During a 90-minute interview on NPR’s “How I Built This,” Compass CEO Robert Reffkin shared his life story and the defining moment that changed his company’s trajectory.

When Robert Reffkin launched Urban Compass in 2012, real estate agents weren’t part of the plan. The then-rookie CEO focused on transforming talented service industry workers into salaried neighborhood specialists who’d help renters navigate New York City’s unique and expansive rental market.

“I would literally go to restaurants, try to find the nicest waiters, and ask them if they would become neighborhood specialists,” he explained during a 90-minute interview on “How I Built This” on NPR. “And I’d go up to the doorman and doorwoman at hotels and say, ‘Hey, would you want to be a neighborhood specialist?'”

Robert Reffkin | Photo credit: Compass

However, after a year, Reffkin realized his reliance on neighborhood specialists, although experienced in customer service and knowledgeable about the day-to-day goings-on of an area, was a mistake that could tank Urban Compass before it had a chance to make the impact he and his co-founder, Ori Allon, dreamed of.

“We didn’t know anything. Including [anything] about real estate” Reffkin said while laughing about his and Allon’s naivete. “My mom was an agent, and I worked with her a little bit when I was younger, but we didn’t understand the way real estate worked.”

“We didn’t even know how much the commission really was,” he added. “We were two complete outsiders and the idea was just let’s make things better.”

Reffkin said despite deep discounts for renters and a 30-day guarantee that put Urban Compass on the hook for one month’s rent if they failed to find a tenant, the company was flailing under the weight of frustrated consumers and an overstretched budget.

“So within a little less than a year, I go to the team and I say this isn’t gonna work,” he said. “…We were charging half off and even giving such extraordinary offerings on both the landlord side and on the renter side.”

“[But] renters were not happy when you really looked at the feedback, and you look at the comments in the emails, you can see there was too much frustration,” he added.  “The way I knew that it wasn’t working is I was listening to the customer.”

Reffkin went back to the drawing board and presented a new idea. Urban Compass would become a traditional real estate brokerage focused on providing trained real estate agents with the technology and tools to better serve their rental clients and become successful entrepreneurs.

“I came to the conclusion that real estate agents are central to the transaction and that real estate agents are not going away,” he said, recounting his thoughts back in 2013. “There are 2 million of them in the country and there’s no great company that’s working for them to help them realize more success.”

“It was a really large industry with $100 billion of revenue that agents produce every year, where the incumbents, the brokerage firms, aren’t investing in research and development to get better,” he added. “The agent is the most underserved customer out there.”

“I kind of saw the lane, the opportunity to build for this huge customer base that no one else was building for.”

Reffkin’s change of heart didn’t go over well, with Compass’ senior members planning to fire him. However, after a talk with Allon and his wife, Reffkin decided to double down on his plan to become the go-to place for New York City’s best real estate agents.

“Over a third of the team left. It was really hard and people wanted to change the world,” said Reffkin of the aftermath of his pivot. “I was telling them, ‘Let’s not reinvent the wheel, let’s just make the wheel better.’ That didn’t align with a lot of people’s dreams.”

“I didn’t take anything personally. These were friends [who left]. I love some of these people to this day,” he added.

From there, Compass’ trajectory became what real estate dreams are made of — the company recruited leading agent Leonard Steinberg from Douglas Elliman, rapidly expanded into New York City’s for-sale market, rebranded and began its meteoric rise to the top of the real estate food chain, which included a successful initial public offering in April.

Reffkin said Compass’ success has attracted plenty of critics, with a laser focus on the brokerage’s recruiting tactics that have been at best called controversial and at worst, illegal and unethical. However, just like when a third of his team left in 2013, Reffkin said he doesn’t take it personally. In fact — he calls the criticism “one of the best things Compass has.”

“When our competition says, ‘Oh, Compass, they’re only successful because of A, B, C, D or whatever that thing is, it makes them feel okay about not doing anything about not asking their agents ‘What can we do to make it so you don’t want to go to Compass?'”

“The concept that an agent has moved for money is really offensive to the agent in that sense. They’re not going to move their entire business to a company they don’t believe in for some economic incentive,” he added. “That’s a small percentage of their annual income.”

Reffkin likened the recruiting criticism to the mass movement from Blackberry to Apple in the late 2000s. “When I moved from my Blackberry to my iPhone, yes, I got like $300 off the first phone, but that’s not why I moved,” he said. “[Apple’s] competitors said a lot of really bad things, to try to secure people from wanting to move, but they had their chance.”

The CEO said he’s focused on cementing Compass’ position as a technology company, which he said should be a goal of all real estate brands that have any plans of sticking around for the long term.

“I think that 20 years from now if you’re not a technology company, it’s unlikely you’re going to exist,” he said. “These agents are going to be here, right? People use agents more now today than they did 10 years ago.”

“Who’s going to be the company that helps agents use technology to realize their entrepreneurial potential?”

Email Marian McPherson

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