From Brokerage to Breakthrough | Fifth Wall

Key Takeaways

I'm Magnus V from Fifth Wall. It's awesome to be back at Blueprint and I'm really excited to be joined by someone who needs no introduction in the real estate industry, James Harris. >> Thank you, man. >> James is one of the most recognized agents in the world. He's also familiar face to many from his time on Million-Dollar Listing Los Angeles. And over the last two decades, James has built one of the most successful residential brokerages in the world. He's generated billions of dollars in sales from Beverly Hills to Bair and beyond. But what's really exciting today is that we're not here to talk about the past. And that's because James has set his sights on building the future, creating technology by agents for agents that's designed to fundamentally reshape this industry. And Fifth Wall and I are thrilled to be backing James in this endeavor which is still in stealth. James, thanks for being here. Welcome. Really excited to do this with you. >> Thank you so much. And thank you to everyone for being here. Thank you to Fifth Wall for being a great partner. Um, and thanks to Blueprint for having me. >> Awesome. So, we're going to spend a lot of time talking about tech today, but before we do that, I kind of want to set the stage on your journey as an entrepreneur. So, looking back as you were building your brokerage business, what do you think were some of the keys to scaling and growing that business? >> Yeah, it's a it's a great question. I think being an agent is such an interesting such an interesting business. In order to have a successful business, I think the most important thing is people. It's people first. I often tell people getting into the industry, unless you're a people person, it's probably not uh the right industry for you. Um I really went out of my way to surround myself around great people. Um I've always lived by success breeds success. Um, and so when I've hired agents on our team, I've always had that very much top of mind when I'm looking for great talent or trying to build culture. Um, and I think that proximity is power. You know, it doesn't matter what industry you're in, proximity is power. And so for building a team, I've made sure to surround myself by the very best of people. I think systems uh, and processes are everything in this business. Um, I think if you have your systems down, and this is something I've drilled into my team for over 20 years, um, you need to understand who your market is, who are you prospecting to, who you marketing to, is your follow-up on point, what does your client service look like? Um, and I think you need to have in this business relentless client focus, right? Your clients need to trust you. Um, and I think where agents make a very big mistake is they're looking for a quick paycheck. You know, agents aren't looking um at their business as a long-term career. They're looking at it as a paycheck. And I think once you start to shift that mindset um of actually doing business for the long term, you start to build client trust. And then with the world changing and tech moving so quick, I think as an agent, if you want to scale, you have to be adaptable, right? You have to be able to move and shift with the trends. I think that luxury is very cyclical. Markets go up and down. Every single market uh shifts, the focus shifts, the fundamentals shift, the way clients trust you shift, but the hustle always remains the same. And I think for me the formula is passion with structure and people. And I'll end with you know to all of us in any industry energy is so contagious. You know, that's why I started with how's everybody feeling? Because energy is the key to our success. It's contagious. People want to work with people that have a great energy. Um, and so for me, um, growing a team is really down to the people, the structure, the formula, um, and having a contagious, infectious energy that people want to be around. >> Absolutely. And honestly, like when we met and we first started talking about working together, the energy that you had was really something that drew me. I mean, it was unbelievable. And so kind of shifting gears a little bit now you're building in tech. Do you see that as a natural progression from what you've done for the first part of your career? >> 1,000%. I mean I've always been obsessed by change. Um and tech to me at this time is a change that I think unless you get in front of it, whether you're a consumer or somebody building it, you're going to be 100 ft behind it. And so I do feel as though this is the most organic evolution for me. I feel I feel like real estate was my lab. It's where I learned. Um and I feel like tech is now the platform to scale everything I've learned. I've been doing real estate for 26 years and I feel like I really understand the problem that we're solving for. Um I understand the pain points of real estate agents. And I think with tech, it's been one to one whereas now it's one to many. Um, and I think that brokerage for me was very much the the training ground, right? It's high stakes. It's complex deals. It's client trust and relationships, but it's who I've met along the way. And for so many years, clients have said to me, "What's next?" Like, "Let us know. We'll write the check." But I never knew what it was. I feel like I had the reverse problem to most people that have this great idea but they can't find the money. Whereas for me it was like I'd go home and really think about what is the problem that we're solving for. Um and so the idea came to me and I've been building very quietly for nearly a year and a half now. Um and for me at the core it's all about efficiency, timesaving. you know, with AI so rampant, changing so fast. Again, unless you're in front of it, you're 50 feet behind it. So, yes, it feels like the most organic evolution for me. >> So, one of the things I think that was so exciting to us in meeting you and starting to talk to you about this idea was seeing a really innovative approach to building technology for residential brokerage. And, you