead of policy. Academia has always produced pioneers first and permission second, and I have watched the same pattern repeat on every continent I have worked. The pressure AI puts on a university does not get absorbed by a task force. It gets absorbed by a person, or it does not get absorbed at all.

That is the whole argument of this series. The people best positioned to rebuild a university’s capability are already inside it — not a vendor, not a consultant brought in for a semester. Our job, as leaders, is to find them and connect them to each other before someone outside the building does it instead.

The institutions that survive this decade will not be the ones with the most AI tools installed. They will be the ones that kept producing people willing to build before they were told to.

I am collecting these stories for the rest of this series: the builders nobody has named yet. If that is you, or you know who it is on your campus, tell me. I want to hear it, and I am easy to find.

This is the first piece in a series I am calling The University Intrapreneur. I have spent 20 years inside innovation programs at companies and universities on six continents, and I have watched the same failure happen every time an institution waited for permission it was never going to get.

AI is disrupting education. Most institutions have not caught up, and I put the reason down to arithmetic. A new degree program can take up to 18 months to move from proposal to approval, and a tenure-track faculty search runs 9 to 12 months from posting to a start date. Those timelines protect quality, and they were built for a world where the job a graduate walked into looked the same at the end of the process as at the start.

That world is gone, and no policy closes the distance, because policy moves at the speed the institution already moves. Only people can close it, the ones willing to build inside the cycle while the cycle is still running its slow vote.

According to the 2025 Google DORA report, 90% of developers now use AI daily and agree it makes their flow more efficient. Yet the same report says AI just amplifies what already exists in your business’ flow rather than making development stronger by default. When code becomes cheap, it’s so much easier to test each new idea without giving a proper quality estimation. That’s where product judgment becomes critical, picking the right problem to solve, testing the idea early, keeping the product lean, and knowing when to stop with new features.

To keep judgment ahead of production volume, business leaders can rely on five core principles.

Data from CB Insights covering over 400 closed venture-backed startups shows that 43% fail due to a lack of product-market fit. For most of them, the real problem was not the engineering capacity, but a clear understanding of what to build.

When a customer asks for a feature, they usually describe a quick fix that sounds good to them, cutting out of the loop the actual problem. If a support team asks for a button to pull all customer data into one screen, the real problem might simply be that searching for information takes too long. Before taking any request, word the core problem and confirm it with the person asking. A quick call to see how they currently solve the issue usually reveals far more than the request itself.

The Stack Overflow Developer Survey 2025 shows that 66% of developers spend extra time fixing “almost correct” AI code. At the same time, GitClear analyzed over 200 million lines of code and found an eightfold jump in duplication since AI tools went mainstream. It was often a question of price: whether to test new features or not. Now that AI has made development cheaper, weak ideas move just as fast as good ones unless you intentionally slow things down for a proper review.

Amazon learned this the hard way in December 2025 with Kiro, its internal AI assistant. Given broad access to fix a minor AWS billing dashboard bug, Kiro decided the cleanest solution was to wipe and rebuild the entire production environment. Result? A 13-hour standstill. The mess forced Amazon to freeze what AI tools could modify without human approval for 90 days. 

According to the Feature Adoption Report, around 80% of features in an average product are rarely or never used. Still, every unused button comes with a set of problems: it costs money to maintain, complicates onboarding, and needs to be fixed with version updates. With an AI speed it’s easy to send to a prod every technical possibility seen; what’s more, these might be the ones that don’t work properly. But a good product isn’t a feature count.  Before building something new, ask whether it strengthens your main product or just creates clutter. 

In 2026, Google quietly began winding down Firebase Studio, migrating users and key features into its broader suite of AI development tools. Instead of spreading resources on diverse platforms, Google chose to double down on its primary, high-impact tools.

Just because you can build a new feature fast, doesn’t mean you’ve learned a single thing about whether your users actually want it. MIT’s 2025 State of AI in Business study hit on this exact trap: 95% of AI pilots didn’t bring any measurable financial return, and only 5% made it to production with proven value. The product worked fine, but companies didn’t know how to measure the impact and learn on this data.

The key is in reviewing your funnel. Figma is using Figma Make to spin up fully interactive prototypes, validating concepts with real users before a single line of production code is written. It pulls product discovery right up to the decision-making stage, when failure is not that expensive and measurable. Stop judging your team’s success by how many features hit the roadmap each sprint. Pick the exact business metric you want to shift before building. If a new release doesn’t work out as expected, cut your losses, and don’t double down just because the AI made it easy to build.

Gartner projects that by 2027, half the companies that laid their teams off for AI will be rehiring again for those exact same roles once they’ll face the gap between efficiency metrics and real service quality.

The goal isn’t to see how much of your business you can automate; it’s to estimate where trust, review, and emotional involvement matter most. Leave all the mechanical routine to the machine and keep critical interactions human. This saved capacity is sure to bring both a better flow and experience.

