Robert Reffkin: Compass

Robert Reffkin had a hard time fitting in when he was growing up: raised by a single mom in Berkeley California, he was both bi-racial and Jewish, and had to learn to "feel comfortable with being uncomfortable." Even though he was a self-described C student, he was admitted to Columbia and landed a series of prestigious investment banking jobs, but often felt like he was failing. Then in 2012, Robert was tasked with writing a business plan as part of a job interview, but the plan was so intriguing that he was encouraged to launch it as an actual business. So with a partner, Robert launched Compass, a real estate company that focused on building technology to make agents' jobs easier. Less than ten years after launch, Compass is a publicly traded real estate brokerage with about 20,000 agents, valued at around $6 billion. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 0:46Guy Raz?

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• 1:32Guy Raz?

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• 2:14Guy Raz?

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• 3:40Guy Raz?

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• 4:23Guy Raz?

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• 5:07Guy Raz?

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• 5:12Speaker 01

  The way I knew that it wasn't working is I was listening to the customer. You can see there was too much frustration. The most consistent feedback is it was more complex and it took more work on their part than it would have otherwise. So within about a year, just a little less than a year, I go to the team and I say, this isn't going to work. What are we going to do?

• 5:42Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 5:56Guy Raz?

  I'm Guy Raz, and on today's show, how Robert Reffkin wrote a business plan just to get a job, didn't get the job, but turned the business plan into Compass, a real estate company worth around $6 billion.

• 6:13Guy Raz?

  2020 was supposed to be a disastrous year for real estate in the United States. Instead, the value of the US housing market increased by $2.5 trillion last year. That is the biggest single-year gain since 2005. And despite all the fears about a housing collapse during a pandemic crisis, the overall housing market in the US is now worth over $36 trillion, trillion with a T, which couldn't have come at a better time for the real estate broker Compass. The company is one of the fastest-growing players in the real estate business in the US. It was founded less than a decade ago, but it's already one of the biggest

• 6:58Guy Raz?

  real estate brokerage firms in America. In the spring of 2021, Compass became a publicly traded company, turning its co-founders, Ori Yalone and Robert Reffkin, into multimillionaires overnight. Each of them owns about 6% of the company, a company now valued at around $6 billion. And the decision to start Compass wasn't inspired by Robert's passion for real estate. In fact, he knew very little about the industry. But as he considered ideas for a business that wasn't dominated by Google or Amazon or Apple or Facebook, he realized there were two options: healthcare or real estate. So Robert chose the latter. And as you will hear,

• 7:43Guy Raz?

  the initial launch of Compass was kind of a disaster, a disaster that would push Robert and Ori to make a major pivot. But before any of that, when Robert was growing up, he was, by his own account, a pretty mediocre student. He didn't always feel like he belonged, in part because of his background. Robert is both Black and Jewish, so he felt a little like an outsider in both communities. But what Robert did have was a skill much more important than the ability to get good grades. He learned to feel comfortable feeling uncomfortable, and that helped him develop incredible people skills. He'd meticulously save business cards. He'd follow up with people he met

• 8:28Guy Raz?

  and actively seek out mentors. Robert grew up in Berkeley, California. His mom Ruth was born in Israel and emigrated to the US when she was a young girl.

• 8:38Speaker 01

  She moved to New York when she was seven and raised by very strict parents. She was the kind of person whose parents would not let her leave the block. And she went to a very religious school named Ramaz. She ended up going to NYU and marrying a guy named Gene. He was a drummer.

• 9:02Guy Raz?

  He was a drummer, like in a band?

• 9:04Speaker 01

  Yeah, he was a drummer. They both went to NYU together and all he did was play music. My grandfather wanted Gene to be an accountant, but he didn't do that. And so they ended up moving to Berkeley, California. And on the way to Berkeley, they actually went to Woodstock. And at the time, they were the real hippies, the kind of people that didn't wear shoes when they were walking on the street. There's a place in Berkeley called Telegraph where they would sell beads and necklaces. And so they were really, you know, big communes of people and they were just figuring it out.

• 9:43Guy Raz?

  So your mom really rebelled against her upbringing. I mean, she went to this super religious Orthodox Jewish school and parents were really strict. And she, it sounds like she just kind of rejected it.

• 9:54Speaker 01

  I think it's interesting. My, my mom is very entrepreneurial, believes that she can do whatever she wants. That when people say no, she can say, yes, I could figure it out. I think those qualities of a girl at that time, from my grandfather's perspective, were bad qualities. He wanted her to be the quiet girl that sits in the corner.

• 10:23Guy Raz?

  You actually took your, your last name from Gene, from Gene Reffkin. Though he wasn't actually your dad. He was your mom's first husband. And so how long did her marriage to him last?

• 10:35Speaker 01

  Their marriage didn't last long and they're friends to this day. Gene Reffkin is my godfather. And I, by the way, I love that my last name is Reffkin. And it's neither my mom's maiden name or my father's last name. And it's a reflection that I can create my own future. I can build my own identity.

• 10:58Guy Raz?

  So after your mom's relationship with Gene ended, she met your dad. What's the story about how they met?

• 11:06Speaker 01

  So they met at a bar. And my father, African American, good looking guy, jazz player and construction worker. I'm sure he was in great shape. He sits next to her and they start talking. And then he says, hey, what's your birthday? And she says, July 26. And he said, hey, my birthday is July 26. And she says, her year. He says, oh, my birthday is the same year. And of course, she doesn't believe him at all. And she says, let me see your license. And they ended up having the exact same birthday. So in a way, that was destined. They dated on and off for a few years.

• 11:49Speaker 01

  And I was not born on purpose.

• 11:55Speaker 01

  I was not intentional, but we had me and yeah.

• 12:00Guy Raz?

  Was the initial idea to make it work for your mom to be a sort of life partner with your dad? Was that her intention?

• 12:08Speaker 01

  My mom loved my dad and I think my dad loved my mom. But he already had two other children. So I have two other half brothers that I don't know. The other issue was he was a drug addict. There's no other way to say it. And not just the marijuana kind of drugs, but real drugs like heroin and some really difficult things and needles.

• 12:37Guy Raz?

  You write about this in your book a little bit. I guess your mom told her parents that she was pregnant, right? With their grandchild. How did they respond?

• 12:48Speaker 01

  The day I was born, my mom calls her parents and says, I just had a kid.

• 12:58Speaker 01

  And they just asked one question, what is he? And she said, he is Jewish and black. And they hung up the phone. A week later, they sent a letter in the mail that said that she was disowned. You know, to this day, I never met my grandparents. I never spoke to them. She never spoke to her dad again. He ended up being very successful. I think he and his family owned real estate in Israel. And when he died, he gave 26 million dollars to her sister,

• 13:43Speaker 01

  who is, I guess, more obedient to the way that he wanted her to be, and gave a hundred dollars to her just to say, I hate you.

• 13:51Guy Raz?

  To your mom?

• 13:52Speaker 01

  To my mom, right? I mean, it's worse than giving nothing.

• 13:55Guy Raz?

  So as a child, you had no connection to her family at all?

• 14:00Speaker 01

  I had no connection to anybody other than my mom. You know, it was just me and my mom against the world. The interesting thing I think about at times is I think my grandfather would have loved me. You know, obviously, we have very different views of the world. But I think the success that I built, I think he would have actually been very proud to have known me. It's really sad for me. Yeah, sure, it's sad I didn't get to know them, but I never knew what I didn't know. So actually, it wasn't as bad as it may seem from the outside. But for them, they could have had more of a family and more love. I just don't understand how you could disown your kid.

• 14:44Guy Raz?

  So your mom raised you on her own. She was estranged from her family. Her relationship with your dad fell apart. And by the way, did you have a relationship with him? Were you able to see him growing up?

• 14:58Speaker 01

  I have pictures of my dad when I was younger, but I don't remember it. And so the last memory I have was many years later, where I saw him on the street and-

• 15:11Guy Raz?

