Glenn Sanford, Elizabeth Riley, Renee Funk | Leadership from the Heart

Oh no, thanks for having me back. And yeah, it's true. This has turned into a really... I mean, I see it. It's every week, I think I'm watching it, especially on LinkedIn. It goes up really well on LinkedIn and pops up there, and I'm always watching an episode or two every week or two.

Yeah, it has. I mean, if you go back six months ago, it's now September, so that would be like February, March timeframe. Six months ago, that was hit. You know, I was actually, Debbie and I were actually in Australia at the time, and we were like, you know, watching the news, wondering, you know, what country is gonna get shut down. We actually moved our trip up to come back to the US by two days because we're like, flights are potentially gonna get shut down or whatever. But obviously, fortunately, you know, COVID hasn't been as bad as it could have been. I mean, it's a pandemic, you don't know what you don't know until you figure it out. It's still not good, obviously. It's certainly changed everything. You know, obviously going to the office for people is a very now perceived risky proposition. And sort of, so the whole idea, you know, social distancing and wearing a mask everywhere you go when you're in public. I mean, these are just different things that are going on. The cool thing about, obviously, eXp, and there's some other folks that really have branded this, but we were built for what we're going through. It was, you know, we launched after the downturn in 2008 to 2009. We recognized that the fact was that we finally had technology. You know, our phones now, super high-speed internet. In fact, I'm streaming off of an LTE connection for this meeting, and yet I can literally be anywhere. You can be anywhere, and we can actually be collaborating, working together. That whole thing. And so as a company, we were able to provide, you know, the infrastructure and support for agents to continue to do their business without missing a beat. We downsized because we didn't know how bad it was gonna be, but you know, as a company, we were able to weather the storm. And we actually had our, you know, from a financial perspective, our best quarter in the history of the company in what could be perceived as the worst quarter for residential real estate for quite some time. We saw Realogy was down like 25%, Zillow was down, you know, a bunch. Redfin barely grew, you know, growth company. And then you've got, you know, a number of other players that are out there, most of all of whom shrunk in Q2. And we were able to actually, because of the agents growing and everything that was going on, we were all supported agents and have a great quarter.

No, go ahead.

Yeah, no, for sure. You know, there's, I think there's now five, I think there's five publicly traded real estate brokerages now, so it is actually fairly easy to sort of see a lot more numbers than you could even, you know, three, four years ago. I mean, when you go back to 2013, you had two companies at that point that were publicly traded, and that was Realogy and, to a limited extent, Berkshire Hathaway. But Berkshire Hathaway, of course, is like half of the planet in terms of just, you know, different companies, so it's hard to actually isolate the real estate brokers inside of that. But you know, Realogy and Zillow, and they were hit pretty hard in Q2, and we grew, you know, pretty significantly.

Well, certainly Showcase IDX didn't really contribute at this point, but one was our ability to, you know, the single biggest cost to run a real estate brokerage is the bricks and mortar, followed closely by the staffing costs. And so that's the reason why, you know, most real estate brokerages that are out there want their franchises, so they're having to pay franchise fees off the top to, you know, headquarters. And then in order to pay for the local brick and mortar component, which is a requirement of the franchise agreements in 99% of cases, you know, owners have to charge at least a 70/30 split with their agents just to be able to support that bricks and mortar infrastructure. And then on top of that, you know, they have to have them pay in that 30% enough again to pay for that. You know, the agents, they're paying twenty, forty, some markets fifty thousand dollars before their split comes down. That's because, you know, in order for that market center, that real estate office to be profitable, they need that much income just to pay for the bricks and mortar, the staffing costs. So it's totally different economics as a real estate brokerage. And then because all of our costs are variable, we're able to reduce our expenses on a dime and then reinvest as things come back. And so we've reinvested in staff and a bunch of other things to make sure that we can keep up with the growth in Q3, which has been incredible. But it's been, you know, that's been the real driver, just agent productivity, agent growth. You know, we're up over 50% year over year in terms of agent count, and so that certainly doesn't hurt when it comes to putting up transactions. Of course, all of this is all based on Chris's leadership from the heart, and it all comes down to the leaders who literally have led with their hearts in helping agents actually succeed. They've given back to others to help them succeed at a higher level, and that's what's really driven, that's what really drove the numbers. And it's really that, you know, that leadership component, people living and caring more about others' well-being, recognizing full well that, you know, if you care for other people, eventually it comes back. The giver's game is just built into the eXp model. It was from day one something that really was part of my DNA for a long time, even pre-eXp. I love models where I could help somebody else succeed and I can get rewarded for those efforts over the long haul, and that's sort of really just played into why we had such a great quarter. Of course, IDX is a really great opportunity for us to actually build out something we were doing pre-eXp. I was involved in running six of the top real estate portals around the country, and so we had the top real estate websites. And when we were thinking about what we're gonna do during the housing crisis, we're going, well, we could go and lean in on the portals, but that was gonna take a lot of money. You look at how much money Zillow invested to get the footprint that they have, or Redfin, we're talking about hundreds of millions of dollars that they've invested to sort of build out these national footprints and monetize them and do all the other things that they're doing. And we didn't really want to, you know, go and raise tons of money, didn't really actually want to be sort of subservient to Wall Street because that's what it would have meant had we went and raised that money. We want to be very agent-centric, so we instead went with a model that was very agent-centric. And now we're able to come back around now that we've got the agent base, now that we've got the profitability, now that we've got, you know, all of that, and we're able to go back in and invest in actually building out a portal. So one, in general, so you think about just, you know, searching eXpRealty.com, and so the upgrades will take place in the next six months or so to just that portion of the site. But then, you know, could we develop our own portal strategy? And I think that's gonna get really exciting because wouldn't it be great if you're one of the top two or three portals on Google when you search for real estate is an eXp-powered portal. And that's what we're really sort of gearing towards. Probably, it's a long game. It's probably, you know, 18 months, two years before anybody gets to look at what we're doing in that regard. But once it starts to really roll out, you know, the types of things that we are internally, having done this before, is something that, you know, very few companies out there have any understanding of how to do it. And that's an incredible competitive edge for not only our buyers and sellers, but the agents as well and how they're focusing on the customer acquisition and also the customer service that they provide their customers. So that's an incredible leverage point for all of the eXp Realty agents.

