The new CEO of OpenDoor details his radical, non-traditional approach to turning around the company from the brink of bankruptcy. He describes implementing 'violent change' by firing consultants, mandating a return to office, and shifting the company culture from process-oriented to outcome-driven, all while rebuilding around a core of dedicated individual contributors.
0:00 You need to figure out which defaults are killing the company and change them violently. There must not be change management because you want the change to feel jarring. You took over a company that was months away from bankruptcy. Take me inside the company. What did you do on day one? I left home um to fly San Francisco where Open Door had one office. Um and on the way out the door, I told my wife, "Hey sweetheart, I'll be back on Thursday." And she said, "Do not come back until you have a plan to break the company even." And I'm like, "Haha, very funny. This is hilarious." And my wife said, "No, no, I'm not kidding. Do not come back." She went Amazon and ordered a mattress to the office for me. Like I knew I was going to sleep in the office for multiple days in a row because my plan was try to figure out what had gone wrong. Because basically what happens is all companies fail in similar ways.
1:03 No companies succeed. And I said all success is unique but all failures rhyme. Good people leave. People lose control of innovation. GNA goes up and over time you end up fighting picking fights with your customers and partners. So that had happened at open door. I asked for a full list of all employees, every contract, every payment the company had made for the last 12 months, and they're like all the accounts. Like I'm just cool, give me like the state. And one of the things I realized is that it is actually surprising how lack of active management allows companies to atrophy.
1:46 >> What do you mean by that? If you're trying to avoid looking bad, you do a certain number of certain things, right? So, Open Door for a very long time was doing everything it could in order to not be noticed, in order to not stand out, which meant the company was basically had become a company run by professional consultants. Let me give you two specific examples. So, I got um figured that I was going to join the company and then uh chair the board sent me a Google doc that was going to be my announcement that this guy's going to become the CEO of the company. And I like read the doc and it sounded like it was written by someone trying very hard to avoid saying anything that might offend anyone. So, I took over and made edits and then someone went in and undid my edits and like changed the dock again such that it would be un like not offensive. So, I put in big bold letters on top of the dock. Whoever wrote this dock doesn't work at Open Door anymore.
2:47 And I didn't realize that both the consulting firms that the company had hired to do PR for it were in the dock. What happened as a happy accident is is both the consulting firms very loudly resigned the account like we would like to have nothing to do with the company which did two good things. One I didn't have to pay 30 days of notice and two I got to have one less expense on my uh on my income statement. So I got every expense the company had paid for the last 12 months. And usually for tech companies like your largest expense to an external vendor ends up being like your cloud provider. But for open door number one was millions of dollars written to very large consulting firm. This company had come in and had told open door to basically offshore every job to massively overload the company with GNA and basically cut engineering which is literally what you do if you have zero desire to create alpha. And that basically happened to open door. And by the way, I think this actually happens to a lot of companies where the founders are no longer there. There is no large shareholder that cares a lot about the company. So over time, many of these companies essentially become hosts for professional leeches whose job it is to suck the company dry while making management look good. So I want to go back to day one, too. Like we we started down this track of you got all the expense reports. Like I want you to walk me through and to give me the blueprint of like coming in here and
4:21 >> Yeah. >> it you find a culture that exists without you. >> Yeah. >> How do you tell what to keep, what to get rid of? >> So, Open Door had gone fully remote. >> So, at 9:00 a.m. that Monday, I told the entire company, "Hey, Open Door is going to be back in the office next Monday. If you don't plan to be in one of these offices, we appreciate your help, but you're no longer with us." Then the second thing that happened was that open door had become a place where you succeeded by creating process not outcomes. So a bunch of people chose not to be part of the company because we became so outcome oriented uh because we demanded ownership. But the third thing that was impressive is and this actually was best good surprise of open door. I would every once in a while find someone who I thought was exceptional and I would honestly ask them in that first couple weeks why are you still here and it was a series of these people that had kept the company alive on their shoulders and we've now rebuilt the company around these IC's
5:21 >> IC's are individual >> individual contributors yeah who actually do the actual work >> so it was on life support >> yeah I see open door would have died had it not been for maybe a dozen Well, so this is fascinating to me, right? Because if you were to read a book on how to turn around a company or you were to go to business school and take a course on like the best turnaround, you're not doing any of that. You're in fact you're doing the opposite. There's a lot to be learned from books. But if open door could have been fixed by following someone that was written a book, it would have already been fixed. Look, there's two things. One, the people you hire is the company you build. So the first week at Open Door, I changed our career page. Our career page used to say something along the lines of this is a happy place to work where we all care about each other. And by the way, here are all of our ERGS. Open doors career page now says this will be hard. Like our job is to attract people who want to work hard and we don't like we say this is not for you. Like I my job is to try to convince you to not work at open door such that if you come you're highly committed. So that's one thing.
