Truth Over Feelings: Inside Opendoor’s Massive Turnaround

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

0:17 Months away from Bankruptcy. Take me inside the company. What did you do on day one? I left home.

0:27 Um To fly San Francisco where open door had one office. Um And on the way out the door, I told my way, Hey, sweetheart, I'll be back on Thursday. And she said

0:37 Do not come back until you have a plan to break the company even. I'm like ha ha very funny. This is hilarious. And my wife said, 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 gonna sleep in the office for multiple days in a row because my plan was to try to figure out what had gone wrong.

0:56 Because basically what happens is All companies fail in similar ways. No companies succeed in all success is unique. But all failures rhyme. Good people leave. People lose control of innovation.

1:12 GNA goes up. And over time you end up Fighting picking fights with your customers and partners. So I don't know how it happened at Open Door. I asked for a full list of all employees. Every contract Every payment a company had made for the last twelve months.

1:28 And then like all the accounts. Like I'm just called give me like The state. And one of the things I realized is That it is actually surprising.

1:38 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 cer certain things, right? So open door for a very long time was doing v 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

2:06 Two specific examples. So I got Um, figured that I was going to join a company and then uh Chair the board. Send me a Google Doc, that was gonna be my announcement. But this guy's gonna become the CEO of the company.

2:19 And I like Right. And it s 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.

2:33 And then someone went in and undid my edits and like change the dock again such it would be un like not offensive. So I put in Big bold letters on top of the dock. Whoever wrote this stock doesn't work at open door anymore.

2:47 And I didn't realize That both the consulting firms that a company had hired to do PR for it. We're in the dark. What happened as a happy accident is Is

2:57 both the consulting firms very loudly resigned. They can't. Like we would like to have nothing to do with the company, which did two good things. One, I didn't have to pay thirty days of notice. And two, I got to have one less expense on my Uh

3:09 So I got every expense that company Hide. Paid for the last twelve months. And usually for tech companies, like your largest expense to an external vendor ends up being like your cloud provider.

3:23 But for open door number one Was it? Millions of dollars. written to very large consulting firm. Complete coming.

3:31 And had told Open Door to basically offshore every job. massively overload the company. with G and A. and basically cut engineer, which is literally what you do if you have zero desire to create alpha. And that basically happened to open drawer. And by the way, I think that actually happens to a lot of companies.

3:53 Where the founders are no longer there. There's no large shareholder that cares a lot about the company. So over time many these companies essentially become Hosts. For

4:05 Professional leaches. Whose job it is. to suck the company dry while making management look good. So g I wanna 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. You find a culture that exists without you. Yeah. How do you tell what to keep, what to get rid of? To open an or I've gone fully remote. So at nine AM that Monday, I told the entire company, Hey Open Doors gonna be back in the office next Monday. If you don't plan to be in one of these offices, We appreciate your help.

4:41 But you're no longer with us. But the second thing that happened was that Open Dor 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.

4:56 Uh because we demand ownership. But the third thing that was impressive is I just actually the best been best good surprise of Open Door. I would every once in a while to find someone. Who I thought was exceptional.

5:08 And I would honestly ask them in that first couple of weeks. Why are you still here? And it was a series of these people had kept a company alive on their shoulders. And we've now rebuilt the company around these ICs. Uh I Cs are individual contributors. Yeah.

5:24 who actually do the actual work. It was on life support. Yeah, I see open door would have died had it not been for maybe A dozen people. Well, so this is fascinating to me, right? Because

5:35 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 OpenDoor could have been fixed.

5:52 by falling from that was written in the 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 you can open draw, I change our career page. Our career page used to say something along the lines of

6:07 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.

6:26 So sh if you come, you're highly committed. So that's one thing. 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.

6:40 Towards niceties. So everyone I'm up. Telling each other. Nice lies.

6:48 a series of white lines that take very off course. And a job of a founder type is to be, you know A nuclear bomb of truth? Over and over again. First principle truth. But what it's important is to discover who you are.

7:01 Discovered a 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 w for all of these nice lies sort of aggregating into the company's doing okay?

7:18 Yeah, I mean I think I think a lot of people had convinced himself themselves that bad things were happening to open door. That open door was like this victim of the macroeconomic environment. You've got a victim tech mentality that people develop, right? Because you've you know people.

7:37 Who blame the world for everything that goes wrong with them. Open door. Felt like that. A company was just mad at the world, mad at its partners, mad at customers because

7:49 It blamed the outside world for everything that was happening to it. 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 an 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 to do it.