AI doesn’t kill the need for great product strategy – it just highlights when you don’t have one. When building software becomes much cheaper, the final boss is not the speed but the confidence in strategy. Use the speed to test smarter, but never forget about the importance of human judgement.

According to the 2025 Google DORA report, 90% of developers now use AI daily and agree it makes their flow more efficient. Yet the same report says AI just amplifies what already exists in your business’ flow rather than making development stronger by default. When code becomes cheap, it’s so much easier to test each new idea without giving a proper quality estimation. That’s where product judgment becomes critical, picking the right problem to solve, testing the idea early, keeping the product lean, and knowing when to stop with new features.

To keep judgment ahead of production volume, business leaders can rely on five core principles.

Data from CB Insights covering over 400 closed venture-backed startups shows that 43% fail due to a lack of product-market fit. For most of them, the real problem was not the engineering capacity, but a clear understanding of what to build.

Many CEOs treat their company’s online search presence like a quarterly credit score — checking it periodically to ensure no major damage has occurred, then forgetting about it.  

Such a passive and defensive view misses how online searchers actually make decisions today, representing a fundamental misunderstanding of modern enterprise growth. When business-to-business (B2B) or direct-to-consumer (DTC) executives relegate their digital footprint to a mere reputation metric, they mistake active pipeline development for simple cost management.

In reality, in a highly digitized economy, a brand’s digital footprint must be treated as a high-yield, compounding revenue engine that requires active management. 

The danger of the passive approach becomes obvious when you look at how customers, partners, investors — quite literally anyone and everyone — interact with a brand online. Long before an introductory call or formal proposal, page one of a search engine serves as an automated background check for every prospect, investor and high-caliber candidate. This digital environment dictates whether or not a deal even has a chance to close, a reality supported by critical market dynamics: 

• At the onset: Industry data indicate that 93% of all online experiences begin with a search engine, making page one a brand and/or an executive’s digital front door. 

• The trust hurdle: Buyers strongly favor independent research; 68% of B2B buyers prefer to research online before engaging with a sales representative.  In conversations with mid-market CEOs, I consistently hear about lengthened sales cycles. The root cause isn’t a bad product; it’s that prospects are disqualifying companies, based entirely on unmanaged search results, before the first sales call even happens. 

• The cost of doubt: If that self-directed search surfaces a fragmented or negative narrative, historical complaints or irrelevant noise, high-intent leads quietly exit the sales funnel, directly suppressing conversion rates and inflating customer acquisition costs (CAC). 

Ultimately, treating search presence as a static score to be monitored four times a year allows third parties and fast-moving competitors to control your brand’s narrative. To capture modern demand and protect margins, executive leadership must stop playing defense and start managing search results as the aggressive distribution channel it is meant to be. 

The page-one economy 

Marketing organizations invest significant capital in optimizing downstream assets such as landing pages, automated nurture sequences and sales scripts. However, far less strategic energy goes into controlling the search environment above the click, where consumer trust is actually won or lost. 

Every dollar allocated to paid media or organic campaign traffic is essentially a wager that our search destination will withstand scrutiny. A flawless user interface or an aggressive ad buy cannot overcome a search results page laden with brand inconsistencies or unmanaged risks.  

The actual conversion decision often occurs in the search engine results page (SERP) before a prospect ever navigates further. In fact, search behavior data shows that the first organic result on Google captures 28.5% of all clicks, with click-through rates dropping sharply to just 2.5% by the tenth position. 

Look at your current marketing budget. If you are spending $50,000 a month on Google Ads but ignoring the organic complaints right next to those ads, you are actively subsidizing your own friction. We must stop treating paid acquisition and organic reputation as separate silos. 

If those premium top positions are held by disjointed or negative third-party content, brands and executives lose traffic they have already paid to attract. With this, there is a compounding business advantage. Imagine two businesses execute identical marketing budgets with identical creative assets; the company that actively owns and protects its digital search real estate captures significantly higher conversion rates. Over time, this variance compounds into a financial advantage in customer acquisition and customer lifetime value. 

Transitioning reputation into financial growth 

Historically, companies have regarded online reputation management as a defensive, reactive crisis communications and PR function. In today’s digital reputation landscape, the market leaders who treat their search footprint as an offensive growth asset are the market winners. 

When a brand’s search environment is proactively structured with its digital reputation prioritized, overall marketing performance rises. Paid search performance increases because prospects see cohesive, positive and accurate organic results. Organic traffic converts at higher rates because supporting digital assets validate organizational credibility, and proactively managing this pre-click environment can drive overall revenue while reducing operational acquisition friction. 

Ultimately, safeguarding the digital front door is no longer just an IT or marketing task. In a digital-first economy, controlling the narrative on page one is a core fiduciary responsibility for the modern chief executive. 