6:29 So the people end up being the company. The second thing ends up being that over a very long amount of time, groups of people tend to have tendencies towards nicities. >> So everyone ends up telling each other nice lies, a series of white lies that rear you off course. And the job of a founder type is to be, you know, a nuclear bomb of truth over and over again. First principle truth. But what is important is to discover who you are, discover that kernel of truth and build only on that and then hire exceptionally good people and guide them. Was the view from the inside like was were all of these nice lies sort of aggregating into the company's doing okay?
7:18 >> Yeah. Yeah, I mean I think I think a lot of people had convinced themsel themselves that bad things were happening to Open Door that Open Door was like this victim of the macroeconomic environment. You know the victim tech mentality that people develop, right? This you you know people who blame the world for everything that goes wrong with them. Open Door felt like that. the company was just mad at the world, mad at its partners, mad at it customers because it blamed the outside world for everything that was happening to it.
7:52 >> But like how do you change that in in the sense like you're one person, you're coming in >> and you have to have this equal and opposite force, I would imagine, to counteract this and start changing the culture and you pull the curtain and you're like, "Guys, we need >> Yeah. I mean, I think I think like a commitment to truth over feelings is incredibly important." I sent my team, I have a blueprint that I sent to the entire company because my job was to create strong repelling forces. I.e. I wanted everyone who didn't like how I was going to run the company to quit.
8:27 >> You wanted people to opt out. >> Yeah. To opt people opt out and then that would create room for people to opt in from the outside. The most dangerous people in any company if you grab a 2x two chart are competent but m not mission aligned people. So your job is to identify who they are and help them move on as fast as possible. >> What makes them so dangerous though? >> Well, because competent people have a way of tilting the org in their direction, right? Everyone has had at their job someone who was very good at internal politics and you can see it. This person keeps getting promoted because your boss doesn't realize what they're doing. So my job I thought early on was to cause that rift to widen. we've have had to basically hire an entirely new company and that has been very painful.
9:13 >> So if you sat down and had to write a document on like the key principles involved in turn around a business, what would they be? >> I think changing defaults is incredibly difficult. So if you're going to change a default, you have to do it violently. Let me give you an example. Open door was remote. Open door was never going to become in person if we had a sevenstep plan over eight months. I know this because Open Door had had many sevenstep plan over 8 months to become in person. It never worked. So like the only way to become in person for open door was was through significant amount of aggression. Transparently I thought open door was a place where some people were kind of mailing it in.
9:52 >> Yeah. >> Not everyone but some people. So um I stopped at the office. I thought open door was a place where people were unwilling to take you know risks. So we took risks publicly. They want like you need to figure out which defaults are killing the company and change them violently. There must not be change management because you want the change to feel jarring. Second, you must tell people what you expect of them. Most company's mission statements end up being bland, pale imitations of statements. We're here for the good of the world. Ye PIA, who isn't, right? But you have to say things that a reasonable person would say, I don't want any of that. You have to figure out what those things are because it matters. And third, I I if you're starting and uh as a CEO of a new company, I strongly urge you this. be committed to truth over feelings.
10:55 Truth over feelings all the goddamn time because you will invariably over time find that you will get rounder edges if you're not careful. >> Double click on the truth over feelings thing though because I mean most people think that they already do that. I think what happens is people are truthful within the context of the situation and the people they're in the room with. The larger the room is, the less space is there is for truth, right? But that is the death of companies. This is why big companies are so usually uh average. I mean a pizza thing team is real, right? Like having small teams is real because you can be truthful in smaller rooms. You can say things you would never say in a big room and you need to get that in a company. If you're like a new CEO of a company, you need to discover who are the speakers of truth and get them in a room alone such you can discover things.
11:55 >> Otherwise uh you will die. >> So what's a a meeting with Cass like? >> We try very hard not to have meetings unless they're needed cuz meetings are a bug in the system. >> Wait, go deeper on that. So meetings exist because people could not get the information they needed to make decisions before the meeting. >> So most meetings are like context sharing effectively. >> Yeah. So >> typically we only have meetings where we're broadcasting not casting and our meetings end up being relatively u full of disagreement. Go deeper on that. So there's no point to have a meeting where we all agree and we believe it is impolite not to disagree. Our meetings tend to be uh louder than the average company's meeting more orary than the average company's meeting and like I mean it happens with some frequencies where people just leave in the middle of the meeting because they have nothing to contribute. It's impolite not to leave a meeting in which you have nothing to contribute. So our meetings end up being much more um collaborative and much less let me present something to you.
