How Robert Reffkin Built Compass - the #1 Real Estate Brokerage in the World | BAT Disrupt

How did Robert Reffkin take Compass from an idea to the #1 brokerage firm in three years? In this exclusive interview, we dive deep into the strategies and insights that fueled Compass's meteoric rise. From flying over a million miles in economy class to meeting agents to developing AI tools that are transforming real estate, Robert shares it all.

Transcript

SPEAKER_00 0:23

All right, welcome to our next filming of Bath to Shrub. Really excited to have Rob Revkin here. Your friend, your CEO of Compass. It's been an amazing journey knowing you for about seven, eight years now, and really excited to have you on Bath to Shrub, which is about interviewing the best innovators and disruptors in the real estate space. So welcome.

SPEAKER_02 0:42

Well, I'm really glad to be here. And I did just have eye surgery, so it's a little uh it's a little hard, but I'm glad to be here. Yeah, I appreciate you. It's been a long time. We've known each other for more than 10 years now.

SPEAKER_00 0:52

And that's what I've always respected about you is like you're such a worker and you just you get after it. Oh, absolutely. And when I first met you, I'm like, no one's, you know, who's gonna compete with this guy? Like you're just amazing. Like pace and energy. And you know, I was telling guys before I come meet you, I was like, you get me so excited every time I talk to you. Like, you know, you're so encouraging.

SPEAKER_02 1:08

Well, look, I feel the same way about you and and and really agents in general. I mean real estate agents are all entrepreneurs. Yeah. Uh 1.4 million strong, largest industry, you know, it gets dominated by women in the industry uh where people do their hard work, their creativity, and their talent, they create a business. And so I like at Compass that I get to work for entrepreneurs like you.

SPEAKER_00 1:28

Yeah, that's amazing. And we have a lot of entrepreneurs that well, it's just agent entrepreneurs as well. I mean, I guess go back, say you're you know, starting a company or starting a real estate business, like you know, talk about the beginning. You come home, you're your beautiful white Benny's, you're like, okay, yeah, I got this idea. Like, you know, get it take us back to the beginning. Like, how did that all how did it unfold?

SPEAKER_02 1:48

Well, my mom is a real estate agent. Uh, she's an agent today at Compass even, so nine years old. Yeah. Um, and so I can grew up, she was an agent and a life insurance agent before. I grew up with a mom who's a single mother and who was an entrepreneur. Yeah, and I saw her move from firm to firm to firm, always hoping that she would get more support, more tools, more services to better serve her clients, um, to help grow her business and have a better quality of life. The idea is like more income to support her family of small family of two, uh, more time to be with me. Um, but she didn't get that. And so that that was the the spirit behind Compass. My co-founder, as you know, is Ori Alone. He he previously had sold one company to Google, another company to Twitter. So he he brought the technology expertise. I was before at McKinsey at Goldman Sachs, worked in the White House, the White House fellow. You know, I brought more of the business expertise, and we became together, and that's where Compass was founded. It's like the real estate Avengers, man.

SPEAKER_00 2:48

Yeah. I love it. That's it's it's so inspiring. It's been amazing watching a company grow. I remember meeting you like fall of 2017 and then taking the journey. I mean, how's the journey been? Like, what's you know, what's what's been, I guess, the challenges, what's been some of the highs and lows of it?

SPEAKER_02 3:04

Wow, I mean, the in the beginning we didn't know what we were doing, um, but that that was like the most fun part. Yeah. You have a whiteboard, you're like coming up with ideas, um, and then we quickly learned within the first year, the answer to everything we need to do is in the agent. And so we started hiring the best agents in the country. And clearly you're as you're the best, you're more than top 1%. And um, and we just asked you, what do you want? And so we didn't actually decide to go to Hamptons. Yeah, we we launched it in New York, and then New York agents said you should go to Hamptons because there's a referral network of clients in New York that go to the Hamptons. Yeah, and so every place that we've launched, it came from our agents where they said launch this place.

SPEAKER_01 3:45

Yeah.

