Wed 6 Sep 2006
The love that dare not speak its name
Posted by Marlow Harris under Real Estate
Redfin’s in the news again this week, and the media seem to be having a love affair with this company, including the P.I’s John Cook, as he’s mentioned Redfin 51 times in his blog alone, in just the past few months. What is the fascination?
It can’t be just the venture capital raised. Madrona Venture Group invested in both Redfin and Bag, Borrow and Steal about the same time, but BB&S only got written about a measly 7 times. The President and CEO, Michael J. Smith, is a soft-spoken man, who previously served as president or CEO at four consumer Internet sites, including Land’s End, Nordstrom, LifeSketch and Classmates.com, so he’s got an even more impressive resume than Kelman. But his demeanor is less openly aggressive and seems to be a more serious type of leader. This idea of borrowing, rather than buying high-end handbags could, I suppose be as “disruptive” to handbag manufacturers as Redfin is to the real estate business. And now they’re renting high end jewelry too. That’s pretty unusual and ground-breaking. But barely a peep from the business blogs. So why this fascination with Redfin?
According to Peter Cochran, who’s with Vulcan Capital, another investor in Redfin and who also sits on the board, the reasons 1, 2 & 3 are CEO Glenn Kelman.
Why did you invest in Redfin?
I’ve got a 40-page investment memo that answers that question in dizzying detail, but since I’m not willing to post that document on the web, let me try to summarize:
Reason #1, 2, 3. Glenn Kelman and the Redfin management team. It’s a VC cliche, but for an early-stage VC deal my first three criteria are people, people and people (to borrow an investment philosophy from Jon Callaghan at True Ventures and many others). I have confidence that Glenn will always strive to do the right thing for Redfin customers, employees and shareholders. He has the intellectual aptitude, enthusiastic work ethic, humble confidence and swashbuckling-style that makes Redfin a great place to work for super smart engineers and business people.
So, like a lot of what goes on in business, and real estate in particular, it involves personal strength and a cult of personality. Kelman could be being perceived by these other writers and investors as an alpha-type male, and they are responding in kind with attention and money and are happily playing follower to his lead. The alpha male establishes a hierarchy of domination that manifests itself in aggressive, hostile and powerful domination of their enemies, other less-powerful beta males and business competitors.
Kelmans antics in the press, before the U.S. Congress and documented on his blog, have positioned him as the P.T. Barnum of the new 2.0 real estate business model.
Kelman seems to delight in escapades and the high-profile spoof, lives for the short memorable riff of “crazy addictive” male Valley talk and the quick hot-shot sizzle and spin when discussing his “disruptive” technology and “crazy awesome” website. Other people have noticed and are seemingly immune to his mischief, but there are plenty of other people out there who are hypnotized by his hustle and jive.
Let’s hope that Kelman can learn to use his considerable powers for good rather than evil, and rein in some of his “freaky” impulses and become the better man. Competition is great and is unwelcome only by those who have nothing to offer. Pitting business associates against each other, associates who have come together formally and actually created associations based entirely on the concept of cooperation, however, is bad business.
Redfin should follow the lead of the other online/real estate web 2.0 companies and do the right thing. Take their clients out to view the homes, even if it means raising the price of their services, take the Buyer Agency responsibilities, liabilities and risks seriously, and join in the real estate business with a spirit of helpful assistance and cooperation. It doesn’t have to be “we win, you lose, damn the torpedoes, full speed ahead, let the best man win”. You can play nice and still be successful, and be admired to boot.
–UPDATE–
The P.I.’s Venture Blog gives the bully pulpit to Kelman once again by publishing his entire email response to my article in this post “Redfin and the Alpha Male”.
I just want to point out that when Kelman complains of getting letters from the local MLS asking Redfin to remove certain information from their site or blog, it’s because Redfin is violating membership rules that everyone else follows. Redfin doesn’t want to follow the rules and doesn’t think the rules should apply to them. The MLS is a private organization. They are free to try to change the rules or they should resign their membership. To continue whining to the newspapers is tiresome. The bigger story is why David Eraker is gone and why the media haven’t followed up on his departure.
14 Responses to “ The love that dare not speak its name ”
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Pingback from RealEstateUndressed » Blog Archive » Warning: Not about Redfin only, but any discount or flat fee broker.
September 8th, 2006 at 7:17 am[...] This article in by Marlow Harris in her 360 digest about Redfin I propose you think about with all discounters. Click Here with Fear. [...]
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Pingback from The San Diego Home Blog » Blog Archive » Redfin 101 and the Debut of the Podcast
September 10th, 2006 at 6:57 pm[...] I made reference recently to the New York Times article last week, The Last Stand of the 6-Percenters?, and vowed to revisit it. The article dealt with brokerages they called “innovators”, primarily Redfin who has been the subject of tremendous, heated industry debate. The blogging community (see Sellsius, 360Digest, ) has been in a veritable lather over the emergence of the “new” discount (or, more appropriately, limited-service) anti-Christ. It’s actually not new, as the debate has been going on for some time. If you follow the hype, this has been nearly beaten to death. If you are new to the subject, it is worth some serious thought. I find the topic so chock-full of issues begging to be addressed, that it has taken me the better part of a week to collect my thoughts and figure out just how I’m going to skin this cat. Therefore, this will be the first in a several part series and a logical introduction to our first podcast. [...]