13:02 >> How do you disagree without being disagreeable? So in my blueprint I sent to the whole company I said I value being told I'm wrong like our commitment is a tr is to a truth. When we make a mistake open door made a mistake. All mistakes belong to open door. All information belongs to open door. So, when you and I disagree, we're not doing it because I dislike you. We're doing it because I respect you and I believe you and I are on the same team. I wrote a post that I published uh called Say the Thing a while ago and it became part of Shopify's lore and people would say the thing to me, which I appreciated. So most people sit in rooms or watch a Slack message and have a large disagreement, but they don't want to be the person that you know uh farted in church. So they don't say what's on their brain. So when I got to shop, it was true, but I got to open door. I would sit in meetings where everyone would act like everything was going well, but things were not going well.
14:06 You could tell things were not going well by shape of the chart. So I wrote a note of the shop where I said, "Hey, say the thing. Say it now." Like the second you know something, say it. Say it about the thing, not the person. Always say this sucks, not you suck. And say it until you've been heard. People don't have to agree with you, but they have to hear you. So, if you feel like you're not being heard, say it over and over again until you feel like you've been heard because you get paid to do this at Open Door. So, it's incredibly important. Say it now. Don't wait. Second, say it about the thing, not the person. Say it over and over again until you've been heard. And those three things are a cultural expectation. Not doing it is considered rude. And this has been a very real part of our learning at Open Door is allowing people to object to things that are stupid. Do you think it's a turnaround or like a reounding?
15:07 >> I think it's a new company because AI has made this a different company because look what what about open doors business is difficult. The operational complexity of the physical asset and what do you need to make that operational complexity go away? You need very lowcost fast decision making at scale with data. We have built an AI exoskeleton around every human being at Open Door such that they can be 3 4x more efficient than everyone else. To give you a sense, the last time Open bought as many homes as we bought last quarter, Open Door's OPEX was more than twice as high. In a world where prices have gone up for human beings, we've become twice as efficient. Every few years, a new platform earns its place at the top of every smart advertiser's media plan. The people who find it early build advantages that are very hard to close. Apploven just had the most remarkable run in adtech history, and now they've opened that engine to businesses like yours. Over a billion people play mobile games every day. Focused, not scrolling, with no feed competing for their attention.
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17:18 Do you think of AI as replacing people and labor or do you think of it as amplifying the ability of a particular person? I see. >> I think what AI does is two things. One, it lowers the lowers the need for human management, right? If you look at any company, you end up with these very long tales of managers managing managers before anyone does any actual work. And AI because it takes the communication barrier down so much, we can share more information more broadly, it just collapses the company um chains of the company. The second thing it does and what it has done at Open Door is AI fundamentally changes who wins and who loses. That people who use AI well will win and there'll be more of them. Open Joint has more engineers today than I did when I joined because we use AI well.
18:16 >> What are the most powerful mental models that you find yourself coming back to over and over again? >> Actually, you you know me a bit so you know this is true. Uh I I have these written down. First, friction is underestimated. Two, uh map is not the train. Three, truth over feelings. Those are like the three. So let me give you the first one. Everyone has seen uh the supply and demand graph in their life and but people underestimate the uh invisible hand of friction on where those two things cross. The total market size of Walmart would have been massively underestimated. Same with Amazon, same with Google. Because before these things existed, everyone thought the market was smaller because there was so much friction in the market. When you reduce friction in a system, you just get a lot more of whatever you reduce friction on,
19:13 >> right? And if you look at the open door parallel before I got to open door from the time you entered your phone address into our homepage to the time you got an offer there'd be 11 people in the path many many days many many processes many many docs all of that friction and every one of these we removed increased demand we're buying six to seven times more homes this week than we did last year this week and it's almost entirely because we restriction the second one is like the map is not the train which is like I find the one that I wish I could teach corporate America.
19:52 >> M >> I think Hayek is just generally underappreciated. He gave a speech called pretense of knowledge but the entire speech is basically about this idea that all of us confuse the map for the train for a train that's like the land. If you were in Europe pre-discovery of the new world, you would look at a map from an expert and trust it, right?