SPEAKER_02 3:46

Um we didn't decide to build one tool over another tool. We asked agents what to build, and we created, as you know, the feedback tool where agents can go in, they they they put in their idea, and other agents can vote it up or down, and people can add to that idea. Yeah. And so that's where that's where the platform came from. So I you know, I remember when I was in the White House, there was uh it was actually I think Colin Powell, he said, good leaders have to be good learners, and good learners have to be good listeners. So at Compass, I think one of the most important things for us is knowing who to listen to. Uh and to us, that's the customer, and you're the customer. I think a lot of brokerage firms, pre particularly before companies came, thought that agents worked for them and not the other way around. I think I work for you. You're my client.

SPEAKER_00 4:32

Yeah, no, I love that. I think compass really, I mean we put in all our marketing like powered by compass, and I think they really you guys really understood the platform and agents with their own brands and their own CEOs, and they had these kind of you know, real estate's very hyper-local, and you want to empower them to go be number one and stay number one, you know, do more. That's been incredible. I mean, I guess for like it's something I've I had a question for is like thinking about what to ask you, and I was like, all right, how do you recruit good talent? Because I was always been amazed by you, like you flew over the country and uh at the beginning, and you just go into a market like Boston or whatever and just go, and you would always come out with like one of the top one or two or all three of the top agents in there. So I mean, talk about that as an entrepreneur and as an agent, you're trying to grow your team. Like, how do you go recruit good talent and how do you keep them?

SPEAKER_02 5:13

Yeah, it it it's definitely been a lot of flights. I actually looked over the weekend um because you can see it on uh on the apps. Uh I've now flown over a million miles on on economy to meet with agents and employees to help build compass. And I I think historically I've traveled probably three days a week. So there are certain years where I traveled four years, yeah, or four and a half. I'm sorry, four days, four um four and a half days a week. And that was that was a lot. Um but yeah, I remember I had promised my daughter that I'd I'd stop traveling that much. Yeah. Um she was only four years old, and I had promised her that um I would only travel like three days a week, and I did it for a year.

SPEAKER_00 5:51

Yeah.

SPEAKER_02 5:52

But uh look, everything's talent, you know that. Right? So you have to hire the best people. Um and that really for a lot of entrepreneurs, a lot of investors invest in people, not in over the idea. Um and I've come to believe my most the most important thing that I can do is hire and retain the best people and help them accomplish more, help them uh deliver better results, help them, you know, build build the company. Um but it's everything is people. If you have the if you have the worst people, there's nothing you can do to be successful. If you have the best people, just don't mess it up. Yeah.

SPEAKER_00 6:33

Yeah, it's amazing. I mean, I guess and the culture is so good at combat, too. That's one thing I was really in like when I first met you guys too, just you felt it. You felt the energy, and you know, it's good people, want good things, want to help you, you know. And everyone I met with you guys, you it wasn't really about like the split you're gonna give me all that stuff. You kind of gave me a business plan, you really cared. Um and then once I plugged into culture, I just realized how encouraging this place is. I guess my point is like in the beginning, or where where did you really realize like you want to build a great culture? Because I think that's great for anyone that watches this too, for my team or anyone who runs a business, you know.

SPEAKER_02 7:05

Yeah, I I think um I think uh cult culture when we when we launched Compass and started hiring great agents, we asked them, what do you want? They were at the firms, they were happy. To come to Compass, what would you want? And at that time, culture was number one. It was culture, more support, marketing, technology. That was the order. It's now changed to technology, culture, marketing, support, private exclusives.

SPEAKER_01 7:34

Yeah.

SPEAKER_02 7:35

Um but on culture, I asked them like, what do you mean when you say culture? They say, I want to be around people that are likable, collaborative, experienced, and fully committed. Um and so we then we we asked them, okay, can you tell us who those people are that meet that criteria and who they aren't? I think one of the most important things we did early on is not hire the wrong people. Yeah, there's certain companies, you probably know the names, that I think are are now seeing the challenges of not focusing on culture, and you're starting to see people leave more than they would have otherwise. Uh and so a culture really does matter at the highest level. Because the way I describe a good culture is it a good culture is one that gives you energy that doesn't take it away.

SPEAKER_01 8:23

Yeah.

SPEAKER_02 8:24

And in this industry, like in a lot of industries, they have what do you call um energy vampires. Yeah. People that suck the energy out of you. And so we we try to do our best to screen people for being culture carriers.

