Gary Keller: Dominating an Industry While Simultaneously Destroying It
Have you ever listened to a podcast and had a revelation?
I was listening to the Tim Ferris Podcast the other day (The Tim Ferris Show, Episode 401) and heard an interesting interview with Gary Keller. I have been in real estate for years now and have closely watched as the industry has changed. During this podcast, everything that I had been thinking became very clear to me. I think Gary Keller is a business genius, but I think his business plan is one of the main reasons for the disruption of the real estate industry. I also believe that this business plan will not stand the test of time in the real estate industry. After hearing him on the podcast, it was clear to me that KW is missing the “One Thing”, the one BIG thing that would make them a company that stands the test of time.
The Interview
Let me break down his interview with Tim Ferris. One of the first things that they talked about is how Gary started selling real estate in Austin. The story Gary tells is similar to many others I have heard in this business. He moved into an area that he was unfamiliar with and sold 6 houses in 30 days. He told Mr. Ferris that all he did was read some real estate books that taught him how to generate leads and off he went. Congrats, good for you, probably not good for your clients.
This exact scenario is what has always bothered me about the real estate industry. A brand new agent, who knows nothing about an area or nothing about real estate can represent someone who is making one of the largest purchases of their lifetime. For those of you who have been in the business for more than 5 minutes, you understand how many things can go wrong in a real estate transaction. A lot of these things could wipe someone out financially and have lifelong effects.
Unfortunately, the real estate industry has made it too easy to become an agent.
I do not know the laws in every state, but in the state that I live in, the only requirements are that a person has finished the 10th grade, sits through 60 hours of “training”, and passes a test. Do those things and you can now “help” someone through a transaction involving a huge amount of money.
The training that I speak of only consists of how to pass the real estate licensing test. Once during my training, I raised my hand with a question about easements, and I was told that my question would not be on the test and that we need to move on and not waste time. Anything that will not be on the test will not be discussed. Great training!
Obviously, Gary Keller did not make the rules on how to get a real estate license.
What Gary has done with KW is to exploit these rules. His business model is to offer “education” to agents. KW focuses hard on recruiting brand new agents. Every KW office is independently owned, so I don’t know if this is a common practice, but in my area, KW was the only company sitting at the real estate training school recruiting agents. The goal with KW has always seemed to be getting to the top of the agent count. Why not focus on brand new agents and offer them an education? This plan has worked very well for KW and they now have the most agents of any company.
When I worked at KW, Gary used to brag that KW was an education company, not a real estate company. That is a brilliant marketing tool for recruiting new agents, but Gary’s story about reading some real estate books before selling 6 properties in 30 days explains the type of education that KW offers.
KW Education
The focus of 99% of KW’s different education programs, BOLD, IGNITE, and coaching is how to generate business. Obviously, everyone in this industry needs to generate business.
The KW formula is old school.
I’m guessing it is very similar to the books that Gary read in the ’80s. I went through the BOLD class about 5 years ago. It was 8 weeks of “how to bother everyone you know and beg for business”. Call 30 people a day, tap strangers on the shoulder at the grocery store, knock on a bunch of doors. This may have been how people did business 20 years ago, but now it’s just annoying. There is a reason that congress just passed a law banning robocalls. People don’t want to be bothered by salespeople.
One of the most disturbing things that happened in the BOLD class was the “money magnet” exercise. I’m sure the general public would be as horrified as I was when I witnessed this exercise. Everyone was told to bring 100-$1 bills to the class that day. We were split into groups of 5. One person would then lay on the ground and yell “I’m a money magnet” while the others dropped their $1 bills on top of that person. Here is a video that I found on YouTube of a BOLD “money magnet” exercise.
I submit that this is the reason people don’t like real estate agents.
This type of “education” does absolutely nothing for a person buying real estate. All it does is help with the narrative that real estate agents only care about making money, not helping people. This narrative is a major reason for the current disruption of the industry.
The KW Franchise Model
Another podcast topic was the creation of the KW franchise. Gary Keller did extensive research on different franchises like McDonald's and Dairy Queen. He modeled KW with ideas from other successful franchises and has tried to redefine franchising. Gary gives a lot of credit for the success of the franchise to the fact that he has total control of the franchisees.
This is great for Gary Keller, and KW Corporate, but is it good for the real estate industry?
Again, Gary is a great businessman. He has made more money than most people in the world, but at what expense? Is his company really helping the real estate industry as a whole or is it only helping KW? Keller’s quote, one hour and 2 minutes into the podcast tells the tale. He told Tim Ferris “The (KW) franchise document is the most valuable asset of the company. Hands down, the most valuable asset. There is not even a close 2nd!”
This revealing quote leaves out 2 major groups of people. The thousands and thousands of KW agents, and real estate customers.
The current real estate landscape
The real estate industry has been ripe for disruption for some time now. It is not only because of KW.
This is not to bash on KW agents. There are some great agents at KW. This is not about the agents personally, it is about the franchise model.
The model is not helping the real estate industry at all. The reason people don’t like real estate agents is that most of the time, the agents are not providing a service worthy of the commission earned. The education provided in this franchise is all about the agents, not the customer. To prove this point, I looked up the itinerary for the KW Family Reunion (an annual company convention) which takes place this February. Of the 112 classes offered to the attendees, there is only ONE class that focuses on the consumer. I would bet that most consumers would rather their agent learned about local laws or how to read a building inspection. Instead, KW Family Reunion offers classes such as “Pick up the Phone to PickUp the Profit” and my favorite “Turn Your Listing and Buyer Presentations Into Acadamy Award Winning Performances”!
The One Thing…Missed
In order to fix this industry, we need to focus on the customer. We don’t need to give “Performances”!
In almost 2 hours of talking to Tim Ferris, Gary Keller did not mention the customer once.
Gary has done a masterful job of recruiting agents and building his business but I think it has been at the cost of the industry. The focus of every great company is on the consumer, for KW, the consumer is the agent, not the general public that is buying real estate.
Let me repeat, I think Gary Keller is a great businessman and it goes without saying that he has built a huge real estate company. He did this by primarily focusing on the agents that work for him. It is always a good idea to focus on your employees and make them happy. Now he has a legion of loyal agents/fans who are “drunk on the red Kool-Aid”. The problem with this plan is that by making the sole focus on the agents, he is missing what real estate and any other industry needs to focus on, the final customer. His plan is not good for the real estate industry and we are currently seeing the effects of this type of business plan.
It is now 2020. The public has had enough “performances”. Gary was right when he said that KW is not a real estate company. The One Thing should always be the consumer!
