023 - Space Race

We dive right into the intricacies of real estate investing, with a front-row seat to our learnings from note expo and what AI is doing. Listening to Damon West, a former footballer and sentenced to life in prision and now a best-selling author, was inspirational. We also indulge in some light-hearted banter about East Coast timezone differences during daylight savings and Richard's amusing encounters with whales and hummingbirds.

As we journey on, we draw parallels between the cumbersome process of manually filing paperwork with the county recorder and the ease of accomplishing tasks online in the digital era. Discover how AI is fundamentally altering real estate procedures such as buying lists, creating renderings, and streamlining complex tasks. We delve into the implications of AI replacing mundane tasks, and how it can potentially alter human interactions. We extend the conversation to AI's influence over a spectrum of industries, focusing primarily on real estate. From pre-operation building mapping, loan package analysis, to extracting information from documents, AI is genuinely the game-changer. We conclude by emphasizing the importance of caution when integrating AI into business operations. Tune in for a thought-provoking discussion!

Resources and links discussed:
- Videocast on our YouTube Channel
- ANB Funds Website - https://anbfunds.com

About the Host:
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!

Connect with the Host:
Facebook - bethebank
Twitter - bethebank1
Instagram - bethebankpodcast
American Note Buyers - https://anbfunds.com/
Monthly Broadcast - https://youtube.com/playlist?list=PLzc944w1xydt5aLDrrEPHJhdJeDkBjjD4

Transcript

Narrator: 0:02

Interested in real estate. How about wealth? Well, they go hand in hand, and here you'll learn all about it. Welcome to Be the Bank, a podcast where we discuss and debate the topics centered around real estate investing. Your host, Justin Bogard, shares insights into investing in real estate to create real wealth and passive income for you and your family. He'll share stories of real estate investments done right, Look you through the process of owning a real estate note and, most importantly, educate you so you can be the bank. This is Be the Bank brought to you by American Notebuyers. Now here's your host, Justin Bogard.

Justin Bogard: 0:46

Welcome back to another episode number 23 to be exact, on season five on the Be the Bank podcast. Just a few more episodes left till the end of the season. Today we are going to actually be talking a little bit more about AI, and we've talked about this in the past. I recently went to a note conference and we're going to be discussing kind of what I learned from that as well, and you're going to see Mr Richard Thornton on today as my co-host, so stay tuned. Thornton Thornton, thornton Thornton. How's it going?

Richard Thornton: 1:25

Pretty good, Mr Justin. How is it in your neck of the woods today?

Justin Bogard: 1:30

We are still hovering around the mid 60, high 70 window. Today might be the last day for that. The daylight savings stuff is really messing with me. Yesterday the girls and I went to dinner after school and met my dad because he was on the north side of Indianapolis, which is kind of where we live, and they get off the bus around like 415 or so. Then we're driving over to meet him. I think it's around like maybe 445 and it's already getting dark. It's just kind of ominous. So my time zone is the Eastern time zone, as you know. But for the listening audience here I am on the very west of the Eastern time zone. So like states like Maine that are the furthest east that you go in that time zone slot the sunrise and sunset is significantly different than mine. So I think it's around, richard, maybe 720 to 730 now the sunrise is and the sunset is more like right at five. So it's only going to get worse.

Richard Thornton: 2:33

For the next month. It's a little bit like living in Norway or someplace like that. I've been there at both seasons. I've been in Norway during the summer solstice, where it never quite gets dark Long. About midnight it gets sort of what we would call dusk, and then the sun comes back up. And then I've been there more towards November, where it's just dark all the time.

Justin Bogard: 3:01

Wow.

Richard Thornton: 3:02

No fun.

Justin Bogard: 3:03

No fun at all. So, on your time zone, where you're at Petaluma, are you in the middle of the Pacific time zone? Are you towards one side or the other, or do you even know what?

Richard Thornton: 3:12

the line is yeah, I never really looked at it like that. Yeah, I think we're more towards the eastern side, but we never have any argument with the fish out in the ocean. But who gets to experience time for it? They don't seem to care.

Justin Bogard: 3:31

I like that. I wasn't expecting you to say that it's very funny.

Richard Thornton: 3:34

Yeah, well, I know that I've had some issues with whales every once in a while, but yeah. You speak dolphin, I speak dolphin. Didn't you ever watch Flipper? Yes, that's what Flipper did all the time.

Justin Bogard: 3:54

Nothing like Flipper, well, yeah, I would try to do it, but I'm laughing too much. I'm just going to make even more.

Richard Thornton: 4:03

It's like what am I saying?