8:08 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 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 to people opt out. And then that would quit room for people to opt in from the outside. The most dangerous people in any company, if you grab a two by 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?

8:51 Everyone has had at their job someone who was very good 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

9:07 Have had to Basically hire an entirely new company. And that has been very painful. So if you sat down and had to write a document on like the key principles involved in turnaround a business, what would they be? I think changing defaults is incredibly difficult. So if you're gonna change a default, you have to do it violently.

9:28 Let me give you an example. Open door was remote. Open Door was never going to become in person if we had a seven step plan over eight months. I know this because Open Door had had many seven step plans over eight months to become in person. It never worked. So like the only way to become impressive for open doors was was through significant amount of aggression.

9:48 Transparently I thought open door was a place where some people were kind of mailing it in. Yeah. Not everyone, but some people so Um I stopped at the office.

9:58 I thought open door was a place where people were unwilling to take You know, risks. So we took risks publicly. You need to figure out which defaults are killing the company. And change them violently. There must not be change management.

10:13 Because you want the change to feel jarring. Second. You must tell people what you expect of them. Most companies' mission statements end up being bland. Tale imitations of statements.

10:28 We're here for the good of the world. Ye PI who isn't. Right. But you have to say things. That a reasonable person would say, I don't want any of that.

10:39 Yeah. You have to figure out what those things are because it matters. And third, I I uh if you're starting an uh as a CEO of a new company, I strongly urge you this. B Committed to truth.

10:53 Over feelings. Truth over feelings. All the goddamn. Because you will invariably over time find that you will get rounder edges if you're not careful.

11:07 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 a room with. The larger the room is

11:23 the less space is it 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 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.

11:46 And you need to get that in a company, if you're like a new C of a company. You need to discover who are the speakers of truth and get them in a room alone such that you can discover things. Otherwise Uh you will die. So what's a a meeting with Caz like? We try very hard not to have meetings unless they're needed,'cause meetings are a bug in the system. Oh yeah, go deeper on that. So meetings exist because

12:09 People could not get the information they needed to make decisions before the meeting. So most meetings are like context sharing, effectively. So Typically. We only have meetings where we're broadcasting, not narrow casting. And our meetings end up being r relatively um full of disagreement.

12:28 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 meanings tend to be

12:39 A louder than the average company's meeting? More Warnery than average company's meeting? And Yeah.

12:46 I mean it happens with some frequency where people just leave in the middle of a meeting'cause 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.

12:59 And much less let me present something to you. How do you disagree without being disagreeable? So in my blueprint I sent a whole company. I said I value being told I'm wrong. Like our commitment is a truth is to a truth.

13:15 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.

13:26 We're doing it because I respect you and I believe you and I are 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 say the thing to me, which I appreciated. So most people sit in rooms

13:43 Or watch a Slack message. And have a large Disagreement. But they don't want to be the person that you know uh for it in church. So they don't say what's on their brain. So when I got to Shopify, it was true when I got to open door.

13:57 I was still in meetings. What 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 note about the shop five that hey, say the thing. Say it now. Like the second you know something, say it. Said about the thing. Not the person.

14:19 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 hurt.

14:35 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.

14:47 And those three things. Our cultural expectation. Not doing it is considered rude. And this has been a very real part of our learning at open door.

14:59 Is Allowing people To object to things that are stupid. Do you think it's a turnaround or like a refounding? I think it's a new company because AI has made it's a different company. Because look, what what about open doors business is difficult.

15:15 The operational complexity of the physical asset. And what do you need to make that operational complexity go away? You need very low cost fast decision making at scale with data. We have built a AI exoskeleton around every human being at Open Door. such that they can be three, four X more efficient than every else. Keep this science the last time Open Door bought as many homes as we bought last quarter.

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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

17:30 Two things. One, it lowers the the 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 uh barrier down so much we can share more more information more broadly.

17:52 Just collapses. uh company. Um change the company. The second thing it does. And what it has done at Open Door.

18:02 Is AI fundamentally changes who wins and who loses. The people who use AI well will win and there'll be more of them. Well Pinto has more engineers today than it did when I joined.