Yeah, you know, we're talking to, you know, all kinds of folks. We're talking to associations of realtors that wanna use the platform. We're talking to, you know, I think that was the Women Up conference that you were part of yesterday. You know, and so in the real estate space, we've talked to, again, you know, associations, national associations, and, you know, I don't want to mention by name because, you know, we're not really at that stage where, you know, they want to announce or we wanna announce that we're doing something together. But the fact is that we have the only true platform that creates a sense of place that currently exists in any industry, not just real estate. So that's, you know, for businesses, for events. We're partnered with one of the largest events companies in the US, a company called The Farm, that was working for Nike and Apple and a bunch of other companies, who's doing real-life events, providing support services for them. And now they're doing events with, you know, the NBA and with, you know, and there's a number of companies I can't mention because they're under NDA, but we're talking about the biggest tech companies, multi-billion-dollar tech companies that's using the platform to run their events, to organize their staff and their people. We've got one company, I think a forty billion dollar market cap company, not in technology directly, but they're moving fifteen thousand of their staff full-time into a private campus to actually run their business virtually. And they have a distributed workforce in the field actually doing physical labor, but you'll have fifteen thousand people gonna be working every day in eXp just like we do. So it really creates the sense of going to the office, having water cooler conversations, being able to quickly pull people in and out of conversations. And the best part of it is, given that there are other technologies out there, you aren't going to Zoom fatigue. So I'm like staring at the camera here, which means that I can sort of see you down here like talking, but I don't actually see you because I wanna ultimately give the best presentation to the people who are watching in the audience. But in Virbela, when you use the avatars, all of a sudden, I'm much more relaxed. I'm able to really sort of pay attention on the different things, take notes, and actually be more present for the person that I'm talking with in Virbela than I can be on Zoom or Google Hangouts or what have you. So it's a totally different platform. Some great stats that came out, HTC did a big study, and they found that socially present immersive experiences were actually better at staying in flow state, meaning, you know, being and staying in the flow of actually getting things done, and was as meaningful and emotional as being in person with somebody. So it wasn't quite there, so it's, but it was the best analog for physical reality, but it actually trumped physical engagement from being able to stay in flow and being able to keep working and make things happen. So you get this huge bump in productivity. It's something like thirty to forty percent over being in person working with, but still getting a lot of the emotional connection piece. So we've got staff, lots of stuff now that we've never met in person, but because we're always working together every day in a virtual campus setting, running around, pulling people into meetings, you know, drafting stuff, asking people's opinions. It's quite incredible.

It is, yeah. And obviously there's other companies that are trying to go virtual or being forced to go virtual. Primarily, you know, they're going to Zoom as their platform of choice. And the reality is that nobody's really been able to scale a company using Zoom or Skype. Now, that doesn't mean that there aren't some companies that aren't able to operate in a more virtual way. And some companies have been around for a while, like WordPress is, you know, a fully virtual company, and some other companies have certainly done it. But Virbela provides this level of true engagement that it's just a totally different animal. And so, you know, companies trying to scale virtually without a platform like Virbela, and Virbela is kind of a standalone entity right at the moment, meaning there's not really a good analog outside of, you know, they're just gonna have a hard time sort of doing what we've done and continue to do, which is why we bought the company back in 2018. We knew how powerful this platform was for us. We didn't want anybody trying to grab the platform out from under us and potentially doing something in other areas with it. And as you know, there was a little bit of a kerfuffle in January of 2019 that, you know, one of our competitors actually tried to do that, and they literally tried to make that happen. And fortunately, Alex turned that down and said, 'No, we're not selling to you because we're actually, you know, we're gonna go with the company that has actually been a customer of ours.' And so we were able to, you know, fortunately had a great relationship with Alex that we were able to sort of work that attempt, much to the chagrin of the other player out there. So, you know, and now it's been, you know, full circle. We are now totally empowered to continue to scale and grow.