  How old were you?

• 15:12Speaker 01

  Around 10 years old. And my mom, you know, she had started to become a little more successful. And she bought this red Volvo who went to Oakland.

• 15:24Guy Raz?

  And by the way, she was a real estate agent. Right?

• 15:27Speaker 01

  She was at the time of life insurance agent.

• 15:30Guy Raz?

  Got it, okay.

• 15:30Speaker 01

  And so she, she gets the red Volvo and we go to a diner around Lake Merritt, Oakland. And we're sitting down and this homeless guy comes, you know, walking across the street. She runs out and grabs him and then they come in together and she said, you know, Robert, this is your dad.

• 15:57Guy Raz?

  Wow.

• 15:58Speaker 01

  All I remember are two things. One, he gives me this huge slobbery kiss on the lips and says, hey, little man. And then the second is he ordered two different plates of steak and eggs and he was so hungry. But the, the last time I saw him after that was about a year later and, and it was at his funeral.

• 16:20Guy Raz?

  Wow.

• 16:21Speaker 01

  You know, my mom always told me that he wasn't around because he didn't want me to be like him. Maybe it was one of the first things early on that taught me that you could, you could change the story and the perspective on anything. They can make anything that's bad, good. That any disadvantage can be your advantage. It can give you motivation to succeed and do more.

• 16:47Guy Raz?

  How were you at school as a student? Were you, um, did you like school?

• 16:52Speaker 01

  I hated school.

• 16:55Speaker 01

  I just, it never made any sense why I was learning Western civilization. I don't get it. Calculus, come on. You know, who's gonna use calculus? And so I couldn't get excited by something that I felt I was just being told to do because other people did it. And so I was never a good student. I was a C student.

• 17:18Guy Raz?

  It's interesting. I mean, you grew up in sort of a very self-consciously progressive part of America, right? Oakland, Berkeley. Because of who you are and what you looked like and, you know, your different identities, black, Jewish, you know, single parent, I mean, all these things. Did you feel like it was a good environment all the time? Or did you feel like, did you feel like an outsider, you know, at school or just in the community?

• 17:46Speaker 01

  I felt that I just didn't have a real community. Synagogue, I was the only black person. Around my black friends, I was also, you know, Jewish and, and half white. The private school where I got a scholarship, hey, I was a scholarship kid. And I was commuting, you know, two hours to school and two hours back. And from the East Bay, and I went to high school in San Francisco. And I was also a C student in a really good private school. That didn't make me feel like I belonged. But it did give me a skill of feeling comfortable being uncomfortable.

• 18:25Speaker 01

  I think I was forced to feel that way so much when I was younger that when I was older and started working, that it didn't drain me. I just, it was just part of, of life, of how I felt. And so I just moved on and I was, I wasn't able, it didn't suck that energy out of me.

• 18:46Guy Raz?

  Yeah.

• 18:47Speaker 01

  Over time, I just felt very comfortable that I am different. And I didn't fight it anymore.

• 18:52Guy Raz?

  I mean, it sounds like when you think about your childhood, externally, one could say, wow, what a difficult childhood. I mean, the tragedy of your dad and, and the tragedy of your mom's relationship with her family and your mom's sort of up and down financial situation. But, but it sounds like you would say, oh, I had a pretty good childhood, like I was happy.

• 19:17Speaker 01

  I had a lovely childhood. And, look, I don't think any kids care about money. I do remember. When I was in first grade, my mom didn't give me underwear and the sweatpants had holes in it. So people used to tease me in school because they could see my bottom. But in terms of how I felt, I felt supported. My mom loved me. Like, in a way, think about what it would have been if I would have had this mean grandfather coming around and just telling us that we're not good enough in whatever way he would do. And if my father was around, coming in and out of my life, you know, being, you know,

• 20:01Speaker 01

  abusive and seeing them fight physically, like, I think about, I didn't have any of that.

• 20:05Guy Raz?

  Yeah, right.

• 20:06Speaker 01

  All I had was me and my mom. It was happy.

• 20:09Guy Raz?

  Yeah.

• 20:09Speaker 01

  Yeah, the only thing that wasn't happy, you know, one of the hard things about being a mixed kid is that you don't really feel like you belong, like, you have no place. You have no community. And that feels lonely. So I do remember being lonely when I was younger. But those feelings are what instilled in me at such a young age, a drive to succeed, a drive to build a better life for the family that I was gonna create.

• 20:43Guy Raz?

  You grew up in the East Bay. I mean, you were up, sort of, in high school in the early, mid 90s. And that was like, from a, like, from a musical standpoint, there's a lot going on. I mean, there was, of course, there was MC Hammer. There was also Green Day, Souls of Mischief, and East Bay hip-hop, but also punk. Did you listen to that, to any of that music?

• 21:06Speaker 01

  First of all, like, I respected you before, but this is even better. I mean, the fact that you know Souls of Mischief, 93 till infinity, of course. Yeah, I was more into hip-hop and rap. I started listening a lot to reggae. And I had this older friend named Jabali, and he had dreads, and he was mixed. He was the first guy who made me proud to be mixed.

• 21:36Speaker 01

  He owned it. Yeah, he's the kind of guy that would that would breakdance along the pier in San Francisco. And he had this radio and he would always play like reggae music.

• 21:48Guy Raz?

  You met him at school?

• 21:49Speaker 01

  I met him at school. Jabali Sawiki. You know, I didn't have a father figure, so I searched them. And ultimately, a number of the people that were my friends became father figures in certain ways. And then I had mentors over time that also became like a father figure. But the reason I bring it up, reggae and dreads have a special place for black people who don't feel black enough. It was almost like a shield of armor. It was like, if you have dreadlocks, no one can question your your blackness.

• 22:28Guy Raz?

  Did you have dreadlocks?

• 22:30Speaker 01

  Yeah, I started with the Afro as a freshman. And I had Afro for like six months. But it was like big, big. And then I had dreadlocks all the way until college. And it was like this force field that made me feel really confident about who I was.

• 22:47Guy Raz?

  Um, in high school, I guess you you started a business. You started by sort of selling like Rasta gear, like to classmates. What would you sell?

• 22:58Speaker 01

  I tend to, when I go into something, I go all in. And so I didn't just get dreadlocks. I didn't just start listening to reggae. I started buying a bunch of licorice root, a bunch of Rasta bells, and started making mixtapes and selling them on the buses and subways. And I had this big reggae backpack that I put all this stuff in. The truth is, not many people bought my stuff. But it was fun. It made me feel like that I was controlling my destiny, that I was in the driver's seat. And, you know, whether people bought it or not, it didn't matter. It mattered that I was trying.

• 23:40Guy Raz?

  And I guess you went from making mixtapes to actually starting a pretty successful DJ business in the East Bay. And I read that you called it Rude Boy Productions.

• 23:51Speaker 01

  Yeah, I ended up being one of the most successful DJs in the high school Bay area system for years in a row. So it was mostly school dances, then there were house parties, a couple of bar mitzvahs, did one wedding. And I had something called the Rude Boy Productions Guarantee. And it was basically, I gave a list, and I said, you can fill out any song that you want, and I promise you that I'll play it. And if I don't play it, I will give you all your money back. And I noticed at the time that there are all these DJs who were just playing the music that they wanted to hear. They literally weren't listening to the customer. And I just wanted to be successful. And so I said, I'll pay you whatever you want.

• 24:34Guy Raz?

  Yeah.

• 24:34Speaker 01

  And I cannot tell you how different, like, an all-black house party is versus a bar mitzvah of 13-year-old kids versus a private school party, a wedding. These are such different communities that listen to completely different types of music.

• 24:53Guy Raz?

  Yeah.

• 24:53Speaker 01

  And you gotta give the people what they want.

• 24:56Guy Raz?

  I read that you, over the course of your time in high school, would earn, like, more than $100,000 DJing, which is insane. I mean, that's an amazing business.