20:21 >> Yeah. >> Cuz everyone did. It just so happens that unless you recognize you're looking at a first derivative of a fact, not the actual fact, you almost always will build models of the world that end up drifting from reality. And this is how companies go bankrupt over time because they continually drift more more derivative, more derivative. They build models upon models and no one says, "Uh, excuse me." Like, how far am I from the fact?
20:54 >> But how do you do that as a company? How do you stay in contact with reality? >> Dashboards are wonderful things, but most corporate executives run the entire company on dashboards. And it is a derivative of facts. It's not the facts. You're playing like Sim City >> and you don't know when the environment changes. >> You end up losing a feeling for the business. Ray Croc, the guy the the founder of McDonald's, used to go into the kitchens.
21:22 >> Yeah. He'd be like, "That's too much ketchup." >> You watch Undercover Boss and they're always surprised by what's happening in their company. And again, I'm like, why are you surprised? Like, how are you surprised? How did you not know? Like what is the job if it's not understanding how your product touches the customer? >> But how do you do that as a company? How do you stay in contact with reality in contact with the evershifting terrain?
21:49 >> I talk to our customers every single week. Every single week I go visit our homes all the time. All the time I look at the raw database all the time. It's I built my own dashboards all the time. And I find that at least that gives me less ability to be um fooled >> and it gives you a huge context window. >> It does. You just have to just have to do it. So the map is on and the last one which we've talked about a bunch which is truth over feelings. There is a level of suicidal empathy that people have developed that is just deadly. It is killing our best companies because people are are assuming that everyone is thin skinned
22:37 >> and they're assuming that people are offended by facts. And I'm just sorry facts do not care about your feelings. They just don't. And it's incredibly important that everyone be committed to truth. >> I want to come back to the turnaround for one second because >> Shopify was a remote work culture. Yeah. Yeah. >> And one of the first things you said you did was everybody's in the office Monday or you've opted out of working here.
23:04 >> Yeah. >> Why? >> First of all, I don't think remote works generally. It only works for Shopify. And that's because um we built more software to make remote work than anyone reasonably thought we could. And I think the jury has fully come back on this topic that companies that are primarily remote end up having slower cycles and if you look at startups that just tends to be true.
23:30 >> Why do you think that is like what explains that? >> You lose a lot of culture. It's very hard to build uh culture remotely because open door's core mission is difficult. We need to make other things easier. And I think the best thing everyone intuitively understands if you played any sports growing up, you understand that the thing that causes you to build camaraderie is doing hard things together in person and winning. Like high school football teams have amazing cultures.
24:03 >> Yeah. >> Amazing. >> Yeah. And look, we do a very hard thing, but we do it in person with our colleagues shoulderto-shoulder where we celebrate our victories together and if failures we see together so we can actually get through them together. That's one thing. The second look, a lot of communication gets lost in remote companies. And third, uh, intercomp multiculturalism does not work. What does that mean?
24:30 >> Companies cannot have multiple cultures. They just can't. They just die. If you allow a company to have many different cultures, what you end up creating is you lose all short form of communication >> and you end up spending a lot of time aligning people such that you can move >> and it's much easier to have a uniculture company much easier if you're in person. I talked to somebody inside the turnaround who who reports to you now and he said uh you've killed more things in nine months than most CEOs do in a decade. What did you kill? In my first four weeks I killed two entire business lines. Open door used to have essentially I uh we provided general contractor services to other companies which was it was a profitable business for us but it was not the mission of our company. Our job isn't to become the world's best contractor. So, we killed that. We had a business where we essentially called OD Select, which we essentially were like quasi builders.
25:34 Like, we would take essentially homes that were like unlivable and just build them from scratch up. Profitable business side for us. Killed it off because again, that's not our job. There are builders in the world. We're not one of them. We're a market maker. It's a different job. If you think of my time at open door, I think it's reasonable to say I've only started three products and we've shut down a few dozen. >> You started mortgage >> mortgage uh our buyer product and our new product cash down more later which like existed in a odd shape but exists under me now in much much real way.
26:09 >> What does it mean to be a market maker in housing? >> Yeah. So if you look at the history of assets, the way assets grow on the internet has been basically similar. First someone solves the discovery problem. I need to find X. Uh Craigslist is a best example of this. Then someone comes and says okay you know what I can build trust session now you have found something you know who you're dealing with. I build a trust layer. PayPal
26:37 >> is a great example of this. actually eBay, Discovery, PayPal, Trust. I will allow you to trust your counterparty. >> Yep. >> And the third player almost always tends to be someone who says, "Great, I will help you both find something, trust the counterparty and underwrite the risk on both transactions." Amazon. And usually in the marketplace of like under internet, the third player wins because they reduce the friction. So she can have much more volume. Right. If you go back to 2002, everyone thought eBay was going to win against Amazon.
