The Thursday Show: Will AI put renderers out of business? Plus: Takeaways from Las Vegas Market

0:07This is Business of Home. I'm Dennis Scully and welcome to The Thursday Show. Later on, I'll be speaking with M &A consultant Tim Stump about what happened at Las Vegas Market. But first, we're going to catch up on the news, including California's ban on digitally altered real estate listings, a look at how AI might threaten the rendering business, and why Cherish's owner keeps rejecting takeover bids. To do all that, I'm joined by Business of Homes executive editor, Fred Nikolaus. Hi, Fred. Hi, Dennis. How's it going? Great to be back with you, Fred. Missed you, Dennis. And I will say, if you're in Caitlin's goal was to make me feel better about not getting to go to Paris and London, mission not accomplished.

0:53That was our goal. It sounded like an amazing trip, but we're glad to have you back stateside. Well, it's great to be back with you. And I'm so glad to have made it back safely. And I wish you had been with us, Fred. So many people were talking about meeting you in Madrid and the lucky opportunity they had. So, yes. Well, we'll meet next year. It's the 18th floor of RH Paris for that cappuccino. In the meantime, let's look back on Monday's episode, a conversation with interior designer Young Ha. Great conversation with someone who's been a longtime friend of BOH and apparently helped launch the boh podcast this was news to me i i wasn't wasn't there what's this all about that's right fred before there was a boh podcast you know with real microphones and all there was uh there was an early version of the show done with uh with a gooseneck kitchen faucet that uh that apparently sounded pretty darn good and had them rolling in the aisles at holiday house i just I believe I wasn't there.

1:59Anyway, what did you make of the chat with Young? I always love hearing from her. Always, always great to chat with Young. And I realized afterwards that so many people didn't know her story and didn't realize that she very dutifully went all the way through law school, passed the bar exam in multiple states, and then told her family, no, no, but really, I'm actually not going to be a lawyer. I'm going to be an interior designer. and uh and that in and of itself is just such a great story and uh and shows the uh the honor and respect that she showed her parents sticking that out but then uh but then pursued uh interior design and has never looked back yeah i think a lot of designers maybe kind of start going down that road but there's like a quick left turn once they actually get into law school they're like nope my skills lie elsewhere uh but that was interesting to hear i also just you know it's funny like the show is in some ways kind of a love letter to kipps bay and how much of a difference it's made in her career.

2:52I mean, it's not that she was already a successful designer and, you know, she would have been fine without Kips Bay, but that 2019 room really helped, like, launch her nationally. It was everywhere. You know, she joked that, you know, the next day she was in Sweden and people were like, where are you? Get back here and soak up this attention, you know, because it really caught everyone's eye. It was an incredible room. I was there. I remember, like, the buzz in the show house about this room. And, you know, I congratulate her for that, and what a cool story. Yeah. And I think also it's a story, as she pointed out repeatedly during the conversation, not an overnight success.

3:28Another decade-long overnight success, yeah. Exactly. And so persistence and patience and just staying with it is clearly the lesson learned. And I think Kips Bay, two different rooms in different times played a huge role. And I think also that lesson of even though the room might be not the ideal room that you want at Kips Bay, take it anyway, even if Tony Ingrau is throwing his garbage in your room. Tony Ingrau's trash room is no one's idea of an ideal assignment, but she made it work. She made it work, and it really helped to get her going. So a lot of good lessons and just a really enjoyable conversation.

4:13She's a delightful human, and I'm so glad that so many people have enjoyed the conversation and sent nice notes about it. I appreciate it. All right, we're going to take a quick break, and then we'll get into the news.

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5:15And we're back. Fred, guess what? The tariffs are off. What a surprise. Last week, President Trump threatened higher levies against a group of European countries if the U.S. was not allowed to acquire Greenland. Now following a new deal, the increase is called off, as you were. Stand down. We're not attacking Greenland. Good news. Yeah. What'd you make of all this? Well, it was so dramatic. And as we talked about on last week's show, to be there while all of this was playing out and then to see it rolled back so quickly, it has fed this whole conversation, which we'll get into about how seriously we should take all of this.

