Peter Rex, Real Estate and PropTech Entrepreneur and now Austinite

Episode 43 Transcript

Michael Scharf: Austin is the new innovation powerhouse, not the next Silicon valley, but the first Austin, we are adapting to the future in real time.

Jason Scharf: I'm Jason Scharf, a biotech executive, and early stage investor.

Michael Scharf: And I'm Michael Scharf, advisor and board member for multiple private companies.

Jason Scharf: You can call us optimist abundance minded up wing, and even solutionists we see a bright future ahead that can be achieved through innovation and entrepreneurship.

Michael Scharf: In this podcast, we explore Austin superpowers, the people and companies driving our growth and the macro and microtrends that come together to create Austin today.

Jason Scharf: This is Austin. Next.

Michael Scharf: Welcome to the Austin next podcast, and to our very first remote. From the headquarters of Rex, LLC. And we're here to talk to Peter Rex, an innovator and leader in the property tech space. Someone who's become very involved in the innovation ecosystem here in central Texas. Peter Rex began working construction at 18 years old, while attending community college. In 2005, he purchased his first property. So to preserve cash, Peter would sleep in vacant units and he did all the maintenance, construction management, legal tax, finance, code compliant, and asset management work. Oh. And in his spare time, he completed the philosophy in government degree from Georgetown, a law degree from Harvard.

And got his CPA. Beginning with a great recession of 2008, 2009. Peter scaled this portfolio to 2 billion in assets and over 500 employees seeing an opportunity in PropTech Rex began about four years ago to liquidate some of that portfolio to raise capital. He raised about a billion dollars in investible capital and launched Rex tech ventures, which is building technology to serve real estate owners and operator.

Rex currently has 10 companies solving the largest and most lucrative problems in the real estate industry, ranging from ensuring and paying workers to investing and managing assets. In mid 2020. Peter moved his operations here to Austin, Texas,

Pete. Welcome to the Austin next podcast.

Peter Rex: Great to be here. Thanks guys.

Michael Scharf: Why'd you move from the west coast. Why come here?

Peter Rex: Well, why not? You know, you guys are here as well. We figured it all get together. Have a good time here. So for the listeners, we are, we're overlooking the city of Austin. We could see it right next to the penny backer bridge and we get the view of lake Austin as well and the beautiful hill country and the skyline.

Right. So we got a good, good, good place here to get together and talk some shop here about Austin, the future of tech future of Austin. Yeah. Why Austin? Why we make the move? Well, a lot of reasons, right? But ultimately I'm a long term thinker and I'm thinking over a 30 year cycle. And I got my start in the technology industry by moving out to San Francisco and built ground up out of there for, you know, a couple years then moved outta the Seattle, did it for a couple years up there.

And that's a very different technology ecosystem, but equally as powerful, a lot of people don't realize. You know, there's just a couple small trillion dollar companies up there called Microsoft and Amazon. making some, you know, small moves. So it was good to see a different way to do things. But from there, I felt like I had passed a, you know, hit the marginal learning curve level on technology where I'm still have a lot to learn, obviously, but hit a marginal learning curve and wanted to really set up the headquarters in summer.

That would be long term and the best soil possible. For building a company that is world class long term. And I wanted to pick the place that I thought would be the next big wave where I thought, you know, would be, who's gonna own the next 30 years. And when I thought about that landscape and I considered even personal items like my family, and what's important to us and for my family and myself and a lot of our employee base as well.

We highly value things like faith, family, and freedom. I also am obviously a sucker for entrepreneurship and business. That's all I do all day long, 24 7. So, you know, these are all things that Texas loves and Texas embraces and they're willing to fight for. I said, that's, you know, the, the recipe there that makes sense.

This is gonna flourish is gonna be good. It's a happy place to be. It's fun. And then there's always the other bonuses about it. Great food, great food scene. And comedy scene here has gotten a lot better. And then folks like you coming over here that are bringing a lot, lot of diversity of thought. Different perspectives coming different, different areas.

That's also great as well. We all come here and we're all sort of new. So we're new together. It's almost like coming into a new school together at the same time. You know, first of class, you start to get to know each other, almost like, boom, we all started the same spot, so that that's kinda long summary of it.

Michael Scharf: But no, it's great summary. What surprised you moving to Austin?

Peter Rex: You know, not too much, actually. Which sounds a little crazy, but a lot of people they, you know, cuz I. I make moves fast. They tend to think I'm a complete cowboy, but that is not the case. Actually. I'm very strategic. So I research and think about things heavily in very long term.

So I, I basically I'd say I knew what I was getting into. I had taken a, a bet investment wise, even on Austin back. Before, you know, Austin was like, you know, known to be a powerhouse and bought, you know, hundreds of millions dollars assets here and without even stepping foot in Texas, just off of computer screens and research

So I had already, and this was many years ago, and then I still have still have some of these assets. I bought it during the great financial crisis. And so, and then during the, the great financial crisis, we also bought hotel Ella and a few other ones when I moved down here. So, and that's cuz hotels were fairly cheap while there was no one, you know, while I was in distress and everyone thought, oh, the world's over.

