This approach is particularly relevant to real estate investing, a sector which has proved much harder to automate than the more mechanical processes of buying and selling stocks or bonds. For Koo, this is a good thing. “I don’t want the AI engine to trade without intervention ever, in any investment category, because human judgement should always still prevail,” he explained. To Koo, rather than being enamored with any one cryptocurrency or algorithmic process in investing, the bigger story (incidentally, hidden in the details) is the opportunity represented by blockchain technology (see sidebar at right). “Blockchain itself, not Bitcoin, will likely have an enormous impact on the future of the financial industry and the real estate industry,” he said. “Blockchain is fast, transparent, and low-cost. It can authenticate transactions and secure them as it crisscrosses the internet, which could have significant implications for everything from credit to leasing to chains of title.” Koo noted many companies will likely not refer to their version of the technology as blockchain. “The code itself is open source, so a lot of companies will download it and then employ the technology within their security frameworks. I would say by next year, you will see more secure systems thanks to derivative blockchain integration. They may not even refer to it as blockchain because the name is getting a negative connotation from its public association with cryptocurrencies.” This increased security will benefit real estate investors in a number of ways ranging from increased transactional security to better privacy and control over Internet of Things tools, such as electronic locks, used in rental management processes. “One good thing to come out of this technological evolution is a really, really robust authenticating system and a more secure internet for many types of document transactions,” Koo said. Blockchain also stands to reduce the timing of closing for
real estate transactions, synchronize cash- flow streams from leases, and even create unprecedented levels of privacy and control on the profiles of individual consumers as well as commercial entities, he added. “All the parties in a transaction, commercial or residential, could effectively look at an entire chain of verified, validated transactions and
complete a closing, for example, in a matter of minutes,” Koo explained. If such technology evolves successfully, investors at every level could save a great deal in time and, additionally, in transactional fees that affect everyone in the process. “The possibilities are endless when it comes to the blockchain,” he said.
BREAKING DOWN THE BLOCKCHAIN PROCESS
Thanks to Koo's fascination with the details, he is also well-positioned to comment on investment and economic trends that affect all investors operating on all levels of scale. For this issue of Think Realty Magazine , Koo divulged the details of his ultra-high net worth process, from identifying the long-lasting ramifications of cryptocurrency on the real estate industry to evaluating how this November’s elections could affect your real estate strategies on a regional basis. IMPLICATIONS FOR EVERYTHING FROM CREDITTOLEASING TOCHAINSOFTITLE." BLOCKCHAIN ITSELF, NOTBITCOIN,WILL LIKELYHAVEAN ENORMOUS IMPACT ONTHE FUTURE OFTHE FINANCIAL INDUSTRYAND THEREALESTATE INDUSTRY... [INCLUDING] SIGNIFICANT
G eorge Koo is an expert on the unique combination of real estate, finance, machine learning, and blockchain technology. He dedicates a great deal of his time to instructing, advising, and consulting for the business community and academia on these topics and, as a result, has a finely tuned breakdown he uses to illustrate what blockchain really is and how it works: “Blockchain is simply a technology for authenticating transactions. In fact, it was originally developed for use on the dark web so various ‘bad actors,’ like money launderers and drug dealers (who certainly wouldn’t trust each other), could operate in a wholly trustless system. For every party in a transaction, the blockchain technology provides a cumulative security mechanism and distributed ledger that can be validated across an entire
AI and Cryptocurrency Bring Endless Opportunity to Real Estate
Artificial intelligence (AI) and cryptocurrency have certainly been two of the most prevalent topics in the headlines across many industries in 2018. The intensely complicated subject matter in both areas not only positions them for great advances; it also creates a perilous situation for investors seeking to take advantage of early adoption without full knowledge of what the future holds. “Investors at every level absolutely must recognize that cryptocurrencies are, at this point, a totally digital asset,” Koo stated. “It is nothing more than a digital file, not much more different than an encrypted email message file. And that makes its perceived value extremely volatile. Most importantly, cryptocurrencies cannot be easily spent. It’s very difficult to figure out the true value of a bitcoin (or any
cryptocurrency), for example, at any given point in time.” He feels similarly cautious about many of the more advanced machine-learning technologies beginning to appear in the market and noted that although he might use a computer to help identify investment opportunities, he would never sacrifice the human element of control in any aspect of investing, be that stocks, bonds, or real estate investments. “Sure, my goal is to be able to take my brain and put it inside a computer so it can evaluate investments similarly to the way I would,” he laughed, but continued, “I would never let a computer operate a trading mechanism. You have to make sure you have some level of human intervention between the mathematical models the machines are learning and the implementation.”
community. That validation creates a series of pending transactions, all chained together, in a digital file. “The secret sauce is the distributed ledger process that provides blockchain with the authenticating mechanism over the system itself. It is a unique signature, and whenever a transaction ‘goes through,’ so to speak, it creates a ‘block’ that is, at the end of the transaction, validated by the entire population involved in the transaction. These blocks are essentially chained together, distributed to everyone involved, and problematic blocks, those that have been altered or rejected, are rejected by the community.
Because of the unique nature of the signature capability of the blockchain process, this verification is probably the strongest technology to emerge from cryptocurrency’s evolution.”
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