Executive summary for leadership 

If your current marketing strategy excludes proactive search and digital reputation management, your team is optimizing only half of the conversion equation. What prospects find in the moments immediately preceding business engagement dictates the financial return on your entire ad spend. 

The goal is not simply to spend more capital, but to spend it strategically through a proactive lens focused on the brand’s positive digital reputation. A strategic, well-curated search results page is not a side project for corporate communications; it is the first consumer impression, a primary trust signal and a critical line item on a brand’s revenue statement. 

Many CEOs treat their company’s online search presence like a quarterly credit score — checking it periodically to ensure no major damage has occurred, then forgetting about it.  

Such a passive and defensive view misses how online searchers actually make decisions today, representing a fundamental misunderstanding of modern enterprise growth. When business-to-business (B2B) or direct-to-consumer (DTC) executives relegate their digital footprint to a mere reputation metric, they mistake active pipeline development for simple cost management.

In reality, in a highly digitized economy, a brand’s digital footprint must be treated as a high-yield, compounding revenue engine that requires active management. 

Goldman Sachs ran the numbers on Trump’s tariffs. Their finding: US companies and consumers collectively absorbed 82% of the tariff costs in October 2025. By July 2026, Goldman projects that 67% of the burden falls on consumers alone.

That’s not an abstract policy number. That 67% shows up in grocery bills, appliance prices and the monthly squeeze on household budgets that’s been compounding for the better part of three years now.

The Institute for Supply Management adds more texture to the picture. US manufacturing activity contracted for nine consecutive months through early 2026. Unemployment sits at a four-year high. Hiring slowed more sharply in 2025 than any year since the Great Recession, excluding the pandemic.

Most investors read headlines like this and wonder whether to rebalance their stock portfolio. Here’s why I think passive real estate investors are reading the same headlines and seeing something very different.

The conventional fear around tariffs and real estate runs like this: tariffs raise construction costs, higher costs reduce new supply and reduced supply worsens affordability. That chain of logic holds up.

Lumber, steel, aluminum and appliances all face import tariffs at various rates. The National Association of Home Builders put the tariff-driven cost increase per new single-family home at roughly $9,200 in early 2026. That doesn’t stop construction entirely. It slows it and shifts the economics toward higher-end builds where margins can absorb the hit.

The net effect: affordable and workforce housing supply tightens further while demand stays strong. People who can’t afford to buy keep renting. People who might have bought a $280,000 starter home find it now costs $310,000 and pencils differently at current mortgage rates. They rent instead.

That dynamic has been building since 2022. Tariffs accelerate it.

Here’s the number that matters most for passive real estate investors right now.

Median home prices nationally hover near all-time highs around $364,000, according to Zillow data from early 2026. The 30-year fixed rate still sits above 6%. Household income growth hasn’t kept pace with either of those numbers since the pandemic.

The result: a growing cohort of Americans who’ve become persistent renters. They’re not renting because they prefer it. They’re renting because the math on buying doesn’t work for them…  and it won’t work in the near term regardless of what happens to interest rates.

That cohort needs somewhere to live. They want space…  ideally a single-family home experience, or at minimum a well-maintained apartment in a neighborhood with decent schools and reasonable commutes. They’ll pay market rent for it. What they can’t do is produce a $60,000 down payment and qualify for a mortgage that costs more than their current rent.

Workforce housing in middle America serves exactly that cohort. The Clevelands, the Columbus’s, the mid-sized metros with diverse employment bases and median household incomes between $55,000 and $85,000. Deni and I have invested in several deals fitting that profile through the co-investing club over the past couple of years. The distribution yields have held consistently. The operators running those properties report waiting lists, not vacancy problems.

That’s the environment tariffs are reinforcing…  not creating from scratch, but reinforcing and extending.

Henry:
What’s going on everybody? Henry Washington here and happy Labor Day. I hope you’re all doing something super fun. On the feed today, we’re sharing an episode of our sister podcast on the market that was originally published on August 20th. James Dainard, Kathy Fettke and I broke down a few big recent real estate news stories. We covered JP Morgan’s announcement that they’re investing 750 billion, that’s billion with a B into the housing market, and also talked about whether the market has already peaked for 2026 and whether the latest inflation report could stop the Fed from raising interest rates. We’ll be back with a brand new episode of the BiggerPockets Podcast in just a couple of days. Here’s that conversation with me, James, and Kathy.

James:
So let’s just jump right in. Henry, what do you got today?