Justin Bogard: 4:04

Come on, all right.

Richard Thornton: 4:10

I will share something with you that was quite odd and I still don't know why it happened. In my office here it's the second floor and I was looking out of the window on a telephone pole and I counted, there was 15 hummingbirds that all decided to sit on the telephone line, sort of bundled up together. I don't think I've ever seen 15 hummingbirds in one spot one time, certainly stationary, ever in my life, yeah.

Justin Bogard: 4:49

I don't think I've seen that many before. I've seen two. My grandmother's got some really cool feeders at her house and she likes to feed the hummingbirds and they'll just sit there just like cover, moving their wings at. You know a rapid pace that no one can even tell their if it moving. Anyways, I wanted to bring up note expo because there let's go.

Richard Thornton: 5:12

Whales and hummingbirds.

Justin Bogard: 5:13

No, no, it's not Okay. This is not beat. Be the bird or be the whale.

Richard Thornton: 5:19

We'll teach you how to be the bird. Somebody the bird. Okay, go ahead.

Justin Bogard: 5:26

Dallas, texas. For those of you that are just listening to us, we also film and stream this on our American note buyers YouTube channel, so come check us out there. So this is a event that I go to annually. You did not go this year.

Richard Thornton: 5:39

But I went this year.

Justin Bogard: 5:40

I'm sorry what.

Richard Thornton: 5:41

I was a bad boy. I did not.

Justin Bogard: 5:45

Well, it's fun, you know. We get to see a lot of our people in the note community that we know throughout the year and we don't get to see them in person a Whole lot, but it's kind of cool. Everyone meets at one spot. This is kind of the biggest one in the year that there are other conferences out there for no investing, but this is what's considered the the biggest one. So we had a keynote speaker there. His name was Damon West, and Damon was a Pretty good high school athlete in football and screw up in Texas I forget what city and then he actually was good enough to get a division one scholarship to a College in Texas and so he went there and I think I don't know if was right when he got there or during his college season he ended up hurting himself pretty bad I think it was a shoulder or something to where he couldn't play anymore, and then so he went into like the financial industry, working at like a Wall Street type of job.

Justin Bogard: 6:36

I'm trying to fast-track this to the answer, richard. So fast track. Yeah, he ended up after a few years doing that, gotten, got into like meth and got into some drugs and then he ended up being like a I don't know if you call him a professional burglar, but basically he was breaking into people's houses and stuff and then eventually he got caught by the by SWAT, I would assume and so then he got Sent to jail and then he had a trial and during the trial the jury convicted him of so many counts of burglary and they Suggested to the judge to sentence him for life in prison, which life in prison and the state of Texas, I believe, is like over 70 years. So they did convict him of that and they and they put him in jail and they went to a super max facility in the state of Texas I forget where. I think this is close to Dallas or maybe close to Houston, but he went there and so he's, he has to go to jail and he's he's telling about the story, about you know how.

Justin Bogard: 7:39

He's just this, you know this, this young or white kid I would say he's probably like it and maybe in his let's just call it like late 20s, mid, early 30s, and so he goes to jail for about six or seven years and tells the stories about how he has to get along with, you know, people and stuff and his, his whole thing about the story was being a coffee bean and so after about six or seven years, the Probation or the parole hearing came up for him, his first parole hearing, and they basically said, like you know, you, you have just changed this jail and we just we want to understand like how, how this happened and stuff, and and so he was explaining the story about how he was just trying to be a coffee being and just what that means is like he's just trying to bring positivity to everybody and everything around him, and he got this be the coffee beans from another guy in a different, in a different prison and so he ended up getting out on parole and he's able to go around to different Jails and and he works at Networks.

Justin Bogard: 8:47

He goes, does a lot of speaking things for state farm agencies and stuff and speaking about his inspirational story and stuff. So he's done like a couple of college teams Clemson, alabama, he's. He's done this stuff for like the Dallas Cowboys and it's a really cool motivational thing. So, anyways, the same as Damon West. If you guys look him up, it's called be the coffee bean, his book. It's a definitely a two-time best-selling Book on the New York Times, so that was the opener for that and I was pretty, pretty excited after that.

Richard Thornton: 9:19

So is there any metaphor about getting roasted or anything like that?