know, as we've looked at the space, we've been at this for a decade. There's been a lot of innovation in commercial brokerage, a lot of tech built for that space, but Resi's kind of always lagged behind when you think about, you know, what's being built for residential agents. Why do you think that is? That's a really great question. Um, I think if you really think about real estate in two categories, residential and commercial, I think what you'll find is that commercial agents are employees. Residential agents are independent contractors, right? Independent agents are 1099. They are their own boss. They write their own paycheck. So, that inherently makes adoption slower I in in my opinion. There's a massive mismatch between market size and tech penetration, right? You've got 1.6 million licensed agents in the US and you have 20 million agents globally despite millions of agents and billions being written in commissions every day, every year. The residential tech space has always been incredibly fragmented. Always. You've got 50 different apps that do 50 different things and they typically have one flow. If you look at the residential market, you have so many different MLS's, there's so much disruption in that space. There is so much data. There is so many different workflows. So I feel like where you have residential that's super emotional, commercial is creativity and numbers, it creates this m mismatch. But what I'm now seeing is a huge shift that's coming in the residential space because what you're starting to see out there is riser consumer expectations have gone through the roof. The client expects more from an agent today because of the data that's available in the public domain. Right? You've got a serious amount of agent competition. It's a cutthroat space and the people at the top win. And in most sales rooms, it's 20% of the people that do 80% of the business. And in the high-end luxury real estate market, it's literally the 1% that do 99% of the business. So, the agents that separate themselves from the competition are the ones that have the information at their fingertips. And I think residential agents are really trying to level up. And today, AI is now making that far more scalable. And now those tools are really starting to exist. And so we've talked as you've been building this business about you're building things that you wish you had when you were scaling your residential brokerage business. What do you think agents struggle with the most today? >> Hands down, bar none, agents are drowning in admin. You know, the the idea of what a successful agent should be in the car, back at the office, at a meeting, back in the car, back to the office, have a bite of lunch, back in the office, doing more admin. The truth is, we cannot clone ourselves as real estate agents. We drown in admin. We drown in paperwork. And truthfully, it leads to burnout, right? We're human beings. And if you're really pushing yourself, which as an agent you should be, you do end up burning out. And what happens when you burn out? You provide an inconsistent experience to the client. So time scarcity, you know, we cannot clone ourselves, right? That doesn't exist in our business. Data accuracy, I said it before, your consumer expects you to be accurate. Your credibility depends on it. So right now your clients are more informed. Agents have to bring unique insights if they want to separate themselves from the rest. And so my focus is how can you leverage AI to save you time and I feel like there's so much AI out there that agents in my space feel like there's an overload of AI. But how do you streamline AI? How do you make an agent more efficient? How do you create an agent to become more successful? And I think that a lot of that comes down to time and admin. >> So let's talk about data because I think data, you know, if you look at what's changed in residential transparency of data with the advent of Zillow, the internet, MLS becoming more public available. That was a huge kind of step change. Now everybody's got that data at their fingertips. Clients are more informed than ever. They've done their homework before they even show up to see a house. How does that change the way that you or any other agent need to show up for a client? >> Again, it's accuracy. You know, the amount of times I tell people on my team, if you don't know the answer, don't make one up. We're all guilty of it. Someone asks you a question and you give them an answer because you're scared no answer is going to get you fired or you're going to look dumb. The best thing that you can say is, "I don't know. Can I get back to you?" But the agents that will separate themselves from the the rest have to show up with proprietary precise insights. [snorts] And I think once you can provide to a client something that they couldn't get access to themselves, you've just proven value. You've built trust. The key differentiator for me is like data mastery and the inter and the interpretation of how you deliver it, right? Your consumer has 10 hundred agents they could choose from. Why should they work with me? Right? And I think that when I start to think about and everything in my business is how can I separate myself from the competition? And it now comes down to data. The information that you have at your fingertips is what separates you from the competition. And truthfully, in this business, in all of our businesses, you want to become indispensable. You want your client to feel they need to work with you. They may not even want to work with you, but they need to work with you because you have the data, because you're accurate, because you're three steps ahead. And I'll keep going back to it. AI will allow us as agents to be three steps ahead, not five steps behind if we use it efficiently. So, you've been at this for more than 20 years. You've seen a lot of tech tools come to market over the years. I'm sure you've tried many of them. Why do so many of them kind of fall flat? Why has it been hard to build tech that resonates with agents? >> So, this is something I've been