Henry:
Well, I picked a story that was very near and dear to my heart, top of mind, something I am always thinking about. The headline is, “The market may have already peaked for 2026 and the summer isn’t even over yet.” This is an article found on usnews.com, and it’s talking about what’s happening in the real estate market in terms of sales. So the article goes on to talk about that existing home sales fell 1.7% in July to a seasonally adjusted annual rate of 4.06 million. Even as the median home prices have climbed to a record for the month, the national median existing home price rose 2% year over year. That’s up to $434,000 in July, making that the 37th consecutive month of annual price gains. So housing prices have gone up and the market seems to have already peaked in terms of sales price. And now that we haven’t finished summer yet, but we’re moving into what would normally be a winter slowdown anyway, could be just a not pretty time in terms of real estate sales in the country.
And as I was researching this article, I came across another article that talked about how first home purchase sales are down, but luxury home sales are up. And I think all of this is tied to affordability. Interest rates peaked over the last month and that’s caused a slowdown in the market for people who are just barely priced into the market. But there’s also a lot of people who have made a lot of money or are making a lot of money in stock market gains. And so the wealth gap is pretty substantial. And so the people who have more money are buying more luxury homes. And in my market, I’m seeing exactly that. And why do I know that? Because I’m trying to sell my house right now, my personal house. And every house in my neighborhood in the luxury market, when it goes up for sale, it is under contract in less than 30 days.
Wow. But when I’m selling my flips, I am seeing longer times on market. It’s a little harder to sell them. There’s more competition. And so I think all this just plays into affordability. But I was very curious, James, is that the same thing you’re seeing in your market? Your market’s substantially more expensive than mine, but you’re doing deals consistently.

James:
Yeah, it’s flat. Things are sitting on market. I mean, it depends on what it is. There’s velocity in every city.
So I think one of the most important things that we’ve been going over the last 90 days is where’s the velocity at in every zip code? Because it doesn’t matter if it’s luxurious or it’s a first time home buyer, there’s a price point that’s moving in that pocket. Everything is not selling, but there’s a lot of things that aren’t moving. And so we’re really locking down by zip codes, price points, where’s the velocity? And that’s what we’re really targeting. For example, in North Seattle, if you have a house that’s 1.5 million and it’s a good street, that is selling and it’s going to sell on the first weekend. If you’re 1.7 million, not selling, your market times are going a hundred days. And so you really got to look at every type of price point. Look in 10% blocks and then focus on that because it tells you where to be aggressive and not to be aggressive.
I mean, it’s not enjoyable in the summer when you’re sitting on, I think I got 18 for sale. I would say I’m clicking off two to three a month. But one thing I do want to stress is this was no different last summer. Last summer was terrible. And so what I’m hoping is we actually did see a little bit of an uptick in momentum the last two weeks. I think we sold five new construction of ours, a little bit more starter units. I sold a couple different flips. And it’s funny, the ones I though wouldn’t sell sold and the ones I though would sell.

Henry:
Story of my life. Same thing here. Just when I think I’m a real estate expert and can predict what’s going to sell and what’s not, I am absolutely not that because I have houses that I’m like, this one’s going to be a tough sale under contract in 30 days. And I have houses that I’m like, oh, this one’s going to fly off the shelves. Sits. So don’t ask me. Maybe I just don’t know what buyers want anymore.

Kathy:
It’s crazy. I mean, we have a subdivision we’re building in Oregon and we actually have the city come to us and say, we need more housing. We want to help you come up here. We’ve heard your reputation. And we did. We got some land, we got a great deal on it. This is the one where we just optioned the lots. We didn’t even have to buy them, built the homes and they’re sitting, same thing. And the offers we’re getting are brutal. It’s something you and I would offer. They are low ball offers. We had one regular sale recently, but same thing, like five brand new homes just sitting on the market and it hurts. It’s painful. But then we have a big subdivision, the one I’ve probably talked about before. It’s north of Tampa and that’s where we bought 4,200 lots back in 2012, I don’t know, for 10 cents on the dollar, but it’s a lot of lots.
And that one has just been consistent. It’s done great. Maybe because it’s, I don’t know, it’s Florida, it’s inland. Could be that people are moving from more expensive areas like Miami has gotten so expensive, they’re moving inland where there’s not as. I don’t know, but that one’s doing great. So as we always say, every market is different, but I also have my finger on the pulse of buyers and we just saw massive buying at Real Wealth, one of the best months that we’ve had. So what’s that? Just all over the place.

