YouSaid · the spoken record

Max Simkoff

lines on the record: 74
first: 2021-08-19
most recent: 2021-08-19
sittings or episodes: 1
sources: podcast

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“The best in what's currently available from academic research. And I think that's a really important component. Again, in the case of evolve, we had a chief data science officer who has now become a friend of mine. And he really pioneered for us, he said, guys, the way we should do this is we should borrow models from epidemiology and biostatistics. And what we ultimately looked at was something that sounds very morbid, but we looked at something called a survival curve. So instead of looking at an absolute attrition number for people, it's just like just tells you at a point in time, do more people leave than stay. This individual said, we should look at a continuous spectrum starting at 100%, like on day one, ideally you've got all of your people there. And then you look at a continuous curve over time. By the way, these survival curves are used in epidemiology to study the impact of disease. And we applied them against people's tenure on the job. And then we applied them on productivity. They all work the same. They give you the continuous measure. So you know.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Great looks like you have to have a very clear picture of what the outcome is. You have to know what it is that you want to predict. And it sounds like a simple, it's like, yeah, of course. When you want to get in the case of Evolve, if you want better employment outcomes to everyone, yeah, I want better employment. What does that mean? What does success look like? In that case, we got very granular about it. We were like, well, everybody even wants to reduce their attrition or their turnover, but even that was a loaded stat. What we ultimately boiled it down to be great. We had great business people who were like, what's the business value of tenure? Because there's like good tenure and bad tenure. You have someone who stays on the job for six years, but they've plateaued to a level of productivity that's 70% of somebody who's been there for six months. Like that's not good. So first ingredient is great business people to find the outcome. The next ingredient is great data scientists applying”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“You have structured data and somebody's not paying attention to how it should be used, you can put data science on top of it”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Combination of off the shelf statistical software like SPSS with econometricians working in it and being like, okay, the model's working. And then talking to the IO psychology team and saying, can you guys create new questions or measurement mechanisms for that front-end application? The engineering team had the thankless task of like, then they got the survey questions from the Io team and the models from the econometrician team and the engineering team had to build the software. They had to actually make it all work in production and to add insult to injury, a lot of the computing power is a lot more expensive. And so that, you know, it just was harder to do. But it was seeing that those outcomes were like some of our customers, Xerox, eBay, AT&T, I mean, they plugged in our solution and over months or even years of time, they cut their attrition in half. Their productivity went up by like 10 or 20%. And it was huge. I mean, these people are handling customer calls. They're doing sales. That formative experience was, oh,”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Constructs that you could measure on people inside of an online job application, conscientiousness, punctuality, these kinds of things. The econometrician said, here is this level of statistical validity that you should look for changes in the numbers in the back end to tell you that the constructs you're measuring are in fact predictive. Then we started doing some really amazing stuff, which was, again, because our employer is hiring so many people, I mean, some of these companies hired tens of thousands of people for a single job category a year. And we got really good at measuring things in the front end of our online job application that were highly predictive of somebody terminating for any given reason or for somebody not getting to a certain level of productivity or not getting to a certain level of promotability, right? We could predict it all upfront. Now, it was very, in hindsight, it was all very rudimentary. Like a lot of this, the way that we were building these what became models were using”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Did someone quit voluntarily because they found a better job? My favorite was they had a reason code called involuntary termination due to punctuality and attendance. That one was a hard one to parse because like, oh, they stopped. They were showing up late too much. You fired them. And they're like, well, actually a lot of these, they just stopped showing up for work. And we had to turn them in the system. And so the code we used was involuntary. Who knows what happened to them? And it was punctuality attendance related because like they didn't show up for work. That's like the worst case of not being punctual, right? And so when we saw this data, I think the aha moment for us and we were, I think we were really on the front end of this was we said if we were going to try and determine reasonable signal from this data and then transform it into something that we could use on the front end of a hiring process, how would we do that? And we got a group of what are called industrial organizational psychologists, a group of econometricians. And the industrial organizational psychologist said, here are the”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Think the biggest one is it relates to evolve was I got a front row seat to understanding how this is going to be an oversimplification, but applying statistics or econometrics against reasonably structured data could yield dramatically better business outcomes in a function where people thought you can't apply data to that. That's got to be an intuitive experiential thing. And in our case, this meant hiring. Evolves business was focused on helping the largest employers in the country or hiring lots of entry-level hourly workers, which happened to make up at the time it was two-thirds of the nation's workforce is probably higher now. And they had all this structured data to tell them whether or not those people were successful, namely how long did they stay on the job? The reasons that they left. So every HR system in these large employers, when a termination date would get entered for somebody, whether somebody terminated, they would terminate either voluntarily or involuntarily, meaning they quit or got fired. But they would also track what are called reason code.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you send us PS through the digital integration if you want? We will consume it. Our machine will make sense of it, send it back to you in the format that you want it.