Well, we hoped. I think we would probably be the, probably the more accurate term. We knew what it did for eXp. We knew that, you know, without Virbela, there's no way to scale the organization at the rate that we did. It never would have happened. And it just, because, you know, if you think about the folks that are stuck with Zoom as being their platform for engagement, it really tends to be more of a one-way communication. It's not really having a whole bunch of people really truly collaborating and bouncing off into different work groups and coming back and sort of being that sort of dynamic thing that you get in a physical office. And I also consider them to be very transactional and relatively high friction. You have to set an appointment, you have to put it on the calendar, it has to be worthwhile to actually put it on the calendar without wasting somebody's time. And so there's all these sort of checklist items that have to sort of be in the mix. Whereas with Virbela, it's just on, you jump in, you wanna have a conversation, so we just wanna ask him something. You know, who, I don't wanna say who answers the phone because we're realtors, but who wants to answer their phones these days, right? So, you know, it's like the phone, I call the phone app on my phone the most intrusive app on my iPhone. So it's like the one app that I actually wish I could get rid of on my iPhone.

Oh, oh yeah. Well, even today, if I show you my screen, like on my speed dial, you don't see my phone app like the speed bar down here. It's up here. So if I'm scrolled over here and somebody, you know, I wanna make a phone call, I have to actually scroll back. It's like I just don't use the phone now. Workplace by Facebook, I've got, I got the Boxer app, which you guys can remember when we were really using Boxer heavily. And then I've got some of my Gmail and other stuff in the other speed bar. But, you know, the phone is not my favorite app.

Yeah. So, well, first and foremost, you know, it's really cool that, you know, we led the way on two fronts, you know, revenue share and equity. And now we've got, you know, we got a couple of other companies that now offer equity in some form to their agents. And so that's pretty cool to sort of know that, you know, it's a, if you can't beat them, sort of do what, copy, you know, that's kind of what we're seeing is that we're seeing, you know, we're not able to grow their brokerage, you know, by just doing this or just doing that. So we're gonna copy and copy and copy. And in fact, one company, they've got, you know, five-level share program, they got like four ways to earn equity, and then they're like, quote unquote, you know, charging less fees and this and that. And it's kinda funny to see, quite frankly, because they're not innovating at all. They're just copying. And so the challenge that I see is that, you know, unless they're truly coming from an innovator's persona, they're always gonna be trying to catch up because we're, you know, like we just bought Showcase, we bought Virbela two years ago. You know, we got some, I can't talk about yet, that we're in the works that are game changers yet again. But first and foremost, you know, I wanna just, you know, hats off to the fact that we got other companies now offering equity. You know, so that's a big deal. So agents are being honored for the work that they're doing, something I, as an agent, you know, I was, you know, obviously the active productive agent at a very high level, running teams, I knew all the pain points that agents went through. And other folks that literally don't even come from residential real estate trying to build a model for residential real estate agents, and then they figure out that, okay, what we're doing isn't working, so let's just copy eXp at some level and just make it cheaper. And so that's kinda what we're seeing at the moment. One of the challenges, and of course we're talking about one particular company in that particular case, it's a total turnaround too. If you look at their revenues from Q1, look at the revenues from Q2, the company's been like in a, trying to figure out what to do to actually turn themselves around. And it's tough to turn yourself around once you start to actually shrink. You know, you look at almost any company when they're growing, you know, you wanna keep your foot on the gas because once you stop growing, it starts to go downhill fairly fast. And it's sometimes hard to stop that, especially when somebody's got a first-mover's advantage like eXp who hasn't stopped growing. So the other piece is look at the financials. We now have five, count five, public companies in the real estate space. Read the financials of RE/MAX, read the financials of, read the financials of eXp, read the financials of Redfin. Actually, there's six companies, read the financials of Fathom. Fathom, you know, they just did the deal with where they're serving equity to their agents because they're more of a transaction-based model versus, you know, the combination of revenue. And then you got, you got Keller Williams out there. Read all the financials, look at the numbers, and make, you know, if you're evaluating, look at the numbers. Who's gonna, you know, actually got a model that scales, is profitable, and is growing? And it becomes, you know, in my opinion, pretty clear. And that right now, and won't always be the case. I'm kinda like Jeff Bezos in that, Jeff Bezos says somebody's gonna eat his lunch at some point. I fully own the fact that if we aren't vigilant and we aren't continuing to iterate and continue to make the best model, somebody will eat our lunch, and they deserve to eat our lunch. So I'm not gonna complain about somebody eating our lunch if we aren't innovating, doing things cool and interesting. But that's our job. It's always continue to innovate, iterate, do things cool and interesting, and make sure that the agent is always first and foremost. You know, who we're building this company for, it's not for, you know, obviously, we're all shareholders, so we do wanna be profitable because we wanna be around long-term as well. But, you know, the key is how do we continue to put agents first? How do we continue to iterate? How do we come up with new products and services? eXp Offers platform, you know, I can't say enough about what's coming down the pipe with the offers. Darren James is now leading up really kind of affiliated services with that. He's a super uber producer, super great guy. If you guys haven't had him on Leadership from the Heart yet, get Darren on, great, great, great person.