27:14 >> Yeah. >> But clearly has not happened. Amazon won because it solved the full problem. Now it's a much harder problem to solve. So the job of a market maker is to stand between two people who want to transact and allow them to transact with you such that they don't have to actually look for each other and find them. And that's our job for housing, right? The largest problem in housing is people want to move and they can't cuz they have not found a buyer for their home. And our job at Open Door is say, "We're that buyer. We will buy your home. Come to open door.com, type in your address. We'll buy your home at a fair price and then we'll sell it to someone when whenever that person is available."
27:49 >> So, how does Open Door make money then? Like, how do you become insanely profitable doing that? >> We make our money in two ways. First, we make money each transaction, relatively thin margins of each transaction. But we make our real money from the first derivative of the business, which is uh mortgage, insurance, title and escrow, all the things that go with a home. So our job is to buy and sell the home at fair prices as fast as we can and make our money on the services you get. This, by the way, is how we built Shopify. If you look at Shopify, you can buy Shopify the software for $1. Like, and it's $1 because it can't possibly be less. But credit cards won't let you charge less than a dollar. And Shopify makes most of its money by you succeeding on Shopify by its services it provides you. And this has always been true. People misunderstand how businesses work. It has always been true that some of the biggest companies in the world have been built on the first derivative of the core business. Google does not make money from you searching for things. Google makes money from showing you ads while you're searching for things.
28:54 >> How did you learn this concept? I've just been always interested in the history of companies. It just seemed relatively obvious to me that that would have had happened in the world that these ancillary businesses to core business had become a real thing. Because if you look how software grew, the way software used to be sold is you came to me for software. I wrote some code and handed it to you and I ran away cuz I would make all my money from like the implementation, right? And then SAS came along and SAS companies said hold on I will make money from you over a very long time from the relationship and then Shopify came along and said cool I will make very money from you for a very long time over relationship but from services right and that pattern has always held true in every business cuz there is a word for people who make all their money from you upfront and never talk to you again. We call them carnese like they come to town they get take your money and run away.
29:52 >> Yeah. >> Right. That's not how businesses work. No one trusts someone where you know that the second this relationship is over, you'll never see me again. But that's how the largest asset people have transacts. It's crazy. It is insane that this is how we deal with the largest asset class in the world. You would never trust a stock broker that made all their money from you from one trade. You would just never tr trust that person. It is very real that like for the good of a relationship is important that you and I be committed to knowing each other for a very long time. I built an AI version of myself with Hey Jen. Today I'll have it dig up an old prediction I made and we'll each grade it. Let's give it a shot. Hey Shane, you once predicted that long form would beat short form for anything that actually mattered. Grade that prediction today. Hey, I was directionally right, but I underestimated just how much short form would become the front door to long form content. I agree you were right, but for the wrong reason. You thought attention spans would recover. They didn't. People just got better at choosing when to go deep. Right call. Lucky logic. Well, I got the right answer with the wrong math, but I'll take it. That's Hey, Jen.
31:08 Record yourself for 15 seconds and get an AI avatar that delivers professional video on demand. Your first three videos are free at heyen.com/tkp. That's h ege.com/tkp. Ever hit 3 p.m. and feel like your brain just quit? For a lot of people, that's not caffeine or sleep. It's electrolytes. And water alone won't fix it. That's why I drink Element every day after lunch. Zero sugar, no dodgy ingredients, just a real dose of sodium, potassium, and magnesium. I know you're all thinking electrolytes are for athletes, but you don't have to be an athlete to benefit from it. And it tastes great. Stay sharp in the afternoon and grab a free 8count sample pack with any purchase at drinklement.com/tkp. That's drinklmnt.com/tkp. So, one of your principles was sort of say the thing, but I was surprised another one was get [ __ ] done.
32:15 >> Yeah. >> Why do you have to tell people to get [ __ ] done? So, let me tell you a story. Toby's Toby Luke is among the most thoughtful people on the planet. There's a reason why people call him the founders founder. If you walk the offices of Shopify, first of all, they're incredibly thoughtfully designed, but they all say on the walls, um, do things, tell people. And I always found that was odd. I actually haven't had a conversation with Tubby about this, but like I realized that like in most companies the order is reversed.
