Rapid Response: Why real estate matters more than ever, with Compass founder & CEO Robert Reffkin

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Mm-hmm. There was a moment where I looked to my wife and I said I think this could be it. We may not be able to survive this. А колиздат до гол ва No longer to thrive the коллаз серва.

А мій застатимен публіклі да диссикимі на біге семер. In the history of real estate. And I'm happy to say we were right. The goal of compass

is to improve the real estate transaction for all stakeholders. The agent The buyer. Cellar. And the pathway to doing that is by supporting agents.

Армия Тільон антропенур. It's the largest industry dominated by women in the country. Они не ферстрізке. that let the LGBTQ plus community thrive. How do we power entrepreneurship? How do we

Empower people to realize their dreams and their гол to create a better life. That's Robert Refkin, co-founder and CEO of real estate platform Compass. He's had quite a ride over the past year. From a housing market that stopped cold when Covid hit to a boom that's vaulted compass to a successful IPO. I'm Bob Safian.

Former editor of Fast Company, founder of the Flux Group, and host of Masters of Scale Rapid Response. I wanted to talk with Robert because how we view real estate dramatically shifted during the pandemic. As urban locations came under new pressure and a remote work world fueled reloc everywhere. Robert's insights on housing prices and the future of big cities provides an insider's perspective useful to all of us. And his approach to his business too offers lessons about the power of optimism, the role of entrepreneurship, and the responsibility of those businesses fortunate enough to have benefited from a year that he describes as traumatically stressful.

It's a house tour worth taking. I'm Bob Safian and I'm here with Robert Refkin, founder and CEO of Compass. Robert, thanks for joining us. Thank you for inviting us, Bob. So I have to start by congratulating you. First of all, on Compass's recent IPO, certainly a significant milestone for any entrepreneur.

And of course, congratulations on your new book, No One Succeeds Alone, which came out this month. So Which felt like a bigger deal for you, the book or the IPO? Definitely the IPO. That was the hard work of thousands of people. over eight years and for me it's just a a beautiful reflection

Determined, passionate people. who believe that really anything's possible together. And IPR relies on so many things and so many people, as you say, including the environment around you. Last spring when the Covet nineteen crisis first hit. The housing market basically shut down. I

Can't imagine that IPO is necessarily the first thing on your mind a year ago at this time. So we closed our offices on March twelfth. And then just a few weeks later It was in almost every market that we were in.

It was against the law to show property. mean there was a moment where I looked to my my wife and I said I think this this could be it. We may not be able to survive this. When you're in that moment and you suddenly realize you're running in illegal enterprise, which I know wasn't the goal of it, but So what did you focus on?

I was looking to my left and to my right and seeing what other companies were doing. I uh quickly that the goal Was no longer to thrive, the гол was just to survive. Just surviving at that point in time.

would allow us to be incredibly successful because at that point time we thought a lot of companies w in our space were not going to survive. There was no end in sight into when we were going to be able to start operating again. And when you look to your left and your right, we saw a lot of companies doing downsizing. And so we unfortunately had to make the hard decision. And we had to Ask fifteen percent of our our people to leave.

As I recall, you also started sending out weekly emails to your team every day, even on weekends, and to agents every other day during the week. What was the thought that cadence, that discussion you were having with them? For things that are in my control, I like to do whatever I can to help make people feel good. So I thought, okay, what is in my control. is I can be motivational for the people in Compass. That's why I was sending out the daily emails and the daily social posts. Every morning say, Hello Compass, and I'd be, you know, outside my my wife would we be bought some camera equipment and sh she would make the video tape and it'd be around thirty seconds to two minutes depending on the topic.

And it was all trying to be motivational and kind of sharing this theme that Even though You may not be able to grow your business. You can still learn and invest in your business. So then you get about I don't know, eight weeks or so into the pandemic to the middle of May.