So we're gonna come back. But, you know, when I, you know, it's I knew what I was getting into, not too much surprised me. And in fact, you know, we've been nothing but happy, but what if I'd say nothing surprised me about what I found here, but I'd say when I think about things, I couldn't have predicted fully as easily as I wouldn't have predicted that Elon Musk would've just called it, decided, you know, move the whole company over here that I definitely wouldn't have thought would've happened.

I did think people were going to think similar to us. We had been the first technology company to notify anybody that were making a move. And the first people I knew about that even thought about it actually. And before we even posted, we had a wall street journal oped that went viral that I put out and that, you know, put notice throughout the whole world what we were doing.

But before that, we had already made that decision in May of when COVID hit. So we had already two months before that made a decision, but. Every time you have a good idea in investing. For example, I always know that someone else will catch onto this idea if it's smart. So I did note I, there was the only time I've given my advice, personal advice to anybody from the financial side to our company.

And I told all the employee base that I said, Hey, you should buy home. Cuz this idea is, seems so obvious to me that other folks are gonna catch on. And fortunately for them that they did for those ones that listen to me anyways, cuz that thing just boomed, you know, and doubled in. Fastest growing city in the country.

So yeah,

Jason Scharf: it's something I wish we, we moved in December of 2020, but started thinking about it in that kind of summer timeframe. And in hindsight, as someone who, you know, went through 2021 looking for a house would've loved to have made that decision, you know, nine months earlier. It's interesting when you see the immigration kind of go in these waves and it really does feel like there is this pandemic wave.

You talking about Musk and then also companies like Oracle and Lonsdale and 8VC and Breyer and the like, what do you see kind of as the. Something that kind of binds the COVID migration group. That's kind of come to Austin.

Peter Rex: Well, you know, I, I always say for me it was faith, family freedom when they say personally, you know, but I think if you take those three things, it could be any one of 'em for people.

Sometimes it's family. These are all people, you know, like if we share any one of those three things, we're gonna get along. if you're into freedom, we're gonna get along. I don't care what your background is, where you're from. And if you're into family, we're gonna get along as why I think, cuz that's basically, I like these types of people we get along generally and it just depends, you know?

So there's that guy. One of the guys on a boat who's out on my boat yesterday, we were like I said, the, we got caught by surprise of the storm outta nowhere. And then these Texas storms can rage. My five year old son actually noticed it in the horizon said, what's that? And I thought, man, that's not coming for us.

Is it? But it was so we had a bucket, man. It started hitting the hail and stuff. And, but anyways, when I was talking to him and his background, he's, he's he's a partner in the company. It's MIT background, you know, Been in tech forever, really smart on tech, you know, knows it deeper than me. . And when we were talking out there, his wife was on the boat too.

And she was saying they have had zero regrets. They moved from LA actually, and they've had zero regrets and they've been here now. They, they, they were here before I even got here. Actually, he came in, joined our company after we were here, but he they both said that they've had zero regrets than when they go back to LA.

They're actually only convinced more of the, the wisdom of the decision. Ultimately for them, it was family, you know, they wanted to, and some simple things it's, it's funny, right? It was, they love having their kid be able to play outside and know that he is gonna be safe. And it seems like, you know, that's such a simple thing, but man, if you got kids that's huge.

And so anyways, it interest, everyone's got different things that drives them. And like I said, if anybody's got any one of those, I think if you take it's any one of those three things, I think ultimately drive somebody who makes that decision. And by the way, any one of those three things. I believe are good for business long term.

Jason Scharf: Well, I, I did like your metaphor about kind of everyone coming in on the first day of school together and, and be these waves. And everyone's the joke is always, everybody's like, oh, and you know, five years ago, Austin was great. And I kind like, you know, for us, I think it's gonna be the same thing five years from now.

Like you should have seen it when we all first kind of came here. Right. And so this kind of class, I, I said, I like that metaphor, that kind of the class that kind of goes together and learns Austin all at the same time, I think will be fascinating to see how that group kind of changes it. I want to kind of come in now on kind of Rex itself.

And you've got 10 companies all kind of in the prop tech space with obviously I think blockchain and digital. Talk to me kind of at the vision at the high level of what you guys are doing.

Peter Rex: Yeah. So high level vision, we are creating technologies to serve owners and operators in real estate. So we're, we've identified the largest, most lucrative problems in the industry.

And. We have built 10 companies around these problems with solutions. Right? So. Our main thing with the company is we have three main advantages as I see it. I'm sure there's, you know, that's gonna be in the company. So there's a lot of advantages. They, they might think they have, but I think it's three core ones.

One is we have a elite tech team on par with anything in Silicon valley or Seattle, right at the top percentile. Second is we have deep domain knowledge actually better than any of the companies out there in Seattle or San Francisco. We have deep domain knowledge in real estate. So, and the third is we are able to.

Test off our companies. We have a company that spun out a couple years ago. That's already over managing over billions of dollars of assets on the property management side. And we can test with that and make that company a lot better and also get learnings. And then we have an in-house inbuilt customer, again, initial scale, right?

So all the companies have traction and they're on the move. So we are and that's, that's kind of the high level view of, of what we're going after. And ultimately, when I think about what I really want to do with any company at the very, very highest level, I try to think like, how are we going to serve with these companies and businesses, right?