32:49 >> Like it's most companies is tell people then do things. In most companies, this is what happens. You have an idea, you spend a lot of time writing memos about that idea to get buy in about that idea before you can have a meeting, someone that can approve that idea. And there's a whole process that takes many months before you can do the thing. There's a chain of command designed to minimize risk. And there's two ways to deal with that chain of command. The first is to do what Amazon said. Amazon became a default yes. Most companies are default no. The chain of command is designed to reduce risk and say no to many things. Right? That's what it does. Amazon said, "No, no, no. We're a default yes company." Which worked incredibly well for Amazon. But I think a better way to deal with this problem is to not have the chain of command like to minimize the number of people who can say no.
33:47 >> Yeah. and only have people that you want and trust to do things. This, by the way, is not people. This not a theoretical thing. I want to give you this very specific example. I got to open door and I realized that for a substantial number of homes we had bought, the person who was supposed to benefit would show up and the power would not be on in the home. And when this happened, the person who was managing home would get a note saying, "Hey, power isn't on, and who this person would have to go to Salesforce, fill out a form. That form would get emailed to someone else. They would look at it. Then they would ask for permission from the manager to turn the power on. Then they would call the utility company, turn the power on, they would mail, and there would be a back and forth that involved three or four managers." And I thought this was the nuttiest thing ever. So, we literally gave everyone corporate cards and said, "Hey, if you see a home whose power is not on, if you type in the address into Slack, you will get back the phone number you're supposed to call, the account number you're supposed to say, and the credit card number you can give them to turn on power." We're the largest buyers of home in North America.
34:59 And by the way, Open Door was not run by uh unintelligent people. They were highly credentialed people. But the general incentive inside every company is to reduce risk as much as possible. And the way you reduce risk is more process, more people in the path. So do things becomes actually difficult. I think of this is like nobody would want to wake up in that state, right? Like you would never create the end state that they were operating in as like the goal.
35:32 >> So somewhere it just gets like one degree off course, you know? And that one degree starts to compound as time goes on and on and on. >> This I think I'm I'll use another pilot example. I want to be a pilot. My wife won't let me. >> Um >> smart. >> Uh I >> listen to your wife. >> I have a bunch of plane analogies. But there's a very real thing happens to new pilots. New pilots go into like into clouds and they turn slightly slightly slightly slightly. M
36:00 >> and people say you'd be surprised by a number of new pilots who come out of sky clouds fully inverted cuz you basically end up upside down one degree at a time. That's basically what happens to every company. This is a very good sign that your company is upside down. If you have acronyms, if you have lots of acronyms, the odds are you're upside down as a company. Because acronyms are things that people do when they want to create in cultures and out cultures by definition. So if you have acronyms, the odds are what you have done is create so many inroups and outroups that no one can tell if anyone else is inverted. And the only one who can tell if someone is inverted is someone above the chain who can look at both of these things. Unfortunately, most corporate CEOs don't go that deep, right? They they manage the dashboards.
36:55 >> This comes back to sort of like trying to touch reality and being in the weeds and having a bigger >> I've literally turned on utilities. I've uh fixed the work orders. I've like you have to do it otherwise I don't know how you like I mean Elon famously sleeps at the factory and people think it's like a meme. People think he does it for show. I don't think he does it for show. I think it's literally the only way to do things.
37:24 >> Well, that sort of begs the question, how important are the words that we use to communicate ideas? Like, how do we make ideas more transferable in a company? >> Yeah. Um, early on in my career, I used to ask everyone who worked on my team to read Orwell's uh essay uh politics in the English language. It's an incredibly good essay because in it he talks about how English is among the most powerful tools ever invented by humanity in the English language. And I say as someone who was not English is not my first language. But Orbal says English is in trouble because words have lost their meanings. And the word he uses is fascism. In the essay he says fascism doesn't mean anything anymore because everyone's a fascist. Like everyone gets called a fascist. Anyone I don't like is a fascist. Therefore, fascism doesn't mean anything anymore. I used to share this essay with people I work with because in order for language to be useful, we must hold it properly. And English is an incredibly powerful powerful tool if you speak simply. And that is an incredibly important thing to learn inside a company. as he come to guard against it because most business talk is designed to confuse the listener, deliberately confuse the listener. I challenge anyone to find any sentence that includes the word leverage that means anything.
38:55 >> H like it just means almost nothing all the time. And there's a series of these words that are very common in the corporate world that are designed to have a low density of information to words and they're sort of ambiguous, right? So it's like I can weasle out of whatever happens because this word can mean multiple things. Yeah, it's very there's another one by the way that it's it's the passive tense is another example of this very the past tense is very bad but even the worse is um othering of facts. Let me give you an example legal decided that X would be true.
