I hesitate to write this. I really do.
The reason is that I have so much admiration for Gary Keller, who is on my list of the top five most important and influential people in the history of the residential real estate industry. (The other four are: Colbert Coldwell, Dave Liniger, Arthur Barnhisel, and the duo of Lloyd Frink and Rich Barton.) The real estate company he founded in 1983, Keller Williams, has grown to be the largest single brand in the world by agent count with over 180,000 agents in May of 2018. (Realogy remains larger across its many brands with about 192,000 agents.)
Many of my favorite people in the industry are Keller Williams brokers and agents, and things like KWCares, Red Day and KW’s coming to the assistance of the people of Houston after Hurricane Harvey are extraordinary and worthy of admiration.
But the tone of the conversation — intense, conflict-ridden, sometimes awkward, sometimes funny — is what really stole the show.
That’s being rather gentle.
UPDATE: Inman has published the full video of the session in sparkling HD. Go check it out!
Combined with the strange message of his Vision speech at Family Reunion earlier this year (which I discussed here and here), what I saw was a leader of a company well past Stage 1, deep in Stage 2, and headed towards Stage 3 of decline. This is worth talking about not because any of us should take pleasure in KW’s fall, but because other companies in real estate can and should learn important lessons from what is unfolding before our eyes.
Dr. Slido, the One Word is “Hubris”
Since I’ve learned not to rely on a news report, let me embed the video of the complete session between Brad Inman and Gary Keller:
You tell me whether I’m being uncharitable when I say that the one word to describe Gary Keller on stage yesterday is “hubris.”
The constant back and forth with Brad Inman was entertaining, to be sure, and Gary Keller’s charisma is undeniable, but…. The constant interruptions and side comments, the refusal to sit down, the one-upmanship, the incessant “We’re #1” claims, the putdowns of other companies…. Combine all of that with small revealing moments like, “Pretty much all the people that Inman News worships,” and “I built an innovation engine,” and “I don’t care” (when told that Glenn Sanford of eXp respects him) and so on and it is extremely difficult to avoid the overwhelming impression of (a) supreme confidence, if you’re a fan, or (b) overweening arrogance, if you are not.
Is this what you want from the leader of your organization?
And if this is the leader, what does that say about the organization?
Five Stages of Decline
- Hubris born of success
- Undisciplined pursuit of more
- Denial of risk and peril
- Grasping for salvation
- Capitulation to irrelevance or death
Quite a few companies and organizations in real estate are somewhere on this curve from hubris to capitulation, but it is difficult to discern exactly where and to find evidence of where they are.
But it seems clear that Keller Williams is past the point of hubris born of success and deep into an undisciplined pursuit of more, and leaning into a denial of risk and peril.
Stage 1: Hubris Born of Success
Of hubris born of success, Collins writes:
Great enterprises can become insulated by success; accumulated momentum can carry an enterprise forward for a while, even if its leaders make poor decisions or lose discipline. Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place. When the rhetoric of success (“We’re successful because we do these specific things”) replaces penetrating understanding and insight (“We’re successful because we understand why we do these specific things and under what conditions they would no longer work”), decline will very likely follow. Luck and chance play a role in many successful outcomes, and those who fail to acknowledge the role luck may have played in their success—and thereby overestimate their own merit and capabilities—have succumbed to hubris.
The best leaders we’ve studied never presume they’ve reached ultimate understanding of all the factors that brought them success. For one thing, they retain a somewhat irrational fear that perhaps their success stems in large part from fortuitous circumstance.
Does any of Gary Keller’s performance at Inman, or at Family Reunion, strike you as suggesting an irrational fear that perhaps success stems in large part from luck?
Do his constant putdowns of competitors, from eXp Realty to Realogy, say to you that this is a guy who underestimates or overestimates KW’s merit and capabilities?
What I find so disturbing about this is that Gary Keller does in fact have penetrating understanding and insight as to why they’re successful. I wrote in a previous post:
In my recent post about Leadership in real estate, I said that what is most needed is courage. Well, Gary is acting with enormous courage here and betting his company’s future on it. He’s not putting his head in the sand hoping that somehow, magically, things will change. He’s not going to the government seeking intervention to somehow save his skin, save his company, to stave off the inevitable as taxi operators have and continue to do confronted by Uber and Lyft. He is exercising true leadership, instead of positionship, and trying something different.
For that alone, he deserves our praise and admiration.
But it’s more than that. He sees very clearly what the problems are on the horizon. I found very little with which I disagree on the problems that the industry faces; where we differ is on the solutions and strategy, but not on the underlying problem.