SPEAKER_00 8:37

Yeah. That's amazing. Um, you know, switching gears kind of deeper into just the real estate in general, it's obviously a really kind of disruptive time, lawsuits, NAR, all this stuff. I mean, um, if you started Compass today, what would you do anything differently than you did you know when you did start Compass?

SPEAKER_02 8:52

I wouldn't start Compass today. Yeah.

SPEAKER_00 8:55

Like I'm like, I'm good. I'm good.

SPEAKER_02 8:57

Um, I mean honestly, I I think two things. One, if I would have known how hard it would be to create Compass, to build Compass today, I would have never done it.

SPEAKER_01 9:04

Yeah.

SPEAKER_02 9:05

I mean, I think there's a naivete, there's a benefit of being not knowing how hard something can be.

SPEAKER_01 9:09

Yeah.

SPEAKER_02 9:09

I mean, we had we had to raise over two billion dollars to complete the platform. Yeah right. What what if the Fed would have started raising rates after we only raised a billion? We wouldn't have been able to complete it. Um and it's you know it's never done, but we we wouldn't have been able to get to the sufficient level of impact for the platform. We wouldn't have been able to be in all the markets. You know, now we're the number one brokerage firm in the country for three years in a row by s by sold volume of the top 1,000 agents in the country. More agents are encompassed than any other player by far. Um, but we wouldn't have been able to build it. And then if I would have known that in the middle of this journey, the Fed would have raised rates faster than any time in history. And mortgage rates in March 2022 would go up two full percentage points from three to five. Never happened before that fast. And then the then just three months later, in one week, it goes from five to six. It never went up that fast in either a month or in a week and shut the market down. Um and then last year we had the lowest level of transactions in the country since 1995, and the population's 30% larger today than it was back then. Yeah. And so, yeah, if I would have known all this would have happened.

SPEAKER_00 10:20

Like, no, I'm good. Yeah, I guess it's for anyone. You just go, and I think it's uh it shows the timing too, like timing in life, and you feel this vision of building Thomas and just go after it, and it's just like you know, go ahead.

SPEAKER_02 10:30

Someone at Columbia when I was there asked um Bill Gates a question how is luck favored in your career? And he said it's been everything. If I was born 10 years earlier, the technology created Microsoft would not have existed. And if it was 10 years later, someone else would have created it.

SPEAKER_00 10:45

Yeah.

SPEAKER_02 10:46

Think about that.

SPEAKER_00 10:46

That's amazing. Um, you know, speaking of the real estate market, obviously, what you know, where do you see the real estate market next five, ten, twenty years? And same with compass, what's kind of the vision going forward, five, ten, twenty years?

SPEAKER_02 10:58

Uh well, there there's transactions and transaction volume, and then there's price. I think the Fed is gonna lower rates on September 18th. I think there are a number of buyers who are waiting for that point and don't fully appreciate that much of it is already baked into the 10 year, which drives the mortgage rates. And so now is a very good time to buy uh as a po when a lot of buyers are kind of waiting uh for that September 18th moment. So there's in a way guess artificially less demand than there would be otherwise because and this is just what I hear from our agents, people are saying, let's let's wait until September 18th.

SPEAKER_01 11:36

Yeah.

SPEAKER_02 11:37

Um I think that transaction volume, if you look over the course of the last 30 years, it's gone from 4 million homes sold a year to 7.2 million homes sold a year. Uh and the mid the the mid-cycle is around 5.4 or 5.5. The last call it the last last year's 4.09, right? Lowest levels in 28 years. And the year before that it was depressed, and right now it's depressed. So what that means is that there's a lot of pent-up demand. Uh, I think when the market comes back, it's gonna come back strong and it'll it will surpass the mid-cycle on volume. On and the reason why it was artificially suppressed is four percent is mortgage rates. Uh in the beginning of 2022, 75% of homeowners had a mortgage rate of four percent or below. Effectively locking them out of selling their homes when mortgage rates went up up to last fall to 8%.

SPEAKER_01 12:30

Yeah.

SPEAKER_02 12:30

Now it's around, it's almost 50%. So in about two years, it should be another two years, it should be around 25%. At that point, the lock in effect of not being able to sell your home because of the low mortgage rates will be gone.

SPEAKER_01 12:44

Yeah.

SPEAKER_02 12:44

Um, but if mortgage rates go down faster than expected, it could be gone earlier.

unknown 12:49

Okay.