• 25:07Speaker 01

  Yeah, I earned over $100,000 as a DJ. And better than that, I was able to employ a number of my friends and help them make money as well. And so it was a very empowering feeling. And it was fun.

• 25:24Guy Raz?

  All right. So you go off to college, you went to Columbia. You describe yourself as a C student, and yet you graduated Columbia in two and a half years. You got your degree in two and a half years. So you had to have been a good student while you were there to make that happen.

• 25:39Speaker 01

  Yeah, people question if I'm a C student a lot. They don't believe it. And I actually think it's, of everything that I've accomplished, the thing that I'm almost the most proud of is that I was able to accomplish it all by being a C student. And the reason I decided to graduate in two and a half years is I knew I couldn't be good at school. I knew I could never be magna cum laude. And so I felt, hey, I'm paying for school. This costs a lot of money. Let's pay less, get it done faster, and let me hurry up and find the thing that I can be good at.

• 26:15Guy Raz?

  What did you wanna, I mean, you had already had experience running a business, the DJ business. And, and so when you, when you got to college and you were clearly in a rush and hurried to get out, what did you envision you would do? Did you think, uh, I'm gonna go start a business, or I'll go to Wall Street? What did you think?

• 26:32Speaker 01

  My, my journey to New York is really just the idea of New York. I felt like New York was a city that would accept anybody, where everyone could belong. And then I started, you know, seeing, you know, what, what do people do after they graduate college? What are the opportunities? And of course, when you're in New York City, it's all about, you know, Wall Street at that time. And so in the fall, before I graduated, it was November, and I had interviewed at a number of investment banks, anyone that would let me interview, and none of them gave me a job. And so I was getting terrified. I was, I accrued all

• 27:14Speaker 01

  this student debt, and as about I graduate a month later, you know, with a C average, by the way, and no job. And so I got really, really nervous. And I had collected hundreds of business cards. I actually had a binder of business cards where you, you would slot them into like baseball cards in like a collection. I'd go through, and I started emailing people and calling people that I had met and asking them if they would interview me.

• 27:45Guy Raz?

  And I guess one of those contacts that, that you had saved was a guy who actually worked for McKinsey?

• 27:52Speaker 01

  Yep.

• 27:53Guy Raz?

  And then through that connection, you, you were actually able to get your foot in the door for an interview?

• 27:57Speaker 01

  Yeah. So I knew this was like, this was my shot. Like, if I didn't get this job, I thought everything would fall apart. And so I take two weeks off of school. I go to the library and in there they had the wet feet press and the vault guide to case study interviews. And that's how you interview for consulting, case study interviews. And I memorized them. I spent two weeks every morning, every night, just learning how to interview as like a business school student would for McKinsey. And then I go into the interview and I basically aced the case. And that's why they, they had the confidence to give me the offer.

• 28:38Guy Raz?

  All right, so you get to McKinsey. Admittedly, you were the guy who was like super bored in high school. By the way, that was me too. I totally like, what's the point of this? And did you, was it, I mean, was it kind of disorienting working for a big company like McKinsey or did you, did you love it?

• 28:57Speaker 01

  So I was so excited to start McKinsey. And I go in and I just get my butt kicked. And I learned at McKinsey, why should I focus more at school? These kids were smart.

• 29:09Guy Raz?

  Yeah, right.

• 29:11Speaker 01

  I was exhausted every day.

• 29:14Guy Raz?

  Yeah.

• 29:14Speaker 01

  Every day I'd walk home and I'd just be like, I'm gonna fail. I can't succeed. I can't be as good at them. I didn't have the words. I remember being at this lunch. Everyone was talking about the election and the president's election. I didn't, I had nothing to say. I wasn't, that wasn't my world. I wasn't focused on those things. So for entire lunch, I said not one word. I couldn't relate. I mean, it's one thing to be a DJ and to like relate to different people musically. It's a whole different thing to be able to relate to people in dialogue about politics or about travel.

• 29:51Guy Raz?

  Going to the south of France or, yeah.

• 29:53Speaker 01

  Yeah, I didn't have any of that. And so I, I made it a point for myself over time to be able to make sure that I can always be relevant in a conversation.

• 30:07Guy Raz?

  You ended up staying there for like around two years. Is that right?

• 30:10Speaker 01

  Yeah, I stayed there for two years and I was not, they did not let me continue on. They don't call it fired, but they say you are not invited to stay on.

• 30:22Guy Raz?

  So it's like a two-year sort of trial period and you just didn't, you didn't cut it?

• 30:26Speaker 01

  Yeah, didn't cut it.

• 30:27Guy Raz?

  Yeah.

• 30:28Speaker 01

  Look, I wasn't good enough at writing. I wasn't good enough at synthesizing ideas. I wasn't good enough at anything. Like if it were sports, it would be like you're in the NFL and you're playing at like a freshman year of college or a senior high school level. It was not even close. I had a personality and I worked really hard, but every single night I would go home and say that I'm failing. I mean, every single night.

• 30:58Guy Raz?

  I read that around like while you were there, because you get paid pretty well when you're, you know, and you're, you're young and that you took all your money and you invested it in the stock market during a boom time, which turned out to be a really unfortunate decision.

• 31:16Speaker 01

  Yeah, it was very unfortunate. I, so I took the over a hundred thousand dollars I had from DJing and I combined that with some of the earnings from McKinsey. And this was in the middle of the dot com boom.

• 31:31Guy Raz?

  Oh, yeah.

• 31:32Speaker 01

  I learned about something called margin. And I took all of the money I had and I opened up a couple of different online brokerage accounts. And I took out the maximum amount of margin on them and invested it. And I kept earning more and more margin and it ended up being a million dollars at the top of the bubble until the crash. And in just like less than a few months, it went not only to nothing. I owed the bank money.

• 32:05Guy Raz?

  Wow.

• 32:06Speaker 01

  I owed around like over $10,000 and I had nothing.

• 32:11Guy Raz?

  All right, so you're broke and eventually out of a job. But you were young, I mean, you were like 22, 23 years old. And I guess you decided to go to business school, back to Columbia, to get your degree. And did you, I mean, I guess part of that was you were out of a job, but part of that, I'm thinking, you know, you get that degree and it's like a ticket to anything, right? Was that your thinking?

• 32:34Speaker 01

  Yeah. I remember that when I lost the million dollars I made in the stock market, and I was like, how am I going to get it back? The idea was, I applied to business school, then worked really hard. It was the first time I started taking school seriously because I realized from McKinsey that it actually does matter.

• 32:52Guy Raz?

  Yeah.

• 32:53Speaker 01

  And then I ended up applying to a bunch of investment banks. I didn't get into most of them, but I didn't need to get into most of them. I got into two, one of which was Lazard, and I ended up working at Lazard.

• 33:09Guy Raz?

  I read it. There's a quote in your book. You talked about your time kind of working as a banker. And you write, "I was almost always the only black person working on a team, often one of the only black people working on an entire floor of a building. There were the small comments that stung, the times people confused me with other black people, the times people assumed I worked in the mailroom, the awkward jokes about the racial comedy skits of Dave Chappelle's show." How are you kind of observing all of those things?

• 33:41Speaker 01

  I think I grew up with low expectations. And I said, this is the way the world is, and I've just got to work twice as hard and do the best in the way the world is. And so, yeah, it didn't feel good being the only black person in almost every meeting. But I felt fortunate. I felt lucky, like, how lucky am I to be here? I need to work twice as hard, not just for myself, but to pave the way for others that come after. If I do well, that's the way to honor the people, like the late Vernon Jordan, who paved the way for me. Because if it wasn't for them, I wouldn't have had that.

• 34:22Speaker 01

  I mean, it was very clear to me, if I was born a couple of decades earlier, none of those, first of all, I was born 50 years earlier, I wouldn't have been able to even get a scholarship to any of these schools. But the most important thing that happened to me in my career

• 34:41Speaker 01

  Not just professionally, but psychologically was Vernon Jordan.