18:14 Because we use AI well. What are the most powerful mental models that you find yourself coming back to over and over again? Actually you you know me at best, so you know this is true. Uh I I have these written down. First, friction is underestimated. Two

18:31 Uh map is not the train. Three truth over feelings, to something like that. Three. So let me give you the first one. Everyone has seen

18:40 Uh the supply and demand. Graph in their life. And but people underestimate The

18:48 Uh Invisible hand of friction. On where those two things cross. The total market size of Walmart.

18:57 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 reduced friction on. Right.

19:14 And if you look at the open door parallel, before I got to open door, from a time you entered your phone uh address into our homepage, the time you got an offer. There'd be eleven people in the path. Many many days, many many processes, many many docs. All of it friction. And every one of these we removed increased demand.

19:33 We're buying six to seven times more homes this week than we did last year this week. It's almost entirely because we're destriction. The second one is Like

19:44 The map is not trained, which is like I find The one that I wish I could teach Corporate America. Mm-hmm. I think Hayek is just generally underappreciated.

19:56 He gave a speech called Pretense of Knowledge. But the entire speech is basically about This idea that All of us. Confuse.

20:05 The map For the train. But train affect the land. If you were And

20:13 Europe. Pre-discovery of a new world. You will look at a map from an expert and trust it. Right. Yeah.

20:21 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.

20:36 That end up drifting from reality. And this is how companies go bankrupt over time. Because they continually drift more more derivative, more driven they build models upon models. And no one says uh excuse me.

20:51 Like how far am I from the fact? 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.

21:06 And uh is a derivative facts, it's not the facts. You're playing s like SimCity. And you don't know when the environment changes. You end up losing a feeling for the business. Ray Crock. The guy the the founder of McDonalds.

21:20 Used to go into the kitchen. Yeah. He'd be like that's too much catch up. You watch undercover boss and are 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?

21:36 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 in contact with the ever shifting terrain. I Talk to our customers every single week.

21:52 Every single week. I go visit our homes. All the time. All the time. I look at the raw database.

21:59 All the time. It's I built my own dashboards. All the time. I I find that at least that gives me less ability to be Um

22:10 Fold. And it gives you a huge context window. It does. You just have to just have to do it. So the map is not true. And the last one which we've talked about a bunch, which is truth over feelings. There is A s level Of suicidal empathy that people have developed.

22:26 That is just deadly. It is killing Our best companies Because people are Are assuming that everyone is thin skinned.

22:36 Hm. 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.

22:46 And it's incredibly important that everyone be committed to truth. I wanna come back to the turnaround for one second because Shopify was a remote work culture. Yeah. And one of the first things you said you did was Everybody's in the office Monday or

23:03 You've opted out of working here. 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.

23:17 And I think the jury has fully come back on this topic. That Companies that are primarily remote end up having slower cycles.

23:28 And if you look at startups, it just tends to be true. 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 doors core mission is difficult, we need to make other things easier and I think the best thing Everyone intuitively understands If you played

23:48 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. Yeah. Amazing. Yeah.

24:04 And look, we do a very hard thing, but we do it in person with our colleagues, shoulder to shoulder, where we celebrate our victories together. And of failures. we see together, so we can actually get through them together. That's one thing. Second, uh look m a lot of communication Gets lost in remote companies.

24:22 And third. Uh Intercompany multiculturalism does not work. What does that mean? Companies cannot have multiple cultures. They just can't.

24:32 They just die. If you allow a company to have many different cultures where you end up creating is you'll short form. Of communication. Mm-hmm.

24:44 You end up spending a lot of time aligning people. Such that you can move. It's much easier to have a unicultural company. Much easier. If you're in person.

24:56 Talk 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.

25:12 Open door used to have Essentially I uh uh we provided general contractor services. To other companies. Which was a it was a profitable business for us. But it was not.

25:24 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 were essentially called Od Select. Which we essentially were like quasi builders that we would take essentially homes that were like unlivable and just build them from scratch up. Profitable business side for us.

25:41 Kill it off. Because again, that's not our job to our 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

25:57 A few dozen. East her mortgage. Mortgage, uh our buyer product and our new product cash down more later, which like Existed in them. Odd shape.

26:06 But exists under me now and much much Real way. What does it mean to be a market maker in housing? Yeah, so if you look at the History

26:16 of assets. The way asked grow on the internet. has been basically similar. First, someone solves The discovery problem. I need to find X. Uh quite fast.

26:27 the best example of this. Then someone comes and says, Okay, you know what? I can build trust such that now you have found something, you know who you're dealing with. I build a trust layer. PayPal. Mm-hmm. Is a great example of this. Actually, eBay Discovery PayPal Trust.