Gary says on Inman stage, he woke up about three years ago and realized that training and education is no longer the key, but “technology and only technology” is. (At about the 31:45 mark of the video above.) That’s a remarkable insight.
However, hubris born of success led directly to stage 2: undisciplined pursuit of more.
Stage 2: Undisciplined Pursuit of More
On stage 2, Collins writes:
Hubris from Stage 1 (“We’re so great, we can do anything!”) leads right to Stage 2, the Undisciplined Pursuit of More—more scale, more growth, more acclaim, more of whatever those in power see as “success.” Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence—or both. When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall. Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall.
Discontinuous leaps into areas in which you have no burning passion is undisciplined. Taking action inconsistent with your core values is undisciplined. Investing heavily in new arenas where you cannot attain distinctive capability, better than your competitors, is undisciplined. Launching headlong into activities that do not fit with your economic or resource engine is undisciplined. Addiction to scale is undisciplined. To neglect your core business while you leap after exciting new adventures is undisciplined. To use the organization primarily as a vehicle to increase your own personal success—more wealth, more fame, more power—at the expense of its long-term success is undisciplined. To compromise your values or lose sight of your core purpose in pursuit of growth and expansion is undisciplined. [Emphasis added]
Is this not a perfect description of Keller Williams in 2018? A company that has strayed from the disciplined creativity that led them to greatness in the first place? One that is making leaps into an arena where they cannot be great, cannot be better than existing incumbents in that new arena, into activities (technology development) that do not fit with its economic engine?
KW’s culture and emphasis on training, on learning, on community all made it the largest single brand in real estate over the past 30 years. Gary’s insight into the mechanics and motivations of agent teams gave KW a huge leg up over their competitors in real estate in the past decade or more.
Absent hubris from success (“We’re so great, we can do anything!”), KW might have seen the coming changes in the industry and the importance of technology, and chosen to find partnership and alliances with everybody they could in order to remain focused on the real estate industry.
Instead, it chose to jump into the technology industry with both feet, calling itself a “technology company”, dressing its senior executives in what they think is the tech-startup uniform of black t-shirts and hoodies, and telling technology vendors to FOAD.
Talk about a discontinuous leap into areas in which they have no burning passion.
Then on stage yesterday, when Brad asks Gary whether he has a deal with Zillow, or with “any of these people”, Gary does the coy thing and “What do I do with Zillow?” and “I have an agreement with Dotloop, but they can’t use our data.” Why in the world would you want to alienate and piss off Zillow?
Love ’em or hate ’em, Zillow is a company with a burning passion for technology. They are the largest technology company in real estate by far today. I wrote about this in my second post about Gary’s Vision speech:
Facebook spent $1.9 billion (with a B) on Research & Development Expense in just the last three months of 2017; for the entire year, that number was $7.7 billion. Do we need to continue on with Amazon, Google, Apple, Oracle, Salesforce, and so on?
OK, so that’s big bad Facebook, and the real Tech Giants, all of whom are hard at work on AI + Data. We already know KW isn’t talking about competing against those guys. Fine. Realtor.com and Zillow came in for a bunch of abuse during the speech, and the audience was more or less told to stop sending their data to Zillow. Gary’s Tech Breakout video made that even more clear.
Well, Zillow spent $320 million in 2017 on Technology and Development. In 2016, Zillow spent $255 million on Technology. Over the past five years, from 2013 to 2017, Zillow spent a total of $893 million on Technology and Development with significantly more than 200 people who touch code.
KW had best get to spending that $1 billion, like this year, and buy all the talent it can get its hands on.
To turn from the disciplined focus on real estate, on training, on education and on culture–in which KW had substantial advantages over its competitors–to compete head-on with real technology companies, in their own backyard, then go out of your way to piss them off as much as possible….
This is a textbook example of Stage 2 of decline: undisciplined pursuit of more. It is a direct result of hubris born of success.
That is where KW is today.
Stage 3: Denial of Risk and Peril
But after yesterday’s performance by Gary Keller, I have to wonder if KW is not edging into stage 3 of decline. When Brad asks Gary “Does anyone scare you?” and the answer is a disbelieving “Noooo!” as if Brad had asked if Gary likes Nickelback… it’s beginning to feel a lot like
Christmas Stage 3.
On stage 3, Collins writes:
As companies move into Stage 3, internal warning signs begin to mount, yet external results remain strong enough to “explain away” disturbing data or to suggest that the difficulties are “temporary” or “cyclic” or “not that bad,” and “nothing is fundamentally wrong.” In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes high-performance teams dwindles or disappears altogether. When those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.