• 34:46Guy Raz?

  Who was a lot of people remember was an advisor to President Clinton and many other presidents.

• 34:51Speaker 01

  Yeah, he was the only black partner at Lazard when I went there, the only black person at Lazard when I went there in the New York office. And he was larger than life, you know, six feet six and really amazing human being on more Fortune 500 boards than any other person is what I had read.

• 35:11Guy Raz?

  Wow.

• 35:11Speaker 01

  And seeing a black man, dark, tall, black man, walking the halls of Lazard, a multi a hundred plus year institution on Wall Street, just made me feel like being black wasn't a barrier to your dreams.

• 35:30Guy Raz?

  So he became, I mean, it sounds like he became a pretty important person in your life.

• 35:35Speaker 01

  Yeah, he invited me to Thanksgiving at his house. We would have lunch on a regular basis. He told me to apply to be a White House Fellow, which I did right after Lazard. He said, he said, "All young professionals in the private sector should get exposure to the public sector, even if just for one year, because the experiences you gain and the relationships you have will be transferable to any sector you choose."

• 36:00Guy Raz?

  And you actually did go to work in the White House as a White House Fellow for a year, so I think around like 2005. And then after that, I guess you, you were able to land a job at Goldman Sachs, like a pretty big job, like a VP level.

• 36:15Speaker 01

  Yeah, it was, it was a really big job. And I thought this was my golden ticket. I thought like I had made it. I remember talking to my mom and she said, "You've networked your entire life to get to this point, to get to Goldman. Now stop networking and just work as hard as possible." And that was my approach. I moved in literally one block from Goldman Sachs. And the idea was I was never going to be at home, I was always going to be in the office. And if I'm not in the office, I'm just going to be asleep. And so I just walked one block back and forth. And I gave it everything I possibly could. Unfortunately, I just never was great at it.

• 36:59Speaker 01

  But I did have the support of a really, really great mentor, Henry Cornell, who was the person who hired me. And he also gave me the honest advice that most people don't get. What he said in one of my reviews, I come in and he says, Robert, he said, stop trying to make your weaknesses a strength. Just minimize your weaknesses and maximize your strengths. He said, you're really good at the personal stuff. You could be generating deals. You could be bringing in CEOs and making transactions happen. Focus on your strengths. And that was like really important for me to hear.

• 37:40Speaker 01

  My entire career before, I was just banging my head against the wall, trying to make these weaknesses strengths and depressed every single night, just depressed, walking back at home, saying, I'm never going to be good enough, never going to be good enough. And then for the first time, someone said, hey, you can be great at what you're great at, and that's okay.

• 38:00Guy Raz?

  So this is now around, I guess, 2012, and it sounds like you really need to figure out what you're going to do next. What did you do?

• 38:09Speaker 01

  So I reached out to a guy named Bio Oganlessi, and he was the biggest donor to a nonprofit I started called America Needs You.

• 38:21Guy Raz?

  This is a nonprofit you started in New York?

• 38:23Speaker 01

  Yeah, when I was in Goldman, I decided I'm going to start a nonprofit. It was called New York Needs You at the time, and we focused on students who were first in their families to go to college and below the poverty line, giving them career development, college support, and two summer internships.

• 38:41Guy Raz?

  So you had called one of your donors up and you said what? You said, hey, I'm looking for a job or thinking about going to another bank?

• 38:47Speaker 01

  Yes, I called this donor up. His name's Bio. He was the biggest donor to New York Needs You. And he had a big private equity fund called Global Infrastructure Partners.

• 39:00Guy Raz?

  Right.

• 39:00Speaker 01

  He said he is willing to meet with me, and as I sat down with him and I told him, I really wanted to work for him, and would he be open to interviewing me?

• 39:09Guy Raz?

  So what'd he say?

• 39:10Speaker 01

  He says, look, if you were my son, I would tell you to go start something. He says, how about this? You go think of a really good business idea, put a lot of effort into it. And I'll use that to evaluate how good you could be in this job. And it'll be part of the interview process. And so I go out and I put a lot of effort into this business plan. I had a friend named Ori Alon, who had sold a company to Google and another company to Twitter. And we just started talking about it. And the idea was, what's, what's an industry that's really, really big that the big companies, Google, Facebook, Apple, Amazon, Microsoft, aren't competing in? And it really came down to real estate and healthcare.

• 39:55Speaker 01

  And my mom's an agent in real estate. So I was like, hey, let's do that.

• 40:01Guy Raz?

  When we come back in just a moment. How Robert's trial business plan morphs into Compass and how, one year after its launch, the company goes through a major identity crisis. Stay with us. I'm Guy Raz and you're listening to How I Built This. Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in.

• 40:44Guy Raz?

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• 41:29Guy Raz?

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• 42:13Guy Raz?

  how people and teams work together, and that shift is already underway. That's why NetSuite wants to put a new, expert-created business guide in your hands today. It's called "Aligning for the Agentic Era: How AI is Changing Everyday Work." And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization, and how to position your business to prosper from it. If your revenues are at least in the seven figures, get NetSuite's free business guide, "Aligning for the Agentic Era: How AI is Changing Everyday Work", at netsuite.com/built. The guide is free to you at netsuite.com/built.

• 42:56Guy Raz?

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• 43:41Guy Raz?

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• 44:03Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2012, and Robert is looking to get a job with this big player in private equity named Bio Ogunlessi. And just to kind of see how Robert's mind works, Bio asks him to come up with a really good startup idea and write a business plan for it. So Robert and his friend Ori come up with an idea for a real estate company.

• 44:28Speaker 01

  And so then I go back to Bio, and I have like this 10-page plan. I say, hey, Bio, here's the plan. Well, do you think it's a good plan? What do you think about me working for you? And he said, well, why don't you go do the plan? Why don't you create the company? I was like, Bio, I only did this so that I can work for you. You told me that as part of the interview process. And then he says, well, I think it's a good idea. And I told him, I can't do it. I'm getting married in a couple of months. I'm going to have a kid. I can't afford to not have a real income. He said, how about this? I'll be your first investor. I'll give you $500,000.

• 45:12Speaker 01

  And if you fail in a year, I'll hire you.

• 45:15Guy Raz?

  Wow.

• 45:16Speaker 01

  And I just said, yeah. That's why I said that. I think I said, wow.

• 45:20Guy Raz?

  What was the idea you had? I mean, because you wanted to sort of do something in real estate. I get it. You were kind of brainstorming, and you figured it was going to be real estate or healthcare. But what was the problem that you were suggesting you could solve with real estate?

• 45:33Speaker 01

  The idea was that we would focus on rentals in New York City. Our big, big dream at the time was we were going to make the process of renting a home wonderful for everyone. We're going to make it an amazing customer experience. And the way we would do that is we would hire neighborhood specialists, pay them on salary, not commission.

• 45:52Guy Raz?

  And just to clarify, New York is this really weird market, where when you rent a house, unlike almost anywhere else in the United States, you have to pay An agent, like a commission. You, as the renter, pay a commission to an agent so you can rent an apartment, which is super weird, right? Like, New York is this kind of outlier when it comes to that, right?

• 46:13Speaker 01

  Yeah, so we didn't know that it was an outlier at the time. The idea was, no one liked any part of the process. It was too hard to find the home. It cost too much. And I sent out an email to everyone in my network and I said, "Quick question for a tech friend. If there was a problem that technology could solve, what would you want it to solve?" And maybe it was just my peer group, but the number one thing was finding an apartment in New York.

• 46:40Guy Raz?

  All right, so you come up with this idea that instead of a commission-based system, you would employ real estate agents, which you called neighborhood specialists.

• 46:52Speaker 01

  We called them neighborhood specialists.

• 46:54Guy Raz?

  Right, okay. And they would be like friendly and they'd be on salary and the renter wouldn't have to pay as much in fees. They would pay a smaller fee, basically. That was the model?