39:41 >> I have a rule at open door that people decide things not teams. >> Yeah. So whenever someone says legal decide X I'm like who legal doesn't get to decide thing >> like was the name of the person because if you named a person what you are doing is you cannot round the edges of what they said. This is how you end up uh mutating everything into bad by taking away specifics of the situation and living with generalities. like you're a pale pink imitation of everything.
40:16 >> Yeah. When I look at a company, I sort of look at it through strategy, operations, capital allocation, and people. How do you look at a company? >> Products, man. I think of products first. I really do. I think most people overemphasize strategy. [sighs] I must say strategy isn't important, but it's usually not that complicated. There are very few businesses where strategy has been the cause for the win. Usually it's exceptional execution by the one company that shared the same strategy as seven other companies. It's just the best executor one. Google's strategy was not meaningfully different than the other 25 search engines. Its execution was different. I think strategy is important but far less important than people think it is. I think what tends to be very important and far more important than people think it is is the product. Like is the product deeply useful to the end user?
41:16 Uh can you find 1,000 people who love the product? And if you can, you have to be on the right track. If you can't, all the capital in the world won't save you. How do you think about risk? A lot of people think, you know, for instance, that delaying a decision reduces risk. I I think it almost always does the opposite. Like there are very few decisions that gathering more facts will help. I actually did this the other day. I was in a meeting and some one of her um colleagues said, "Hey, we're going to run this AB test and then decide what to do." And I said, "Great, guys. I'm from the future. I'm from 6 weeks from now." The AB test was 51% positive. Tell me what you're going to do.
42:17 what most tech companies end up doing and by the way AB tests are like the most because people misunderstand um statistics and misunderstand like what mean average error means and the compounding nature of mean average error people misunderstand these things what for most tech companies AB tests have done have been the safety blanket
42:42 >> for management >> I don't have to make a decision >> like this is like uh Google famously AB tested something like 400 different shades of blue. >> Yeah. >> Like dude, it didn't matter. I promise you it didn't matter. It reverted to the mean. It could have been any shade of blue. It would have been fine. I'm not saying that AB tests don't matter to be clear. I'm not saying that. But what I am saying I'm saying AB tests matter a lot but they cannot replace human judgment.
43:16 >> Of course. Yeah. >> And if you sit in a room and tell me like a one slight deviation of shade of blue matters, I just don't want to be in a room with you. >> There's a lot of people in life that I feel there's a parallel here. There's a lot of people in life who feel lost, maybe a little bit rudderless. The north star is not there. They know they're capable of so much more. And the parallel to me is this is like open door when you come into it. You know, things aren't working as good as they could be. There's still a heartbeat and you're sort of going through the motions and you're on this slow road to death. Like how could somebody apply these principles to their life outside of the corporate structure? If you know anyone who's had a problem with alcohol
44:06 >> and their life is draining away, what usually happens for them to turn around is an intervention. It's a deeply uncomfortable moment of truth. >> Yeah. >> The first step is taking ownership over the problem, right? They're taking ownership. I understand there are things I can do, right? There's a reason why um AA works so well, right? Cuz you do things, you track your accountability like day one, week one, month one, you track over and over again thing, your accountability, and you do the right thing over and over again and the score tends to take care of itself
44:52 >> over a very long period of time. And I think that pattern tends to be one that is repeatable over and over again. If you look at yourself and say, "I am to blame for my problems." It's hard. And as someone who does it more frequently, the average person, it can feel lonely. Uh, luckily for me, uh, I have an incredibly supportive family. So those days where I say, "Hey, I made a mistake. I am to be blamed." I have uh my wife and my kids and that makes a world of difference. I also pray more than the average person. So it helps me find the ability to look at the mirror and say, "You screwed up. You should do better. You can't do better." and then just like feel that I'm not holding my past self guilty but just do better. And I think that pattern is as repeatable um in companies as as it is in people.
46:01 >> How do you not hang on to that? A lot of people go through that. They make a mistake. They'll even admit that they made a mistake and then they become paralyzed by fear. >> I have high degree of sympathy to people who do that. I really do. One of the best parts about being a founder, which is why I think founders are such unique characters, basically every founder I know has had to look at like a bank account statement and count how many payrolls they are away from like not being able to make payroll.