Henry:
Yeah. And it’s so weird. James, you mentioned that we had a similar time last summer. And I agree with you from a velocity perspective, but this summer feels a little different. And here’s what I’m saying in my market because again, real estate is local. Last year when I put a good product on the market, it was done well and priced right, it’s still sold. This summer, that’s not always the case. Sometimes that’s the case, but sometimes it’s not. And I think affordability is really playing more of a factor this summer than it has last summer. Because the trend that I’m seeing in my market is when we start comping these houses before we put them on the market again, and actually when we’re buying them, because I comp them twice. I comp them when I buy them and then I comp them right before we put them on the market so that I can make sure that we price it right because the market shifts pretty quickly sometimes.
And what I’m seeing in comps is homes that are unrenovated, but livable and clean have far less days on market than homes that are flipped and look super pristine. And I think that’s just the affordability. I think people are much more willing to buy a unflipped home where they can put their own touch on it and get in for a lower price point than houses that are looking awesome because they’ve been flipped. And so we’ve had to adjust our strategy where we do kind of a two-pronged approach when we’re buying deals right now. I comp deals where I can just clean them out, turn around and sell them as they sit and I comp deals as a flip. So I’m using the flip as my plan B now. Plan A is just to get it clean and livable and get it on the market and see if we can get that deal churned faster.
And we’ve done it a few times now and it’s worked out really well, but all of that to me is just a problem with people’s affordability.

James:
We’re seeing the same thing. There’s grandma’s house, which is your clean, dated house, well kept and well taken care of, but these aren’t like fixer properties. These are like the windows are okay, the roofs are okay. There’s about a 20% delta on that price. If that house is selling for a million dollars in our neighborhood, it’s going to trade for 850 as is in that kind of dated condition. And it’s pretty consistent across the board. Same thing if it’s worth 500, they’re selling for like 380. And so we have problems making that pencil because we have to buy them so cheap that we just can’t get them for that pricing.

Henry:
Yeah. Well, again, I think because real estate’s so regional, my market doesn’t have those kinds of spreads. For me, it’s the percentage wise, it’s not that big of a deal. So as an example, we just bought one for 130. Now original, the flip plan is to spend 60 on the renovation, sell it for 275. But instead of doing that, we’re going to spend three to 5,000 on the renovation, just cleaning it out, cutting back some of the shrubs and the bushes in the backyard, professional cleaners, stick it on the market for $200,000. So yeah, I could sell it for 275 flipped or I can spend nothing, sell it for 200 and I’ll actually make pretty close to the same amount of profit.

James:
Yeah. Look for the velocity because people are rain clouds rightnow. They’re like, oh, market six. I got some messages from somebody like, “Hey, do you want to come to this conference?” I was like, “No.” And they’re like, “Well, it’s just important to get everyone together to huddle and talk about what’s going on with the market.” I’m like, “Are we in the same market?” The market’s not, it’s not like it’s 2008 or nine. I mean, this is flat. And I think the key today is you got to reduce your holding costs on everything, whether it’s new construction build, whether you’re going to dispo, how can you get that monthly debt down? Whether you’re refinancing them into DSER loans, can you refinance that product? Right now I’m about ready to refinance all my flips into more DSER because then it just knocks two points off my interest carry.
And you just got to look at how can I stop the bleed? And it’s not just for flipping. Any type of project right now, the bleed and the expense of the debt is what’s really beating up the deals because it’s just taking a lot longer to sell.

Kathy:
Yeah. I mean, that’s kind of why I love and probably will continue to do buy and hold so I don’t have to worry about selling anything, just renting it.

James:
Well, Kathy, because you guys buy so much new construction for the buy and hold because some price points are dead in the new construction. I mean, you guys have been able to start talking to these builders about dumping off in bulk too,

Kathy:
Right? Oh, we’ve been doing it for years. I mean, builders are distressed. And when you’re a buyer, you want to look for the distress. I mean, you guys know that. So why not? I know this sounds terrible, but why not look for a distressed builder because now you don’t have to buy an old property and fix it up. You’ve got a brand new property that you can get for a discount. So that is what we’ve been doing. I literally just was looking at some properties that are highly discounted from builders and they don’t want to reduce their price because then they’ve ruined the comps for everything else they’ve got to sell. So if they can spend a bunch of money and buy down your rate, you can get a really low rate, in some cases 3%, that really makes it cashflow well in a brand new home.
And a lot of people don’t realize on the buy and hold side, if you have a new home, say in Florida where everybody’s complaining about insurance, the insurance is not high on newer homes because they’re built to hurricane standards. So it’s just a lot lower insurance, a lot lower CapEx over time, and people love to rent new homes, so it’s fairly easy to rent. So for me, it’s kind of a set and forget type buy and hold and I love it. So yeah, to me it’s a wonderful, one of the greatest opportunities out there. But this is only for people who don’t like getting their hands dirty like me.

James:
No, but you know what though? The new construction, it’s starting to become very attractive for value add investors because you can now buy for less than you can build it for.

Kathy:
Yeah, in a lot of cases. And listen, I’m on both sides of that. I’m on the side of being a builder and trying to sell stuff and having a really difficult time, but that’s kind of how it is for you guys. If you’re in flipping, you got to be able to find the deal so you love a buyer’s market, but then you got to sell it so you hate a buyer’s market. That’s the

Henry:
Game.