And you had an all company meeting where you declared or predicted to your team that twenty twenty was gonna be the biggest summer ever for Compass. I'm told that you have a very optimistic mindset. Clearly you do, but in that moment, were you just being positive or was there something that you were seeing in the data or in the marketplace? In May. I started seeing some transactions come back.

A number of states started to allow agents to sell property again. They were defined as essential workers. Agents were one of the first professions out there sanitizing homes, you know, wearing gloves, wearing masks, trying to help clients realize their goals. Now it wasn't in New York. In New York at at that time, they were still unable to show property, but we did see people leaving the cities and moving to the suburbs. And we started seeing people moving within the suburb communities to places with pools. because they wanted to have a summer experience.

From that data, I made the statement publicly that this is gonna be the biggest summer in the history of real estate. And I'm happy to say we were right. When you look back, was it the numbers or did you just feel like this has to turn? Кампис ви сер. over twenty thousand real estate agents in across three hundred cities, and at the time I was going to sales meetings. with our agents in each region.

Every day I was going to probably five, six, seven sales meetings, talking to agents and asking them what were they hearing? They were hearing the demand from their clients to start looking for a new home because they were so unhappy in in their current circumstance. And the demand was for more indoor space, more outdoor space, more private office space, and then yeah, more second homes. And that's what gave me the confidence. To say that the transactions will follow that sentiment. So the summer comes and all this comes to fruition. There's this boom that's fueled and pushed, as you're describing it to, by a

pandemic environment where people adjusted what they felt their needs were. And then it gets to the fall, and it's not like this boom in housing subsides. It just continues. How much of it, I guess, is about the pandemic, and how much of it is about other factors that were in place before and have been supercharged or accelerated in some way? I believe there's a permanent shift in demand. For home ownership. And that's because

People are going to be in their homes more. going forward than they have in their past. The ability to have A hybrid work environment where you can work from home. Or work in the office.

That means you're gonna use it more. But then there are also second homes that people are getting in lower cost areas, places like Raleigh, North Carolina, or Nashville, or Austin. where people believe they're gonna be able to work a few months of the year. From a different area.

So yeah, those are two reasons why people are buying homes more. And then on top of that is effectively been through Covid. Yeah. multi, multi, multi billion dollar free advertising campaign to everyone in the country saying Do you like everything about your home? How would you change it? You've been stuck in your home.

for a greater percentage of time than any point in the history of the United States. And it's forced people to really re evaluate what they want in their home needs. On top of that, we've had record low interest rates and the Fed has said they're going to keep interest rates low for at least the next two years.

And so that's also supporting this activity. That's interesting. I hadn't thought about that, what you described as a multi billion dollar advertising campaign, basically. We're all being told something that we hadn't really been reinforced to this degree before. Yeah, the home really matters. It's not just a home. It's a neighborhood, it's a community, it provides you a sense of belonging

And I think a lot of people were just busy moving around from job to job, from vacation to vacation. That's really driven this boom in second home ownership. Because if you don't know If you're going to be able to rely on a vacation to another city or another country. having a second home and again it doesn't have to be in a really expensive place like the Hamptons or Santa Barbara. It can be in a lower cost area of the United States. That gives people the security to know that they can always take their family somewhere

And escape. There's been a lot of news coverage for primary homes about people fleeing denser urban areas like cities because of COVID fears. Do you think Housing patterns about where we live have permanently shifted over the last year, or is it too soon to know what's permanent and what may be just transitionary? I think second home ownership.

is permanent. And the desire to have a second home in a a lower cost area, I think that's permanent. I think the desire for an extra room so you can have a private home office, I think that's permanent. I think what isn't permanent is the flight from the cities. We're already seeing in New York it is completely bouncing back.

