Be Bold and Innovative

So these are— so what did I do at the start? I did some bold ads. Yeah. Thank you, my man. I appreciate it. So what did I do? So for one, when I started out, I wanted to differentiate myself. So when I started out, there's a huge number of realtors within Palo Alto, 600 realtors trying to sell 400 homes. So right when I was new, I ran a very bold advertising campaign. And I think the majority of people, when they do real estate, Their flaw in life is that they try to— whenever you do ads, you try not to offend anyone. Oh, I don't want to offend anyone. The thing is, when you don't want to offend anyone, you're not going to attract anyone because they're going to be so boring, so homogeneous, that they're not going to be distinct whatsoever. So I ran a very creative advertising campaign. You guys are quite a bit younger than I am, but there was the Village People, YMCA. Some of you guys may know that song, YMCA. And they had the Village People dressed up as this. Oh, yeah. So I dressed myself up as that. And imagine poor grandma who's, like, reading the paper and she's going to, like, have a heart attack when she sees that. But what I can tell you is, love it or hate it, that ad will stick out. And my thought process on doing these ads, maybe 10, 20% of people will love them, probably, like, 60% of people will hate them, and maybe the other remainder won't care. But what I realized in life, don't broadcast yourself to the masses Appeal to your target audience. And I just said, hey, if 10% of people in my area use me, I can become the top guy in the entire nation. I'm fine with 10%. And then that's the key, having that boldness to not be afraid. And this really kind of helped launch me before I got started. Oh, that's another— that can wait. Jesus. We might go no audiovisual. We'll see. Ken. And I ran a few other ads. There's one there. It's the anatomy of America's number one realtor. And it played off Da Vinci's anatomy. And it said things like, left brain, very analytical, math econ. Heart, belongs to my clients. Hands, written $2 billion in contracts. So it kind of went through some of— kind of played upon the Da Vinci ad. But creative— oh, please. I have a question about your— so I don't know if you've seen the movie I Love You, Man. Kind of gets the idea from— Ah. More like that movie. Thank you. Explaining how they marketed. Yes. So I'm— good memory. So those who haven't seen the movie, it's actually kind of a funny movie, I Love You, Man. It's about a real estate agent who's kind of like unsuccessful. And then he has like— meets somebody who really gets him all confident and runs these crazy ads and starts doing well. So good question. Did those— did that movie inspire me? I kind of have a very egocentric view of life. I think that helps you achieve things more in life. I think I inspired the movie. So these ads now are— they're a bit dated. So these ads predated the movie. And I would say as a whole, if you see a good idea and you improve upon it, that's good. But the real— try to create something new. Try to create something original. So I think I created that movie. But no, it's a very funny movie. So great question. But having the boldness, and again, not being— if you guys are on your path to greatness, I can actually just tell you a little bit what's going to happen. On your path to greatness, all the mediocre people are going to be going after you. So you might be surprised, but in real estate— well, do you guys think, am I very popular in real estate amongst our other agents, or not as much as I should? Not. Yeah, not as much as they should. The fan club's small, which is— I was actually very popular until I started my own agency. But the key is once I talked— started my new model, which I'll get to in a moment, and disrupting it and improving it and changing it, people didn't like it. I can tell you guys this right now. This applies both psychologically on your path to greatness, but also in business. As you're launching higher, the people below you are gonna try to bring you down. You wanna jump from mountaintop to mountaintop. And you don't— the people in the valleys who are trying to pull you down, you don't care about. Because mediocrity always opposes greatness. There's a great book, Confederacy of Dunces. You guys should— really funny book, Confederacy of Dunces. Not so much for business, but just for a good read and really funny, interesting psychological book. But it's a great quote at the start. And it says, you shall know a true genius by this sign: all the dunces are united in a confederacy against him. And that's the key, is like on your path to greatness, when you're disrupting and improving things, people might rebel against you. And it's okay. It's actually flattery. At least you're attracting notice. At least you're not being boring. And I think to me, that's the greatest crime in life. If you're bored, you're boring. I never want to be boring. Life is too short. So after the success, I had the crazy ads, I started doing really well, I said it's time to change the real estate business model. So you really want to dissect things. And what I try to do is try to whatever space you're looking at, try to think of what inefficiencies are out there. I'm not sure if there's too much left. Oh, this is good. But what I tried to do was was look at what are the flaws in the business model and how can I improve upon them? And so I tried to create— I've created on the buyer side 3 revolutions within real estate. And I think you guys can listen to them, which is good. The most important part, though, as just a general principle, just because whatever space or industry you're looking to disrupt, just because it's always been done that way, Doesn't mean it's not ready for radical change. It doesn't mean that people don't want more. Just because it hasn't been done doesn't mean it can't or won't be done, and by you of all people should do it and do it