No one scares Keller Williams? Nobody?
Obviously, Zillow doesn’t scare Keller Williams. Does Amazon scare them? How about Google?
Sure, the history of the real estate industry is filled with lions over the hill who have ended up doing precisely zip to change the fundamentals of brokerage. But KW is no longer competing (solely) in that space; KW wants to be a technology company because technology, and only technology matters. No one scares Gary Keller or his team at KW in that arena?
At one point, Gary Keller says, “When people disagree with me, that means I’m ahead.” Really?
Does anybody on the senior team, or in the agent Leadership Council that Gary mentions (around 31:00 minute mark) disagree with Gary? Is there any vigorous, fact-based dialogue happening inside the room where decisions are being made? You know, facts like “$1 billion really isn’t that much in technology” and comparing the number (and quality) of programmers working for KW vs. the number (and quality) of engineers working for Amazon, Zillow, Redfin?
How about facts like huge numbers of KW’s producing agents leaving for eXp, NextHome, and others? I mean, Gary himself admitted as much when he talked about former KW agents now at eXp returning $1 million in profit sharing. That’s a lot of profit sharing which left the company in recent months, no?
I don’t know and can’t say whether KW as a whole is in Stage 3 of the decline. Maybe there are vigorous debates behind the scenes, and Gary feels like he’s way ahead as his own senior team disagrees with him on investing $1 billion into becoming a technology company–something precisely none of the senior executives at KW have any experience running. Maybe his franchisees and top producing agents are sending warning sign after warning sign back to Austin, and those warning signs are being heeded.
But based on what I saw yesterday, it’s hard to think that’s what’s happening.
Could KW Actually Be in Stage 4?
It could actually be that what we are seeing is Stage 4 of the Decline. What Gary Keller and the KW team are doing is not making discontinuous leaps into areas in which they have no burning passion, but throwing up a Hail Mary pass out of desperation. That is a possibility.
Of stage 4, Grasping for Salvation, Collins writes:
The cumulative peril and/or risks gone bad of Stage 3 assert themselves, throwing the enterprise into a sharp decline visible to all. The critical question is: How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place? Those who grasp for salvation have fallen into Stage 4. Common “saviors” include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a “game-changing” acquisition, or any number of other silver-bullet solutions. Initial results from taking dramatic action may appear positive, but they do not last.
Charismatic visionary leader? Check. (Note that Gary Keller is not KW’s CEO. John Davis is.)
Bold but untested strategy? Check.
Radical transformation? Check.
Dramatic cultural revolution? Maybe.
Hoped-for blockbuster product? Check.
The only thing missing so far is a “game-changing” acquisition. Maybe that’s in the works.
In a way, that would explain all of the over-the-top rhetoric on display yesterday on Inman’s stage: it isn’t arrogance we’re seeing, but fear. It is possible that KW’s pivot strategy isn’t one born out of hubris, but out of desperation, a grasping at salvation, a silver bullet named Kelle to stave off the bad news….
If so, that is a tragedy. Gary Keller is one of the greatest leaders in the history of real estate. He deserves to go down as one of the visionaries who truly deserves the oft-abused term “game-changer.” I sincerely hope that he turns the ship around and reverses the decline.
Need for Introspection
As I mentioned at the outset, I really hesitated to write this at all. I know there are going to be people who think I’m just hating on Gary and on Keller Williams. That’s just sad and unfortunate, since I have enormous admiration for both the man and the company he built.
I wrote this because you, me, the rest of us can learn something from what we are seeing. Decline is hardly limited to just Keller Williams. So many companies, organizations, and institutions in the real estate industry find themselves in one stage or another of decline. The challenge for leadership is to identify when you are in decline, identify where you are, and think of ways to reverse the decline.
Collins tells the story of one such turnaround success story at Xerox. I urge you to read about it in full.
There is no reason why KW can’t turn things around. It isn’t too late. There is no reason why other companies in real estate facing decline, facing bad news, facing irrelevance and loss of value, can’t turn things around. They can.
But in order to turn things around, you have to first acknowledge that you are in decline, and identify where things might have gone sideways. Grasping at silver bullets is not the answer (that’s Stage 4, and close to terminal). Discipline and above all, introspection are necessary. Today’s mighty can fall, but then again, today’s mighty can also find ways to coexist with tomorrow’s mighty.
It doesn’t have to be that the best of all the years have gone by. It isn’t too late for introspection, for getting back to your core competencies, for a disciplined approach to changing market conditions. It’s not too late to turn around.
I hope for all our sakes that leaders find a way to do just that.