Over the long run, everything that people love about the cities are still there. In New York it still has the MOMA, it still has the Met, still has Central Park, it still has the theaters. There's been a shift over the last thirty years from the suburbs to the cities for that reason, and I believe it will continue. In cities there are companies that may not need as much space as they had before. That may mean less foot traffic in certain areas. The commercial real estate market and the housing market don't necessarily run together, but what impact do you see there? I think on the commercial side it's still too early to tell. On one hand you could say, Hey, these

Companies aren't going to need as much space because a lot of their employees are gonna work from home. On the other hand, you could say, Oh my God, they're gonna need a lot more space because A number of these cities have built trading floor Bloomberg style floor offices, and really the employee demand is what drives how the company's gonna operate because there's a war for talent and everyone wants the best talent. So if the employees say over time, hey, we need more private offices. and more separation, that could actually create a demand for more space. Have Campus' physical commitments shifted at all since the pandemic in cities like New York or Seattle or other places around the country?

So this has been the riskiest event in the country in terms of Coven. There hasn't been uh something that's happened where

the consequences of getting it wrong for a company. could be more dire, and so we are not being a A first mover. or the leader in making the decision on how to come back to the office. We have a principal at compass called learn from reality.

And what that means is the greatest advantage you have in life is the speed at which you learn. So you have to learn fast and be the the fastest follow of proven solutions. And so We're looking very closely at how other companies are bringing people back to work, whether that's Google, Microsoft, Amazon on one hand, or whether it's Goldman Sachs, Morgan Stanley, JP Morgan on another hand. And we're going to see what is working and and what isn't, and then

Follow it quickly as soon as we get the confidence. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity. When to diversify, how to manage tax risk, and how to protect what you've spent years.

Building. Creative planning where wealth works together. Learn more at creative planning dot com slash masters of scale. Hey, listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topic are just as compelling and timely. From Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode.

I hope to see you there. Humans will never be more intelligent than AI. There's gbi two types of companies. Those are great at AI, and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone.

Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Pre-Covid, you spent a lot of time visiting offices and agents during one stretch in late twenty nineteen, you went to twenty one office holiday parties in fourteen days. You thrive on in person and face to face. And then suddenly You're at home and you're interacting with people remotely.

Has that been hard? Yeah, yeah, we are a very personable company. I would travel four days a week. I could be in two cities, sometimes even three cities. in one day and so it was a big shock for me to to not travel

At all. For what's been now a year. Yeah, which has been great for my family. I have a a seven-year-old daughter, a five year old daughter, and a two year old boy. And also, look, I may just be a glass half full, but I'm actually meeting with more agents now than I was before because it's just on Zoom video conference. I can go from one office meeting in Washington, DC with two hundred agents. They're all asking questions on the chat. And then I can go to Austin literally 10 minutes later and then Los Angeles 15 minutes later and then Hawaii

fifteen minutes later after that, it's really pretty effective. I mean it's funny, those capabilities were there before, but you didn't necessarily use them. Now that you're using them When it becomes I mean, real estate is such a face to face in person business, or always has been. Now that you've been forced to be virtual. Will you be more virtual going forward and how will that balance work? I think you can do both.

Think about email versus handwritten notes. You know, I've personally written over 10,000 handwritten notes. I think there's something to showing the effort to the person on the other side. Yeah. And so I think there's that dynamic here where yes, email's really efficient, but there are reasons to do in person. And so I think it's how do we get the best out of both going forward. So much of house buying became virtual and I saw a staff today, sixty three percent of people made an offer without seeing the home. Do you think that's gonna persist? Like is that gonna be the norm in some way, or is that gonna fade away? I think the percentage of people That buy home sight unseen will go down.

Over time. If given the option People will always rather see the property. I think what we have right now in this environment and things are so competitive. There are so many offers on homes. relative to actually winning that people are being more aggressive than that they have been in the past. I think what technology will do to make that

simpler and more efficient. is there will be Three D virtual tours, which we launched during COVID to help support our agents live stream. open houses, live stream tours. I think there'll be more tools for agents to interact with their clients virtually. At Compass, we launched uh digital CMAs and digital listing presentations. So you can do the home valuation presentation and the listing presentation virtually. It doesn't have to be with paper in person. And we're constantly looking at other things we can do to support our agents in a time of COVID.