• 47:04Speaker 01

  Exactly.

• 47:05Guy Raz?

  All right. And this was called, you called it Compass, Urban Compass, right?

• 47:09Speaker 01

  Yeah, we were Urban Compass at the time.

• 47:11Guy Raz?

  And you had a friend named Ori Alone. And I guess he was, he had done a couple of startups. And tell me about him. He was the guy that you wanted to start this with. Who's Ori?

• 47:20Speaker 01

  So I met Ori Alone when I was a White House Fellow at a conference called Academy of Achievement. He had just sold his first company to Google. And we just sat next to each other and we really connected. And I sent him holiday cards every year afterwards and we stayed in touch.

• 47:38Guy Raz?

  And why did you, why did you think he was the right partner to start this with? I guess presumably because he had experience, right? With startups and selling them.

• 47:45Speaker 01

  So I saw this guy who had sold one company to Google, another company to Twitter. And I was like, this guy's a magician. I said, "I need to work with him. If I ever do anything, I need to work with him." And he gave credibility to everything we were doing on the tech side. I knew I could hire the business people, but he would be able to hire the technology people.

• 48:09Guy Raz?

  And when the technology, when you say technology, you thought this would be like an app or a website that kind of made it, took the friction out of renting an apartment?

• 48:20Speaker 01

  Yeah, we wanted to, at the time, we didn't know anything. Very clear.

• 48:25Guy Raz?

  Including about real estate?

• 48:27Speaker 01

  I knew my mom was an agent and I had worked through a little bit when I was younger.

• 48:32Guy Raz?

  Right.

• 48:33Speaker 01

  But we didn't understand the way real estate worked. We didn't even know how much the commission really was. We didn't know anything. We were two complete outsiders and the idea was just, let's make things better.

• 48:44Guy Raz?

  You launched this in 2013 because I think you raised, you raised a lot of money before you launched. You ended up raising about eight million dollars, which I think is credit to your connections at that point and all the experience you had, presumably, right?

• 48:59Speaker 01

  Yeah, we raised eight million dollars, which was the largest seed financing round that year. And we raised it from three groups of people. Venture capital firms, real estate investors, and CEOs.

• 49:13Guy Raz?

  Right.

• 49:13Speaker 01

  We could see that each group was bringing more credibility to the other. So like the investors liked that the real estate developers were there because they made it feel like we knew what we were doing. The real estate developers liked that the technology investors were there because they felt like that meant that we were going to actually be able to build the technology that will transform the industry. The bad thing was, we had no clarity of what the single thing we were trying to do was. You know, we're going to hire really talented people and make things better. And so everyone was going in different directions. Better for some people meant bringing down price. Better for other people meant creating scheduling software.

• 49:54Speaker 01

  Better for other people meant having really, really nice neighborhood specialists that are trained on customer service. And we realized, people, they're looking to find an apartment that meets all their needs. And the people that are best at doing that, I could see, were agents who had been doing it for 10 years, not people that we hired, you know, from restaurants or hotels that are really, really nice and trying to train them to like meet someone on a corner and show them property.

• 50:21Guy Raz?

  And that was what your idea was, that you would hire nice people, not necessarily experienced agents?

• 50:26Speaker 01

  Exactly. I would literally... Go to restaurants, try to find the nicest waiters and ask them if they would become neighborhood specialists. And I'd go to the doorman and doormen at hotels and say, hey, would you want to be a neighborhood specialist?

• 50:43Guy Raz?

  So you launch in 2013, having these neighborhood specialists and you rent it and the renter comes. And how long before you realize that that's not working, that that model is just not going to work?

• 50:55Speaker 01

  So within about a, about a year, just a little less than a year, I go to the team and I say, this isn't going to work. I was NFL, it was the same thing from so many times before where you're going home every night. And I'm just saying, this isn't going to work. This isn't going to work. The same feeling I had at Goldman, the same feeling I had at McKinsey is like, this is all going to not work. What are we going to do?

• 51:21Guy Raz?

  And by the way, how did you know it wasn't working? Because, because the money wasn't coming in? I mean, you weren't going to be profitable so early, but how did you know that it wasn't going to work? What gave you that, that sense? Was it intuition or was it real hard data?

• 51:36Speaker 01

  We were giving the landlords guarantees in rent to get exclusive listings.

• 51:44Guy Raz?

  Right.

• 51:45Speaker 01

  And what we said is if we can't rent your property within 30 days, we'll pay the rent because we're so confident we're going to be able to rent it. And so we're going above and beyond for the landlords. And then for the renters, we were charging half off. And even giving such extraordinary offerings on both the landlord's side and on the renter's side, renters were not happy. When you really looked at the feedback and you look at the comments and the emails, you can see there is too much frustration. The way I knew that it wasn't working is I was listening to the customer.

• 52:23Speaker 01

  And the most consistent feedback is it was more complex and it took more work on their part than it would have otherwise.

• 52:34Guy Raz?

  So once you started to come to that realization, how did you, I mean, did other people in the team agree? You had hired all these people and you had a management team and did they agree with you?

• 52:46Speaker 01

  I tell everyone that this isn't working and they.

• 52:51Speaker 01

  They didn't agree with me. They were saying things like, hey, you know, don't give up on the vision. You know, we could transform the industry. And I was never motivated just to transform the industry. I wanted to make things better. I didn't want to innovate and disrupt just for disruption's sake.

• 53:09Guy Raz?

  Yeah.

• 53:09Speaker 01

  And they were very unhappy with me. One morning, Ori was invited to a breakfast by one of the senior members of the team. He goes to breakfast and everyone is there on the senior team except me. And they basically tell him that they want to fire me. And Ori, you know, later on, he takes me on a walk and he tells me what happens. And he said, hey, let's think about this throughout the day. Let's have dinner tonight. I go home to my wife. I tell her, I think it's all over. They don't want me at the company anymore. And, you know, we talked for about an hour. And at the end of it, she just tells me like, bounce back. Tell Ori why you have conviction in this new strategy.

• 53:53Speaker 01

  And the new strategy was building for regular agents that are experienced and know what they're doing. And so we have dinner that night. And I make the case. He says, we're always going to be able to hire really talented people from outside the industry. You know, great business people, great engineers, and we were able to raise, raise a good amount of money. If we can just use those resources to help agents be more successful, won't we be successful? I said, yeah, absolutely. If we can just make agents more money, we'll make more money. And yeah, ever since, we just hired a bunch of traditional agents and asked them what they wanted to help them grow their business, realize their entrepreneurial potential.

• 54:38Speaker 01

  And that, that allowed us to be more successful by making them more successful.

• 54:42Guy Raz?

  All right. So you, like, your idea was this original vision isn't working. We've got to go to the traditional model of a real estate brokerage. So basically, were the agents, would be paid a commission?

• 54:56Speaker 01

  Exactly. I came to the conclusion that real estate agents are central to the transaction. And that real estate agents are not going away. There are 2 million of them in the country. And that there's no great company that's working for them to help them realize more success. And it was A really large industry with $100 billion of revenue that agents produce every year, where the incumbents, the brokerage firms, aren't investing in research and development to get better. And so it just felt like they're the customer. The agent is the most underserved customer out there.

• 55:38Speaker 01

  I kind of just saw the lane and the opportunity to build for this huge customer base that no one else was building for.

• 55:46Guy Raz?

  But how did the neighborhood specialists that you'd hired, how did they respond? Were they like, okay, I'm happy to pivot? Or did you have like a mass exodus of people leaving?

• 55:56Speaker 01

  Over a third of the team left. It was really hard. And people wanted to change the world. And I was telling them, let's not reinvent the wheel, let's just make the wheel better. And that didn't align with a lot of people's dreams.

• 56:12Guy Raz?

  Was that personally hurtful?

• 56:14Speaker 01

  I don't take anything personally like that, no.

• 56:19Guy Raz?

