A good dose of Alpine air works wonders for gaining fresh perspectives

REFIRE attended the ReComm Real Estate Leaders Summit in Kitzbühel in the Austrian Alps recently. This was the fourth year the event has taken place but for your editor, it was his first visit. Most certainly not his last.  

The charm and relative seclusion of Kitzbühel, with or without snow, is clearly a drawing factor in enticing the top brass of the collective Austrian real estate industry to down tools in Vienna and disappear off to the Tyrol for three days. Although it brings the heavy guns of the real estate industry together, the content of the gathering is about anything BUT real estate. Or at least, not directly.

It’s about blue skies thinking, listening to top-class speakers talking about a variety of issues that affect us all in our business and private lives. Issues that shape our existences, but are not reducible to yields, benchmarks, internal rates of return, or any of the other key metrics of the professional real estate investment industry.

Instead, under the inspired leadership of Reinhard Einwaller and his highly competent team, the event has blossomed into a warm, hospitable gathering of mainly Austrian real estate people, with a handful of Germans making the trip across the Bavarian border. The guest speakers, on the other hand, came from all around the world, and many pleasingly stayed around for the few days to talk with participants and of course to attend other speaker sessions in addition to enjoying the excellent Austrian Gastfreundschaft organised by our hosts.  

Philosopher and economic scientist Nassim Nicholas Taleb talked to us about Antifragility, the subject of his most recent book and a progression on his earlier bestsellers Fooled by Randomness and The Black Swan. Antifragility deals with the attributes that companies and individuals possess that might help them profit from Black Swan events.

Taleb bemoaned the fact that many people took the wrong message from The Black Swan, thinking it was about trying to predict the unpredictable. It’s really about knowing, in the event of such a random event, who is harmed and who benefits.

Invest in businesses that have had lots of small shocks, he advised, because then you know they’re not hiding vulnerability. Companies become antifragile when they’ve shown evidence that they’ve been able to recover from serious problems with out being damaged.

Many companies, countries and so cieties are hiding these vulnerabilities, without exposing them. You want to live in a society that thrives on volatility and stressers. Fragile systems don’t like shocks, randomness, variability, but antifragile systems need and thrive on control stressers to profit from Black Swans.

Taleb commented that Germany, with its very decentralised industrial structure, showed many characteristics of antifragility. Its industrial behemoths, instead of being fragile entities likely to be swept away by the next wave of dotcom wizards, have often achieved market eminence by understanding trial and error.

The pharmaceutical business, which has produced a number of German champions, is what he called an error-loving business, in that many of the great drug breakthroughs have come about by accident while the scientists were working towards another result.

As each plane crash makes the next plane crash less likely, antifragile systems never let a mistake go to waste. The sinking of the Titanic taught us not to build larger ships, thus saving countless lives from the next shipping disaster. Italy’s constant political manoevering and countless governments in the post war era have led in a perverse way to stability and furthered the country’s antifragility. Two different countries committed to rigid dynasties and an abhorrence of volatility are fragile, and will crash. Syria has already done so and Saudi Arabia will crash probably within the next five years, predicted Taleb.

Since the early days of Fooled by Randomness, we have always found Taleb a most stimulating writer, and his early musings helped fuel our interest in gaming and probability theory – an interest which has proved enduring. He proved no less agreeable in person at our various gatherings in the Alpine air. When choosing a place to live that will be relatively free of crime, he confided, make sure you live in a place where the Mafia is in control of the local vice mobs. That way criminals can’t run riot and cause mayhem among the citizenry. And it probably makes for very agreeable living in Larchmont, New York, where Taleb makes his home.

That other great gaming theorist, Yanis Varoufakis, reminded us that Greece is the canary in the mine, warning that the recent euro crisis will shortly raise its head again. Like other speakers, including London mayor Boris Johnson’s adviser Gerard Lyons, he urged reform of European institutions now, before the British vote on Brexit, or else he fears they may really vote to leave the union.

Other talks from top experts covered topics as diverse as the New Jihadists, urban agriculture and food distribuion, climate capitalism, the future of Berlin, honesty in business, borderless economics, and the battle for God. Phew! All this out-of-the-box thinking helped us view our economic and real estate challenges in a fresh and invigorating light. At least for a few days.

Now, back down from the mountains, we can already feel the clammy hand of benchmarks, minimum yields and key performance indicators jostling for our attention. We’re glad of the new energy that will help us to deal with them. But roll on ReComm in Kitzbühel next year!