5:56But let's recap some of the drama that's happened in the last week, shall we? It was over in 48 hours. It was over before it began. Yeah. We talked about this last year, the idea that the tariffs were more than just sort of trade policy. They were kind of like a cudgel that the president can use on the international stage If, you know, if a country doesn't does something he doesn't like, he can say, well, we're going to drop a tariff on you. And that's kind of exactly what happened is there was this long running drive to acquire Greenland. And it kind of came to a head and several European countries, you know, didn't support it sufficiently.

6:31And so, you know, this list of companies, Denmark, Finland, France, all were threatened with, you know, a 10 percent tariff increase going up to 25 on June 1st. Of course, you know, none of it happened because it was over, you know, almost as quickly as it started. But definitely during that 48 hours, I was like, I'm not going to send an email to my friends at Fritz Hansen right now. Yeah, I mean, you know, I don't know. It's tough. These things seem to happen and come and go. And, you know, the industry moves on. What do you think? Well, I think first, I wish I hadn't had to get schooled by London taxi cab drivers right, left and center over the whole thing.

7:05And then it all went away. But I do think that in this case, it really has given people pause. And I think people are becoming very, very hardened or numb in some way to the tariff issue in general. I don't want to take anything away from my conversation with Tim Stump later, but he definitely got the sense that it wasn't the hot topic that it once was because people are just getting a little beaten down by it. But to your point, it certainly hasn't made anybody feel more confident about building that new factory or investing based on plans or what they're seeing in the in the tariff situation at the at the moment.

7:48And it all could change and it changes constantly. So, you know, it's hard to know where to go. Yeah, I don't know. It's possible that really, you know, no one reacted to this at all or changed their plans whatsoever because people have just, you know, gotten wise to the fact that the stuff kind of comes and goes. And so, you know, maybe that's the lesson here is that you can kind of ignore this and carry on. You know, as you mentioned, you know, there hasn't been a lot of, you know, the other, you know, reason behind the tariffs is to, you know, inspire US manufacturing. I did a story a few weeks ago for Businesses for Home that, you know, looked at various sort of numbers in the design industry.

8:19And one of the numbers I jumped on was the fact that, you know, we've actually lost 4 ,100 furniture factory jobs. since, you know, Liberation Day. So, you know, I wouldn't necessarily blame the president for those jobs going away, but, you know, the tariffs thus far have not led to, you know, a renaissance in American manufacturing. So, you know, no one is betting on that. I'm sure some European companies just hit pause for a couple of days on their expansion plans in the US, but maybe they're picking them right back up, you know, until the next tariff crisis. But this was certainly kind of a, certainly a very, very strong tempest in a very big teapot for 48 hours.

8:52Moving on, we're going to talk about Cherish. Glad we get to talk about this one again. Earlier this month, the owner of Live Auctioneers and Cherish rejected a$660 million buyout offer from its largest shareholder, private equity firm Fitzwalter Capital. The twist, this is the 12th offer the firm has made in the space of four months. What? If at first you don't succeed, try 12 times. Hang in there. Yes. This is a very weird situation. So, you know, we talked about this at the time, but, you know, early last year, Cherish was acquired by this group, this group called Auction Technology Group, which is the owner of, among other things, Live Auctioneers, a site that, you know, beloved by a lot of interior designers.

9:36They also own a lot of like industrial machinery auction sites as well, too. And at the time, apparently their biggest shareholder, Fitzwalter Capital, this PE firm was not too happy about the acquisition. And ever since September, Fitzwalter has been quietly trying to acquire, you know, they've been either a PE firm. So that's what they do. They take businesses over. They've been trying to take over ATG with these buyout offers that they are sending at this incredible cadence. You know, they had made like how many? It was like six or seven before it even went public. And then it was public in January.

10:07And there's sort of like a war of words happening back and forth in the British press about this because these are both British companies. So there's a lot of angrily worded, very British statements going back and forth about this acquisition. What do you make of all this? It's interesting that this Cherish acquisition and whether or not it was a good strategic purchase, whether or not they're feeling that the company overpaid or there wasn't enough value there, or perhaps there was too much goodwill built into the deal and lots of hidden costs in sort of executing the whole thing. Clearly, there's lots for them to jump on here.