  You weren't hurt by that? I mean, I would be devastated by that. I don't know, I think a lot of people would.

• 56:25Speaker 01

  No, people, they had a vision. I think for me, I had a lot of empathy for their position. No, yeah, and these were friends. I love some of these people to this day. I don't take any of that personally.

• 56:39Guy Raz?

  So at this point, when you, this is in 2014, were you still focused on the rental market? Or did you start to, were you also saying, well, let's focus on selling homes? Let's have these agents also represent sellers and buyers?

• 56:54Speaker 01

  So we started by trying to hire rental agents. And I said, we have all these engineers, we can build any technology that you want, come here and let's build this, we'll build the future of real estate together. And they basically told me in their nose what they wanted.

• 57:15Speaker 01

  And so whenever someone rejected us, they would tell us why. And then that why was what I knew we had to do in order to get to a yes next time.

• 57:23Guy Raz?

  So what were people saying?

• 57:25Speaker 01

  The biggest no at the time was there's no top agents there. And you need to have a top agent or else your firm will never have credibility. I then asked all the agents that had told me no, give me three names of the top agents that you respect the most. And there was only one person that every agent said that they are one of the top three most respected agents. And it was a guy named Leonard Steinberg. Leonard was the number one agent in New York the prior year, having sold or put in contract $500 million in listings. And I knew that he was, if he came to Compass, then other agents would come.

• 58:10Guy Raz?

  And by the way, was he working for himself or was he working for another brokerage?

• 58:15Speaker 01

  He was working for another brokerage. And I just literally called him out of the blue because every agent's phone number is on the internet. And I said, hey, Leonard, my name is Robert Reffkin. Would you be open to meeting with us and talking about coming on as a leader in the company we're building? He said he was willing to meet, but then when he met, he said like, absolutely not. Because we had no experience in real estate.

• 58:46Guy Raz?

  Yeah. I mean, and if he was listing $500 million in real estate, I mean, just on commissions alone, he was minting money. I mean, he was making a lot of money. Like, why would he take a risk on this? Like, how would you even convince him? Presumably, you had to say, look, you can make more money with us.

• 59:06Speaker 01

  We convinced him not with money. I mean, money's always part of it. But we convinced him with vision. A vision of the impact that he could have on his industry. And that he would allow us to build a better company for agents that are coming after him. And so we knew that if he came, then other people would come. That would give them the credibility with their clients. And he did say yes, and he's really transformed the company since.

• 59:37Guy Raz?

  But hold on. How long did it take you to convince him? Did he, was he convinced right away? I mean, was it several meetings? I mean, because, look, it's not enough to just say, hey, here's our vision. I mean, lots of, there are lots of people with a great vision. This guy is the best real estate agent in New York. Everybody says so. Presumably, he's going to become a partner in this endeavor, right? He's going to become an owner as well.

• 1:00:03Speaker 01

  Yeah, he came on as our, as our president at the time.

• 1:00:06Guy Raz?

  Right.

• 1:00:06Speaker 01

  And, you know, we started off with, you know, one meeting. It was like a 15 minute meeting. And then we call him back and he brings, for our second meeting, his partner on his team. But the reason why I believe we were able to get him to come is he really wanted to create a better industry. You know, the best people in the world don't move just for money. They move out of passion. He felt that real estate agents don't get the respect that they deserve and they don't get the investment that they deserve from their companies. That the culture of a lot of the brokerage firms is they're the same thing year after year after year, that they're not getting better.

• 1:00:51Guy Raz?

  It sounds like what you're saying you were offering was better tools for the agents, right? It wasn't, the experience for the client wouldn't necessarily be different? Or would it be?

• 1:01:02Speaker 01

  At first, when we pivoted, we were doing a little for the client and a little bit for the agent and, but we, we realized at a certain point, you have to choose a customer. You can't work for everyone. And who's your customer? Your customer is the person that pays you.

• 1:01:21Guy Raz?

  Yeah.

• 1:01:21Speaker 01

  And buyers and sellers don't pay brokerage firms. They pay agents.

• 1:01:25Guy Raz?

  Right.

• 1:01:26Speaker 01

  And agents are the ones that pay brokerage firms. They split a percentage of what they make with you.

• 1:01:31Guy Raz?

  Right.

• 1:01:32Speaker 01

  And so that clarity, which took us years to get. But that clarity helped us be very focused on creating value for the person that's paying us, for agents. Just asking them, tell us what you need to make you more successful. Whether it's marketing, whether it's technology, what are the things that will help you either grow your business or have more time? Those are the two things that agents care the most about. More money or more time.

• 1:02:01Guy Raz?

  What were, I mean, this is 2014, and by this point, you know, Zillow and Redfin are already kind of disrupting the market because at this point, everybody can look up homes for sale, you know, from their computers. They can even look at the Zillow value of their home, whether it was accurate or not, they could look it up. So this is already, I mean, there's already a lot of disruption happening. What did the agents say they wanted or needed that they weren't able to get?

• 1:02:28Speaker 01

  So it was clear to us that there was a real misunderstanding of real estate and what the business of an agent was. Everyone thought that real estate was like searching listings, what aggregators do.

• 1:02:43Guy Raz?

  Right.

• 1:02:44Speaker 01

  That's probably less than 5% of what an agent's business is. The agent business, we started to realize, when you ask agents what you want, you know, none of them come back and say, I want a better consumer search. You know, what they're saying is, I want better marketing tools to market my listings. I want better marketing tools to market myself. I want a CRM so I can stay top of mind with my sphere of influence, so that everyone that I know, whenever they're thinking about buying or selling a home, they think of me. I want transaction management so I can have all the transaction documents and closing documents in one place.

• 1:03:29Speaker 01

  And so there are so many things, and that's just a small portion of what real estate agents do, that people, people are all focused on the wrong thing. They're all focused on this consumer search. Remember, all those consumer searches, they just go back to the agent. Because you click the button and then the agent gets it. And no one was focused on the person that's actually doing the work.

• 1:03:49Guy Raz?

  I'm curious, though. I mean, you were talking about a customer relationship management, right, platform. But I mean, I mean, there's HubSpot and there's Salesforce and presumably there are agents who use those, those CRMs. There was nothing out there that was designed specifically for realtors?

• 1:04:08Speaker 01

  That is the point. Instead of just being this broad, basic software for everyone, we have a CRM that we built for real estate, marketing tools for real estate. Let me give you a simple example. Let's say you want to do a digital newsletter. And there are a lot of these email newsletters.

• 1:04:33Guy Raz?

  Yep.

• 1:04:34Speaker 01

  That you can get, you know, third-party sites.

• 1:04:36Guy Raz?

  Sure.

• 1:04:36Speaker 01

  But then you have to upload the photos from your listing. You have to upload the description. You have to upload the price.

• 1:04:43Guy Raz?

  Yep.

• 1:04:44Speaker 01

  Because it's not connected to a listing system. And then you have to do the same thing again for your postcards, same thing again, upload again for your social media. But by connecting everything in one place, integration creates the innovation. Where you only upload things once. You only log in once. Think about it, without that integration, you can't get on a mobile app. Because a mobile app can't connect to 13 different third-party tools, which is how many tools the average agent uses.

• 1:05:14Guy Raz?

  Yeah.

• 1:05:15Speaker 01

  We're building the one thing that they can use. They don't have to log on to 13 companies. They don't have to use 13 companies that don't speak to each other. We're putting it all together in one place.

• 1:05:26Guy Raz?

  I imagine like in order to attract the best agents, you had to focus on marketing and branding, right? Because if you are an independent operator as an agent, and you've got to give a percentage of your sales to Coldwell Banker or Sotheby's or whoever you're affiliated with, you are affiliated with them because they have a brand. And people see that name and they say, oh, there's Sotheby's. Yeah, I think that's a good brand. Or there-- and Compass was brand new. Was that also the strategy to just very quickly kind of get your branding and your signs and your logo in as many places as quickly as possible to build that momentum?