as soon as possible. But my thought process was, when you buy a home, you guys say in 10 years we'll be looking at buying a home. I saw 3 fundamental inefficiencies within real estate that I wanted to cure, and I had the confidence and courage to do it even though I was already number one. doing the traditional model. Like, it's getting boring. It's time to innovate and change. So one thing I've done, I have about 50 employees at my company. They're all, all my buyer's agents are salaried specialists. Salaried specialists, each word's revolutionary. All my agents are on salary. So within real estate, everyone's on commission. So it's a radical departure to be on salary. And I thought, what would be the advantage to you, the home buyer, If your agent's on salary. Any thoughts? My man. They don't have an incentive to sell the house immediately. That's brilliant. Exactly. People— like, you talk to a typical agent, when's the best time to buy real estate? Today, right now. Oh, what home should I buy? Well, this one. This one right here. And they're just looking for the sale. And that's all you worry about. Does anyone else have any further thoughts? But that's exactly it. Oh, good. My man. How are you able to incentivize your employees to continue to sell? Because at the end of the day, you need to sell houses to keep the business afloat. So how do you find balance between salary and incentive? Great question. Probably the fundamental question of my model. So how do you incentivize people? Typical in sales, you know, you have this big carrot at the end, and it's kind of zero or a huge payroll. And it was interesting. I came from law, where in law it's all about the billable hour. Whether the client wins or loses, whether you settle or, you know, go to trial, it's all about billable hour, and that's your incentive. But in sales, the norm is, you know, I want to, you know, give me the big fish. So how do you incentivize people? Well, first I thought it's really about attracting the right people. So what I realized is I could not pick traditional real estate agents. I couldn't pick salespeople because already it's in the blood. I need the sale and I get all the money. So I realized I had to go out of real estate. And I thought, who actually would be good? Who really— this is kind of more of a billable hour mindset. Who would be good at this? And I thought attorneys. I'm sad to say it, but attorneys are pretty cheap. You can get a— if you get an attorney who didn't go to a top 10 law school, you can get somebody for like $80,000 a year, which, you know, given how hard they worked, isn't that much money. But if I picked— So at my firm, even though it's a real estate brokerage, we have about 20 attorneys working there. And I thought attorneys were the best model because they're used to that. They're not used to the big payout. That being said, how do I incentivize people? I still try to give raises. People start out at $80,000. 2 years later, they're at $120,000. Show them the path that I'm on your side. I'm going with you. But also sometimes people as a whole are risk-averse. So how could I take advantage of that? These salespeople, your income is very volatile. It goes up and it goes down. During the spring and fall, I just see millions of dollars coming into the firm. During the winter, I see my bank account drop by a few million because I'm carrying the whole firm. So there's a lot of volatility. I'm taking that they're not taking. And also I give my employees matching 401s, health insurance, so things that you normally wouldn't get in real estate. So I got people who are of the right mindset. and who are risk-averse to do this. That being said, I do worry as I'm training my agents to get better and better, and now the person I'm paying $120,000, he's worth $200K to me. So I just, I wanna keep the money coming in. But that is the fundamental flaw of the model. And then my people, maybe they don't work quite as hard as a salesperson would because you're pounding the pavement trying to get the deal done versus they're getting paid regardless whether the deal comes in or not. So I try to incentivize them. And then also certain personality traits are more drawn to, I don't mind the sales. But that's the fundamental issue with my model. Good analysis. Please. Very great analysis. If you get somebody early, a buyer, and get them early, you might have 4 or 5 transactions within them. You gotta love Silicon Valley. I've had clients who have bought 2-bedroom condos from me for $1 million. 2 years later, they're buying an $8 million estate in Atherton because their company, Facebook, IPO'd and they got a ton of money now. But like, they get them while they're young, the buyers, and then you're playing the long game. And also, big picture, Realtors slash almost all salespeople, it's just a short-term horizon. People as a whole, as a metaphor, don't play the long game. I'm not sure if you guys have heard of the marshmallow test, that famous psychological study where it just looked at, I think it was 6 years old, and they said more or less, they gave a marshmallow in front of the child, left him alone for a minute, and say, if you don't eat that marshmallow in that time you're alone in the room, we come back, we'll give you 2 marshmallows. And it kind of broke down about 50/50. Some of the kids are like, I got to get— I just got to eat it. And then some are like, nope, nope, I'm going to wait my timeout and get 2. And they tracked these children, and later on in life, those who had the patience to not grab the marshmallow had much better life outcomes than the children who couldn't, who had no willpower. So I've been very good at deferring my happiness, my gratitude. And right now I'm making pretty good money. But I'm heavily reinvesting back into the firm. I think that if my model succeeds, I could just destroy every other firm. Coldwell Banker, L'Enpanel, it's the wrong model. So I'm kind of going— I'm playing