Because if you're not serving, you won't make money in the long run. If you're just a parasite, you know what I mean? You've gotta figure out how to serve long term. And so, and then we go, okay, great. Well then how will we do it as a company? I've gotta look to our assets. And when I say assets, I mean, first foremost, our people.

Both myself, but also a lot of our leadership. And where do they have key advantages? Cause if you just go to, if you try to play in anything, then you're gonna win. I could be like, you know what? I think I'll be really good at, you know, basketball, let me go play against you know, pro no, you're not gonna win.

So, you know, in business, same thing, right? You gotta pick your forum. And I want to, if you wanna pick a forum. You're gonna win in for me, the form I'm gonna win in. I'm gonna win in the real estate forum in tech. And, and the reason why is because I've, I've just massive advantages there. So that's why I'm doing that now.

Can I win healthcare? Definitely not against one of you guys, not against you, Jason, cuz , you know, a lot more than me and, and you've been doing it for a while and can I win in corporate strategy? No not against Michael. He's not, I'm not, it's not gonna be able to not gonna be able pull off. It just got way too much experience on me.

So I, now I wanna play in the area that I just know that we have the advantages, that that's why we're doing it that way. And it's huge undisrupted place and we're going to disrupt real estate completely. And it's a huge asset class, 208 trillion.

Jason Scharf: one of the things I think is really interesting about Austin is the convergence of these various sectors.

And I know obviously correct me in the detail, but you guys have a hotel you're using an NFT around it. So there's kind of convergence now blockchain and real estate. How do you see that kind of playing out and where do you see blockchain playing into real estate?

Peter Rex: Yeah, so I think I, you know, and the good, so the bad news of blockchain and crypto is to me, the good news, because the bad news, going in the crapper lately, they've all gone under it. Right. But that's a good news for me because I was getting tired of all these like nonsense things about blockchain and crypto and everything else. Even though I have actually been, I've been early on some of this stuff, right? I'm I've got Bitcoin around 3000 or so, and still holding it for a million.

And so I'm still long on blockchain and on, on certain crypto, you know, Bitcoin particularly. But I'm a very pragmatic person. If it's got pass muster, it's gotta pass reasoning. If it doesn't just could be about a lot of bluster, you know, but when we look at what we're doing in the real estate space is I'm taking blockchain to what I am applying in an area that I actually think that the technology itself creates massive value. So in the end of the day, we're still going to be transacting on real estate assets, assets that are actually investment grade in investible assets in real estate. However, we're doing it on the blockchain, the pro the company's called OwnProp.com Own Prop. So why is it called Own Prop?

Well, you get to own a property we're democratizing ownership to property. That's why it's called Own Prop. So we, I put I bought a couple hotels downtown when we first got down. Because it was distressed. And also one of 'em was an iconic hotel, beautiful location, both actually phenomenal locations, right in the core can't lose.

And I bought another office building right in the core as well. So now we're, we're putting likely all three of 'em already, two of them are already tokenized on the blockchain and people have already bought and transacted on them and closed off the first opening first offering that we, that we made. So blockchain, what it does there though, is it's, it is allowing someone to have the assurance and certainty that they own that piece of real estate.

Because it is imutably recorded and it has been done. You know, as though you had a bunch of like attorneys working on that for you, even if you only bought a thousand dollars worth of it. So, because we're able to drop the minimum investment massively because we use blockchain and that replaces lots of people trying to audit and, you know, make sure it's, it's accounted for correctly.

So my background, you mentioned I have a legal background. I also have a CPA as well, so. I understand finance, my actual original background was just philosophy and political philosophy. Right. But I was when I wanted the business, I mastered these understandings just cuz I hated them. First of all, I don't like accounting a law.

So, and I knew I just was just, I don't wanna do that and go over it. So I forced myself into it. Just get it done, you know, anyway. So, but having an accounting and a legal understanding really enables you to understand the play there with blockchain on real estate. Because what you're doing is you are verifiably ensuring that asset is being recorded so that the owner that passes it from one hand. So if I own it and I give it to you, then you know that you got it and that I had it before. And then, you know, where I got it from as well, cuz it all been recorded. So this is, this is basically the bedrock of the ability to trade and real estate 280 trillion asset class is huge.

Well, it's actually very hard to transact in this country. We can transact fairly. But you can't transact at a low minimum investment because the costs of the transaction are fairly high. So if you want to go buy a hundred thousand dollars investment, it's gonna cost you no matter what, like about a thousand bucks or more, just to verify the ownership from before was who owned it.

And then you take the new ownership on, and on top of that, you're gonna still pay title insurance just in case you were wrong. and an insurance company ain't losing money on you. So , in other words, like. That's what that's doing is disrupting that part of it.

Jason Scharf: So what does, this is obviously outside of my wheelhouse.

So what does blockchain give you that say like a REIT doesn't, which the point of the REIT is I'm able to invest in properties, not directly, but in that ownership. So how does that, what does that actually, the value prop that increases from that?

Peter Rex: Yeah. So you know, in a way it's almost like you a different, and I use a lot of mental models, but they're not exact one-to-ones, by the way I use just analogies.