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Pingback from Seattle’s Rain City Real Estate Guide » A Two Week Moratorium for Redfin Critics
September 11th, 2006 at 7:28 am[...] A Two Week Moratorium for Redfin Critics September 11, 2006 You are cordially invited to a two week Moratorium on “Sticking it to the Man”. I know Greg and others have been having a lot of fun poking at Redfin, but I would like to announce that Glenn Kelman of Redfin is getting married this weekend. [...]
September 6th, 2006 at 10:32 pm
Type A’s like Kelman can take no prisoners. It is a zero sum game, where success is measured as much by how much the other guy loses as how much is won.
It’s like Chamberlain trying to appease Hitler. Redfin seems to see its entree into the industry by scorching the earth as it blazes a path. Kelman is like Karl Rove trying to capitalize on the wishy-washy position on Iraq and Terror of Democrats. If they seem weak and in retreat, don’t reach out to them - attack and consolidate.
Only by traditional agents finding a way to highlight the shortcomings of Redfin, and winning the battle in the arena of public opinion will Kelman back off, and realize that another more cooperative path is needed for his business to succeed. Right now, he smells blood in the water, and is making like Sherman, burning his way across the landscape of the perceived obsolescence of the current way real estate is bought and sold.
September 6th, 2006 at 10:36 pm
Well- on your own site “Redfin” appears 25 times on the home page alone and over 50 times going back a couple months. So I guess- what’s your point?
September 6th, 2006 at 11:17 pm
Imagine if every broker stoped cooperating with the local MLS and listed their own listing on their sites and only represented buyers looking to buy only the listings they have.
Are we going in the wrong direction? If your serious about real estate, start with Realtor.com and if you see anything promising, contact a local real estate agent. That local real estate agent will most likely has his/her own real estate site with an IDX system you can use specifically tailored to produce local home search results. Also make sure their system updates you daily by email.
Once you find a home you like, contact that agent to arrange a showing. If your using craigslist.com, Windowns Live, Oodle, etc… to search for homes, your definately not doing yourself any favors and spinning your wheels.
Sincerely,
Richard Johnston, REMAX
September 7th, 2006 at 8:13 am
Your implied suggestion is interesting - that the prototypical VC-funded startup CEO is by defnintion an alpha male. I think many in startup circles would disagree with this assertion.
When I think of an alpha male, I think of the character “Biff” in Back to the Future, not of a charasmatic executive. Alpha males are defined primarliy by a desire to be at the top of their local social structure, by threatening and cajoling others into submission. Startup execs want to grow their business by delighting customers. Asserting that the two are synonomous does a disservice to the reputation of all startup CEOs.
j
September 7th, 2006 at 8:30 am
Yes, Jason. Alpha males are defined primarliy by a desire to be at the top of their local social structure, by threatening and cajoling others into submission.
September 8th, 2006 at 8:35 am
Do a search in Lexus Nexus and you will see Redfin is in the news everywhere. 2 reasons why: They have an excellent PR company and what they are doing is in fact newsworthy. Don’t you think? Redfin is new and that is what the “News†is all about. Redfin is interesting. They’re taking big risks. They have formidable VC. To wonder why that gets coverage is borderline idiotic. Maybe, those who are making a fuss about it are really wondering why Redfin gets coverage and they don’t.
September 8th, 2006 at 3:10 pm
“It doesn’t have to be “we win, you lose, damn the torpedoes, full speed ahead, let the best man winâ€. You can play nice and still be successful, and be admired to boot.”
That’s just whining. There’s absolutely nothing wrong with running a business that attempts to ruthlessly crush the competition within the bounds of the law. In particular, there’s absolutely nothing wrong with attempting to destroy your competition by reducing the size of the market itself by doing things like fee-based transactions; you should expect to see flat fees for buyers in the $2k range in the not-so-distant future, and then expect to see that $2k figure drop like a rock as existing brokerages are destroyed.
You can play mean, attempt to destroy the current anti-consumer culture of the real estate business, and take a large chunk of a much smaller pie. Sounds like a perfectly fine strategy to me.
This is capitalism, guys, and this isn’t Japan. Cooperation isn’t always good. Fees for buying and selling real estate are absurdly high and have been high for far too long. The days of percentage-based commissions are numbered; prepare to see zeros sliced off how much it costs to do a real estate deal.
September 8th, 2006 at 3:36 pm
Hmm, this guy sounds a lot like Bernie Ebbers.
September 10th, 2006 at 12:56 pm
I find the whole Redfin excitement to be a bit much, as well. Everyone seems to love it, because of it’s potential, or, even, it’s goal. Whether or not it will ever reach them, is another question.
Redfin is only in two states! Plus, as they’ll tell you, they’ve only rebated under a million dollars in commissions, so they are very small players in a very big pond.
I had to laugh, as well, when I read in the Times article that Redfin ended up opening a couple traditional offices (complete with agents), “because we found that it was what buyers wanted”.
Yeah, you think?
September 15th, 2006 at 11:28 am
yeah this is really not about winning and losing. the important thing is you make the costumer satisfied. and happy.
September 30th, 2006 at 9:07 pm
You know, something I have noticed about many of the blogs that are discussing Redfin, Trulia, and Discount Realtors is that traditional Realtors are scared. Now I am not plugging Redfin, but I think anytime a Realtor or company gets outside of the “John L Scott - Windermere - Coldwell Banker - ReMax - I only charge 6-7% commission, and pay $20,000 to my Broker” box, the agents who have been around 30 years throw a fit. If charging 6-7% commission for tradtional real estate services is a successful business model than it will succeed. If Redfin’s business model is a successful model then it will succeed. Let the market determine the winners. We can quit being the real estate police now.