10:44I don't know if that's really what they're trying to do here or just take advantage of a much lower stock price and a valuation at present that's actually much lower than this offer that they're making. So this offer looks pretty rich based on the current valuation, but it's an interesting drama and one that you don't often get to see played out in newspapers and filings like this. Yeah, I mean, it's high drama, high British drama. Yeah, it's interesting. There's a lot of threads to pull on here. I mean, you know, one thing is that, you know, right, as soon as auction technology required Cherish, the stock dropped precipitous, it dropped something like 20 % or something like the day after the acquisition went through.

11:24So certainly not everyone was happy about this Cherish acquisition. And as you mentioned, the stock has been, you know, kind of flatlining or going down since then. So there's, you know, that's why they're making this offer is because, you know, they can make an offer that's higher than the stock price. And, you know, it looks it looks pretty good, at least to some shareholders. So there's an element of this is an opportunistic buy, you know, whether this was a good move for them to acquire Cherish is complicated, you know, like, I can see the logic behind the deal, of course, because they own a lot of auction sites, they have, you know, live auctioneers, they don't have sort of a direct sale site, like a listing site where people can put up vintage stuff, people buy it right away.

11:59So if you have both of those things, whoever wants to list them, they can do it. If I want an auction, I'll do live auctioneers. If I want to do a direct sale, I'll do Cherish. You can sort of cross between the two of them. You immediately acquire a lot of customers and a lot of inventory. And so it's not a crazy deal, but it was costly. It was, I think,$85 million for Cherish and then$15 million to get the transaction done. So a very big transaction. And what this investor is arguing is essentially that Cherish was not a profitable company when they were bought. and it's going to drag the whole enterprise down.

12:32And so it's just really early though. I mean, Cherish hasn't even been part of ATG for a year. So I kind of feel like this is a little premature to throw the baby out with the bathwater. But I don't know, these are tough businesses. No, exactly. It's a tough industry to be in. Clearly they wanted the Cherish name. And often when you acquire a brand like that, you're paying a lot more in goodwill. And then the execution costs, as you say, are quite high. Clearly, there were a lot of advisors and people getting paid on this deal, it sounds like, but that's often the case. But I think they're making the argument this is going to pay off over time, but it's always easy to take the other side.

13:12So it'll be interesting to see how it plays out. We've talked about first dibs and others in this space for a long time that have just had a hard time getting back to previous valuation levels. And I think it's a competitive space. We thought all of this was going online and then it didn't. Right. I mean, that's what's so interesting about this whole thing is that, you know, in the early 2000s, when, you know, Amazon was taking off and all these companies were going online and e-commerce was the future, it was really compelling to believe that just the future is everything's going to be online and every transaction is going to be done through the website.

13:46You know, there's no point in fighting it. You're naive if you do. And I think that, you know, there is some truth to that because, of course, every consumer wants the convenience of being able to look up a price, click to buy. People love that. But that doesn't necessarily mean that like the economic incentives are a place to make a huge business out of an online antique site. You know, I think like there's a reason why companies that sell software can, you know, grow and go crazy and, you know, get 100 million X valuations, you know, cherish and first dibs. They have to, you know, help move armoires around the country.

14:17You know, there's a lot of risk. There's a lot of complexity. There's not like a ton of margin. You know, I don't know whether this acquisition was smart or not, but I have a lot of sympathy for the people trying to kind of figure it out because it's not just snap your fingers and get it done. It's a tough business. No, exactly. There's a lot going on here. It's just an interesting drama and it'll be really interesting to see how it plays out and how it ultimately affects the auction space because there clearly is a lot of interest and demand. Ask any designer about that, right? Yeah, these are popular sites.

14:50No, no, no. To be sure. We're going to move on and we're going to talk about AI, specifically AI versus renderers, Fred. This week, BOH's Jen Fernandez wrote about how AI tools may pose a threat to the rendering agencies that designers have come to rely on. Or have they? Dennis, this was a good story. Hot button issue. I love this topic. I think renderings are a fascinating, maybe underexplored issue in the design industry. What did you make of this story? I agree. I think anytime designers see an AI related story, they tend to sort of pick sides pretty quickly. Right. Yeah. There's an immediate good, bad type of reaction.

