Redfin: Not all industries can be revolutionized with just an app

Doing research for something else, I came across this profile of Redfin blending technology with people working through the challenges of scaling both while realigning incentives in a broken industry (WSJ):

If you're touring a neighborhood and see a house for sale, you can order up a Redfin agent to drive over to show you the property quickly. In the company's most-established markets, Seattle, for instance, the agent can be at your service within an hour. (It takes longer in Redfin's newer markets, like Dallas). This works thanks to a blend of technology and management. Just as the Uber online ride service maps its drivers, Redfin keeps track of its agents' calendars and real-time locations. Unlike a traditional real-estate brokerage—in which agents essentially are contractors of a brand, not employees—Redfin's agents are salaried workers. The company can tell them where to go and what to do.

Redfin helps soothe other home-buying frustrations as well. Redfin compiles detailed histories on competing brokerages' pricing strategies, strengthening Redfin agents' negotiating prowess. Redfin also conducts most of the home-buying process online, reducing paperwork. And if you're selling your house, Redfin can test offer prices on the Web, helping you to home in on the optimal price.

The biggest opportunity is price. Mr. Kelman says the incentives of traditional real-estate agents are misaligned with those of customers. If you're selling your house, your agent, who gets paid on commission, will prefer that you take a lowball offer over no offer. If you're buying, your agent will want you to bid higher than you might otherwise want—or need—to pay. Economists call this the Principal-Agent Problem, and it has proved stubbornly intractable in real estate.

Mr. Kelman says Redfin has a solution. About half a typical Redfin agent's pay comes through salary. The rest comes through commissions. But crucially, commissions are linked to detailed reviews that Redfin customers complete after sales. The reviews are posted online and affect each agent's future business. Your agent always has an incentive to please you. If pushing a client to close a deal will produce a bad review, the agent would rather not close.