26:41 I will allow you to trust your counterparty. Yeah. And a third Fair. Almost always tends to be someone who says great.

26:48 I will help you both find Something. Trust the counterparty and And underwrite the risk on both transactions. Amazon.

26:57 And usually And The marketplace. Of okay, on on the internet. The third player wins.

27:05 Because they reduce the friction. So she can have much more volume, right? If you go back to two thousand two, everyone thought eBay was going to win against Amazon. Yeah. But clearly has not happened. Amazon one 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.

27:26 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 that people want to move and they can't because they have not found a buyer for their home. And our dial at open doors say Without 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. one of one of the person that's 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 in each transaction. relatively thin margin for each transaction. But we make our real money from the first derivative of the business, which is uh mortgage

28:06 Insurance. Talent Escrow. All the things that go with a home. So our job is to buy and sell a 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 build Shopify.

28:20 If you look at Shopify You can buy Shopify the software for one dollar. Like and it's one dollar'cause it can't possibly be less. The credit cards won't let you charge less than a dollar. And Shofi makes most of its money by you succeeding on Shopify.

28:35 by 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. How did you learn this concept?

28:56 I've just been always interested in the history of companies. It just seemed relatively obvious to me. That that would have happened in the world? anciller businesses to core business had become a real thing because

29:09 If you have software group. The way software used to be sold. Is you came to me. For software. I wrote some code. And handed it to you and then ran away.

29:21 'Cause I would make all my money from like the implementation, right? And then SaaS came along and SaaS companies said, Hold on. I will make money from you over a very long time from the relationship. And Shopfire 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, because there is a word for people who make all their money from you up front and never talk to you again.

29:47 We cem carnies. Like they come to town, they get to take your money and run away. Yeah. But that's not how businesses work no one trusts someone. Where you know The second this relationship is over

30:01 You'll never see me again. But how the largest asset people have transacts. It's crazy. It is insane. But this is how we deal with the largest asset class in the world.

30:15 You would never trust a stockbroker. They 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 It's 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 Gen. Today I'll have a dig up an old prediction I made.

30:36 And we'll each grade it. Let's give it a shot. Hey Shane. You once predicted that long form would be short form for anything that actually mattered. Create 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.

30:54 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.

31:03 Lucky logic. Well, I got the right answer with the wrong math, but I'll take it. That's Hey Gen. Record yourself for 15 seconds and get an AI avatar that delivers professional video on demand. Your first three videos are free at heygen.com slash TKP. That's e-yg-e-n dot com. Slash TKP

31:24 Ever hit three PM 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.

31:52 Stay sharp in the afternoon and grab a free eight count sample pack with any purchase at drinkelement.com slash TKP. That's drinkelmt.com slash TKP. So one of your principles was sort of say the thing, but I was surprised another one was Get shit done. Yeah. Why do you have to tell people

32:17 To get shit done. So let me tell you a story. Toby's w Toby Lutke is among the most thoughtful People on the planet. The reason why people call him the founder's founder. If you walk the offices

32:28 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 find that was odd. I actually haven't had a conversation with Tabby about this, but like I realized that like In most companies.

32:46 The order is reversed. Hm. 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.

32:59 To get buy in about that idea. Before you can have a meeting someone that can approve that idea. And the whole process that takes many months before you can do the thing. The chain of command designed to minimize risk. And

33:14 There's two ways to deal with that. Chair of command. The first is to what Amazon said. Amazon became a default yes call. 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.

33:29 No. For default gas company. Which one Incredibly w well for Amazon. But I think a better way to deal with

33:38 with this problem is to not have the chain of command. Like to minimize the number of people who can say No. Yeah. And only have

33:49 People you want D trust to do things. This by the way is not People this is 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.

34:04 The person who was supposed to be would show up And the power would not be on in the home. And When this happened

34:14 the person was managing a home would get a note saying, Hey, power isn't on. And who that the person's good Salesforce. Flutterform. That form we get email to someone else. They would look at it, then it would ask for permission from the manager to turn the power on.

34:28 Then they would call the utility company Turn the power on. There would mail some 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

34:44 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 him turn po turn on power. We're the largest buyer as a home in North America.

34:59 And by the way, open door was not run by Uh unintelligent people, that are 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.

35:20 I think of this as 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. 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. I'll use our pilot example. I wanna be a pilot, my wife won't let me.