15:32Yeah. Yeah. I mean, I think like, you know, when AI, you know, first came around, one of the most obvious uses you could think of was this is going to be used to make digital renderings. It's, you know, it's so quick. You can just tell Nano Banana, ChatGPT, whatever. Mid Journey is one people use a lot. You know, hey, you know, change this room to have this sofa here and this drapery there. And, you know, it was clunky at first and was prone to moving windows around, but it's gotten a lot better. And I do think that there's no question that designers are using the technology to make renderings for their clients.

16:01It's quick. It's fast. So the question, you know, that Jen went looking after is, is that going to put all these rendering agencies out of business? Because there's been this like cottage industry of making these types of images for clients and for designers. And, you know, good renders can charge a pretty penny. And, you know, what happens if that completely goes away? You know, what are what are those dynamics like? And that's kind of what she went looking for and sort of found sort of a mixed picture, sort of a mixed was not really a clear answer yet anyway. Yeah, I don't think there is a clear answer.

16:29But I think as you and I were discussing a little bit before we came on air, I think there's just as much chance that a lot more people start to use renderings that weren't using renderings before and then say, oh, gee, you know, these are okay. but I wonder what actually better renderings would look like from a professional. And perhaps the pool of demand expands, even if ultimately the price of the services might have to come down because of what AI is capable of doing. Yeah. I mean, there's, again, a lot of threads to pull on here. I mean, I think that one thing is for sure, the fact that it's so incredibly easy to make a relatively good looking rendering is going to make things like hand painted renders all the more valuable because they'll be, you know, rare and people will be sort of sick of seeing a million digital images and having something that, you know, a nice, beautiful watercolor you can frame is, I think, has always been valuable.

17:23And I think we'll feel even more special in the future. So I'm not really worried about those people necessarily. It's more the, you know, the agencies that specialize in digital rendering. And it's complicated because I thought like, oh, these people are going to go away right away because, you know, there's this technology, you can do it for free, you can do it yourself, it's quick, it's easy. You know, why would you ever pay someone to do this for you. And I think, in fact, what has actually happened is that, you know, AI's crucial weakness is that you can generate a beautiful image, but making very small, fine-tuned details is still not great at that.

17:53It's still hard. There's also a learning curve. You have to figure out exactly what to tell ChatGPT to get the image you want. You know, some designers just simply can't be bothered. They're too busy talking to their clients and figuring out sourcing. So, you know, they'd rather pay somebody else to do it for them. So there's still like a room, there's still plenty of room for rendering agencies to, you know, do what they do. And I think what's interesting is that what Jen found is that I think people who had never done renderings before, Dennis, as you mentioned, are now using AI. But people who used to pay for renders are still finding value and paying for them.

18:21So it's interesting. Whether that will continue as this technology improves, I don't know. But the dynamic is not exactly what I thought it was going to be. No. And I think, as we were saying at the beginning of the conversation, I think many people hear AI and they immediately think job destruction or something horrible is coming. And I don't necessarily think that that will be the case. Coming up in the early days of my career in advertising, we used to send things out to typesetters, and we used to send things out to have stats or images made. And all of that, guess what, did go away because new technologies came along and the computer just changed all of that.

19:03But I don't think this is necessarily the same comparison. I think the industry could evolve a lot. Listen, to your point, many of these firms, perhaps at the lower end, may well go away because they just can't compete. But I think a lot could evolve around this. And as you said, I think some designers don't even like runners to begin with because I think we've talked about this on the show is that your client falls in love with a digital image. Guess what? The real room is not going to look like that and it becomes a sticking point, you know? So what does it mean if, you know, clients are expecting them and they're free?

19:38Does that kind of put you in a box of feeling like you're designing around something that ChatGPT spat out like three months ago? So I don't know, it's a complicated issue and I'm sure we're going to be covering it more, but there's definitely a lot going on there. Yeah, we got to move on to talk about the great state of California though, Fred. Thanks to a new bill introduced in the Golden State this year, real estate brokers in California must now disclose if images in a listing have been digitally altered. Here comes AI again, Fred. It wasn't just two weeks ago we were talking about these real estate brokers who made a video with dragons.

