‘Proptech’ is part of the broader digital transformation to the property industry, hence this blog takes a closer look into possible ‘game changers’, especially technologies that might to come and dominate entire sections of real estate.

Technological innovation is important, also because, standard economic theory, must bypass or drop innovation completely. Under equilibrium by definition there is no scope for improvement or further adjustment, no scope for exploration, no scope for creation, no scope for transitory phenomena, so anything in the economy that takes adjustment – adaption, innovation, structural change, history itself.

Beinhoecker goes even as far as saying, ‘Businesses are themselves a form of design. The design of a business encompasses its strategy, organizational structure, management process, culture and a host of other factors. Business design evolves over time, through a process of differentiation, selection, and amplification, with the market as the ultimate arbiter of fitness. Through the rise of information technology we see the emergence of new forms of distributed self-organizing networks that are capable of delivering value at a scale that we previously thought was not possible, form this type of alternative organization, form apartment sharing, to file sharing, to open source software. Now that information technology, the Internet, and new software platforms have provided the enabling context, we see that self-organization can in fact be and is increasingly becoming a mainstream economic model for production and consumption. Some even prognose: ‘Given that the ultimate end goal of buildings is to attract talent and retain loyalty, tech companies will be able to do this better than existing real estate companies.’

Complexity theory has an expression for the highly competitive ‘space’ tech companies operate within. The transition space between order and disorder that is hypothesized to exist within a wide variety of systems is called ‘the edge of chaos’; a region of bounded instability that engenders a constant dynamic interplay between order and disorder.

Physicists have shown that adaptation to the edge of chaos occurs in almost all systems with feedback. Even though the idea of the edge of chaos is abstract and unintuitive, it has many applications in such fields as ecology, business management, psychology, political science, and other domains of the social science. Since the edge of chaos has the tendency to fall into the attractors of structure and chaos, it is called a dissipative equilibrium. Such an equilibrium requires work to maintain balance. Unstable markets, fierce competition, and relentless change are the only certainties in today’s chaotic world. To compete on the edge is to relentlessly reinvent, and it’s only way to navigate the treacherous waters of tumultuous markets according Brown and Eisenhardt. The two women say, it is possible to shape ones own destiny and competitive landscape – by setting a rhythmic pace that others must follow. Surprises exist, the unexpected has to be expected, because control is not tight and because the system is adapting in real-time to unpredictable changes.

Today we have new tools based on computation such as agent-based modeling (often used in urban planning) and nonlinear iterative maps. These computational models can handle massive amounts of information. From them, we can get much richer models that don’t require these very simplified reductive assumptions of traditional economics. They allow us to develop much more complex and subtle picture to the values, motives, and real-world behavior of agents. These advances in information technology will bring, according Castells, a shift in business transactions occurring at the time, place, and convenience of the vendor to the time, place and convenience of the consumer. These forces have powerful implications for the property market.