• 1:06:02Speaker 01

  Oh, yeah. We would, we would market the Compass brand outside of the offices of our competing firms. And so there is like a phone booth or a billboard or a bus stop outside of our competing firms. That's where we would put the brand so that agents at other companies would say, oh, Compass, people know it. It's name's out there on the street. And so we did a lot to try to make our brand bigger so that it would give more credibility to the agents we were trying to hire.

• 1:06:39Guy Raz?

  When we come back in just a moment, how Compass started attracting more and more agents and more and more criticism. Stay with us. I'm Guy Raz and you're listening to How I Built This from NPR.

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• 1:08:38Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So after Compass pivots in 2014, things really begin to take off. New agents are joining, revenue is growing, more investors are investing, and the company starts to expand to other cities. I mean, Robert, I can remember, like, all of a sudden, I started seeing Compass signs in Washington DC, where I lived at the time. And that was the first city you expanded to. And why? Like, why did you go there first? Was it just because it was close to New York? Or was there a particular strategic reason?

• 1:09:14Speaker 01

  Yeah, we asked our agents, what would be the market that would give the most credibility to you? It is very consistent with how we approach most of what we do at Compass, just ask the agent. And they'll tell you where to go. Yeah, so DC was, again, nation's capital, big brand. Then it was Florida and Miami, because New Yorkers moved to Florida and Miami. Then it was Boston and Los Angeles. And so we really followed our agents in where they think we should go next, based off of where their clients are moving from into.

• 1:09:50Guy Raz?

  How does it, I mean, I'm curious because there's some agents who are super agents, right, and they have a team. Would you go in and kind of, same way that you would acquire a company, like, would you go into a market and like, make an acquisition offer for that team and say, all right, we're gonna, you know, we're gonna give you a big check to join us, and then now you're part of us? Is that something that happens?

• 1:10:11Speaker 01

  So, in the early years, I personally launched all the markets. So, I've launched dozens of markets myself. I go out to the market, I would call the top agents, and I'd say, "Hey, I'm Robert Reffkin, I'm the CEO of Compass," and they would say, "Compass who?" Like, "Compass the bank?"

• 1:10:28Guy Raz?

  Right.

• 1:10:29Speaker 01

  In no market where we launched, did anyone know who we were in the early years. And so, the hardest thing was just getting the meeting. And so, I'd try to talk about my background, and what we're doing, and the money we raised, and investors, and say, "Hey, look, if you can meet, there's no downside. The worst thing that can happen is you'll, I'll share with you all the ways that we're helping agents grow their business, and if you don't want to come, you can take those ideas back to your own business." And so, that's how I would get the meeting, and I'd have two different conference rooms in a hotel, and it'd be like, back-to-back meetings from one to another, and I'd have someone else on my team be in the meeting when I wasn't there. So, you'd be, you know,

• 1:11:09Speaker 01

  back-to-back, from early in the morning to late at night, and explain to them, "We're going to have the marketing, the technology, the culture, and the support to help them grow their business."

• 1:11:23Guy Raz?

  Yeah, you know, I mean, some skeptics have said, "All these guys do, all Compass does is, they'll go in, they've got their, they've raised over a billion and a half dollars from investors and banks, and they can just buy out the best agents, and it's kind of, you know, it's using money to buy market share." Is that a fair critique, in your view, or a fair assessment?

• 1:11:48Speaker 01

  One of the best things that Compass has is the cynicism of our competition. When our competition says, "Oh, Compass, they're only successful because of A, B, C, D," whatever that thing is, it makes them feel okay about not doing anything, about not asking their agents, "What can we do to make it so you don't want to go to Compass?" The concept that agents just move for money is really offensive to the agent. It doesn't make any sense. They're not going to move their entire business to a company they don't believe in for some economic incentive that's a small percentage of their annual income.

• 1:12:31Speaker 01

  Yeah, when I moved from my BlackBerry to my iPhone, yes, I got like $300 off the first phone. But that's not why I moved. But you are right. The competitors say a lot of really bad things to try to scare people from wanting to move. But they had their chance. This has been a model for over 100 years where brokerage firms had taken the profits from the agents, split it between the manager, the manager's manager, and the owner. And on balance, that owner put it in their pocket and they went on vacation. But what they didn't do is what Apple did, what Microsoft did, what Google did. They didn't invest it back in research and development to create a better company

• 1:13:16Speaker 01

  for their customer, the agent. And that's what we're doing.

• 1:13:20Guy Raz?

  I'm curious, because it has to be kind of a cutthroat element to this, right? So like a talent agency, right? You represent a talent, let's say. That star can at any point choose to go work for another talent agency if they make a more attractive offer. And presumably, that can also happen with agents. Like, you have to, I have to assume, stay one step ahead of other brokerage firms to make sure they don't... Go after the agents that are aligned with Compass because those agents can leave, right? They're not bound to Compass. I mean, they're independent operators.

• 1:13:57Speaker 01

  The average agent that comes to Compass has grown their business 19% in their first year. And because of that, we have above-average industry retention. That's one of the things that I look at the most is if they're staying, that's a good thing. And when someone leaves, that's a really bad thing. And we have to make sure that we're building the tools and offerings and services that help them grow their business so they would never want to leave.

• 1:14:30Guy Raz?

  I guess in 2018, you had this idea to license your software, the CRM and things to other agents who were not working for Compass, and it kind of imploded. What happened?

• 1:14:47Speaker 01

  Yeah, I had this idea of let's license our technology to a competing brokerage. We announced it in less than a month, and there was a complete backlash of our agents. And they didn't want us to give any competing company the technology because they didn't want an agent at another company to say, hey, work with me. I have the same technology as that agent from Compass. And so we shut it down. And there was a lot of press at the time saying how we failed, and it was a failed launch. I never understood that because to me, we just tried. We tried something, it didn't work, and you try something else. And in the next month, we tried something called Compass Concierge. We launched it

• 1:15:31Speaker 01

  really quickly in less than a month. And it turned out to be one of the best things that we've ever done, where we front-load the cost of home improvement services, like staging and deep cleaning and painting, to prepare homes and make them move in ready. And that's been a big success. But you can't be the company that can do that without being the company that also has, that launches something that isn't successful.

• 1:15:55Guy Raz?

  Robert, I loved your book. I love your story, but I wouldn't be doing my job if I didn't make you uncomfortable, so I'm going to. But I'm going to read something mean that somebody has said about you, and it's not just a random person. It's a broker named David Goldsmith. He wrote this last year on a forum called Urban Diggs. He said he compared Compass to WeWork. He said, "It's like WeWork. It's backed by billions in VC money." Claims to be a tech company rather than a real estate firm, but also like WeWork, there doesn't really seem to be any revolutionary tech involved. They just seem to be throwing tons of money at acquiring market share. Did you hear that and say that's just flat out wrong? There's no validity to that? Or is there anything in there where you think, okay, I can see that?

• 1:16:38Speaker 01

  Look, I think that 20 years from now, if you're not a technology company, it's unlikely you're going to exist. These agents are going to be here, right? Just to be very clear, people use agents more now today than they did 10 years ago. Who's going to be the company that helps agents use technology to realize their entrepreneurial potential? Over the last 30 years, every profession has been able to use technology to get better. And that's actually what has made it so difficult for brokerage firms. 30 years ago, all of the workflow of the agent went through the brokerage firm. The MLS book was on the desk.

• 1:17:22Speaker 01

  The client would be in the office. They would look at the off-market listings on the wall. But over the last 30 years, the workflow of the agent has come outside of the brokerage firm. So now it's like half outside and half inside. We're building the modern platform. It's not either or. It's not just, is Amazon a bookstore or a technology company? Is Uber a tax limousine commissioner or a technology company? I think these are false dichotomies. Over the next 10 and 20 years, you have to be both. And you have to use software to make everything better. We have an overall 850-person technology team. And so we're investing more in technology than the traditional brokerage firm.