Justin Bogard: 9:24

It could be. I think about that. That's a good one. I Mean yeah, but you need to. I don't want to spoil the whole thing. I'll let you guys read the excerpt on it. But it's a pretty. It's a pretty great story. I'm definitely gonna get the book, or at least the audiobook, if I can't get the book to read it. Pretty cool. But the the whole premise behind the note. Expo is just a conference that Kind of gives you the flavor of what's been happening throughout the year and a flavor of what they see is gonna happening, gonna happen here in the future, with, you know, all the interest rates rising, with all the the negative connotation that comes with, like commercial loans being called do and and how, you know office space in the downtown metro areas are becoming very vacant, like 20 to 25 plus Percent vacancy. So that's, that's gonna be a problem and I don't think it's gonna get any better.

Richard Thornton: 10:16

What are they saying about commercial?

Justin Bogard: 10:18

So they're saying just be, be weary of the fact that you know if anybody is in apartment syndications or multi-family syndications like you, that's not the right investment to be in right now. There'll be some people that that can come out Okay in this, but it all signs are pointing towards like that's not what you want to do right now. You want to be a little bit more conservative and the residential space isn't nearly as complex and and Dire as the commercial space is right now. Is is is the crux of what they're saying. So it's good to be in the, in the, in the note business and the residential side, which is, you know, primarily what we're doing exactly right.

Richard Thornton: 10:59

Yeah, exactly right.

Justin Bogard: 11:02

So one of the talks you ever heard of a TED talk.

Richard Thornton: 11:06

I've heard of many Ted ducks.

Justin Bogard: 11:07

Okay, so you know the premise behind a TED talk, where it's just a quick Talk on just a topic and it's really impactful.

Richard Thornton: 11:14

I know Ted personally.

Justin Bogard: 11:16

Ted talk, his name's talk, hmm. So Bob repasses the guy that puts on this note expo one of the guys and he does his own version of Ted talk called note talks, and he has a few people always go up there. They give like just 15 minute speeches about a certain topic and stuff and one of the speeches was the guy for Company called paper stack in there like an online exchange company that that buys and that off has a marketplace for people to buy and sell like real estate notes stuff. So he's the CEO and he gets up there and he's he's a guy that's really into tech and always is. It's like finding out ways, you know, to be efficient and use automation and stuff like that.

Justin Bogard: 11:56

And so they we're talking about AI and they were talking about how they're trying to integrate you know AI as much as possible and a lot of their you know Steps that they do and they see AI, just you know, ever exploding even more For what they can do to our industry, because our industry is more kind of archaic. You know we for the longest time and I'm sure, richard, you know this feeling because you've been in the traditional real estate stuff a lot Longer than I have. But, you know, used to have to go to the county to record things. There wasn't a way to send things electronically, right, used to have to actually review stuff in person, right, richard, at the county and supposed to like having somebody you know create a file or a document for you and send it to you in 48 hours.

Justin Bogard: 12:39

So, things were way different. You know, not too long ago, would you say maybe 12 to 15 years ago, it was probably still like that.

Richard Thornton: 12:46

Yeah, so 15, 15.

Justin Bogard: 12:49

So it's been very recent that we've been able to do like online Notarizations. You know virtual closings, you know researching anything that you need to do online as opposed to like going to the courthouse so you can, you pretty much do everything virtual now with it comes to real estate, and so they were just talking about how they're using and implementing AI into the different ways that they can close transactions.

Richard Thornton: 13:14

So that's interesting. I mean I would, I would think that that would be as you're saying, that, and I'm actually thinking that there are some counties that are still back in the 70s, you know, I mean Go to go to Astubula, ohio, and oh yeah. You, you have to what.

Richard Thornton: 13:35

You heard me tell stories about that, but yeah you have to file, you have to either walk in the door and put it in the the filing box Yourself on the counter, or you have to get somebody to walk it in for you, and it cost you anywhere from 75 to $100.

Richard Thornton: 13:51

And if you're out of state, like I am, you mail it to the, to the Person that's going to record it not the recorder, but the person who's going to walk it over to the recorder's office and they set it in there, and so in counties like that, ai is not going to have much of an impact for a while. However, in in larger communities and I don't mean I'm gonna talk about San Francisco, petaluma or or, but I mean cities, I think of probably 50,000 and 60,000 or over for the most part we can go in and download those docs automatically off their websites, and In that case, any county that has done that AI is going to be directly applicable to that. I mean, we talk about buying lists right now. Yeah, they'll be able to use a AI crawler that'll walk through Any database and be able to tell you exactly when the mortgages do what the dates are. It a lot of time you go down the. The detail information will be pretty spectacular, I think.