obsessing over, right? What I am building is built by agents for agents. I feel like the addressable market in the United States is massive when it comes to real estate. But I do feel that a lot of these tech platforms are being built by Silicon Valley people that see a big addressable market. They build a tech product. They think they're going to take it to market, build, be wildly successful, but they don't actually put the agent first. It's just an addressable market that appears to have a lot of money at the end of the tunnel. And I think that that is a misconception. Agents don't want to part ways with their money unless you can truly prove value. And I'll say this, most of the $500 billion residential services industry, we're still running on spreadsheets. We're still running off notes on our iPhones, texts, phone calls. But I am now starting to see agents shift from that. And so I believe that the the the single solution, the single point solution will fail because people want one app that can do everything for them. but really understanding the problem that you're solving for. I think that we got so much to choose from. And generally speaking, I think we have 50 apps that do 50 different things pretty poorly. And I think that the majority of offerings now, they overfocus on lead genen. And by the way, I'm sure there's lead genen companies in the room right now, and I have nothing but respect for the lead genen companies that are out there. But my god, the lead genen, the lead genen, the lead genen. We've got so many different platforms that offer lead genen. But what does the agent do with that lead once they have it? How does the agent ensure that that lead doesn't slip through the cracks so another agent comes and takes it? How does that inexperienced agent take that lead and make sure that it's nurtured correctly, that they present themselves to their client correctly, they're branded correctly, they're speaking to them correctly. So to me, this results in a lot of noise, not more efficiency. So I'm really building for how can we build efficiency in a real estate agent's life. >> It's super interesting because I think, you know, we've been talking a lot about AI. There's been a lot of discussion of AI just even today other speakers. There's such an opportunity right now with AI to sort of take on areas of real estate that might have been really difficult to technologize either because it was the last frontier of something that was just difficult to do or because it's historically been something that has to happen with a person either you know consumer behavior or just the way it works and residential brokerage is definitely one of those things. So, where do you see AI like kind of massively enabling a step change in residential brokerage? >> It's a great question. I mean, guys, AI is something that I think everyone in this room probably talks about 10 times a day and we use it 50 times a day. I'd be blown away if anybody in this room didn't use AI. Um, I'm obsessed over it. I have been for a very long time. But I think AI in a real estate brain, in a real estate world, truly eliminates inefficiencies. You know, when I think about real estate, it's admin, it's data entry, it's coms. Most agents don't really understand AI past chat GPT. You would be blown away if you sat with an agent and asked them to tell you all about AI. It's chat GPT. But now today, if you use AI in the right capacity, it can give the average agent 10, 15, 20 hours back per week. So it's transformative to reinvest it into clients, into the way you conduct your brand, into the way that you grow your business. And I think I look at AI very much like um the early days of the internet, like or even Napster. You know, I'd go to bed at night downloading 50 songs in the morning and I'd be like, "Yeah, there's no way next tomorrow I'm not going to I'm going to have all these songs." Or or back in the day with the internet, you'd plug it into your socket and it would make some ridiculous noise and somehow you could ask Jeeves anything. It was like that was a wild thought and feeling. But today, it's like AI is it really understood? It's growing at such a rapid pace that people get lost behind it. But I think it's the agents that are going to adopt it, that are going to succeed, that understand it, that lean in, that want to learn, that want to grow, that want to scale. I think it's either you adopt it now or you get left behind. >> So, I want to shift gears a little bit to talk about what you're building. And we have to be careful because we're in stealth, but you've spent your whole career representing clients. Now, you're building something for agents. What inspired that shift for you? >> Obsessing over the agent. You know what? what what I'm building and all of my engineers and product leads and design team know that for me the one thing that we have in mind is truly obsessing over the real estate agent, right? And I think everything for me started with clients that I got to meet in this industry really pushing me beyond my own comfort zone. Right? This residential real estate world's a very crazy space in the fact that you get to meet people along your journey that people wish they could have 5 minutes in a room with that people wish they could even have a sentence or a conversation with. And I was very very fortunate that these were clients and these were clients that were pushing me. And I feel like real estate has been the most unbelievable career. It's given me everything I could have ever dreamt of. And I really really mean that. I love what I do. I love people. I love clients. But I did start to realize there's always going to be a ceiling. Doesn't matter how successful I am in real estate, I will always hit a ceiling. And I kind of felt like I was a hamster running on a wheel. The hamster gets tired and the hamster falls off the wheel. As the hamster should fall off the wheel so the younger hamster can come in and be wildly successful. But for me, it was all about waiting for the right opportunity. That was the absolute key for me. And I think that