Inside Kaz Nejatian’s Fight to Save Opendoor

No company decides to fail. It drifts there one comfortable lie at a time. Kaz Nejatian took over Opendoor when it was just months away from bankruptcy and set out to rebuild it from the ground up. What happened next shocked everyone. Most turnaround stories are told years later, by the winner, after the ending is already known. That’s why they always sound clean and polished. This one doesn’t have an ending yet, and it’s anything but clean and polished. Kaz takes us inside while it’s still happening. We discuss why great companies drift away from reality, why truth has to matter more than feelings, and how competent people who don’t believe in the mission quietly destroy an organization. He shares the principles behind rebuilding culture, eliminating bureaucracy, making faster decisions, using AI to flatten management, and creating teams that move with speed and ownership. One of the key things I learned in this conversation is that the comfortable lies that sink a company are the same ones that sink a career. ------ Chapters: (0:00) How Opendoor Came Back from the Dead (1:32) How Mismanagement Causes Atrophy (4:28) The Blueprint that Changed Opendoor (5:33) Rewriting the Book on Company Turnarounds (5:57) The People You Hire Is the Company You Build (6:31) Be a Nuclear Bomb of Truth (7:52) How to Change a Losing Company Culture (8:07) Commit to Truth Over Feelings (8:33) The Most Dangerous Kind of Employee (9:13) Key Principles to Turning Around a Company (11:59) Meetings Are a Bug in the System (12:30) Why It's Rude to Not Disagree (13:05) Say the Thing Culture (15:04) How AI Is Supercharging Opendoor (18:16) Most Powerful Mental Models (22:50) Why Remote Workplaces Don't Succeed (24:56) How Opendoor Killed Distractions (26:09) The Key to Being a Market Maker (35:20) How Companies Fall Off Course Over Time (37:24) The Power of Speaking Simply (43:27) Turnaround Lessons for Life (51:10) Excellence Is Capacity to Take Pain ------ Newsletter: The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. Learn more and sign up at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ------ Follow Shane Parrish: X: ⁠⁠⁠⁠⁠⁠https://x.com/shaneparrish⁠ Insta: ⁠https://www.instagram.com/farnamstreet/⁠ LinkedIn: ⁠https://www.linkedin.com/in/shane-parrish-050a2183/⁠ ------ Follow Kaz Nejatian: X: https://x.com/nejatian ------ Thank you to the sponsors for this episode: +Applovin: Launch your first AppLovin campaign and grow your business: https://applovin.com/shane +Matic: the robot vacuum that does it all—grab yourself a year of free bags here. ⁠http://maticrobots.com/shaneparrish⁠ +HeyGen is a message-first AI video platform that helps people and AI agents turn ideas into professional video in minutes. Try for free at https://www.heygen.com/tkp +LMNT: My go-to zero sugar electrolytes — get a free LMNT Sample Pack here: https://DrinkLMNT.com/TKP ------ Note: ‍Shane and guests may hold positions in assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. Nothing in this conversation should be considered investment advice, financial guidance, or a recommendation to buy or sell any security. Always do your own due diligence or consult with a qualified financial advisor before making investment decisions. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 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.

• 0:15Shane Parrish?

  You took over a company that was months away from bankruptcy. Take me inside the company. What did you do on day one?

• 0:25Speaker 00

  I left home to fly San Francisco where Open Door had one office. 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. 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. No companies succeed. And I said, all success is unique, but all failures rhyme. Good people leave.

• 1:09Speaker 00

  People lose control of innovation. GNA goes up. And over time, you end up finding, 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 like all the accounts, like I'm just critical. 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.

• 1:46Shane Parrish?

  What do you mean by that?

• 1:47Speaker 00

  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 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, we did that I was going to join the company and then chaired a board, send me a Google Doc that was going to be my announcement that this guy is 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.

• 2:31Speaker 00

  So I took over and made edits. And then someone went in and undid my edits and like changed the doc again, such that it would be like not offensive. So I put in big, bold letters on top of the doc. Whoever wrote this doc doesn't work at Open Door anymore. And I didn't realize that both the consulting firms that the company had hired to do PR for it were in the doc. What happened as a happy accident is, is both the consulting firms very loudly resigned the account. Like we were back 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, on my income statement. So I got every expense the company had paid for the last 12 months.

• 3:15Speaker 00

  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 a 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.

• 3:59Speaker 00

  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.

• 4:11Shane Parrish?

  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 give me the blueprint of like coming in here and.

• 4:21Speaker 00

  Yeah.

• 4:21Shane Parrish?

  Because you find a culture that exists without you.

• 4:25Speaker 00

  Yeah.

• 4:25Shane Parrish?

  How do you tell what to keep, what to get rid of?