And it's hard to understand for certain listeners might not be familiar with legal structures, but some of 'em might be so they could track it and be like, okay, gotcha. So a REIT is a good example, right? It's almost a real estate investment trust. So what is a real estate investment trust? It's basically a tax advantage type structure.

As long as you distribute X amount of money. I forgot what these things a long time ago. I think it's 95% of the total funds from operation have to be, you know distributed. But anyways, what that does is a tax advantage vehicle. there. The ones that really are functioning right are in public markets, you know, in the real estate space, you have tons of these like AMCO, et cetera, a lot of these companies.

So UDR, when you look at those companies what are people can go in there and buy interest in properties that those REITs real estate investment trusts own. Now they then have to trust or go through that person that is controlling the REIT and deciding which properties own and which ones to. so you're buying into a pooled ownership vehicle that owns all these interests in a variety of assets that you don't control, which ones they are necessary, but you, you can always investigate and find which ones they own.

And if they offloads, when you don't maybe indirectly, you could figure this out and sell it. Right. But you don't control the destiny of that capital. So that's one thing. The second thing is there still is a decent operating cost to this, both on the transactional side, but also on the public side, when you're a public company, you know, like minimum, like they say minimum 5 million bucks a year to be public, something like that.

Right. So it's fairly high expense just to keep that thing running. That's just the public markets nevermind at the private level, at the property level. So what it does with, with blockchain though, is it's almost like you take a property like Hotel Ella in downtown Austin, that we did this with you take that and you make it a REIT essentially because you turn it into an investible product.

The whole thing that you can buy little pieces of and sell 'em if you want. But instead of with a REIT that you buy something that someone owns a pool of like a bunch of hotels or a bunch of properties, you actually can pick the one you want. And why is that that good? Well, for a number of reasons, it's great.

First of all, it's, it's something concrete and you can see it. And people know it's real. And people who work at our, one of our aspirations is that our, the people who work at the hotel down to the people who change the beds are gonna be able to own a piece of that hotel. We have some blocks on this with the SEC and stuff we're working through it, you know,

Jason Scharf: it's kind, it's kinda like the equivalent of the employee stock purchase program.

Peter Rex: Right. But they they're working on it. Why can't they own it? They know it's a good asset. I mean, these guys aren't stupid people of the street. They're smart. Right. My grandma came over from Ireland. She's like one of my heroes or my daughters partly named after her. And she came over, you know, broke his hell and Basically, you know worked changing beds and stuff, you know, and work in restaurants and, you know, the typical hustle of an immigrant.

Right. So, but she's very smart now. She wasn't smart from books. She's smart, upstairs, she's street smart. So she hustled her way in and was able to buy, like, you know, just, you know, she's passed away now, but by like, you know, land upstate New York said, oh, that will go eventually. And eventually that became more.

Parents even said, well home and she had good vision like this. So she brought from dirt poverty up to that. So her own kids went to some of the best prep schools in Manhattan, you know, Fordam prep and stuff. Right. So, and that's, that's a big step up. And, but so these folks that are out there changing the beds.

They're the future of America. And like, they could take a piece of that and they know what's up and you they're, they're blocked out of it though. They can't get a piece of hotel. I have investors right from the past getting in with me. I mean, it it's, it's either you're gonna know me and I'll, I'll let you come in for a lower minimum, but you have to still be accredited or you don't know me and you're coming in for a million bucks or something or, or more.

Right. So, and the reality is I don't really have time to be fielding emails from lots of people to get in. So I have a limited universe of people that can get in for a little small amount. So. This will democratizing let's say democratizing ownership. It allows them to come in for, in the long run. It be great for a dollar.

Why not? Right. So transaction costs on blockchain are very low, so it could be possible to do this. It is possible definitely theoretical, a hundred percent possible. We just have to work our way to that. So we have to get clear to the SEC eventually to be able to allow retail investors to come in, but we wanna provide them investment grade level information, and investment grade service. So they can make that investment boom, buy, sell whenever they want. Cause then someone changes the beds gonna say, you know what? This is a great part of town. This ain't going anywhere. This is gonna go great. And I'm working on it anyway. So I know it in and out. I know it's a great asset.

I'd like going a little bit, you know what? I'm gonna put away 10% of my paycheck back into the hotel over time. So, but this idea is you get the cab driver Uber driver, you know, driving him down. He know he knows in and outta the city, why can't he say, I want that house. I'm gonna buy that. I'm gonna buy some of this house.

I'll buy some of that building. He knows what's going on. In fact, he might have the equivalent of inside information, just street level information, right. He knows on the street that there's like a, there's a train stop going in two blocks ahead. Okay, well, right now that's not really a nice area, cuz there's no commercial around.

There's no restaurants, but train stops going in. Let's go buy in advance of that. So he can go make that. Cuz he knows that he knows the street level, ground up information, a trader on wall. Street's not gonna know that about Austin, right? So there is advantages. They have the owner all size advantages too.