35:45 Uh smart. Uh I listen to your wife. I have a bunch of plain analogies. But there's a very real thing that happens to new pilots. New pilots.

35:54 go into like into clouds. And it turns slightly, slightly, slightly, slightly. And people say you'd be surprised by a number of new pilots who come out of sky uh clouds fully inverted. 'Cause you basically end up upside down. One degree at a time. That's basically what happens with every company.

36:13 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.

36:25 Because acronyms Or things that people do. When they want to create in cultures and out cultures. By definition.

36:35 So if you have acronyms, the odds are what you have done is create so many in groups and out groups 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 COs don't go that deep. Like they m they manage the dashboards.

36:55 This comes back to sort of like trying to touch reality. Being in the weeds and having a bigger criteria. I've literally turned on utilities. I've uh fixed work orders. I've like'cause you have to do it. Otherwise I don't know how you Um

37:10 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 thick.

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

37:39 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

37:52 Is Among the most powerful tools. Ever invented by humanity. in the English language and I say to someone who was not English is not my first language.

38:02 Ralph says English is in trouble because words have lost their meanings and the word uses is fascism. In the essay he says fascism doesn't mean anything anymore,'cause 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.

38:20 I used to share this essay with people I work with because In order for language to be useful, we must hold it properly. In English is an incredibly powerful powerful tool if you speak simply. And that is an inc

38:34 really important thing to learn inside a company. And to kind of go to guard against it because Most business talk. Is designed to confuse the listener. deliberately confused a listener. I challenge anyone.

38:51 to find any sentence that includes the word leverage that means anything. Hm. Like it just means almost nothing. All the time. And there's a series of these words that are very common.

39:03 in the corporate world. That are designed to have a low density of information towards And and they're sort of ambiguous, right? So it's like I can weasel out of whatever happens because This word can mean multiple things. There's another one, by the way.

39:23 The passive tense. Is Another example of this very but the the past defense is very bad, but even the worst is um Othering of facts. Let me give you an example.

39:35 legal decided that X Would be true. Mm. I have a rule at open door that people decide things, not teams. Yeah. So whenever someone says legal decide acts, I'm like

39:48 Who Legal doesn't get to decide thing. Yeah. Well the name of the person. Because if you named a person What you are doing is you

39:57 Cannot round the edges of what they said. This is how you end up Uh mutating everything into bad.

40:07 By taking away specifics And living with generalities. Like you get a pale pink imitation of Everything. Yeah.

40:16 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. 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 wind.

40:42 usually it's exceptional execution by the one company They've shared the same strategy as seven other companies. It's just a best executive one. Google's strategy was not meaningfully different than the other twenty five search engines. If execution was different. I think strategy is important, but far less important than people think it is.

41:04 I think what Tends to be very important. And far more important than people think it is. Is to Product.

41:11 Like is the product deeply useful to the end user? Uh Can you find one thousand people who love the product. And if you can, you had to be on the right track.

41:26 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.

41:41 Like there are very few decisions. that gathering more facts Will help. I actually d did this the other day. I was in a meeting.

41:53 And some One of our um colleagues said Hey, we're gonna d run this A B test. And then decide what to do.

42:05 And I said great. Guys, I'm from the future. I'm from six weeks from now. The A B test was fifty one percent positive. Tell me what you're gonna do.

42:17 What most tech companies end up doing and I by the way, A B tests are like the most Because people misunderstand Um Statistics and misunderstand Like.

42:28 What um mean average error means? And a compounding nature of mean average error, people misunderstand these things. What for most tech companies A B tests have done have been the safety blanket. Mm-hmm.

42:42 For management. I don't have to make a decision. Like this is like uh Google famously A B test test in like four hundred different shades of blue. Yeah. But dude, it didn't matter. I promise you, it didn't matter.

42:56 It reverted to the meaning. It could have been any shade of blue. It would have been fine. I'm not saying that A B tests don't matter, to be clear, I'm not saying that. But what I am saying I'm saying Maybe it does matter a lot.

43:12 But They cannot replace human judgment. Of course, yeah. And if you sit in the room and tell me Like A one slight deviation of shade of blue matters.

43:25 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

43:41 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.

44:05 Hm. And our life is draining away. What usually happens Time to Turn around is an intervention.

44:14 It's a deeply uncomfortable Moment of truth. Yeah. The first step is taking ownership over the problem.

44:25 Right. I understand are things I can do. Right. There's a reason why.