SPEAKER_00 12:50

So you think rates are gonna come down, markets gonna pick back up next year. Oh, for sure. Yeah, yeah.

SPEAKER_02 12:54

It it can get lower. Yeah, it can't say. Four million homes sold a year is a must-move market. The only people that were moving really had to move.

SPEAKER_01 13:01

Yeah.

SPEAKER_02 13:02

Um or that just really did not were not impacted by rates in any way because they just have the balance sheet and they have cash. Um we call the must-move market the five D's, diapers, diplomas, diamonds, divorce, death. Um the those those life events keep the market moving. But again, we have that pent-up demand of of over a million homes a year from last year, plus almost a million the year before, and what looks like another million this year. So there's a lot of pent-up demand on top of the four for whenever the the market comes back.

SPEAKER_00 13:33

Yeah. Um, you know, we talked a little bit about technology, obviously, AI is the big thing. I mean, what do you think the future of real estate technology, AI, you know, where do you think of that's going in the next few years?

SPEAKER_02 13:44

I mean, AI is is very real. Um I th what I I call it AI for AI. Artificial intelligence to empower agent intelligence.

SPEAKER_01 13:53

Yes.

SPEAKER_02 13:54

Right? And I think people have talked about replacing the agent for as long as it comes as been around, I'm sure, for forever, right? Yeah. I'm certain what people don't understand is technology can replace a transaction. Like think a stockbroker, boom. Yeah, it can't replace advice, and it can't specifically can't replace a process. So agents aren't door openers and transaction people. They are the agents are managing a highly complex multi-party transaction that could span months. You're according to between the listing photographer, the videographer, the painter, the stager, the home appraiser, the home inspector, the loan officer, the title officer, the escrow officer. It's highly complex multi-party, and then the agents on the other side uh of the transaction with their clients. It and over many, many months, you have to create the best results and make your client feel hide them from the pain.

SPEAKER_01 14:50

Yeah.

SPEAKER_02 14:51

Yeah. Now technology can empower a process like that, but doesn't replace it. So I think AI, as well as technology over overall, we invested $1.6 billion in our technology platform. It can it is it will empower you to accomplish more. I like that you said that earlier.

SPEAKER_01 15:07

Yeah, yeah.

SPEAKER_02 15:08

I thought technology has empowered professionals across every industry to accomplish more. Yeah, and that that really is the goal when it comes to professionals who who are who are either managing processes or providing advice. And so it will do the same thing here.

SPEAKER_00 15:24

Yeah, I like that. Empower, not replace. And I I I I I was talking to a few people about this, about AI too. I love because the more you give it, the more it comes back. So for an agent, an agent brain is an interesting place too. We always have these ideas and stuff. It's it helps you work through some of these situations and really empower your business, which is great. It that's kind of built into the compass platform.

SPEAKER_02 15:43

Yeah, and and you know we have tools powered by AI like Likely to Sell. Yeah. We take everyone in your contacts in based off of a number of factors around their address, how likely they are to sell.

SPEAKER_00 15:54

No, I did a deal. I think I told you you were stoked. I did a deal last year. $8 million deal in the Hamptons all the likely to sell, man. I don't like that. Um it was funny. I was in I'm in the sports entertainment division in Compass, which is a great division.

SPEAKER_02 16:04

Um we have the event coming up in uh the second week of September. The retreat, yeah. I'll be there.

SPEAKER_00 16:08

Oh, yeah, the US Open one. Um it's funny, I threw it out in the chat, and this is how collaborative and great the agents are at Compass. I threw out on the WhatsApp thread. I was like, I'm interviewing Robert tomorrow. Who's got great questions? And everyone had a ton of questions, and I had to pick them. And I think Holly Mayor Lucas from Jupiter had one of the best ones you've seen. She's great. Yeah, she's amazing. She's I love her, she's awesome. Um, and she said, if if if you drop Robert off in a new market in today and day and age, what would he do to build that business and lead generate? So that's the question.