46:32 >> Yeah. >> And that usually shakes you pretty good. >> Yeah. >> Cuz if you do nothing, you're dead. like your de like Paul Graham has this essay where he calls it default dead and you just have to do something like action creates information you have to do something and like so I think that allows founders just to act differently than other people would but I don't I don't want to pretend like I know I know all the answers but I can tell you this you will find that the first thing to fix will is easy intuitive and makes you feel good and people who win tend to win over and over again. So the analogy I use internally at open door is this chemical spills are notoriously difficult to solve and clean up. But what if you arrive at the site of a chemical spill? The first bit is really easy to solve. Just grab a shovel.
47:29 >> Yeah. >> The last bit requires a bunch of microscopes and [ __ ] but the first bit is shovel territory, man. It's like your grandfather's wisdom, right? When you find yourself in a hole, stop digging. >> Yeah. Yeah. Yeah. No, it's real. >> It's interesting you sort of mentioned not making payroll. And you know what that made me think of is the moment Steve Jobs, if there was one moment where Steve Jobs became the Steve Jobs that we all remember, it was the 93 I think it was bankruptcy of the hardware division at Next. Yes. like that was the moment where he started to change his behavior.
48:07 >> In the movie, there's this very famous scene where Steve Jobs had fired uh the Apple 2 team and W is like you have to recognize these people like they worked hard. You have to recognize that they worked hard. He gets angry. He's like you almost bankrupted the company. Like there is a very real thing that if you have come close to death >> Yeah. And if you look at a balance sheet, you're like, "Holy God, I only have x number of payrolls left." You do not care at all what it looks like. You just care about what it is. You realize they can put up with more pain than you think you can. Like everyone has a higher pain tolerance than they think they have.
48:50 >> Is part of that sort of not caring what other people think. like the courage to be disliked. I'm thinking like so many people optimize their life in order not to be disliked versus on mission or towards a goal or >> first of all courage to be dislike is an excellent book. Everyone should read it but it's a very real thing where most people's limitations are self-imposed. >> We're capable of so much more.
49:15 >> Yeah. Like everyone is and everyone's pain uh is more imagined than you think it is. And this, you intuitively understand it when it comes to everyone else. But in yourself, you have a hard time dealing with that. Running a public company is incredibly difficult if you care what the Wall Street Journal says about you. >> I just don't. I've never cared.
49:41 >> Is that learned or something you >> I just think what happened was I immigrated from Iran. My family fled Iran and when we moved, I was a teenager. and I didn't get into any clubs. And by the time I was I grown up and I could get into clubs, I cared way less about them. So I just grew up making uh [laughter] making a feature out of necessity and that I think has played a very large role in uh in my life and is the second thing which is very real. I played rugby uh in uh in high school and I uh am not a big dude, but I'm fast and have a high pain tolerance and I really really enjoy winning as a team. Rugby is actually a special sport for this. It's crazy. Uh it tends to be a sport that if you play in North America that basically never has an audience. Like no one goes to watch rugby games in North America really. So you do it for your friends, you do it for your teammates, not for the audience, but you get something better out of it, which is like this idea of like being in pain while winning as a team. There's like something very deeply joyful about bleeding out like out of your knee while winning as a team. Is it Sharp who founded Four Seasons said, "Excellence is the capacity to take pain."
51:17 >> Do you agree with that? >> Yeah. Yeah. Over a very long period of time. By the way, the person who can hold their hand over the fire the longest tends to be the winner. The difference between doing something incredibly well and doing it poorly is not that high, but people just give up too soon. Unfortunately, I think the sugar rush of easy like satisfaction in the modern world has underprepared people for pain.
51:46 >> We always end these interviews with the same question. which is what is success for you? >> I have four kids. Um they're seven, five, three, and two. And I care a great deal about what they say to their kids that their dad did. When my wife and I got married, we agreed that we would optimize our marriage for putting a dent in the world. That that's what we would spend our time on. Um and that that would be our definition of success in our marriage. So I try to wake up every day and think what is the most the thing I can do that leaves the biggest dent on the world. Like I think most people in my position would have looked at the open door opportunity and uh not run at full speed. But I ran at full speed because this feels like a problem of a shape that I should be able to solve for the world and my team and I should be able to solve for the world.
52:55 So that's what I want to do. I want my kids to grow up and be able to be proud of their dad's career because, and this is important, because they are sacrificing a part of their childhood and for my career, like I'm not around as much as I should be. I don't put them to bed every night. And it matters that that time away from them is used for the good of the world. So I hold myself accountable and thankfully my wife also holds me accountable to that end.