44:33 Um AA works so well. Because you do things. You track your accountability. Like day one.

44:42 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. Mm-hmm. Over a very long period of time. And I think that pattern tends to be

44:56 One that is repeatable. Over and over again. If you look at yourself And Say I am to blame for my problems.

45:07 As hard and as someone who does it. More frequently than the average person. It can't feel lonely. Uh luckily for me Uh, I have an incredibly supportive family.

45:23 So those days where I say hey I made a mistake. I'm 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.

45:38 So it helps me. Find The ability. to look at the mirror and say, You screwed up. You should do better.

45:47 You can do better than 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

45:58 In companies, and as it is in people. 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.

46:11 I have high degree of sympathy to people who do that. I really do. What best parts about being a founder, which is why I think founders are such unique characters. Basically every founder I know

46:24 I've had to look at at like a bank account statement and count how many payrolls they are away from like not being able to make payroll. Yeah. And

46:34 That usually shakes you pretty good. Yeah. Because if you do nothing, you're dead. Like your de like Paul Graham has this essay where he calls it default dead. You just have to do something. Like action creates information. You have to do something.

46:48 Uh 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

47:01 That the first thing to fix The Is Easy. Intuitive.

47:07 That 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.

47:19 And clean up. But where if you arrive at a site of a chemical spill The first bit is really easy to solve. Just grab a shovel. Yeah. The last bit requires a bunch of microscopes and shit.

47:34 But the first bit It's 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 y 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

47:52 The Steve Jobs that we It was the ninety three, I think it was bankruptcy of the hardware division at next. Like that was the moment. Where he started to change his behavior.

48:10 Where Steve Jobs had fired uh the Apple two team. And was is like you have to recognize these people. Like they worked hard, you have to recognize that they worked hard. He gets angry. You almost bankrupted the company.

48:25 Like there is a very real thing if you have come close to death. Yeah. If you look at the balance sheet, you're like Holy God, I only have X number of payrolls left.

48:37 You do not care at All what it looks like. You just care about what it is. You realize that you can put up with more pain than you think you can. Like everyone has a higher pain tolerance than they think they have. Is part of that sort of not caring what other people think

48:54 Like the courage to be disliked and thinking so many people optimise their life in order Not to be disliked versus on mission or towards a goal or First of all, Curse to be diselect is an excellent book. Everyone should read it.

49:09 But it's a very real thing where Most people's limitations are self imposed. We're capable of so much means. And everyone's pain. uh is more imaged than you think it is.

49:23 And this you intuitively understand it when it comes to everyone else, but In yourself your hard time. Dealing with that. Running a public company is incredibly difficult. If you care what the Wall Street Journal says about you.

49:37 Hm. I just don't. I've never cared. Is that learned? Or something you're gonna do. And

49:50 When we moved, I was a teenager. And I didn't get into any clubs. And by the time I was I had grown up And I could get into clubs.

50:00 I cared way less about them. So I just grew up Making uh making a future out of a necessity. And that I think has played a very large role.

50:15 And Uh In my life And it's the second thing which is very real. I played rugby.

50:23 Uh and uh in high school. And I uh am not A big dude?

50:32 But I'm fast and have a high pain tolerance. And I really, really enjoy winning as a team. R rugby's actually a special support for this. It's crazy. Uh It tends to be a sport that if you play North America that basically never has an audience. Like no one goes to watch franky games in North America, really.

50:50 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.

51:10 Is it all Sharp, who founded four seasons, said excellence is the capacity to take pain. Mm-hmm. 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

51:30 Is not that high. But people just give up too soon. Unfortunately. I think the sugar rush of easy

51:41 Like satisfaction. In the modern world has Underprepared people for pain. We always end these interviews with the same question. Which is what is success for you?

51:52 I have four kids. Um there's seven. Five. Three and two. And

51:57 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

52:08 That would optimize our marriage. for putting a dent in the world. But that's what we would spend our time on. Um and that that would be our definition of success in our marriage.

52:19 So I try To wake up every day. And think what is the most the thing I can do that will leave the biggest dent on the world. Like I think

52:29 Most people in my position. would have looked at the open door opportunity And Uh not ride full speed. But I ran at full speed.

52:43 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. So that's what I want to do. I want

52:57 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.

53:11 Um for my career. That 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.

53:23 is used for the good of the world. So I hold myself accountable. I'm thankfully My wife also holds me accountable.

53:33 To that end.

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