SPEAKER_02 16:37

If as an agent, yeah. That's a great question. I I would do both. Both technology and old school back to basics practices. I think what I see a lot of students, like too much of one or the other. I would do both. So and so technology, um, simple, CRM, everyone would be my contacts. Uh it it I would be building a repeat and referral business, um, where yeah, every morning I'd wake up and say, Who who should I call, contact and what should I say based off my CRM? Um, I probably would be buying leads from from different sources uh and working those. Um but then I would I would be writing handwritten notes. I'd I I mean honestly, I'd be wearing a name tag. If I if if I if my my kids livelihood was on top of it, yeah, I'd be wearing a name tag because everywhere you go, like let's say you're I've talked to agents who say in that they from their name tag alone, this is an agent from Boulder that she had seven listings last year because she wears in the gym.

SPEAKER_01 17:37

Yeah.

SPEAKER_02 17:37

And they're like, oh, are you at Compass? Yeah, right. And so handwritten notes, I would knock on doors, client gifts. Every every one of my my CRM would get a client gift of some sort. Um happy home versaries, yeah, you know, back to basics, eyes on eyes, face-to-face, building your business one relationship at a time.

SPEAKER_01 17:57

Yeah.

SPEAKER_02 17:57

Uh, and and so I think this world has moved too far to digital, and it creates an opening on the human. So, yeah, as yeah, as as the world's gone to you know wanting to work remote, I've leaning more into being in person. You know, for my uh kids' spring break, it was two weeks, we went, we spent the entire time visiting almost 50 offices in in California at Compass. So I was like, hey, first of all, you you can and I would do that as well. I do think agents have an opportunity to, and they do it already, but merge your personal and professional lives.

SPEAKER_00 18:35

Yeah. Um, you're all in. You're all in.

SPEAKER_02 18:38

Yeah. But in a way that's fulfilling, but also helps you grow your business.

SPEAKER_00 18:41

Yeah, it's funny. I was I always related to you because your mother was in, and I also love, I remember you came out to Hamptons last year and you had all your your kids with you, and like the compass people in my office all know my kids because I'm like, come with me. And that's how I was raised. My mother was a broker. I was like, oh, we gotta go show this house, I'd stop at the office, and I'd be like, I was sitting there. I knew her office number by heart. I was like, You're coming home, you know, like but I was always sitting next to her desk, like, let's go home. Um but it's like you just have to immerse your family in it because it's such I always say it's not nine to five real estate, but it's 24-7. So it's like it's all day.

SPEAKER_02 19:08

One of the issues I I see agents have, and to entrepreneurs as well, given the topic here, is a sense of guilt. A guilt that they're uh always on, that they're not present. Um and I one thing that I think can help with that is not trying to pursue work-life balance, which is like this almost impossible thing to really achieve. It's just like ideal. But instead of work-life balance, work-life integration. I love that. And so as as you you know, every Sunday I bring my family to uh an agent's open house to support them. Uh and you know, last you know, last Sunday I was in Long Island and at Agent's Open House. Uh I try as much as possible on Fridays to actually buy a dinner where I invite agents over um to to my house, and you know, my kids are there and you spend time with agents as well. So again, work-life integration.

SPEAKER_00 20:00

Yeah, I I think your ability to go with even that means so much to agents, like your ability to lean into agents. Like a new agent joined one of the Hamptons office the other day and came over and I called him to congratulate myself and he's like, it's funny you call because I just got a call from Robert. And it's funny, like, you know, any agent you coming over to this company, you calling them to say, Hey, welcome to Compass is really amazing. You blocking that time to do that. It's pretty awesome. So I appreciate you, yeah. Um, I always kind of end something I guess more loose. I mean, I guess for you, would you encourage your kids? I guess you talk to speaking on your family, would you encourage your kids to be entrepreneurs? And if you did, which one would be the best? That's a great question. Which is the best one? That's a great question.

SPEAKER_02 20:37

Which kid?

SPEAKER_00 20:37

Yeah. That's a great question on both.

SPEAKER_02 20:39

Yeah. I mean the entrepreneur journey is a hard one, but it's a passionate one. Yeah. Right? And so um I think I would, but potentially as a social entrepreneur, um, one that like I think as one that I would it'd make me very happy if they could find an issue they care about, any issue.

SPEAKER_01 21:00

Yeah.

SPEAKER_02 21:01

And they could try to pursue solving it in an entrepreneurial way. Um I think that'd be good. Uh now which one? I think they'd all be good. I won't show this too. I'm gonna go. But they would all be good.

SPEAKER_00 21:22

Well, thank you so much.