Kathy:
When are you going to time it perfectly where you’re buying in a buyer’s market, then you’re selling in the seller’s market? You just have to figure it out, right? It’s a balancing act, which is why if you are buy and hold, all you really have to focus on is the buy. And then the hold being what are the rents? How are rents doing? Are they going up or down versus I got to think about what I’m selling because if you’re buy and hold, if you want to sell, you just sell when the timing’s right.

James:
Well, Kathy, I want to talk about some serious money getting put into the market, but before we do that, we’re going to take a quick break. Welcome back to the On the Market Podcast. Kathy, someone’s about ready to drop some serious money into the housing market. I want to know where the money’s getting spent because I can go follow it.

Kathy:
Yeah. My article today really contradicts the sort of doom and gloom we just talked about. This is an optimistic article, I guess you could say. It’s from JP Morgan Chase and it’s basically JP Morgan Chase is doubling down on housing. So they see something that maybe others don’t see. Those who are sitting on the sidelines should probably sit up and pay attention. They are deploying 750 billion through 2035. That’s up by more than $200 billion through their American Dream Initiative. This is nearly 40% more than the firm’s housing capital deployment over the past decade. So again, we’re seeing big companies like Berkshire Hathaway investing in builders. You’ve got JP Morgan Chase upping what they’re going to be lending and also kind of coming in as debt and equity to build affordable housing. And you’ve got Japanese companies buying American builders. So these huge firms are a little more positive than we just were.
They see this demand coming, they see this lack of housing and they are all in. I mean, this is huge. My guess is that a lot of times companies will follow legislation and clearly we just had this new legislation really pushing for new housing and maybe they’re getting incentives for doing it. Maybe they know something we don’t know about the new housing bill getting tax credits, but there’s more momentum towards bringing on that affordable housing and the big players are jumping in and taking advantage.

James:
You always want to follow the money, right? I mean, it’s kind of like, I remember 2008, nine, and 10 when Blackstone started buying all the single. Or no, it was 2010 and 11 started

Kathy:
Getting hard. It was 2012. It’s when Warren Buffet said on national TV, “If I could buy a few hundred thousand houses, I would if I knew how to manage them.” That was the second part, if I knew how to manage them. Instead, he went into creating Berkshire Hathaway and be on the real estate sales side. But a bunch of institutional investors at that time said, “Well, golly, I’ll learn how to manage them.” And let’s face it, they didn’t know how in the beginning, but they figured it out and they brought in new systems. So I do feel like that’s kind of happening right now. There’s a lot of signals that we should be paying attention to because there’s big money coming in and those people sitting on the sidelines waiting for prices to drop, do you think Warren Buffet’s company might know a thing or two?
Do you think JP Morgan Chase might know a thing or two? Listen to them. Sure, it’s probably easier for them to make bets, but to me, it does feel like a similar signal that we got in 2012 that we’re getting now.

James:
Part of this is for financing too.

Kathy:
Yeah, they’re going to be lending. Being a lender is one of the more safe positions, but trying to be able to help more people get into housing, be able to buy their own home, but also building, bringing on new affordable housing as debt and equity.

Henry:
I was looking at this article and it got me thinking, so what does it really mean when JP Morgans are deploying more money into the single family real estate space? And when I was reading through it, it looks like it breaks it down in buckets. So it’s saying one of the buckets is they’re going to be lending more money to developers to build apartments. So that increases housing units, increases apartment units. There’s another bucket where they’re going to be writing more mortgages. So this is what I though the article was mainly talking about. So in other words, they’re saying, “We’re going to be writing more mortgages. More people should be able to buy a home, get a loan from us. We want to put money out there for people to buy homes.” And then the third bucket is investments in affordable housing funds, which is interesting.
I hadn’t thought this was something they do, but essentially putting their own money at risk as an investor and investing in affordable housing funds, which is pretty cool, but that’s a lot of capital to be all thrown at one specific asset class. So I mean, I like it. That’s good for me. I’m a single family and small multifamily investor. So to me, that means that the asset that I own has some demand attached to it. Yeah.

James:
It’s funny. There’s so much weird bad taste in people’s mouths about these big companies buying in real estate. They don’t want hedge funds buying up all the housing, right? And when you really dig into this article, they’re providing a lot of money for first-time home buyers, different types of financing options. And the good thing is, I always look at this as the banks are very quick to change their mind, the big banks. That’s why as an investor, I only work with small banks because once the big bank gets sick of real estate, they don’t really want to give you too much money on it.
The good news is when you are seeing bigger banks, they have a lot of money, they spend a lot of money on research, deploying that much capital into the housing market. They’re not really predicting a massive crash because why are they going to provide so much financing for first-time home buyers that are putting down a low down payment if they think their asset’s going to be worth 10 to 20% less in three years? They’re predicting stability is how I look at that. So anytime they’re providing this kind of financing, it makes me feel more confident, especially when you have a flatter market right now. And that’s what you want, is you want confidence in this market because when the market is flat, you start to double guess yourself on everything. You’re like, “Is this a deal? I know what a deal is. I’ve been buying deals a long time, but on paper it’s a deal, but is it really a deal?” And so these are important things to look at because it shows stability coming forward.
And so I like these things, just gives me a little bit of that spinach courage to where I’m like, “All right, let’s go buy some stuff.” Well, we’re going to dive into the CPI report and what’s going on with inflation and what that could mean for rate cuts soon as we take this break.
All right, we are back on On the Market Podcast and we’re going to jump right into the CPI report. So I pulled the article from Fox Business about the inflation. So CPI report came out yesterday, December 12th, and we had some good news. It didn’t rise very much.