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely correct on the way that we get it is through a direct digital integration with lenders use these big systems called loan origination systems. It's kind of their system of record for managing the transaction. We've built digital integrations with all those systems. We also have our own public API. So if a lender is using a system that we haven't integrated with or it's an up-and-coming lender, we say, look, we make this programmatic, we make it easy. And what's so important, and it does get to the machine learning stuff, is we don't ask them to conform to some new standard of how they pass that information back and forth.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Bystandard deviation, your customer's pay the cheapest price. And by the way, here's what it means for your PL and your own productivity and your own digital mortgage initiatives. It's very much like an enterprise-y sell. On the realtor side, it's somewhere between B2B to C and just straight B2C because a lot of realtors are much more like individuals than they are. They're entrepreneurs. They're like running their own kind of business practice. And so you're kind of selling. It's like you have to sell them on why your solution is going to help them manage their own business practice better because the transaction is closed faster with higher certainty. Today, the volume that we have on the full stack technology solution, which uses all the machine learning, applies to refinance only. And we are bringing purchase transactions onto the platform later this year, which is something we're very excited about. But that's generally how it works is through each of those channels.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“What we have pitched them on was we said if you send your orders, when the mortgage is ready to close, you send an order, we will close it so much faster with such a better outcome for the customer. And oh, by the way, it will also be the cheapest for them. Really, there's no reason for you to send that business anywhere else. And the way that they're set up is they allocate volume. They're not making this decision on every transaction. They basically decide if our solution provider like DOMA is able to blow away their metrics, then we will send them X percent of our national volume. I mean, they can flip a switch overnight and send you a massive amount of volume. So that is much more like a B2B sales motion. We have our DOMA Enterprise Sales Force. These are folks who are well versed in the complex sale. They explain the value proposition unlike any title companies ever. These lenders are used to title companies coming in and saying, we've got the best service. And we come in, we're like, you plug it in and your loans are going to close a week faster. Your NTS is going to go up.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Kind of fascinating business, so there's two, it's easy to describe the go to mark emotion is as follows if it's a refi transaction, it's a lender that you're effectively running your go-to-market motion around. And if it's a purchase transaction, it's typically a realtor. And so on the lender side, it is much more B2B than it is anything else. The reason I wouldn't call it pure B2B is because at the end of the day, the lender is actually recommending to the borrower what to use. The borrower follows the lender's recommendation because they're trying to get a refinance done. This complicated transaction, they trust their lender as well, they should. Most lenders have their customers fiduciary interest in mind. But it's a weird thing where it's like the lender's not actually paying the cost.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Then you have to add their loss ratio because, again, they're insurance companies. Their loss ratio, by the way, is next to nothing. I mean, it typically traditionally runs three to five percent. So if you put that on top of the mid 80s, like a decent incumbent probably runs mid to high 80s combined ratio, which means that they've got 10, 11, 12 cents of pre-tax left. And a bad one can be probably in the low 90s kind of area. So, and again, then they don't break out for you, by the way. They don't want or they don't, or maybe they don't want to break out for you. What's in that labor in the open? How much of that is people working in the back office to do all the work that I talked about? It's a lot. How much is going to management salaries? They're high, by the way. How much goes to sales marketing? Not a lot, as far as we can tell, which is another misconception about this space is people like, oh, isn't title? Like they spend a lot of money on acquiring customers. If they actually don't, it's not hard to acquire customers in this business. That's generally how it works. So long wind way of saying they run an okay pre-tax margin. They don't break out their gross margin.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Who has to examine the county records and put together something called a preliminary title report? And it's a person who then needs to fix all the issues that they found. And it's a person who's like setting up escrow accounts. You just think about the process and what's happening. That person in the title company gets an order from a lender or a realtor and they're asking the title company, they're like, hey, calculate all the fees. And all the fees means not just like paraded interest on the loan that needs to be paid off, but the local settlement reporting taxes, homeowners insurance premium, everything needs to be included in that closing statement title company. And then a bunch of stuff changes. And then there's emails going back and forth. So you can imagine that person scrambling to figure out to get back to the unit economics, I think incumbent title companies, it's hard because they don't actually break it out on purchase versus refi. You kind of just need to look at their B&L. Generally speaking, last time I looked at this, I think it's roughly 80-ish. We'll call it low to mid 80s percent of gross revenue goes to open.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“The bulk of your cogs doesn't vary that much from a refi to a purchase transaction. There's a few differences, but we've described it as basically it's like 80% one-to-one overlap of the steps that need to get done. You need to check the records. You need to set up the escrow, you need to accommodate this first museum line of closing date, get the docs sign. It's the same stuff versus for purchase versus refine. But a purchase has like 2x the revenue. So you basically get a massive amount of operating leverage as a traditional title business on a purchase transaction just by virtue of the fact that it has a lot more revenue and not a lot of significant differences in process from a refinance transaction. So if you look at one of those, the bulk of your gross revenue dollars still get consumed by OuthX and most of the OpEx is very easy business to understand. So all that stuff that I described, all those steps, both in Title A and escrow today, for traditional title companies, they're all manual. It's a person.