• 4:28Speaker 00

  So Open Door had gone fully remote. So at 9:00 AM 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, because we demanded ownership. But the third thing that was impressive is, and this actually has been the best, best, good surprise of Open Door. I would, every once in a while, I'd find someone who I thought was exceptional. And I would honestly ask them in that first couple of weeks, why are you still here?

• 5:13Speaker 00

  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 ICs.

• 5:20Shane Parrish?

  ICs are individual contributors.

• 5:22Speaker 00

  Individual contributors, yeah, who actually do the actual work.

• 5:26Shane Parrish?

  So it was on life support.

• 5:27Speaker 00

  Yeah, honestly, Open Door would have died had it not been for maybe a dozen people.

• 5:32Shane Parrish?

  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.

• 5:46Speaker 00

  There's a lot to be learned from books. But if Open Door could have been fixed by following something that was written in 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 thing 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 Door's 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. So the people end up being the company.

• 6:31Speaker 00

  The second thing ends up being that over a very long amount of time, groups of people tend to have tendencies towards niceties. So everyone ends up telling each other nice lies. A series of white lies that take very 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.

• 7:10Shane Parrish?

  Was the view from the inside, like was, were all of these nice lies sort of aggregating into the company's doing okay?

• 7:18Speaker 00

  Yeah, I mean, I think, I think a lot of people had convinced themselves, themselves that bad things were happening to Open Door. That Open Door was like this victim of the macroeconomic environment. You know, the victim type mentality that people develop, right? Because you've, 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 its customers because it blamed the outside world for everything that was happening to it.

• 7:52Shane Parrish?

  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, and you pull the curtain and you're like, guys, we need.

• 8:08Speaker 00

  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've 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.

• 8:27Shane Parrish?

  You wanted people to opt out.

• 8:28Speaker 00

  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 two by two chart, are competent but not mission aligned people. So your job is to identify who they are and help them move on as fast as possible.

• 8:45Shane Parrish?

  What makes them so dangerous though?

• 8:46Speaker 00

  Well, because competent people have a way of tilting the org in their direction, right? Everyone has had at their job, someone who is very good internal politics. And you can see that 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.

• 9:13Shane Parrish?

  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?

• 9:20Speaker 00

  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 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 and never worked. So like the only way to become in person for Open Door was through a significant amount of aggression. Transplanting, I thought Open Door was a place where some people were kind of nailing it in.

• 9:52Shane Parrish?

  Yeah.

• 9:52Speaker 00

  Not everyone, but some people. So 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 public. So 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 companies' mission statements end up being bland, pale imitations of statements. We're here for the good of the world. EPIA, who isn't, right?

• 10:33Speaker 00

  But you have to say things that a real person would say, I don't want any of that. If you figure out what those things are, because it matters. And third, I, I, if you're starting and as a CEO of a new company, I strongly urge you this. Be committed to truth over feelings. 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.

• 11:07Shane Parrish?

  Double click on the truth over feelings thing there, because I mean, most people think that they already do that.

• 11:13Speaker 00

  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 average. I mean, a pizza thing, team is real, right? Like having small teams is real because you can be truthful in small 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 that you can discover things. Otherwise, you will die.

• 11:58Shane Parrish?

  So what's a meeting with Kaz like?

• 12:00Speaker 00

  We try very hard not to have meetings unless they're needed because meetings are a bug in the system.

• 12:05Shane Parrish?

  Wait, go deeper on that.

• 12:07Speaker 00

  So meetings exist because people could not get the information they needed to make decisions before the meeting.

• 12:13Shane Parrish?

  So most meetings are like context sharing.

• 12:15Speaker 00

  Yeah, yeah. So typically, we only have meetings where we're broadcasting, not narrow casting. And our meetings end up being relatively full of disagreement.

• 12:28Shane Parrish?

  Go deeper on that.

• 12:30Speaker 00

  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 louder than the average company's meeting, more ordinary than the average company's meeting. And like, I mean, it happens with some frequency 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 collaborative and much less, let me present something to you.

• 13:02Shane Parrish?

  How do you disagree without being disagreeable?

• 13:05Speaker 00

  So in my blueprint I sent to whole company, I said, I value being told I'm wrong.

• 13:12Speaker 00

  Like our commitment is to 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 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 or watch a Slack message and have a large disagreement. But they don't want to be the person that, you know, farted in church. So they don't say what's on their brain.

• 13:53Speaker 00

  So when I got to Shopify and 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. You could tell things were not going well by the shape of the chart. So I wrote a note about with Shopify that, 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.

• 14:35Speaker 00

  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 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.

• 15:04Shane Parrish?

  Do you think it's a turnaround or like a refounding?