Justin Bogard: 15:01

Yeah, just even outside of Our, our industry, of what we're talking about with AI being applicable, it's it's just amazing in general what it can do. So recently I just saw something on I think it was linked in and it was a post of showing Somebody that did like a drawing of something, and they did it by hand and then they had AI take it and render it and make it like how it, how it it thinks it should look, and it was just like it was so unique, and so it was really cool how AI was able to, you know, do what it did. But it's interesting. So I have mixed feelings about this. At first, you know, I was kind of taken back from this and I was thinking all right, what is, what are we talking about? Ai? Obviously it means artificial intelligence, but what is it really doing and what are we talking about? So it's a quantum computer, basically, that's running bits of information and analyzing things at a rate that we can't even fathom, and then, on top of that, it has the ability to kind of learn and do things based on what it sees and what's going on. So it's pretty neat in general of how that works.

Justin Bogard: 16:12

But in the same token, I also have my reservations about like what? What should we be using this for? Is it is? It should be like simple, mundane tasks Like you know, we talked about whatever episode it was a while back or should it be like doing processing things that are very complex and have sometimes they need a human interaction to them, or what we perceive to have a human interaction to it, to make a decision that's not only based on logic but also based on emotion? It just seems kind of farfetched of how, how that should be working in society, because, if you think about it, I mean it could replace everything and every everyone around us, right, if it, if it went to scale to the point to where you know it was able to do anything that a human can do.

Richard Thornton: 16:59

Yeah, at some point I still see it as a tool. I know the. You know there were a number of people running around and I've been following this a lot, as you know, Okay but you know, with their hair on fire, saying the sky is falling and we're all going to be out of jobs in 10 years, and things like that. Well, people adapt. So the story I like to tell about that is I didn't realize this, but when the mechanical telephone operator came out remember, you see movies, you see the it's usually a woman operator sitting there saying you know number please, and sticking all the little all of those operators, nationwide, were replaced in one night. So they had a nationwide rollout of all the telephone companies and they completely switched that old system off and went to the new, more mechanized system that you know we have an approximation of now, at once. Well, that was hundreds of thousands of jobs. Guess what? You know, we didn't have this massive employment or anything like that, and they did that all at once. And so I think there's a natural progression where people lose their jobs and people find new ones, and I think that's that's going to happen here. That's sort of one thing. The other thing is that I?

Richard Thornton: 18:21

The more I heard about AI, I thought, well, it's not really going to be applicable to what we do Because, let's face it, notes are just too funky.

Richard Thornton: 18:32

But last week I was listening to a podcast where the military is now using AI in drones that will fit in the palm of your hand. The entire drone and the blades will fit into your hand and they throw it up in the air and turn the sucker on and it'll go into a building and it actually flies all around through all the hallways of the building and this sounds really sci-fi. It identifies the bad guys, you know, it can tell a bad guy from a good guy somehow and completely map the building. So before they even go in a building, they totally know what's going on. Well, the uncertainties that they have in all of that are far beyond anything that we're going to be presenting them in notes. So I mean, we're pretty simple compared to all that. Now, I don't think what we're doing is all that profitable. So, there again, I don't think it's gonna be coming to a theater soon, but I do think it's gonna change our industry significantly.

Justin Bogard: 19:41

There's definitely a lot of efficiencies that it can add. It can analyze things before you buy it and run Some of these hedge funds. They get a couple of hundred to a thousand loans that come in and they have to look at this thing and they usually have several people thumbing through an Excel spreadsheet, analyzing it, looking at over, verifying it. But they can put this thing in some sort of AI filter based on what it needs to be, and they can give it some sort of score, I guess, on each asset on where it needs to be with certain attributes, and they can plug in there and then AI can run it within, you know, like, let's just say, a billionth of a second and spit out the results of what you could have taken several hours to do or several days to do with several people.

Justin Bogard: 20:26

So that it definitely gives them an advantage that the larger players on that aspect of it and not to mention it and you mentioned this lightly on just going through that OCR, that you know the character recognition on documents and just reading through it and skimming and pulling out, extracting information based on how it's worded and what it says in the paragraph of exactly the information you need to like write your next conveyance or your next launch or assignment. So there's a ton of advantages that does that way, and then you still need someone to check it to make sure that it's operating it correctly. But there are some advantages to that. I definitely see that and I agree with you. It's not gonna like completely, you know, make things to where nobody's gonna be able to close a transaction without AI. It's just. I think it's gonna make things more efficient and a lot more correct.