every single pain point that I'm solving for boiled down to time. You just you you you can't buy back time. So my mission in one sentence is build what I wish I always had, right? And give agents tools that will give them hours back in their day so that they can go out and be more successful, more efficient, more professional. so that they can grow their business and be the best version of themselves. >> Absolutely. And I think, you know, without digressing too far, it's been really interesting to see so much of these kind of early applications of AI focused on cost reduction, whereas there's just as significant of an opportunity to use it as a growth lever. And I think you've struck an interesting balance of kind of being able to do both, eliminating admin, but doing that for the purpose of sort of massively enabling more revenue, which is what we care about. >> Absolutely. Um, so shifting gears, obviously we're fortunate to be a part of a really impressive group that has backed you. How has your journey to date as an entrepreneur shaped the way that you approach raising capital for this endeavor? >> That's a great question. Can I see a raise of hands? How many of you have ever raised money in this room? Yeah. Fun, right? [laughter] So, that was an experience. Um, I actually thoroughly enjoyed it. People told me, "Get ready. It's going to be a really crazy journey." Um, I was pitching from home. I will tell you being a founder, someone said is going to be very lonely. I can confirm it is because you do often find yourself building with your head down, trying to be creative, ignoring the noise. Um, and I sat at my home office raising money for this for two months. We raised a very substantial amount of money. But the one thing that I kept at the core of raising money is that I wasn't pitching a theoretical problem. I truly understand the problem that I'm solving for because I've lived it daily for 26 years. And I think when you pitch to raise money, there has to be passion. There has to be there has to be conviction. You have to really understand the problem that you're solving for. And you have to be relentless when you're doing it. Um, and building something I knew intimately as an agent made it very very easy for me. Um, and I think in any business, no matter what you do, you have to have passion. You have to have self-belief. You have to have excitement. And if you don't have that, how can anybody buy into what you are raising money for unless you truly to the core believe what you're doing? And I think the key to that, Magnus, is that tech is now making all of this possible at scale. Right? I didn't have the opportunity to what I'm going to build and building today 5 years ago, even 3 years ago. Certainly not 10, 15, 20 years ago. So there was a very strong reception to when I was raising money. It really allowed me to curate the right partners. And I will say money was actually secondary for me on the raise. It was strategic partners was the key for me. I wanted partners that cared. I wanted experts that could bring advice. I didn't just want capital. And I think once you can put together a group of people that care, that are strategic, that actually want to lean in, that actually want to help, it really changes the game. And I'll give props to Fifth Wall as one of those investors because again, it's not just a paycheck. It's it's being hands-on and being a part of the process because it is very much a journey. >> Absolutely. And we're really fortunate and excited to be a part of this journey with you. So >> I see the clock ticking down. So I'm going to try to jump us ahead a little bit. Last question on AI. So why is now with AI everything that's happening why is this the right moment for you to be building what you're building? >> I mean to me that's an obvious answer right I think again I go back to the early days of the internet it didn't exist before I think AI now can transform the way we run our business. I think that agents that adopt AI versus agents that don't are going to be the ones that fall very much behind. I think client experience can now evolve to digital first. I think that the consumer expectations are rising so fast that the the average agent is evolving and there's a big gap in the market right now. I think there's a huge opportunity with AI and honestly if anyone and everyone in this room has some type of AI in their business, no matter how small, no matter how big, you will thrive. I mean, if you're not using it to the very best of your advantage to be as successful as you can be, you fall behind. And the only way I see in real estate we fail to do our job with AI is if robots show up to showings and start showing houses. then we got a much bigger problem here. But today I believe that if you are willing to be innovative, creative, think outside of the box and utilize AI in your life, in your business, it's going to give you back time, not just personally, but with your family. It's going to allow growth and it's going to better your overall life. >> So the last question, obviously you're building in stealth. We've been sort of, you know, pairing back some of what we can talk about because of that. I think you get great advantages from being able to experiment. But how can people keep tabs on this endeavor? >> Yeah. So, it's a shame. I kind of wish that this uh conference was in six weeks cuz then we could talk all about it. I would say that please follow the journey. Um many many updates will be coming on social. Um we're building very quickly, but I'm also making sure that we're building right. Essentially, I'm trying not to run before I can walk. Um, the launch will be loud. People will hear about it. People will know about it. But please do keep an eye out. Uh, this is definitely my most exciting chapter yet, and I'm incredibly excited to share it with everyone. Um, again, thank you for having me, Magnus. Thank you, Blueprint, and thank you all for being here and listening. And I hope someone got something out of the last 25 minutes. Thanks so much. >> Thanks so much, James. Thanks, everybody.