Kathy:
That’s real good news.

James:
The CPI report came out yesterday, August 12th in July. CPI rose just 0.1% for the month with an annual inflation down to 3.4% from 3.5%. The core CPI at two and a half percent is the slowest it’s been since the post-pandemic surge. So we’re finally starting to see inflation kind of slow down. Now, a lot of what this article does talk about is we’ve seen some slowdown on inflation, but that’s also because energy has fallen in July. The cost of fuel, gas, those things had all kind of dropped down, but they also are predicting that this could make the Fed keep their rates steady and we should not anticipate any sort of increase, which is the biggest thing because the last thing we want is increase going on. Stability works, but we don’t need it to rise. And so we are seeing a little bit of good news on that as far as the inflation goes.
Now, I feel like every month it’s just going to bounce around until this Iran conflict gets sorted out, but it is good news. And what I did see is we saw a flurry of activity the last couple weeks. We did sell more homes, I think in the last two weeks than we did in the month before. And part of that has to do with part of inflation hasn’t. I don’t feel like it feels as bad as it did 60 days ago, and consumers are really sensitive to that. When inflation is jumping up, when fuel and gas is at seven bucks a gallon, people get really nervous and the fear kind of locks in and they don’t make a decision. And so as they’re starting to see a little bit of stability in the energy market with food and groceries, that people are starting to move and actually start getting some activity going because even I saw the financial reports for a lot of these tech companies, they posted some pretty good earnings and people made some good stock bonuses and we’re starting to see a little bit of stability, which is good because it’s all about consumer confidence.
There is so many buyers on the sideline right now, they’re just confused in what to do.

Henry:
Who could blame them if the market is so confusing?

James:
Yeah. What we’re hoping for is just stability and inflation. If we can get it to where it stops going on this rollercoaster ride, I mean, what do you think, Henry? You sell a lot of property. When I see stability on those fronts, it’s much easier to move a deal.

Henry:
Yeah. When people are comfortable with what’s happening in the market, then the transaction volume goes up, people take action. And I think I’m curious at how inflation is going to impact interest rates over time because the Fed just chose to keep interest rates where they’re at. But if you look at the vote, it was actually voted on nine to three. So there were three people who voted to actually raise interest rates. And so that to me says that they’re planning on rates going up as long as things remain the same. That’s the forethought I’m giving that. And that’s again, going to cause more of an affordability problem and that’s going to keep more people out of the market, which is going to seem like things are slowing down. But at the same time, housing prices have continued to rise. And so that’s what I mean by it’s confusing is because it’s unaffordable, it’s scary.
We don’t know if interest rates are going to go up causing more unaffordability, but somehow prices keep rising. So somebody’s buying and it’s our job as investors to make sure we stay very local in the data so that we can have a clear understanding of who the buyers are, what they’re buying so that we can position ourselves to be able to provide that product to them because transactions are happening. And I don’t want everybody to listen to all this and think it’s so doom and gloom in the real estate market. People are making money out here in real estate, but the people that are making money are the ones that are studying the data, they’re studying their market, they’re seeing who the customers are that are actually transacting. How are they transacting? Where’s that money come from and what are they buying and how can I provide that to them?
It’s business 101, but it’s harder now. You can’t just buy anything at a discounted price anymore, throw it on the market and make money. You used to be able to just say, “Hey, if I get something at a 30 or 40% discount, I’m going to be able to make money.” That’s just not the case anymore. It’s very, very niche.