the long game, both in that excellent analysis there and then just big picture because most salespeople don't. So everyone's on salary, so that's pretty revolutionary. Oh, please. So is it— Yeah, you go. No, great question. So let me— I'll just start out. Sometimes I'll go to— I'll meet with a client and clients will say, how are you different from other real estate agents? I go, well, let me just actually start with much shorter. How are we similar? I go, we're both licensed by the state of California. And that's it. That's our only similarity. But the real goal— there's another company called Redfin that actually bears a decent resemblance to our model. So those of you who aren't in real estate or haven't bought a home yet, Redfin is a company that if you buy a home with them, they're a little bit less hands-on, but they have an amazing website that helps you do a lot of research. But they might not show you the home or do other things, but their website's amazing. The key is when you buy with them, and the agent typically gets either, usually the commissions are 5 to 6% of the total sales price. So on $1 million, you're looking at $50,000 or $60,000 worth of commission. But that's split both ways. The buyer's agent will get half that, the listing agent will get half that. But the way Redfin works, so it's usually commissions are 2.5 or 3%. Redfin's model is we're gonna give you less services, But you're gonna get half the commission back. And a lot of agents are really against Redfin and against the model. It's a discount model. It's— they're bringing down the industry. I think it's a great business model. I think it's fine what they're doing. It's a very valid business model. People can't— change is happening in life. People either can bemoan the change or you can lead the charge to change things. You always wanna be the leader. But you asked a very nuanced question. How am I different from Redfin? They're the company that we're most similar. But we're kind of— I think more or less the real estate market's going to bifurcate into 2 areas. You're going to have the discount agents, and then you're going to have the elite boutique agents. I think right now the majority agents are adding no value and pretty mediocre. They're going to become extinct. But you're going to have one big winner on the top and one big winner on the bottom. Because I think in the end there's going to be a network effect within real estate. And then you just get a critical mass and you become that person. Redfin though is very much the discount model in the sense of lower price, lower services. We're the exact extreme opposite, super high services, no discounts back. What we try and provide our clients a lot of, oh, this would be interesting, the way I'd phrase it would be this. I'd be in front of, like, Googlers particularly think buyer's agents are overpaid, and the reality is most are. But I would say, like, how do you, do you think commissions, I would say commissions are inefficient how they are. Do you think commissions should go up or down? Everyone say down. I'd actually think there might be means for it to go up. Up in the sense of, if I can take some money coming into the firm and I can give back to the client a multiplier of value, then they want me to do as many multipliers as possible. So the key is I have a lot of loss leaders. You guys might know a loss leader is an economic concept where you actually subsidize something, it loses money, but in exchange you bring in a lot of business. An example of this would be a grocery store says, you get a gallon of milk for a dollar. They're losing money on that, but by that loss leader, but they're getting a lot more traffic in and making it up. So we have a lot of loss leaders. The construction consultant I mentioned is one. But also if clients buy with us, we have a contractor that they get some free time from him. We also have an interior designer. They get free time with her. We also have— we'll— if you buy a home over $3 million, We'll help you write a will and trust, and then also we'll help set up an LLC. So we'll do more or less a lot of services. But the biggest fundamental difference, Redfin's very scattered. They might have 2 people who cover all of Silicon Valley. And then that leads me to the second point. We have salaried specialists. So the key, one of the biggest differentiations of us is that our agents specialize on a territory, and they get, they can dig really deep. Generally, the way real estate works, the client chases the deal. Oh, I want to buy a home. I'm looking in San Francisco or I'm looking in Silicon Valley. Hey, I'll help you with everything. And my thought process is if you're a jack of all trades, master of none, you're offering no value to the client. What we have with our model is you're a specialist. When you look at what are the most esteemed professions in the world, law, medicine, for example. The way it works in those professions is you specialize on your little niche and all you are is you're expert on that area and that's all you practice. So that's what I want to create. Because instead of people trying to cover so many cities, my buyer's agents, all they do is work with buyers. We have a whole separate division that works with sellers. All they do is work with buyers and all they do is work with buyers in a particular town. In San Mateo, one person. In Burlingame, another person. Generally all attorneys. But that way, if you ask a detailed question, you're the hyper-smart people you are, you want to ask a very detailed question, we can know all that. How high of a fence can I build here? Can I tear this tree down or is it a heritage tree? All very nuanced questions. And also pricing value. There's value in expertise. So I think we're different because higher-level people, almost all attorneys, but specialists and then the loss leaders would be some of the ways. Redfin is a great company with a great business model.