#27. Lessons from Robert Reffkin: Compass
“The day I was born my mum calls her parents and says, ‘I just had a kid’ and they just ask one question ‘what is he?’ and she says, ‘he is Jewish and Black’ and they hung up the phone.
A week later they sent a letter in the mail that said she was disowned and till this day I never met my grandparents, and never spoke to them.”
– Robert Reffkin
“A core part of my belief around entrepreneurship is believing that you can change your stars.”
– Robert Reffkin
Introduction
Welcome to another exciting article in this series of iconic entrepreneurs, and the lessons they can teach us. Previously, we learnt about Personal Branding, Self-Confidence, and Ownership, from Tyra Banks, Oprah, Kanye West, and Ben Chestnut.
Today I am excited to bring you the incredible story of Robert Reffkins, the cofounder and CEO of Compass. Robert has a unique story of constantly overcoming hardships and obstacles to succeed in his career and business. Compass is the leading technology real estate company, and largest independent real estate agency in the U.S.
I believe his story could be invaluable to you. Less than ten years after launch, Compass is a publicly traded real estate brokerage with about 21,000 agents, and annual estimated revenue of $5 billion.
This article is inspired by the podcast episodes of NPR, and Reid Hoffman.
Let’s get started.
SUMMARY
Lesson #1 – Bounce back again and again with Resilience and Passion.
Lesson #2 – Listen to your Customers.
Lesson #3 – Have a Clear Plan of Action and Deliver!
Lesson #4 – Minimize your Weaknesses and Maximize your Strengths.
Lesson #5 – Know when it’s time to go.
Robert’s Story
Robert has a unique, yet relatable story.
He grew up Black and Jewish in California and was raised by his mother, Ruth. She moved from New York to California to pursue her dreams, and there had a relationship with an African-American man, Robert’s father, and was disowned by her parents.
Her relationship(s) did not last, and she had to pick up herself time after time. She first founded a pre-school, then became an insurance broker, and eventually a real estate agent. But she never let the challenges get to her.
Lessons #1 - Bounce back again and again with Resilience and Passion
Despite any challenges, Robert’s mother would start dreaming again about a bright and big future. This energized her and was a crucial lesson for Robert.
Determined to change his path, at the age of 13, Robert decided to invest his savings in buying DJ equipment. He noticed other DJs mostly played songs they wanted to hear vs songs their customers wanted.
Lessons #2 - Listen to your Customers
He played what his customers wanted and was very successful, earning $100k throughout high school.
He also gained a place at Columbia University and used his earnings to pay for tuition. Determined to shorten the expense, Robert completed college in 2.5 years. As university drew to a close, Robert was unable to secure a job offer.
Looking through all the business cards he had collected at college, he found a card for a partner at McKinsey & Company and emailed him. The partner helped Robert secure an interview at McKinsey, although, he had just 2 weeks to prepare.
Lessons #3 – Have a Clear Plan of Action and Deliver!
Robert spent those 2 weeks at the Columbia Business School library, reading every case study interview book. It paid off.
He got the job as the youngest McKinsey analyst ever hired.
McKinsey, Losing $1m, and Goldman Sachs
During Robert’s 2-years stint at McKinsey, he struggled with the culture of constant feedback after every meeting or client engagement-feeling like he was not improving fast enough. Although, later in his career he would appreciate the importance of getting feedback.
During the Dot-com boom, Robert invested his savings of over $100k, Mckinsey earnings, and bank loans in the top 5 tech stocks. He saw this grow to $1m and then it crashed to $0, to the point where he owed the banks over $10k.
Devastated, he called his mom who encourages him to see a psychotherapist. He does this, and like his mom begins to dream again about the future he could create - How he would go back to business school and get into investment banking, and then private equity.
He had seen his mum do this several times when she failed – she would dream her way out of it and bounce back with resilience and passion.
This worked, and in 2006 he joined Goldman Sachs where he would work successfully for a decade. Robert not only dreamed but came up with a plan, and acted on this plan to achieve this dream.
Lessons #4 – Minimize your Weaknesses and Maximize your Strengths
Key feedback provided at both firms was on the need to focus on minimizing your weaknesses and maximizing your strength. That way you stand out doing what you do best.
While at Goldman Sachs, Robert founded a non-profit committed to closing the opportunity gap for young people – America Needs You. This rekindled his entrepreneurial dreams.
Despite succeeding at Goldman, Robert realized his momentum was slowing down, and it was time to go to the next thing.
Lessons #5 – Know when it’s time to go
“I think that you have to know when it’s time to go. I could have stayed there my entire career. But I would not have had the opportunities that would’ve been worthy of dreaming for.
If I can’t go to sleep at night dreaming about how great the future will be, I can’t be my best self.”
– Robert Reffkin
Tricked into Starting Compass
So, Robert reached out to Bayo Ogunlesi, a founding partner of the private equity firm Global Infrastructure Partners, for a job. But Bayo had seen Robert succeed in the non-profit he founded and was convinced he should start a company.
Robert was reluctant, so Bayo proposed that as part of the interview process Robert should develop the business plan for a new idea, with which he can assess his business acumen for a job.
Robert met up with his friend, serial tech founder Ori Allon, and they came up with the idea that would become Compass, although he had no plan to use it.
He returned to Bayo expecting a job offer, but his response was – “This is a great idea. Go do it”. To give him a bigger push, he gave Robert $500k as his first investment, promising that if he failed in a year, he would hire him.
Compass
It’s 2012, and Compass is born with the mission: to take the pain out of apartment hunting in New York City.
The idea was to hire neighborhood specialist (primarily from the hospitality industry) who weren’t real estate professionals but understood a certain neighborhood, and pay them a salary and not commission, with an additional bonus for customer service.
Pivot
Robert soon realized that this model was not working.
Customers wanted to talk to an agent once, get options, and finalize. The additional interaction with non-expert ‘neighborhood specialists’ added complexity to an already stressful experience.
Something had to give. Robert realized that there were 2 million agents in the US who had expertise but had poor tools. He drew lessons from his mom who is a real estate agent – seeing her struggles as she changed firms, with the hope of getting better tools to succeed.
No one else was investing in these agents to make them more successful. They were the customer.
“The same way I was listening when I was a DJ to the people who said play this music while other DJs were just listening to themselves, that was the Compass Pivot.”
“Instead of being the company who just built whatever they wanted, we became a customer backward company that said - Okay, there are these agents that are all entrepreneurs. They know what they want.
We could be the company that listened to them and build everything they want in one single place.”
– Robert Reffkin
To drive this change and gain credibility within the industry, Robert convinced the best real-estate agent in New York – Leonard Steinberg – to join Compass as a partner and shareholder.
The team could now focus on the new vision – creating a platform that would let real estate professionals realize their full potential – through a combination of Technology (project management) tools, marketing, and a strong brand.
Conclusion
Today, Compass is the largest independent real estate agency in the United States with 21,000 agents across 40 cities. The average agent that has joined Compass has grown their business by 19%. Compass’ recent (IPO) debut on the stock market reported an estimated annual revenue of over $5 billion.
Robert harnessed his personal momentum to succeed by believing he could ‘change his stars’. He used this to drive momentum throughout Compass with a refined vision, and transformed an industry by empowering agents to become more successful.
Thanks for reading and see you next week.
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Nero
Racing Towards Excellence.