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Hello again, dear readers!

You might have read last week that the National Association of Realtors agreed to a $418 million settlement in an antitrust lawsuit after a federal jury found the organization “conspired to artificially inflate agent commissions on the sale and purchase of real estate.” We can expect to see some of the rules around commissions change in the near future, but don’t get excited quite yet. Unless we address the basic equation of supply and demand, housing abundance and subsequent affordability will remain a pipedream. 

Even writing about this stuff made me need an aspirin, which provides a great segue to my next topic. Bayer (the originator of aspirin and many other household products) is in some trouble, but CEO Bill Anderson is rolling out a radical-sounding plan to remove an entire layer of bosses and bring in a project team-based model to get things done a whole lot faster. I also check out the secret behind medical tech company Hologic’s incredible “headcount neutral” record, where they’ve successfully avoided mass layoffs despite going through several cycles of peaking and falling demand. 

Want more? This issue features the usual bunch of AI Insights and recommendations for the week's podcasts, books, shows, charts, and tweets, followed by a final chuckle.

Let’s get going.

Industry Highlights: There’s Only One Way to Fix Housing Affordability

Opponents of America’s most powerful realtor group are taking a victory lap after winning a significant legal battle in mid-March. It may sound like a big deal and will shave a few thousand dollars off home sale prices, but we won’t see the market stabilize without addressing the real issue: housing supply. 

Last week, the National Association of Realtors (NAR) reached a substantial settlement of $418 million in response to an antitrust lawsuit. The lawsuit alleged that the NAR, along with several prominent real estate brokerages, conspired to artificially inflate agent commissions in the buying and selling of real estate.

At the heart of the matter is the NAR's multiple listing service (MLS), which played a significant role in determining the compensation rates for buyer and seller agents. During the listing process, home sellers traditionally negotiate with their listing agent to determine the compensation offered to the buyer's agent. This negotiated amount is then displayed on the MLS for transparency. However, the issue arose when sellers were unaware of their ability to negotiate, often resulting in them being obligated to pay the listed brokerage fee without question.

The NAR's system will undergo significant changes as part of the proposed settlement. The commission structure will be eliminated, relieving home sellers of the responsibility to pay or offer commission to both buyer's and seller's agents, which should give sellers greater flexibility and control over their financial obligations during real estate transactions.

But let's not get our hopes up for a sudden break from the relentless rise in housing costs. Tackling this issue calls for serious changes in occupational licensing, zoning and land use regulations, construction materials tariffs, and other policies that drive up construction expenses and restrict the housing supply. We need to get to the root of the problem and make some fundamental reforms to expand housing availability and put a damper on those skyrocketing prices. 

According to an analysis by Scott Lincicome, rents and home prices in many places are still riding high and continuing to climb. Even though rents across the nation cooled off a bit last year, in 18 out of the 150 largest metro areas, the rent growth for Class C (the more affordable ones) properties shot up by over 5 percent. Almost all of those places had a minuscule supply of new apartments. Nationwide, rents still managed to go up in 91 out of 150 markets, with an average growth rate of 3 percent or more. It's a bit better than last year, but let's not forget we're starting from an already sky-high level. As of last month, rents were still a whopping 21% higher than the pre-pandemic era. Median home prices are nearly 27% higher as well.

Housing supply is the real issue

Housing experts agree that prices will remain elevated due to an ongoing supply shortage. Depending on who you ask, that shortage could range from 2 million to 7 million homes.

Building new houses has two positive effects on pricing: one is obvious, the other more subtle but arguably more important. 

Firstly, places that have seen housing construction rates above the national average (Austin, Phoenix, Atlanta, Raleigh, and elsewhere) - have enjoyed much slower home prices and rent growth. 

Take Austin, which is close to where I live. The Austin metro area authorities permitted more housing units than the Los Angeles and San Francisco metros combined, despite having about one-seventh of their population. That green-light approach has put Austin at the top of the chart:

… which is starting to change the supply and demand equation. A genuine impact on price and asking rent growth can be seen from mid-2022 onwards: 

This brings us to the second effect of building more houses and apartments: new construction moderates the prices of all types of nearby housing, old and new, high- and low-priced. 

Back in October, housing economist Jay Parsons discovered that American cities with abundant housing supply, defined as those experiencing a minimum 5% increase in housing inventory in 2022-23, witnessed a rent decline. On the other hand, cities with limited housing supply saw rent increases. Surprisingly, the most significant decreases were not observed in the newest, high-end "Class A" apartments, but rather in the middle-tier "Class B" apartments, which tend to be older. Even the most affordable and typically older "Class C" apartments experienced more significant rent declines than the luxury Class A units under construction. Check out the results of high-supply submarkets below:

What’s happening here? In a word: filtering, where new construction encourages mobility across the entire income spectrum. Filtering refers to a process in which higher-income individuals or families gradually move into newer and more expensive housing, leaving behind older and more affordable housing options. 