When you wanna get out of a real estate asset, you want, I'm giving too much information on this one, but it's I mean, it's probably like, you know, TMI, but some people might be fascinated with this, so I'll keep going. But basically you have people own assets and this happens all the time. You want to sell partial of liquidity, say you have a, you know, a hundred thousand dollars of equity.

This happens in people's homes all the time. Right?

Jason Scharf: Right.

Peter Rex: You would love to be able to sell part of it, but you don't wanna take a loan out because that puts you at risk. So you, so you wanna sell 10%. Why can't you just actually sell that to someone who would like to own that piece of land. Now, anybody at, at a certain price in real estate is gonna be interested if you put it up for sale, right? So, but there's no, there is no liquidity there. Because it's a vehicle. So that's the vision of own prop.

Jason Scharf: That's really interesting. And I think that it was one, just one of the 10. And I think what I found fascinating about Austin with some of these different sectors and all growing, you're not the only prop tech here.

Right? You got Homeward, you got setpoint. Just announced. Why do you think Austin's becoming such a Mecca for this kind of sector?

Peter Rex: well, I would say I can't speak to just PropTech alone because we, we also have insurance tech plays. We have a thing called InsurePro that's absolutely booming. They can look it Insurepro.com.

If they want. We also have a thing called pay up. It's a FinTech play. They can look at payup.com. Now we're these are FinTech plays, InsureTech plays that are coming through the real estate industry. Cuz real estate is basically every industry. Comes through that. It's like a central terminal, everything touches real estate.

So I can't speak to why PropTech would be a big thing for Austin. What I could say though, why tech in Austin? Why is Austin quickly becoming a tech hub? And some people might say, well, it already, was it it really? Yes. You had some early first pioneers like Dell and Joe Lemont from Trilogy. And these guys who are definitely the pioneers and I'm, I'm a follower behind them and we're beneficiaries of it.

Right. There wasn't really much of a tech hub here per se. You didn't have enough density. The density of talent, just to gimme an idea is I always consider it to be about a hundred times or a thousand times more talent over in Seattle, San Francisco for cutting edge tech probably still is the case right now.

So, but why is it? Is it growing? That's the key question? Why is it growing as a hub in tech? Well, some of the reasons I made the move, right, I gave the positive reasons. I think it's gonna be an next wave. It's gonna be this. It's gonna be. You have other folks like Musk did the same thing, right? He's moved his companies up here.

Well, that's gonna, we know that's gonna happen. It's it's gonna start becoming a leader in tech now, but why is that the case? What is it that why'd, they fumble the ball in other words, in a way in the west coast? Well, they did it because, you know, intolerance and it's almost like I was talking to a friend, a friend of mine hit me up outta nowhere.

He's one of the top hardware engineers in the world. So I won't say where company's at, but anybody who, you know, it kind of narrows it down already. I was surprised to hear from him. He's highly, you know, highly decorated type person, highly, you know, he's highly known and at the cutting edge of some things that are critical right now, globally that are happening at edge computing.

So he hit me up. He wanted to talk said all, you know, I just thought he wanted to catch up. So. He wanted to actually get a job with me with the company. And I was surprised about that, cuz I was thinking well we don't have a hardware play. We have software companies that use machine learning, natural language processing.

We're using computer vision. We're using all cutting edge check blockchain, but we don't have hardware right now. I could see it in the future. We could make a play. And he said, well, that's okay. I can, I can join anyways. And I said, well, what are you gonna do? He's like, I gotta learn anything. I can do the software.

I said, well, alright, well, I wasn't expecting this, you know, on the call. And I was said, well, what's going on? Like, gimme the idea. Like, and he said, well, you know, I just want to be in a place more open minded version of Silicon valley. And I said, yeah, I, I get you on that, man. so, but you know, so I think that's, this is a motivator.

People want to be in an open-minded place, a place that, you know, if you're. Whatever your, your belief system is, as long as you don't hate other people and want to hurt people who disagree with you is totally fine. And we accept you who you are. That's cool. You know, I'm, pro-life, I'm Catholic, Irish, whatever.

I'm very open about who I am. I am totally cool. If you are atheist, whatever you are, as long as you're cool with me. We could be friends and actually business is the best forum for that. Cuz we could, it's like a sport team. It's like, okay, that's cool, man. Let's go, you know, then you realize, wow, I learned some things from this guy.

He's a good guy. He's cool. And he's got different perspective and I think about it that way. So I, I think not only do you get a different perspective, you also get innovation idea. You didn't get from someone else and then boom, it's cross pollination ideas grow and that's where innovation comes. So I think that's, that's a big driver

Jason Scharf: Creative collisions are really what drive innovation,

Peter Rex: right? Steve jobs calls like the overflow or whatever he calls it. Right. It's just basically group doing this within the company and another group doing this and it caused overflow serendipity. So people call it serendipitous encounters. So you guys get meet even healthcare, right? You do stuff in a healthcare or other areas.

And I don't know really a damn thing compared to you be honest with you. And but I could probably learn some, I mean, definitely would be able to learn some things. And by analogy, I might be able to take some tricks you mentioned and be like, I can apply that over here somewhere. I was just having a meeting before I came in here with the guy he was telling me about some insurance play and interesting, totally different area than what we're working on, but it was an insurtech play and he was telling me about it.