• 1:18:08Guy Raz?

  I wonder, I mean, 2020, right, was supposed to be a catastrophic year for the real estate industry, and it started out that way. You know, shut down, you couldn't see homes. It turned out that 2020 transformed the industry. It all of a sudden completely opened up virtual tours and people were looking at homes across the country virtually and buying them. And there was a real estate craze. Home prices just skyrocketed. Was that unexpected? Were you surprised by what happened in 2020?

• 1:18:37Speaker 01

  Yeah, when COVID hit in early 2020, we had closed our offices in early March. And over the following weeks, I really thought, hey, this could all be over. I told my wife, you know, we are legally not allowed to show property in almost every market we're in, and there's no end in sight. And so we couldn't make any money. And a business is a business. We can't make any money, you can go out of business because we still had those costs. You know, we had to go through the really hard work of, you know, just trying to survive. Like, the goal was, we just need to survive.

• 1:19:16Speaker 01

  And we're talking just two months later, activity started picking up in market by market by market. Not in New York City, because they would not let you show property in the buildings. But in the suburbs, people started buying at a faster and faster and faster rate. And then over the summer, it became the busiest summer in the history of real estate.

• 1:19:40Guy Raz?

  Yeah.

• 1:19:41Speaker 01

  Because everyone wanted more space.

• 1:19:43Guy Raz?

  Is it going to change real estate forever? I mean, do you think that it kind of supercharged certain innovations?

• 1:19:50Speaker 01

  Yeah, we launched during COVID, a number of virtual tools, like livestream open houses, tours, where you as a buyer could stay in your home, and the agent would go from property to property and do a livestream tour. So a lot of tools to allow agents to work virtually, and we believe that will continue. On the real estate side, I think that we have a permanent shift in the demand curve, where people will continue to want more space and more multiple homeownership. The hybrid work environment, which will continue.

• 1:20:30Speaker 01

  It makes space literally more valuable because you're going to be using it more, whether it's a private office in your home, or whether it's a second home where you can work two months out of the year and give your family a better quality of life.

• 1:20:45Guy Raz?

  Your mom, who became a real estate agent, is an agent for Compass right now. She works for you.

• 1:20:54Speaker 01

  Yeah, I like to call my mom the chief feedback officer. She's always been the kind of parent that tells me what I should be doing differently. And she's been an agent for over 20 years. One of the things that makes me happiest is that, at this point in her career, she's able to work at Compass. I mean, it's such a wonderful thing. And this is one of the few careers where people in their 60s and their 70s are pushed to grow and to get better. While a lot of the traditional companies are pushing people out much earlier in age. And so it's a wonderful thing to be able to spend so much time with her,

• 1:21:38Speaker 01

  both, of course, personally, but also with Compass.

• 1:21:41Guy Raz?

  Do you think a part of you was motivated by a desire to prove all the people who let your mom down, let you down, to kind of prove them wrong in a sense? Or to kind of, I don't know, despite that, despite all the people who let her down, let you down, that you were going to make it?

• 1:22:03Speaker 01

  Yeah, I've always been motivated by a mixture of positivity, like big, big dreams, and anger. So you talk about the competitors at Compass. When they say things that are less positive about me or the company, it gives me energy. There was a woman that came to Compass, one of their early top agents, and she told me, "Hey, Robert, I can't come." The head of my former brokerage firm that she came from, she told me that you were anti-Semitic, anti-gay, and anti-woman. And I'm like, "What?" What are you talking about? I tell her, first of all, I'm Jewish, I had a parmitzba.

• 1:22:48Speaker 01

  So then, second of all, that is not true. Things like that happen in a weird way. Maybe this real estate industry is so full of people that are negative and mean in a competitive sense, like the brokerage firms, that's actually given me an extraordinary amount of energy to work harder. I mean, there was a, at a big real estate conference, one of the top brokerage firms says, oh, you know, this was like in 2018, I think Compass is going to go out of business in five years. And then the head of the fourth largest brokerage firm in the country says, oh, I think that's generous. It's not going to last five years. I mean, that's kind of what this industry has been about.

• 1:23:31Guy Raz?

  Yeah.

• 1:23:31Speaker 01

  And so when someone, when I see that kind of stuff out there, whether it's against me, my company, yeah, it makes me want to work harder.

• 1:23:39Guy Raz?

  When you think about the arc of your life and career so far, because you're still young, I mean, you're in your early 40s, do you think that when you were a kid, like when you were a high school student and you had that business, right? And it was a really successful DJ business, do you feel like you knew intuitively in your head that despite, you know, the kind of personal challenges you faced, and your mom faced, did you just kind of intuitively feel like you were going to succeed?

• 1:24:13Speaker 01

  I've been afraid of failing, you know, the majority of my life, right? Just definitely all of my life then. And that was the driving force. I wanted to create a better life for this family that I had envisioned that I would build. But I couldn't ever see it. There's the line, you can't be what you can't see. But I never saw anyone like me. You know, I didn't see like these successful black people when I was in... The 90s in like high school, middle school. And so the answer is, I never thought that I was going to be successful.

• 1:24:56Guy Raz?

  You never thought you were going to be successful?

• 1:24:59Speaker 01

  I thought that I was going to get fired the majority of days that I've been working.

• 1:25:06Guy Raz?

  Wow.

• 1:25:06Speaker 01

  I worked really, really, really hard. Yeah, and I would do, I'd put in any amount of effort that it would take. But the reason I worked so hard is because I didn't think I was going to be successful. It's almost like if I did think I was going to be successful, maybe I wouldn't have been because I wouldn't have worked as hard.

• 1:25:27Guy Raz?

  I know that, I mean, I think anyone listening to this knows that part of your success just comes from working really hard. But does any part of you believe in luck?

• 1:25:37Speaker 01

  Of course. If I wasn't lucky enough to be born to my mom, I wouldn't be where I am. Not would I not only just, people wouldn't even be, but I wouldn't have been raised to be an entrepreneur. I wouldn't have been raised to bounce back every single time something goes wrong. I would have been raised to be the kind of person that sees positive in negative and knows that whenever something bad happens, there must be something good. So how can you find it? And I also, I had a lot of fun knowing that luck is just around the corner and that I'm going to find it.

• 1:26:14Guy Raz?

  That's Robert Reffkin, CEO and co-founder of Compass. And by the way, remember the nonprofit Robert started in New York while working at Goldman Sachs? Well, to raise money to get it going, Robert actually trained for and ran 50 marathons, one in each US state. He was running a marathon every month to reach the goal.

• 1:26:38Speaker 01

  So I ran probably on average four hours until the last one. The last one, I did everything I possibly could to break three hours.

• 1:26:49Guy Raz?

  Yeah.

• 1:26:50Speaker 01

  And I crossed the finish line at 2 hours, 59 minutes and 31 seconds.

• 1:26:56Guy Raz?

  Wow.

• 1:26:57Speaker 01

  By the way, the faster you run, the less pain you're going to deal with, right? Because there's less, less time out there.

• 1:27:03Guy Raz?

  That is not my experience, by the way. The slower I run, the less pain I have. That is my experience, but it's just different, okay?

• 1:27:12Guy Raz?

  Thanks so much for listening to the show this week. If you're not yet a subscriber, please do subscribe wherever you get your podcasts. If you want to write to us, our email address is [email protected]. And if you want to follow us on Twitter, we're at Guy Raz or at How I Built This. You can also find us on Instagram. That's at How I Built This NPR, or my personal account, at Guy dot Raz. This episode was produced by Casey Herman with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Liz Metzger. Our production staff includes J.C. Howard, Rachel Faulkner, James Delahoussaye, Julia Carney, Farah Safari, Liz Metzger, Janet Wu-Jiang Lee, and Annalise Ober.

• 1:27:56Guy Raz?

  Our intern is Harrison Vijay Choi. And Jeff Rogers is our executive producer. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.