The concept of filtering is based on the idea that as newer housing units are built, the demand for older housing diminishes, leading to a decrease in their value. As a result, these older properties become more affordable for lower-income households or individuals looking for more budget-friendly housing options.

So, building new (Class A) apartments will lower the price of all other Class A apartments in the area, and it will also lower the prices and rents of Class B and Class C apartments down the chain, benefiting everyone. And you can bet that the size of these benefits will be much more significant than any concessions won in the recent lawsuit involving NAR. But, every little step counts, I guess.

The Future of Work: Bayer Tries Something Different

When a company is in trouble, it can give its CEO the platform they need to try something radical. 

Bayer is currently somewhere in the region of 34 billion euros in debt. The German multinational pharmaceutical and biotechnology company recently slashed its dividend and faced down investor demands to split into three units (health, pharma, and crop science). Its $63 billion acquisition of Monsanto exposed Bayer to lawsuits worth billions of dollars over the (probably) carcinogenic weedkiller, Roundup.

But CEO Bill Anderson has a plan. It sounds like a risk and reads like a corporate experiment, but as Anderson told the WSJ, “At this point, we don’t have to be that good to beat the current system.” 

The idea, in short, is “fewer bosses, fewer rules” to drive down 2 billion euros in costs. An undisclosed number of managers will be let go while Anderson ushers in an innovative worker deployment scheme where employees from different departments come together into 5000 to 6000 self-directed project teams, work together for 90 days, get sh*t done, then regroup into different teams for the next project. 

It sounds like the Project Economy has well and truly arrived at Bayer. It’s seen as necessary because launching a new product currently takes years instead of months. Anderson lists off contributing factors including time-wasting disputes between departments, thousands of pages of company rules and procedures, and approvals needing to pass through multiple layers of management. Instead, workers will get together with 15 to 20 colleagues and figure everything out in 90 days. 

It’s bold. But will it work?

Hologic’s incredible steady headcount

Talking of different approaches to workforce talent, medical technology firm Hologic uses some interesting approaches to keeping its 7,000-strong headcount steady despite a boom-and-bust market cycle. According to the WSJ, Hologic considers mass layoffs “a failure of leadership.”

So, how do they do it? The company's approach involves questioning the necessity of every new hire, redeploying positions to control compensation budgets, and seeking savings to offset staff additions. Hologic also relies on temp workers during times of peak demand, and letting go of those contractors doesn’t affect the apparent steadiness of their headcount. 

Rather than automatically backfilling positions when employees leave, Hologic's managers evaluate whether other departments could benefit more from the position. The company also emphasizes performance management, as Chief Executive Stephen MacMillan says:

“The simple question we ask everyone is, ‘OK, you want to add someone, what’s the least productive person on your team doing, and what if you instead replace the least productive person with this new person?’ Then it becomes headcount-neutral.”

It’s certainly efficient, and it’s great for cost control, but refusing to grow the permanent headcount in busy periods inevitably puts a strain on existing staff. Sites such as Glassdoor are full of complaints from Hologic workers about being stretched too thin.

AI Insights

• The Suleyman shake-up has begun at Microsoft. The company is restructuring its Windows and devices teams under the leadership of Pavan Davuluri, just days after Inflection AI CEO Mustafa Suleyman joined Microsoft as CEO of a new AI team. Is this the beginning of a new power struggle?

• Tech heavyweights join forces to loosen Nvidia’s chokehold on the AI chip market: Google, Intel, Qualcomm, Arm, and others have teamed up under the banner of the UXL Foundation to build an open-source software suite that will mean AI code can run on any hardware, “regardless of chip architecture.” This will mean bypassing Nvidia’s software layer which currently keeps developers locked in. 

• On the Conversational Persuasiveness of Large Language Models: A new study found LLMs can outperform humans in persuasiveness in controlled online debates. GPT-4 “increased the odds of shifting opinions in its favor by 81.7% compared to humans,” by personalizing its arguments. These LLMs are going to be great at spreading targeted propaganda and election misinformation in 2024.

Your team's secret sauce to success is here. From concept to completion with monday.com helps you manage, automate, and streamline your projects effortlessly. It’s time to transform your work life.