Richard Thornton: 21:18

Yeah, and so there's also I mean, you know more about databases than I do, but another one I was listening to there's a lot of relational database information that they can they're already gathering, and just a very simple example, that is and this certainly goes to the big boys, the guys on Wall Street who are analyzing portfolios but will eventually get down to us Somebody's you know a paper stack or somebody's gonna offer this on a smaller package but they found a very close relationship between the number of days in which somebody pays a credit card and their chance of default on a mortgage, on a home mortgage, like people who pay their credit cards in general within zero to five days, you know, have a maybe a 2% chance of default and five to 10 days have got a five.

Richard Thornton: 22:17

And I'm making those numbers up. But there's a direct relationship between those things. And it took AI on a huge, huge, because you can say, well, gee, that's something you could do with statistical database. Yes, but it's taking a statistical database much, much longer than it is AI to figure those things out. We will see a lot more of that type of thing.

Justin Bogard: 22:42

Yeah, getting granular with those details.

Richard Thornton: 22:45

Yeah, which I found? Is it fast-running, quite frankly?

Justin Bogard: 22:48

Well, it'll help with forecasting Completely. Yeah, completely. It'll make things a lot more accurate as far as what's going to happen, based on what did happen going forward.

Richard Thornton: 22:58

To agree that people use their credit cards more, their debit cards more their Apple Pay or whatever. That's all collectible. Yeah, you got to believe that one of the big data sources that Apple is getting out of your Apple Pay is they know what you're buying and when you're buying it, and they're telling whoever is selling something, what Justin and Richard are buying and when they're buying it.

Justin Bogard: 23:25

Exactly On the other side of the coin, it does feel like it's space race. What I mean by that is that people are trying to and we'll just say in, big companies are trying to implement AI, I think, too quickly and unique ways to try to be the first one to do something, as opposed to stepping back and saying, hey, wait a minute, let's refine this and make sure this is an appropriate application, or do we need to rethink? Do we want it doing AI, doing this particular step or this process right now, today, or should we think about this further down the road? Because I think other people, like Elon Musk has mentioned, we're going too fast. We need to slow down. As far as how we're introducing it, I feel like a lot of people just want to rush and be like. They hear the word AI oh great, I'm going to be able to run my multi-billion dollar business off of two people and they're thinking like how much efficiency they can have. Instead of going, wait a minute, let's take a step back here.

Richard Thornton: 24:28

It's a double-edged sword. You mentioned quantum computers and I know you said quantum, but I don't think you quite meant a true quantum computer, because I don't think we actually have a true quantum computer yet. But when we do, and we're close to that, also pulling that together with AI, what they're saying is that our enemies who will remain nameless at this point, but the bad guys, and not just the mafia type of the mafia's, but their countries are racing as fast as they can on this because they will be able to crack all of our encryption and everything eventually. I mean what we know about encryption right now. He's just going to fall by the wayside. It's probably I think certainly within the next 20 years. All this is going to happen.

Justin Bogard: 25:29

Well then, that is. The other scary thing is that whatever you hear on the news that we'll call in quote, the good guys are doing the stuff that you don't know that's going on. That the bad guys are doing is probably either advancing what we're doing or what we're saying, or it's at the same level. So it's only a matter of time till a criminal figures out how to break something that we've created, because that's their job in life is to be the axiom of this.

Richard Thornton: 25:56

Right, right. So I mean so bringing back down to where we are right now. How is it going to affect us in the next three to five years in the node industry? Probably not that much. I mean. I think it can help us underwriting a. I'll digress just a little bit, but one of my neighbors has one of the largest secondary short-term rental companies in the country. What do I mean by secondary? A lot of people, when they get onto Airbnb or VRBO, think that they're actually dealing with Airbnb or VRBO, but there's a whole white label behind them. So, like they have any larger property, they go directly to this group. Well, they've found out that they're now able to underwrite. They're already doing this. If there's 25 different AI tools that they have implemented, they can underwrite somebody's credit and see if they're a good person to rent to within seconds, and they could not do that even last year. They couldn't do that. Do that, that's that speed.

Justin Bogard: 27:12

That's interesting. Yeah, ai, what can you say?

Richard Thornton: 27:20

AI, AI.

Justin Bogard: 27:21

All right. So that was a good topic today, beating that up. Thanks for hanging out with us today. And this is episode number 23 of season five on the B2B Podcast. I almost said broadcast on the podcast.

Richard Thornton: 27:33

Podcast. If you're from Maine. It's podcast.

Justin Bogard: 27:38

Yes, yes, they would say it differently there. Yes, I agree. All right, we will see you guys on the next episode. And Richard, as my friend Eddie would say, I'm out of soap.

Richard Thornton: 27:50

All right, my friend, talk to you later. Bye.

Narrator: 28:17

Thanks again for listening.