Name: Compass CEO: “2023 will be the last year of the housing correction”
Uploaded: 2023-01-17
Duration: 9 min 12 s
Description: Robert Reffkin talks about how he can turn losses to profits at the real estate brokerage firm he founded and how civil rights leader Vernon Jordan inspired his career.

Robert Reffkin talks about how he can turn losses to profits at the real estate brokerage firm he founded and how civil rights leader Vernon Jordan inspired his career.

Compass CEO: “2023 will be the last year of the housing correction”

Leadership

Robert Reffkin talks about how he can turn losses to profits at the real estate brokerage firm he founded & how civil rights leader Vernon Jordan inspired him.

Compass CEO: 2023 will be last year of housing correction

so great to meet you robert to talk about compass. You know, you've gotten a lot of attention for starting a real estate brokerage company from scratch and making it the go to brokerage for buyers and sellers from new york city to Los Angeles. You made news a year ago when you took compass public on the new york stock exchange and You earned evaluation of $7 billion 12 months have been tough the next 18 months. I fear that they can be tougher. What changed what happened? The real estate market in 2021 was a record year for agents in the overall industry. But policymakers started raising rates to bring down inflation. And what that did to mortgage rates is it brought us from an all time historical low in January to 20 year high in less than nine months, which really put the brakes on the real estate market. Alright, so on on that point, what's your turnaround plan? The turnaround plan is very clear. Uh it is bringing down our expenses along with the market, but our strategy is the same. We're still focused on hiring the best agents, 18% of the top 1000 agents of country or a compass. The company sells or leases the home on average, once a minute, we sell twice the, the average per agent and we have 30,000 agents in the country. And we, we as a company are building the best platform of tools, services and programs to help them grow their business and best serve their clients? The big question is, when are you an eternal profits? Yeah. So we made a commitment to our investors where we said on the last call that we're committed to being free casual positive next year, 2023, we feel very good about the progress in the path. And we're actually assuming the market is going to be worse than the average Of the analysts out there because we want to have a buffer just in case it's worse than people expect. It's clear that there were things that you had no control over policy makers, you know, raising interest rates, the inflation issues. But compass has just celebrated its ten-year anniversary and through that whole 10 years, you never turned a profit. Why is that? And so as a private company raised $1.5 billion dollars and all of those investors, they invested in the company with a mandate to focus on growth, in expanding the company over profit. That was the time of that period over the last year, the market really shifted to focus on profit overgrowth. And we're shifting with that market. Uh, and we're bringing down our expenses accordingly with the real estate market and we're pausing expansion so that we can create profit without having to expand and invest again and again again in new markets. One of the things that differentiated companies from a lot of other real estate firms is that you created this tech software platform, Do you think you got your money's worth? You spent almost a billion dollars to develop that. Would you have done that differently at Compass? We created the first con to close platform where a real estate agent can go from first contact, putting their client into a crm all the way through the buy and sell side process to their transaction management. Getting paid. There's no other place other than Compass where that can be done. We're very proud of that investment and you can see that the agents that use the platform the most grow their business and stay. Encompass the most. But do you think you got your money's worth for that $1 billion development. My mom has been an agent the majority of my life, she's an agent today at compass and I saw her move from firm to firm to firm, always hoping she would get the support and tools that she could realize her dreams as an entrepreneur build her business and best serve her clients. And so I created compass with the sole desire of how can we be best in the world and making agents better and agents are using over 700 tools in this country every single day. But no industry should have to use all these different tools, average 11 tools. We built it all in one place to make it easier for them to do their job. I understand that you gave an upbeat speech recently to thousands of your real estate agents in Atlanta and your message was personal emotional and you encourage them to embrace one of your entrepreneurial principles bounced back with passion and you guys standing ovation. Well, how do you bounce back? Well, I think there's mindset and actions on mindset, you have to know that there's opportunity everywhere around you and so regardless of the challenge, what's the good news and so, okay, it's a really difficult real estate market. Well, the good news is 18% of the top 1000 agents of country or a compass and historically the best agents always getting market share in a downturn. That's great. That's the good news. I give plenty of examples like that. Um, and as it comes to the actual company and our actions, like I said before, we're going to bring down our expense base, The real estate market will bounce back and is we keep our expense base at a moderate level. That will create a lot of opportunity for profit in the years to come. Well, let's talk a little bit about the housing market and pivot away from just compass. How long do you expect this housing correction to last? I think Next year, 20, will be the last year of the housing correction and I think we'll even see a rebound towards the end of next year. There's still buyers that are out there. They've just been sitting on the sidelines a little bit because there's just record volatility and mortgage rates and a lot of volatility in the stock market Robert. Let's talk a little bit about you. Some of the words you use to describe yourself, hardworking, perseverance, optimistic. Those characteristics have not only propelled compass, but also you in amazing ways compass broke into the Fortune 500 this year you're the first black founder on the list ever to make the list. And there are only six black Ceo on the Fortune 500 you're one of them. What did it take for you to achieve so much? And at such a young age we have eight compass on first principles. The first one is dream big. And so I think I've always been a big dreamer. I'm from Berkeley California. I moved to new york because it's the city of dreams where anything can happen. Uh and I remember when I was an intern during my first summer, I went to Columbia University and I saw who was the Ceo of American Express and he was one of the first black Ceos that was in the Fortune 500. And just seeing him in that role made me think I could accomplish more. Uh, it made me feel like more was possible. And so I think I've tried to do my best to dream big and stay positive uh and have a lot of role models like him who helped pave the way for me. Well growing up, you were raised by your mother and you say that she inspired and encouraged you. What was the most important lesson that you learned from her and how has that guided you? My mom is an entrepreneur, she's a real estate agent today, she's been an agent my entire life. The first half is a life insurance agent, the second half is a real estate agent. And so I think the best lesson I got from her is that no matter how many times you fail, you just got to get back up and I just saw through her that failure isn't a hard thing, it just makes you better and you just, and if you can keep trying and trying again, you'll eventually succeed. You worked in many places before you started your own business, Mckinsey Goldman Sachs Lazard and even when I worked at the White House and you say that you had many mentors along the way, you were always asking for their advice. One of those mentors was vernon Jordan who's famous for advising so many american presidents and he also was an investment banker at Lazard, which is one of the firms that you were working at, I'm sure you learned a lot from him, but what would you say is the best leadership advice that he ever gave you, it wasn't just the advice, it was the confidence. I think at that age when I was in my early twenties, I had this thing in my mind of, you know, I can't do this, I can't do that. And for one reason or another. And then I saw this six ft six powerful black leader who was on more fortune 500 boards than anyone in the history of the United States. And it became clear to me I can do whatever I want. Yeah. He walked in Martha King and came from the segregated south to advising Bill Clinton and working in the White House. Uh, and if he can do that, I can realize my dreams and he interests me to the White House fellows program. He told me to apply like his good friend Colin Powell. And that really changed the trajectory of my life.