But also recognizing that it will continue post Covid. When you talk about all the demand driving people to buy houses without looking at them or make bids on them A lot of the markets this year have seen booms, some of which spur concerns about bubbles from GameStop to NFTs to crypto, whatever. Do you worry at all that housing prices are a a little ahead of themselves? In most markets I am not worried again let's take second home markets.

I think the demand for second homes in places like Santa Barbara or the Hamptons, that's permanent. And when there's more demand relative to supply and the supply is not growing. That is what is increasing the prices. Ultimately Until we have

a surge of new supply in this country of homes. that lack of supply relative to the demand is is going to keep the prices at healthy levels. There's not enough housing stock available for everyone who wants one. And there's also not enough.

Housing stock that is new. And updated. or renovated for everyone that wants them. That's the sub-issue within real estate. We launched at Compass something called Compass Concierge. Where we front load the cost of home improvement services. such as painting, deep cleaning, cosmetic repair.

Fluorine. roofing so that when homes are sold We can help the seller sell a home that is In an updated condition. Because buyers now they want things that are move in ready.

There's so much that's happened this year. I was looking over your book No one succeeds alone. Terrific personal story, entrepreneurial lessons, eight lessons that you rely on. Are there any life moments that you found yourself particularly reflecting on this year? I've really reflected On the power of community and making sure that the community has

the right mindset. a a growth mindset, a positive mindset. I I really believe that mindset matters. I just s kampaні. In the middle of ковід. Where so many people were giving up.

were frozen, were unable to move. I saw us rally around each other, supporting each other emotionally, supporting each other with tools, supporting each other with coaching And I saw how it allowed us to perform and The market in Q one of this year versus prior year.

grew in real estate transactions. fourteen percent, but our principal agents grew their transactions over the same time. Thirty nine percent. And so it showed that hey Together, when we have the right mindset and we support each other with the right tools, the right coaching, the right community, that great things can happen and you can always bounce back.

And as you mentioned mindset. The last year has been Intensely stressful for a lot of people. Has it been. A stressful year for you?

How do you manage your own stress? Yeah, I think that it has Bin very stressful for me. And I think it's been more stressful than

I am able to process. And what I mean by that I I had a conversation with someone that I work with and I was just telling him that it's hard for me to get excited about the rebound uh from from Covid. Like I I felt

in the fall that we were hey, every month's gonna get better and then it didn't. And it's hard for me to feel Right now that hey, every month's gonna get better. There's so many reasons why, you know, with the CDC saying that now you don't have to wear a mask if you have the vaccine. That's like wow, things are really gonna get better, but I can't feel that way. And I was telling my friend

It reminds me of how I felt. After my wife had her first miscarriage. The moment she told me that she is pregnant. Uh

I had never felt so So happy. I felt so happy and I was crying with joy. And then a week later, we we found out that she lost the baby and

In the pregnancy since I've never been able to have that same feeling. And so I was explaining that to him and what he said Which really stuck with me said, Yeah, this is This is a real form of trauma.

And I think our country, we're gonna have to figure out our own individual ways to deal with that, but we've all gone through real trauma over the last year. And so yes, we've had to support each other over the past year, but we'll need to continue to support each other going forward, even after this is over. In the big picture. What's at stake? In this moment for compass.

The goal of Campus is to improve the real estate transaction for all stakeholders. The agent The buyer. Mm the cellar.

And the pathway to doing that is by supporting agents. Agents Ar an industry of two million entrepreneurs. It's the largest industry dominated by women in the country. It's an industry that pushes people in their sixties and seventies. to grow and get better doesn't push them out of the door like so many other companies.

It's an industry of families that work together of our top hundred teams, over twenty percent of them are families. It's the one of the first industries at scale that let the LGBTQ plus community thrive. And Here we are powering entrepreneurship. So what's at stake And I think this is an issue for a country beyond just compass.