Kathy:
Yeah. Inflation is bad. It’s still bad. It has come down, but what I want to really emphasize is that the growth rate of price increases has slowed. The prices haven’t come down. So the consumer is extremely stretched. And even though oil prices, energy prices have fallen, they’re still up 14% from a year ago. Now, how many people got a 14% raise? The inflation is still 3% above last year over that. How many people got a 3% raise? If companies aren’t doing as well, then they’re not maybe going to be giving the raises. Or if you’re self-employed, it’s hard to give yourself a raise if you’re just trying to make ends meet. So I think if we look at the consumer, they are stretched. I see it every day. And when I say the consumer, there’s a tale of two worlds, right? We have some people who are doing just fine and don’t notice the difference in the cost of eggs.
They don’t even think twice about it. But if you are on a fixed income or you are on an hourly wage, you feel it and it’s painful. So just even the concept of buying a house is so out of reach, but they’re focused on rent and that’s hard too. That’s hard too. And for those of us who are buy and hold investors, we’ve got to pay attention to that consumer because that’s our customer, right? That’s who’s going to be renting from us. And how are they doing? How is their health? It’s tough. It is tough. So the more that we can find those properties, get discounts, find cheap properties and renovate them at a good price, be good at that and provide that affordable housing, we are helping people. We’re solving a problem, which is living. So I like to put that message out there for landlords who are truly providing a service.
I could just speak for us in some of the properties that we bought, we got them cheap, so we’re able to rent them for less. We’ve always focused on that niche of the worker. How are they going to afford to live and how can we provide that for them?

James:
Why this is so important is we’re trying to look, as investors, we’re trying to look down the road, what is the market going to look like in 12 months? Because when you’re buying deals today, they’re really good buys. We’re buying stuff for substantially cheaper than we were 12 to 24 months ago. And that’s what we have to keep focused on as an investor is, okay, what do we think is going to happen in 12 months and what is that going to look like? And what this says is the July CPA inflation report shifted the outlook for the Federal Reserve next monetary policy meeting. They were saying that according to the CME FedWatch tool, the market now sees a 61.9% probability of rates remaining current, and that was only at 51% a day ago. And so we want stability. If rates were going to go up in 12 months, I’m going to want to buy even deeper today.
But if I think there’s stability, what I don’t want to do is pass on deals that were great deals, but my fear dictated my decisions
Because fear will make us do bad decisions. It will make us sell something for too cheap. It will make us pass on good opportunities. And these are things that we want to pay attention to because we got to go, what is it going to look like? Because you can’t stop buying when you’re an active. Henry is an active operator. Kathy, you’re in a lot of deals. If you stop and you go on the sidelines, I heard people say this for the last 24 months, “I’m taking a break. I’m going to wait.” You never time it right, ever. But if you consistently buy, you can get a consistent average through because you’re going through all the waves. If you pull out, that’s what I’ve learned over 20 years investing is don’t pull out. Be cautious, but you can’t get all the way out the door because if you do, A, you’re out of touch with the market, you’re not in the market anymore, but then you’re jumping usually back in when it’s too late again.
I don’t

Kathy:
Know. It depends on the asset class. I have a lot of respect for people who just sat it out from 2020 to 2024, 25 even because they could just see the bubble inflating and then it was going to take some time for it to deflate and they’re just now coming. I mean, I know a guy who just kind of sold all his stuff when he saw it peaking and he just went on vacation for a few years. I think that’s okay, depending on your asset class, if you’re really aware. But James, that’s not for you. You can’t stop. You’re not stopping.

James:
James.

Kathy:
We buy

James:
Everything, right? We buy apartments, we buy dirt, we buy houses. And so yeah, did we buy a lot of dirt the last two years? Absolutely not. We had already bought the dirt. We were getting through the projects, but there’s an opportunity in every market and that’s where you have to kind of pivot and go, “Okay, well, what I was buying doesn’t work anymore, so now I need to go buy this.” And for us as investors, if you want to be a professional investor to stay in the market, you have to pivot and you got to shift things around. I’m even starting to look at new construction now, which I’ve never bought, but I’m like, “Oh wow, there’s some really good buys out there.” There’s some

Kathy:
Great deals. Yeah.

James:
We don’t have identities as real estate investors, right? It’s like, I’m the short-term rental person. I’m the flipper guy. It’s like, no, no, no. How do you spread the money out and balance it out? And you want to do that when you’re seeing reports like this. Now, this is just one month. It’s a blip in the month, but we have to see what happens in August and in September and what goes on with this conflict because I think fuel is up right now. So this inflation report could also look a lot different for August. And so I think these are things to just watch, stay in the middle of and make sure that you kind of adjust your buy box based on actual data like Henry’s saying, not your gut. I’m

Kathy:
Going to be more positive now and say this is great. It’s great that we didn’t see inflation shoot up when it really could have. And that’s what we were hearing in the headlines. That’s why people are freaking out and scared because it was. I mean, even the Fed was saying we’re probably going to raise rates for a couple times because inflation’s looking bad. So I will end this part of the story saying, good, at least it is not runaway inflation.

James:
No, and hopefully it stays consistent. That’s what we’re looking for. Keep dropping. That’s what we want. Well, we got JP Morgan spending a lot of money, inflation’s settling down. See, it’s all Sunshine and Bunnies going for.

Kathy:
It’s a good day. It’s

Henry:
Always a good time to buy in my book, James.

James:
Yeah, exactly. You got to keep buying. You got to keep buying. So thanks for listening to On the Market. We will see you guys next time.