And I just thought I was like, just my brain was going off. Cuz I was thinking, man, I could something about that. I could do somewhere else within the company at a different play we're doing, it was a totally different, it was about data, how to, how to really leverage the data better. But that encounter something totally different that I'm not doing.

I had to come outta my own shoes. Try to think about it. Understand. Say, okay. I see the value and I know I came out and I said, well, I can do, I can do something similar on something else.

Michael Scharf: Yeah. It's not all roses. Austin has its problems.

Peter Rex: Oh yeah.

Michael Scharf: We've talked a lot about them over the course of the podcast, housing infrastructure and talent.

Peter Rex: Yeah.

Michael Scharf: It's it's, you know, you've talked a lot about all three, but let's start with talent. You talked about in a recent article quote. We need governments to empower people in Texas and places like Florida and other free states. They're empowering people. and we could see how people flourish in that environment because company leaders earn a fight for talent.

How do you see that talent picture right now in central Texas? I know you just talked about somebody who wanted to come move here and work for you, but how how's it working? How's it working out for you? Are you able to get what you need? Are you looking for people all the time?

Peter Rex: Yeah. If people are out there listening, I'm looking for you.

. I am. So we are looking for people. It's always the number one constraint is talent. But that's always been the case with me for, I've been an entrepreneurship for, since I got outta college, 16 years, and I've always been looking for people , you know, so, but you know, when we look at Austin, we look at you know, Texas, what they're doing, what is it about that?

I think we touch on some of these drivers that are making talent wanna move here, but how is the talent picture? Is it good? Is it bad? You know, is it enough right now for us? It's not enough yet, but we are making it happen. And, and, and here's the thing. And I've been in different spots, right? I've been New York.

I've been in Boston. So. Been in Florida as well, Texas, but I also came to the west coast most recently San Francisco and Seattle. So I've tried to sell every single place. And every time you're selling someone on a position you're selling the whole package, right. And oftentimes you're actually selling their spouse.

So you're talking to them, but you really selling their spouse. So you really have to sell things. The spouse is gonna care about. So. San Francisco has problems even four years ago. That was hard for me to sell. Sometimes. Sometimes if people have a family, they're just not having it. They're not going to move.

So if you can't get 'em local, sometimes it's hard to get 'em. So then Seattle, you know, and I disagreed with this, but everybody would always be talking about the damn rain when I was trying to sell 'em on Seattle, the way I get rains all the time, I'm like, Technically. Yes. But you know, the, so it was always a difficult one and, you know, it's, I got so tired of trying to sell Seattle on the rain problem.

And then fortunately, there's a lot of talent local, but still, you always need to go abroad anyways, as you're looking for certain specializations now, Austin doesn't have nearly the level of local talent at these places, not even close. So we're talking what is magnitude difference, right. However, I can sell Austin.

I can sell Austin fairly easily and I can sell Texas a lot easier than what people would think, because there's a lot of shadow support. There's a lot of people who, who are sort of the, you know, who, who are liking what they're seeing and they wouldn't mind paying less taxes. They wouldn't mind people who are gonna get outta their business and not gonna be in their drawers and try to, I don't know.

And they wouldn't mind a place that is into a lot of those things like faith, family, freedom. Because at the end of the day, you know, even if, even if you are kind of a bit of a curmudgeon, you could have a, you could have a bit of a forward thinking approach where you say, well, if I take this three or four steps down the road, I might be the one they're trying to control.

you know what I mean? So even if they want to go control you, they could have enough foresight to say, well, I could see the shoe in the other foot. They try to control me. And most people say, Hey, you know, I don't wanna be controlled and like, leave me alone. You know, within minimum constraints, you know, I know you gotta put highways and everything else, but so I think like, we'll, we'll see, it's easy to sell in other words, for us, easier to sell.

And so it's been very good in that respect. Yeah.

Michael Scharf: Highways and everything else. Let's kind of talk about infrastructure. Yeah. We're blessed here with lots and lots of developable land. It reminds me when I was growing up in Southern California, you could build things easily. You can't anymore, but the infrastructure is lagging behind.

We have water issues. And with all the chip companies coming, that seems to be a bigger issue. What do you see in terms of infrastructure here that that troubles you or concerns you going forward?

Peter Rex: Yeah, I, I think the only the only constraint is is the mental constraint of people, right? Is, is when people are unwilling to unlock human innovation and allow problems to be solved by human beings, by people.

And we see this in, you talk about tons of land they could develop in Southern California was same thing in San Francisco. The problem is not the land. I talked to a very, very shrewd fairly well known real estate investor that I met with when I was in, I'm still friends with him in San Francisco. So I'll, I'll keep it veiled, you know, any more details on that, but one of the largest owners in, in the west coast so he made a very good point to me and he said, look, and, and we actually agree on things because we're about empowering people.

We're not about trying to, you know, screw basically the working class, which is essentially what happens out there. But he said that basically. And I've, I've held the same position as well. On an investment side is the reason why I held so much positions over there is because the, the rich get richer and you just get richer because they never allow builders to build.