20:10Yes. Do you think that has to be disclosed as a digital alteration? I think they did disclose it very dutifully. I think they said, yes, this isn't real. All these knights in the pool house are not in fact real. I mean, I think this just makes sense. I mean, anyone who's looked at, you know, a house or an apartment or just kind of, you know, Zillow doom scrolled over the past year has noticed that like virtual staging has gotten, you know, out of control. You're looking at an apartment. Sometimes people aren't even good at it. So you're looking at an apartment that's like very clearly real. That's just full of like 3D Mario furniture, you know, and it's annoying.

20:45And, you know, I think I think there was actually a story about a lawmaker or someone in California actually went and drove out to, you know, a proposed house and they didn't even have the kitchen at all that was in the listing. And, you know, I think it makes sense to have some kind of legislation around this. It's just sort of interesting because I think it has become we've become so used to expecting real estate listings to be digitally judged. You know, where do you draw the line? Like what counts is just tweaking the colors and what counts is, you know, alteration. It's a fascinating little, you know, wrinkle of the real estate world.

21:17Well, and do we feel that this legislation clarifies all of that? And what are the lines being drawn in this legislation? To be fair to the lawmakers, I think they break it out and they say, I don't want to like sit here and read California law. The show's boring enough, Dennis. We can't go down that rabbit hole. But, you know, I think things like they even spell out, you can affect like the white balance of the image or the saturation. I think that's OK. I think it's about removing or adding physical objects. I think you're still allowed to do that. You just have to provide a photo that shows the property without that digital alteration.

21:53It's just that I think this kind of thing has become so common. And I wonder how it's going to change how people approach these listings. Like, will people just kind of break the law and think they can get away with it? I don't know that there's jail time around putting in some plants in an apartment. Will they provide some sort of like hidden link to the original image? It's interesting. The law also talks about it's not just real estate brokers, but it's anyone who's sort of representing a property. So that could be a listing service. Now, I don't think any interior designer who digitally replaced their client's ugly art with cool art should worry about a lawsuit.

22:28I don't think that's I think that you're OK, but it's part of this conversation. No, to be sure. And to your earlier point, Fred, I'd hate to think of anyone doing jail time for photoshopping some real estate images. You know, what are you in for Photoshop? Oh, man, I'm sorry. Three strikes. That is tough. That is tough. But but we'll see where it goes. I mean, as I say, there is going to be a lot of conversation around this because images are images that people are taking a lot of liberties with images these days. As anyone who's looked at my profile picture would know, 20 years and 30 pounds ago is that picture.

23:04But anyway, let's keep going. Moving on, Fred, we got to talk about friction maxing. That's the name of a new trend that involves taking an analog approach to daily life. For Architectural Digest, Elizabeth Kiefer explored what that could mean for the design process. Friction maxing. Are you doing it, Dennis? I know you love your trends. You know, I am so moving in the other direction on this. I am all about minimizing friction. I am reducing friction, especially in the home. I want to reduce as much as possible. But tell me I got the wrong idea about this, Fred. Go ahead. I will. Well, this started in The Cut, New York Magazine's sort of sub-publications.

23:44A writer named Hannah Buckman wrote an article, I think the title was something like, In 2026 for Friction Maxing. And, you know, it sounds silly. And I think part of the reason why this has caught on is because it's just funny to say friction maxing. But I think the article is actually kind of brilliant because it talks about how so much of modern life is designed to minimize friction. You can, you know, sit there on your phone, just having TikTok blast content at you while you order Uber Eats and, you know, you can sort of get a date through Hinge without kind of ever getting up from your chair.

24:17And I think it's just, you know, so much of, you know, contemporary technological life is around minimizing friction. And I think, you know, it's kind of like a cri de corps, like, you know, that as much as we try to avoid friction, it's what gives our life meaning. It's what, you know, makes us feel mindful and like we're doing something and kind of shapes our daily existence. So, you know, I think friction maxing is kind of a funny name, but I think the idea behind it is it's got some got some substance to it. It's interesting because I feel like it wasn't that long ago we were chatting with Christiane Lemieux about her book entitled Frictionless and how the future was all about how there won't be friction.