Is how do we Power entrepreneurship. How do we Empower people to realize their dreams and their goals to create a better life. And

We're not doing that in Across every sector. Right, so Shopify does that for merchants. We're doing that for real estate agents. And I want us to be the company that can continue to invest the most in agent success. and building for them in ways that they

they know that they need support where there's more technology, more marketing, where there's things like Compass Concierge or Bridge Loan Services. And With the successful IPO and more capital from a fundraising, which was the goal of the IPO. the increased activity in the real estate market leading to outperforms on our financial results.

It's empowering us. to continue to інvest in building the platform that will enable agents to grow their business better than any other platform out there. And we have a tool called the feedback tool. And that's where they put in their ideas and other agents can vote them up or down.

And so we can literally see What agents are saying will help them the most. And that feedback tool and the results of that, that's what I get really excited by. Because it's what our customers are asking for. And so that's where I spend the majority of my time trying to push the organization with capital and resources.

to the demands in dreams that our customers agents have for the future. And so that becomes like a tool to say Here's what we should build next, or here's what they need next? Like are there things That came out of that this year.

That you would point to? Yeah, there's a graveyard of technology companies that have come into real estate. And they were unable to recognize the importance of the role of the agent. And one of our competitive advantages is understanding that they are the center of this

Multi-party transaction. We launched Cumpus Academy. which is a virtual learning guide with videos and check lists so that Agents could even while the they were not able to show properties, they could still invest in their business by learning and growing on Compass Academy. And then more recently

uh starting the summer, they told us where to launch. They said launch in Hawaii. They said launch in Raleigh. North Carolina. They said launch in Florida in places like Tampa and Orlando. And we did that listening to them, and thank God we did because That's where a lot of their clients ended up moving.

I think that's one of the reasons we've been able to grow our market share and our number of transactions faster than the market is because we listen to our agents on where their clients were going to end up moving. You mentioned Compass Academy. You ended up opening that up not just to your own agents, but to any agents, right? Yeah, at COPESS, we don't just stand for compass agents, we stand for all agents. My mom is an agent. She's been an agent virtually my entire life. The first fifteen years as a life insurance agent

ever since as a real estate agent. And I care deeply about Agents as a profession. And so we launched Compass Academy, not just internally to help our own agents grow and learn. uh in in the middle of covet, we opened it up for all agents. So you're trying to help

Everybody, you feel like giving back is important. I'm very thankful and I'm full uh of gratitude uh at this time. I recognize that real estate was One of the industries that was able to not just survive а thrive

In the middle of a very hard time for a lot of individuals and companies. And I I really want Compass to be a company that can play a positive role in the larger communities that we serve, we have something called compass cares. where for every single transaction we invest back in the the community through donations. And I just hope for the listeners uh out there just know that we're very thankful as a company.

Part of a single parent home. My mom was also disowned by her parents for an interracial relationship. And what she did that was really smart. Is she connected me with seven nonprofits to give me an extended family that of support that she couldn't provide just her by herself. And so The communities that support each other.

which Compass is a community like that now, it matters deeply to me. And I want us to be the kind of company that can support the communities that we're in. And that's why you know Campus Care is where we give a donation back to the community with every transaction that compass matters. That's why with this book We're giving the proceeds and profits back to charities that help young people realize their dreams.

I think that's the least that we can do. Given that This company's had success in this type of environment. By the way, I think it's important for all these companies that were able to realize outside success. in COVID. I think we all have responsibility to recognize the role that luck played and to give back to the our communities.

Well, Robert, thank you. Thank you for spending this time with us, taking the time to share all your experiences. I really appreciate it. I I'm glad to be here and to support in any way I can. Master of Scale Rapid Response is a Wave What original. The show is recorded remotely using sanitized audio gear. I'm your rapid response host, Bob Safian.

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