On Poaching and Growth

Compass tried to poach me from my former brokerage four times. 2014, however, was the first, and only instance when I sat down with its co-founder and the face of the firm, Robert Reffkin.

His director of sales, a charming Brit named Julian, had finished his pitch, and Reffkin walked in to ostensibly close the deal. For about five minutes, he launched into his potted vision of a firm that would make it easier for agents to operate on the go.

Of course, I was keen to find out what this unknown former Goldman Sachs VP had to say about real estate. But I also cut him some slack, because I wanted to hear about his marathon running.

In doing my research for the meeting, I got a little inside baseball about his banking days from people I trusted—not all of it flattering. But I also learned that in his 20’s, Reffkin had completed a marathon in all 50 states. This was more fascinating to me, and not just because I had run a few myself.

Running a marathon says something unique about a person. Fast or slow, overweight or skinny, they set out to accomplish a large goal. They take on a piece of that goal each training day. And after many weeks, or months, they set out with a community of other intrepid adventurers to an arduous 26.2-mile test that reveals just how prepared they are. I admire marathon runners, at whatever pace they cross the finish line. So I was inclined to give Reffkin an honest listen. And then I owed it to myself to get to know the man as well. Clearly, someone who tackled such an ambitious goal—50 Marathons!—had big plans for the real estate industry.

 

We sat in Compass’s new digs at Lever House. Its lower-floor perch framed the bustle of Park Avenue through oversized, mid-century windows, in human terms: well-dressed, determined professionals along the sidewalks, on their way to and from their offices, striving, hustling, pushing. I needed to slow down the conversation.

“What was your favorite marathon?” I asked. No one would blame Reffkin for giving the safe answer, and ranking the New York City Marathon at the top of his list. After all, no day is better in the five boroughs than the first Sunday in November. Anyone can witness firsthand the thunderous support as those runners barrel down Fourth Avenue in Brooklyn, or realize the quality of their training as they slump, or charge, up First Avenue in Manhattan.

He might recount fondly the changing leaves along the Mississippi during the Twin Cities Marathon, or the delightful net-downhill course from Folsom Prison to Sacramento in the California International Marathon. As a newly-minted real estate guy, he might detail the red brick mansions in the Highland Park neighborhood through which the Dallas Marathon goes. Or the awe-inspiring course along the Pacific during the Big Sur Marathon. Any response would surely provide some insight into the leader of this new firm.

 

“Well, I liked so many of them,” was his non-answer. And it only got more disappointing. “I often found a race that was near an airport so I could pop in and out. That meant that some of the races were not that scenic.”

I didn’t press for more. We wrapped up the meeting with some pleasantries and I was on my way.

I didn’t make a move to Compass that day, nor in the subsequent three attempts their recruitment team made to lure me over. That, despite being offered a very tempting nearly seven-figure sum during the pandemic of 2020. I had done the math that last time; Compass would not have made a dime from my sizable and growing business for at least four years.

But why not move? Why not take advantage of their technology, or stock options, or slick branding, or what looked even five years ago as their desire for domination of the real estate industry?

Here was a person who set out lofty goals, and achieved them. He built a business with his co-founders worthy of a Harvard Business School case study. He tried to turn a brick-and-mortar business into a tech startup, pivoted, convinced thousands of agents to join him, acquired dozens of other firms, took the company public, and as of last week, acquired Anywhere. If the decade since its founding were not proof that he was here to stay, this conglomerate would certainly cement Reffkin’s reputation as a remarkably savvy businessman.

The Other Side

Yet there is another side to all of this: the real estate agents, and the clients they serve. On that day in 2014, I knew I wouldn’t entrust my career to a man or a company that was more interested in growth than the agents powering that growth. I believed that every step to Compass’s success—that is, every agent who joined—would be objectified and ultimately forgotten. Whether Reffkin cashed out and pursued political ambitions, or went the route he ultimately did, I saw this marathon of growth in a different light.

 

That intuition proved correct. I have had many discussions with agents at the companies under the Anywhere umbrella who swore they would never work for Compass. They decried their practices as anti-competitive, and ultimately not even beneficial to their clients.

In New York, The Corcoran Group specifically set out Compass as Enemy Number One. I'm not clear the lawsuit has even been settled. Now this firm, and Sotheby's, and Coldwell Banker, too, will somehow try to merge their distinct corporate cultures. It’s going to be a wild couple of years, to be sure.

On the other hand, agents within Compass did not read the fine print in their agreements when they joined. They were lured in by the promise of more, and trapped by clawbacks. Indeed, these agents need to take responsibility for their own decisions. Rather than owing Compass money they don’t have, most stay and suffer under the brand until they can leave without penalty.

Yet we should all consider how one real estate company’s business model—unprofitable growth fueled by massive debt—has wrecked the big box brokerage firms in New York in a race to the bottom. Some firms decided not to play the game at all and sold to Compass. Other once-great companies who, at another time, valued their agents, began to stiffen their own contractor agreements, and still saw their profit margins shrink. These firms now stand on the precipice of ruin themselves.

 

Are We At The Peak?

We may have just seen peak consolidation. I, for one, expect the pendulum to start swinging the other way. Thousands of agents doing good work prefer to work in settings that value them as people, and not pawns.

As the founder of independent real estate firm Magnetic, I am pleased to see things coming to a head. The playing field for marketing homes and delivering exceptional service has never been flatter. There is ample opportunity for firms like ours to stand out in a crowded field. And regardless of where their agents work, buyers and sellers will get varying quality of service, especially in large firms. Whom you hire, not the company you choose, has never been more important.

Real estate, too, is a marathon, not a sprint. There is time for agents to remember the importance of the work they do, and to cherish the people they help each day. It is this focus that will save the real estate industry from its lesser angels.