Hello everyone. I'm Mike Delprey and you're listening to Context, the podcast where we're talking to business leaders about the businesses and business models and technologies that are changing in real estate. So my guest today is Robert Reffkin, CEO and founder of Compass. Hey Robert.
Hey Mike. How's it going?
Good, good. Awesome to have you here in Boulder on a beautiful fall day. We're loving it. So really appreciate you coming in and your time. I think I want to start out with the question on everybody's mind, right? You got Q3 earnings coming up, massive restructure in the business. What I really want to know is how do you typically start your day?
So, I wake up and my wife probably wakes up earlier than I do because she starts getting the kids ready. We have three kids, a 10-year-old, seven-year-old, and three-year-old. Two girls and a boy. And I look at my phone, see if there's anything there. I got to tell you this, I never looked at the 10-year at all, the 10-year interest rate. Yeah, before the last year and a half. Now I look at it every day. And then I go downstairs, I make myself a cup of coffee. And then I start feeling like I'm up, and then I make my kids food, a little breakfast, and hang out with them. Bring the girls downstairs. They go to school and then I walk my son to school every day.
Awesome. What kind of coffee guy are you? Espresso, drip?
Good question. So, Nespresso because it's like so easy to put the pot inside. So I start off in the morning with an espresso because boom, no milk to get in the way.
Oh, no. Nothing's ever in the way. What's the pod of choice? The flavor.
So, it's another good question. So you've learned over time the darker the pod the more caffeine, right? So it depends how I'm feeling, how much I need. I try not to go for the black one, the darkest, because then it's going to take caffeine away from my later part of the day. You got to measure it out throughout the day. So I start off with an espresso and then like two, three hours later like a regular cup of coffee and then two, three hours another regular cup of coffee and then I'll try to be done if I can or if not then like one little half espresso.
Nice. I really appreciate that. We should just, I'd be happy talking about this for the entire time. Living in New Zealand turned me into a real coffee snob in a sense, and I just love it.
Oh, yeah. There's a lot of good coffee out there.
Although, the one coffee I've never understood is some of these coffees when you can get them at a store, it tastes very acidic. Do you know what I'm talking about?
I don't understand why people like that.
Some everybody's different flavor profile. I mean, it's not for me the super acidic, you know. I think there's certain notes that I prefer. Everybody's got their, I mean, how many Nespresso pods are there? There's like 50 you can get. Maybe even more.
Yeah. And then there's some like special ones like from Colombia.
Oh, good. This should be a regular occurrence. Robert and Mike talk about coffee.
All right. So back to coffee and compass.
Love it. So speaking of Compass, when I'm thinking about this and I kind of take a step back and I think about the business, gosh, from the outside looking in over the past decade, I see kind of these three transformative moments for the business. You know, the first one was raising massive amounts of venture capital, more than any other real estate company has ever done. Second would be this really big investment in tech, right? Again, more than anybody has done. And then the last is, you know, this the past year kind of responding to the shifting market, '22, '23. Out of those three different eras, which one would you say has been the most challenging?
I think this most recent one has been the most challenging for sure. And the reason why, I think the hardest thing for Compass has been bringing culture back in to the company to pre-COVID levels. I think culture has been stolen from almost every company from the pandemic. And what I define culture is when you come into the office, are there as many people laughing and smiling as there were before? Are there as many people just talking not about work, just about coffee? Exactly, exactly. Are there as many people walking to get cups of coffee together? Yeah. And across almost all companies, that's been taken away. And I think it creates one of the biggest risks to culture and to companies, particularly in real estate. And so bringing culture and connection back to Compass has been by far the hardest thing, but by far the most important thing that I think I've ever done.
What's something you've learned personally going through that process?
So much. Yeah. It's all I think about every day. What I've learned, it's not about productivity, it's about connectivity. Whoever connects the most grows the most. Connections where the opportunity happens. And what pandemic and Zoom and work from home did is it made people think, 'Oh, this is great. I could be more productive at home.' Because they define productivity as meetings, not about connection. What I've learned is people don't care how much you know until they know how much you care. And it's too hard to show how much you care through a screen. By the way, it's one of the reasons I'm here. If it was two years ago, I'd say why not do it on Zoom. Two years ago, I'd say a text message, email response, right? But now I associate anything that's not in person with risk. And what I learned is you can't build trust virtually. And our industry in real estate is built on trust. Trust and like. What I learned is good times create bad habits. Bad times create good habits. This is a time to do what got you here, not what you did over the last couple years. We need to be less transactional and more relational. This market's your greatest opportunity disguised as challenge and the challenge is, you know, I don't think we have an inventory issue in this country. I think we have a connection issue. We have become disconnected to people. You know the stat, 90% of buyers and sellers say they'd work with the same agent again but only 12% do. That's because people aren't staying in touch when they think they're staying in touch. And what has happened, I believe, is that we have been deceived. Technology has made us think that we were connecting when we weren't. Technology had made us think that a text message or a social post or just a newsletter or a Zoom call is a connection when it's not. If it's not eyes on eyes, face to face, person to person, it's not a connection. I think what's happened in real estate, I think technology has stolen the sales mentality from the profession to be dramatic. And what I mean by that is in the old days, if I'm a sales manager, I would give you the check in person and I would say, 'I know how hard you worked for this. I know the transaction almost didn't happen, you know, many times over, but congratulations, you did,' and I give you a hug. Now that check sneaks in through the night through a wire transfer, stealing the relationship. That's between the broker and agent. But the same thing's happening with the agent and their clients. They're not meeting in person as much anymore. And so it creates, it's a challenge, but also creates an opportunity. And in those old days, that's when brokerages charged 30%. When there was connection, the less connection, the less they're going to charge.
Hm. So just on that, Robert, I mean, what you're describing sounds significantly different from what I hear and what we hear from a lot of other companies. Do you see that kind of turning into a competitive advantage for Compass going forward?