Because if you allow builders to build the constraint is not really land. The constraint is allowing builders to build, cuz you can always go vertical. Right? So even if you did imagine there was no land, which there's tons of land in America and California, tons of land. But if you imagine there was no land, you can always go vertical, right?

You've been like Hong Kong. So, I mean, you can go vertical on small bits of land, right. So, or Manhattan. Right. So, so the constraint there is the ability to, to allow developers to develop if you allow developers to develop. Well, that's actually not even in my interest as an investor. Right. I own a lot of stuff in Austin.

Right. So I don't, if I was a, if I was a selfish, you know, prick, I would say, you know, some people maybe think I am, I don't know, but , but I, I would certainly not want to be one. And I'm certainly not gonna be one when I advocate for things and I'd advocate that they allow developers to develop it's against my interest as an investor.

I own a lot of stuff. That's gonna take down the long term value of investments downtown, but who cares, man? It's about people trying to come up and have lower cost housing, be able to get from point a to point B. But if you let developers develop, it's just pure supply and demand with real estate, right?

Sam Zell said in real estate, there's no other industry that is as much supply and demand. It's just pure supply and demand. So if, if you don't allow new supply, then demand. If it's going up or staying constant. Then, if it stays constant, then you'll just stay where you are and you grow with inflation. But if it goes up in demand, then you're gonna see price go up like crazy.

So if they don't allow developers to build here, which they haven't been doing enough of, you're gonna see price continue to go up. You've already seen it go up a lot. That is definitely a concern, something you've now triggered me on. But it's a, it's a, that is a concern of mine. It is a concern I was aware of as a possibility, cuz I think the city council here I'm sure means well, but this is something I knew that they had this mentality.

It's a San Francisco, Seattle mentality. That has screwed the working class completely. And that's my background, right? So that is something I, I don't like to see happen. And, and I knew that that mentality was there. And I was a little bit of worried about it. Now, the, the one thing I'd say on the, the silver lining on this negative talk is that the positive side is we are still in Texas and you could go outside Austin city limit, you know, of the city limits and you will see development will happen.

You know, Williams county or whatever you call it, just north of here really where Dell's located that whole round rock area, all that stuff's gonna build by crazy.

Jason Scharf: Yeah. So what do you think about the, the changing landscape of the Austin Metro in the fact that yes, you've got Leander and Georgetown are the fastest growing cities in the country.

Yep. And we're starting to see, we've had a couple episodes with in economist Cullum Clark and with John Garrett from community impact. Talking about this kind of multi hub geography that we're turning into, you know, whether it's the sun and the stars, sorry, the sun and the planet's kind of going around it.

And I said, you said you have a lot of things downtown. So how do you see this Metro kind of changing to be this more multi hub?

Peter Rex: Yeah. It's I think one of the big factors that you didn't mention, which I would put out there is something that really consider is remote work, right? So here we are. We're we're in person work.

We're at, you know, probably one of the nicest views in Texas here at our office. But we are in person work, but remote work is, is a real thing that hit during COVID and people are not backing off at they're sticking to it. Remote work means that you are now going to be in a position where if people might wanna live you talk about Leander, right?

That's. 20 minute commute or something like that, depending on what the highway's doing there, but they have a toll road there. So you can go pretty fast. So, but people might wanna live in, you know, in Llano and why not? It's like an hour and 15 hour away. You might wanna live there. If you don't really go into work often you're not constrained about the daily commute.

And if you wanna go visit a city, you jump in a car and you go to the city. So you could have a situation where you see actually people getting outside of the city of Austin, even more. But then how does that all look? I mean, it's hard to predict all these things, but that doesn't stop us from trying. So we will, and we will right now is I think what that looks like is you're gonna see other beautiful places.

And I say, you know, Llano, I own a, a ranch up there in Llano. I bought a pretty big ranch a year and a half ago, and I like the area. It's all red rock. It's like grand uplift, its beautiful area. And I could see someone just saying, you know, I'm gonna live up in Llano now. I don't have the luxury of doing this, just cuz I have a team, a company I gotta be here, you know, so, but I could see someone if they're remote, why, why wouldn't you live up there?

It's gorgeous. And then you can have more land. I mean, you gotta have an acre for like what you might get for like a, you know, basically nothing over here. Right? So you set of houses over there and you have counties that are favorable to developers so I could see land. So that's the, that's what I think of the hope is here outside of the county, outside of city of Austin

you could see development happening that save some of the working class, actually that need lower cost housing and, and man for people, they love owning a home. You know, for me, I, I actually don't like it cuz I own a lot of real estate and I already have enough headaches owning a home is a headache, but you know, my, my wife would probably disagree me on this cuz I was a holdout on just renting forever and finally in Seattle say she was like, we gotta buy something.

We got like four kids, you know? So I was like, all right, fine, whatever. But, you know, because you gotta fix it. But, but for most people, they love owning a home. There's a certain pride of ownership. They love having their, you know, whatever it is that they put in their house and different setup, right.

That they, and then they invest into the house and its their own house. So I, I, I think we could see a situation where a lot of folks go outside the city. Fairly far potentially could be hour and a half actually you know, distance, you know, almost like blast zone or something and they stay outta there and they work remote at wherever they're working.