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The Supply Aside

📕 Read - AutoCulture 2.0: Leading with Gravitas

As the auto industry focuses on the historic shift to EVs, there's a real risk of overlooking the crucial cultural transformation required to make this transition. Incremental improvements won’t cut it. We need radical changes in our team dynamics and leadership approach to achieve an innovation-driven culture. 

Enter AutoCulture 2.0 by my good friend, Jan Griffiths. This book is packed with valuable leadership guidance drawn from automotive and other industry leaders featured on the Automotive Leaders podcast. Jan has created a roadmap for reshaping the automotive business culture and adopting a Gravitas-driven leadership style. You’ll find plenty of actionable steps to immediately implement authentic leadership principles. So happy for Jan on getting this done. Get your hands on this book now!

What Else I’m Reading

• Fasting probably doesn’t lead to a 91% higher risk of cardiovascular death. You may have seen a headline-making study in mid March linking 8-hour time restricted feeding with a massive increase in cardiovascular death. A closer look has revealed that the authors failed to correct for pre-existing conditions, e.g. smokers who regularly skip breakfast. Consider also that many people who have entered into a course of fasting have done so because they’re prompted by health issues like obesity. So don’t worry: fasting is beneficial and safe! 

• Walmart, 7-Eleven, and Chick-fil-A are set to pilot a new drone delivery technology developed by a Virginia startup called DroneUp. The technology aims to address the ground logistics challenges of drone delivery and includes an automated storage locker called DBX, where drones can pick up and drop off packages. The software enables autonomous drone operations, allowing drones to know where to go, how to avoid other aircraft, and how to pick up and deliver packages. The technology has the potential to significantly reduce delivery costs and democratize airspace access. DroneUp plans to roll out the DBX ecosystem in select markets starting this year.

• Phone-based childhoods are downright dangerous: Moving their social lives online has altered young people’s experiences around friendships, dating, sexuality, exercise, sleep, academic performance, and identity. Rates of depression and anxiety rose by more than 50% in many studies from 2010 to 2019, while the suicide rate rose 48% for teens aged 10 to 19. Worse, suicide rates for girls aged 10 to 14 rose 131%.

📺 Watch - Sly (Netflix)

Sylvester Stalone was nervously standing outside the theatre at the premiere of Rocky when something magical happened. “You could hear the cheers of the people inside the theatre from outside on the street,” he said. From that moment, the unknown actor with an unusual drawl shot to fame. This documentary tells the story of Sly’s success, with plenty of footage from classic films (the Rocky series, Rambo, Cobra etc), and also talks about the price of fame and its impact on relationships. Features interviews with big names including Quentin Tarantino and Arnold Schwarzenegger.  

Oh, and while we’re talking about Rambo, Son of Rambow (spelled with a W) is a film about a very sheltered British kid whose world is turned upside down when he watches Rambo for the first time. Sly himself isn’t in it, but apparently he gave it his full endorsement. I haven’t seen it yet but I’m very tempted to check it out!

👂 Listen - Working It Podcast: How To Get Ahead Without Managing People

Typically, people who rise to the top in their careers will eventually “have to” become managers. But what if you’re a knowledge worker who wants to keep doing what you’re best at without having to deal with the admin and headache of overseeing others? This episode of Working It features advice from Martin Wolf, an economics commentator at the FT, who is at the top of his field despite not formally managing anyone in 35 years. 

💡 Think - Clean Up In Aisle 7!

With CEO David Calhoun and other key players bowing out at Boeing, here’s an idea: Larry Culp, the wizard behind GE's turnaround, stepping into the top job. We know Culp gets results: he transformed efficiency and growth at Danaher with his Danaher Business System (DBS), then took the same magic to GE where he turned things around with a mix of sharp discipline and innovation. 

It’s fun to imagine Larry Culp taking the helm at Boeing to address its many manufacturing woes and restore its tarnished reputation. Injecting Boeing with Culp's leadership and applying the principles of DBS to its complex manufacturing processes could address both the symptoms and systemic issues plaguing the aerospace giant. After Culp's success in cleaning up GE's mess, his move to Boeing, succeeding another GE alum, could be the strategic masterstroke needed to navigate the company through stormy skies.

I say pass the baton—from one GE alum to another—and let Culp lead Boeing back to its former glory. Remember, you first heard it here.

Charts of the Week

Quote of the Week

Tweets of the Week

The Final Chuckle

Thanks so much for reading. I’d love to know what you think about this issue and how I can make it more useful to you.

If you have suggestions or topics you want to see me address, email me at [email protected]!

Want more?

If you’d like to read more of my writing on the supply chain, entrepreneurship, or the future of work, check out my website.

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Happy reading this weekend!

-- Naseem