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's probably total title and astro fees of, I think like $2,500 to $3,000. The pricing model is usually priced off of the value of the transaction. And in our refi, again, it just varies. It could be if it's like a retail Refi transaction, so like no volume discounts for the lender. It's a one-off kind of thing. It could be $1,200 maybe-ish. And again, I'm benchmarking to call it a three to $400,000-ish refi. bulk, like the lowest the price can go is basically what DOMA charges for what we call our DOMA enterprise customers, that fee can be, call it $700-ish dollars total of premium and escrow. And so to answer your question about how the economics work, if you took a purchase transaction, those are the most profitable transactions that are in the industry, by virtue of the fact that they have the highest revenue. So one of the fascinating things about the P&L and the unit economics is business is the work that's actually done, which drives”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“What I just described as a title insurance piece. Now, there's another fee stream that title companies get. When I talk about title companies, I'm referring to the at scale, what I'll call full stack providers like DOMA. They have an insurance carrier to write the insurance policy, but they also, once they've written the insurance policy, and this is why it's just such a fascinating business, because they're on the front end of receiving all this information related to a closing contingency, they also morphed over time to now managing all of the closing activity. the lender, for the realtor, for the buyer, the borrower, seller. There's a title insurance piece, and then there's what's called escrow and settlement. And so getting into the economics of the business, title insurance, you pay a premium, an insurance premium for one-time fee. You also pay what's invariably referred to as an escrow settlement or closing fee. And they're separate fees, but it's the same company that's charging them. It's just like ones for one and the other's for the other. On the high end, a typical purchase transaction”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“By the way, you're my bank. So you have all my bank, you have all my money. I'm certifying penalty of perjury. And if I'm wrong, just take my money. Charge another $1,500”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“I had this hilarious, I mean, I wasn't hilarious at the time, I was actually very annoyed. But by the time I did like a second rate interfi on the same property that I owned with the same bank, and they told me yet again, they were like, hey, here's the closing going to work. By the way, you owe $1,500 for title insurance. I was like, hey, I've got an idea. How about I pay you $50 and you send me a certified affidavit that I will sign under penalty of perjury that says I have not originated any new ownership interests in this property since the last time I did a refi and I paid you $1,500”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you want to do a refinance, you have to get title insurance again. But it's not for you. So the insurance policy that you're paying for when you do a refi is to the benefit of the new lender, as it's called a lender's security policy. That title insurance policy basically indemnifies the new lender against anything from having happened to cloud their ownership interest between the time when you purchase the property.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“To the property so that they could effectively insure it, and I would put insure in quotes because basically what they're insuring on title is saying we've exhaustively looked at the records and we can tell you with your certainty that you will be the new effective owner of this property. And so you pay an insurance premium. The insurance premium is a one-time fee that you pay when you're buying or refinancing a home. And here's where things, again, for me, got really confusing. And it's why we started the business. I kind of understood why you get title insurance on a purchase. You're buying a property from someone else. You can have bad actor behavior. Someone could decide they don't want to disclose things. But you also need title insurance on refinance. So now you own the property. Here's where things can even have another twist.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“And even insurance as a concept was relatively unsophisticated. So the way that they said they would insure title, which is the clear transfer of ownership from one party or set of parties to another, was that they just do research. The first title companies were effectively groups of lawyers who would, when a residential real estate transaction was happening, they'd examine the records and they would make sure that there were no outstanding ownership interests in the property conferring to the buyer. Now fast forward all the way to today, that process is actually not that much different in the traditional sense, albeit mostly it's not lawyers who are doing the work. These large incumbent title companies up until DOMA came along for every residential real estate transaction that took place every year, virtually everyone, they were basically doing these mini research projects to go to the county recorder's office and go to the county assessor's office and make sure there's no outstanding wills or trusts that have”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, many history lesson back in the, I think it was like mid to late 1800s, there was a Supreme Court case in the United States where somebody sold a piece of property to somebody else. They knowingly sold that piece of property with liabilities attached to it that they did not tell the new buyer of. New buyer discovered those liabilities and said, what the hell? Why did you not tell me about this? Seller had the audacity to say, well, it wasn't my responsibility to tell you about that. You should have done your diligence. It went to the highest court in the land and the Supreme Court decided that in this country it is actually buyer beware. The seller is not necessarily responsible for establishing clear ownership on the property and not that long after the first title insurance company was founded, which was these businesses, and you have to, again, it's actually kind of fascinating to understand how this industry developed was when those companies were started, obviously no technology.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source
“Has built a technology platform that at its core uses machine learning to remove most of the friction and frustration, time, and now expense involved with closing mortgage. We're structured in the footprint today of a title company. Title companies are responsible for managed residential real estate closings, which is an odd thing for me to kind of get my arms around when I was researching where is the ownership sit of closing a mortgage. But because title companies are responsible for basically closing the transaction, that means everything, not just underwriting this weird arcane product called title insurance, which we can talk separately about, but setting up the escrow, funding Uranus money, doing disbursements, paying the realtors commission check, getting all the docs signed, recorded at the county recorder's office, title companies responsible for all of it. So we're in the business of applying technology in ML to that entire process.”
2021-08-19 · Invest Like the Best · Max Simkoff - Redesigning the Home Buying Experience - [Founder’s Field Guide, EP. 47] · IDENTIFIED FROM THE TRANSCRIPT · source