And then they come into a hub like a downtown Austin for events. Comedy could be shows, could be just like restaurants, different things that go on in Austin, or it could be to go for a walk at the Ladybird lake, whatever it might be. I could see something like that happening.

Michael Scharf: Yeah. It looks like we're really at an inflection point on lots of levels.

And obviously in terms of the innovation ecosystem, that's one of them one of several that Austin's gone through, if you talk to folks who've been here longer than we have the players and the influencers are starting to change, they're starting to expand. How do you see these local organizations evolving?

I mean, I know you've gotten involved with the Texas blockchain council. I know you've talked to Lee. We've got more VCs and investors here in Austin than we ever have before. what would you tell a new cover in terms of how they would need to adapt to this very rapidly changing system?

Peter Rex: Yeah, I mean, I would just say saddle up, man.

You're in Texas. so we gotta ride hard, but I would, yeah, look, it's exciting, right? It's things are on the move. If you, if you want the same old, you know, doesn't change. I think you, you know, maybe go, go to the Midwest or something. I don't know. Go place is not changing so, but this place is gonna be changing like crazy.

And I love that. And I think that's exciting for anybody and, and how that, and, and the other cool, good thing about this when they're shifting ground and it's uncertainty cuz you're building right. Well, that gives the advantage and opportunity for everyone to participate in what happens. You guys are at the forefront of this actually, and you can help shape the future of the fastest growing city and the largest, most powerful country in the world.

That's pretty cool that you can do that.

Jason Scharf: No pressure.

Peter Rex: Now I'm doing it too. Yeah, don't screw it up. So the but I'm doing that too from the entrepreneurship side. Right. And we're our, our vision is to create number one largest enterprise ever built, you know, from the tech side and focused on serving people, not exploiting them.

Right. So that's what we're doing long, long term. Right. And we wanna make tech as the leader in technology and take that mantle leadership away from Silicon valley where. they've screwed people too long. So we're gonna take it back from them and maybe kick 'em in the balls at the same time we're doing it. So the I'm kidding about that, but the, but I think, you know, so I think for folks that are coming in here, it's, this is an opportunity to have an impact on the future and put your fingerprints on it.

Right. And why be part of like the old, old way, like be part of the new, you know, and that's my thought

Michael Scharf: And that's the perfect segue to our final question, which we ask all the time. Peter Rex what's next

Austin.

Peter Rex: Yeah. I, I would say what's next. Austin is. I mean, that's a, that's a big, that's a big question, right?

But I think new tech leadership, we're building that out. Why not? New media leadership? Why not take it away from, you know, the already looks like is getting taken away anyways. It's the question who's gonna win on, on the media side now from Hollywood, but the so why don't we make it a media end tech hub?

So what's next Austin is, I mean, it's gonna be it's it's a blank canvas. What we're gonna pull off here. Might be good if they put another airport in somewhere in like Burrnet that'd be nice that way we have a second airport. That's major that way, you know, kinda UT you, I think the Austin is a little, little too small here, the house airport for everyone, but yeah, I think, you know, Tesla factory is already in things that we're at.

We're very much on the ground floor here, cuz I think what people failed to realize is yes, we had a big migration over here and that could have a boomerang. People could go back and there could have been just tax refugees. Right? However, the reality is a lot of folks bought homes here and interest rates just went up cuz the feds, put it back up.

So what are they gonna do? Buy another home somewhere else that ain't going anywhere. so they're gonna be here. So a lot of this stuff's a permanent migration. That's number one second is remote work. So you see even people more coming out here, calling their friends, saying, Hey, ah, is it safe over there is good.

You know? Oh yeah, it's good, man. We're having fun. We're eating a lot brisket. We're we're we're having a good time out here and be like, oh really? Okay, interesting. Maybe I could leave this. San Francisco and go there. So you could see those folks sort of the late adopters coming in. And then the other thing is there's knock on effects that people don't are not talking about enough.

What's gonna happen is these are movers and shakers coming out here. Like you guys are out here. You're not sitting on your hands. Like I happen to be on your podcast, but you guys are the ones that created it. Right. So you guys are making moves. These are we're, we're making moves. When you make moves, you create activity, you create opportunity for other people.

So we're making moves in our company. We're gonna be pulling in more employees. What about Tesla? They're gonna be pulling more employees, too. Samsung factory coming in. They're gonna pull employees. So what is next for Austin? I mean, we could be one of the best manufacturing hubs in the country as well. I mean, also we're right next to Mexico.

Mexico is, I mean, an opportunity, people talk about the border problem, this and that. Yes, whatever. But, and that's true, but on the other hand, it's a huge opportunity and we can do trading with them. And I think we've seen if you have dependency on one single country and that country maybe gets at odds with you, very dangerous for everyone.

So, you know, we gotta have break that dependency. And I think anybody who. A little foresight is gonna, and the administration's gonna say, okay, we gotta get stuff going here with, with Mexico. And that's a great trading part right across the border.

Michael Scharf: Absolutely. Good lessons. Good talk, Peter Rex, Rex, LLC.

Thank you so much for being on the Austin. Next podcast.

Peter Rex: Thank you guys. I appreciate it.

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