• 15:07Speaker 00

  I think it's a new company because AI has made it a different company. Because what about Open Door's 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 low cost, fast decision making at scale with data. We have built an AI exoskeleton around every human being at Open Door, such that it can be three, four X more efficient than everyone else. To give you a sense, the last time Open Door 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.

• 15:51Shane Parrish?

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• 16:38Shane Parrish?

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• 17:18Shane Parrish?

  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?

• 17:29Speaker 00

  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 tails 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, 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. The people who use AI well will win and there'll be more of them.

• 18:11Speaker 00

  Open Door has more engineers today than it did when I joined because we use AI well.

• 18:16Shane Parrish?

  What are the most powerful mental models that you find yourself coming back to over and over again?

• 18:21Speaker 00

  Actually, you, you know me, but three, no, this is true. I have these written down. First, friction is underestimated. Two, 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 the supply and demand graph in their life. And but people underestimate the 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.

• 19:02Speaker 00

  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.

• 19:13Shane Parrish?

  Right.

• 19:14Speaker 00

  And if you look at the Open Door parallel, before I got to Open Door, from a time you entered your phone address into our homepage, the time you got an offer, there'd be 11 people on the path, many, many days, many, many processes, many, many docs, all of it 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 reduce friction. 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. I think Hayek is just generally underappreciated. He gave a speech called Pretense of Knowledge.

• 19:58Speaker 00

  But the entire speech is basically about this idea that all of us confuse the map for the train, for a train of 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?

• 20:20Shane Parrish?

  Yeah.

• 20:21Speaker 00

  Because everyone did. It just so happens that unless you recognize you're looking at a first derivative of a fact, not the actual fact.

• 20:31Speaker 00

  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 derivative, more driven. They build models upon models. And no one says, uh, excuse me. Like, how far am I from the fact?

• 20:53Shane Parrish?

  But how do you do that as a company? How do you stay in contact with reality?

• 20:58Speaker 00

  Dashboards are wonderful things, but most corporate executives run the entire company on dashboards. And as a derivative fact, it's not the facts. You're playing like SimCity.

• 21:11Shane Parrish?

  Hey, you don't know when the environment changes.

• 21:13Speaker 00

  You end up losing a feeling for the business. Ray Kroc, the guy, the founder of McDonald's, used to go into the kitchens.

• 21:21Shane Parrish?

  Yeah, he'd be like, there's too much ketchup.

• 21:24Speaker 00

  Like, 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?

• 21:42Shane Parrish?

  But how do you do that as a company? How do you stay in contact with reality and in contact with the ever shifting terrain?

• 21:49Speaker 00

  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 fooled.

• 22:10Shane Parrish?

  And it gives you a huge context window.

• 22:12Speaker 00

  It does. You just have to, just have to do it. So the map is not right. 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 assuming that everyone is thin skinned. And they're assuming that people are offended by facts. And I'm just sorry, the facts do not care about your feelings. They just don't. And it's incredibly important that everyone be committed to truth.

• 22:50Shane Parrish?

  I want to come back to the turnaround for one second because Shopify was a remote work culture.

• 22:57Speaker 00

  Yeah.

• 22:57Shane Parrish?

  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.

• 23:04Speaker 00

  Yeah.

• 23:05Shane Parrish?

  Why?

• 23:06Speaker 00

  First of all, I don't think remote works generally. It only works for Shopify. And that's because 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, it just tends to be true.

• 23:30Shane Parrish?

  Why do you think that is? Like, what explains that?

• 23:32Speaker 00

  You lose a lot of culture. It's very hard to build a 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.

• 24:02Shane Parrish?

  Yeah.

• 24:03Speaker 00

  Amazing.

• 24:04Shane Parrish?

  Yeah.

• 24:04Speaker 00

  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 the failures we see together. So we can actually get through them together. That's one thing. Second, look, a lot of communication gets lost in remote companies. And third,

• 24:25Speaker 00

  intercompany multiculturalism does not work.

• 24:28Shane Parrish?

  What does that mean?

• 24:30Speaker 00

  Companies cannot have multiple cultures. They just can't. They just die. If you allow a company to have many different cultures, where you end up creating is use 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.

• 24:56Shane Parrish?

  I talked to somebody inside the turnaround who reports to you now. And he said, you've killed more things in nine months than most CEOs do in a decade. What did you kill?

• 25:07Speaker 00

  In my first four weeks, I killed two entire business lines. Open Door used to have, essentially, as 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 were essentially called Odie 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, killed it off. Because again, that's not our job. They're our builders in the world. We're not one of them. We're a market maker. It's a different job.

• 25:47Speaker 00

  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.

• 25:58Shane Parrish?

  You started Mortgage.

• 25:59Speaker 00

  Mortgage, our buyer product and our new part cashed down more later, which like existed in an odd shape, but exists under me now in much, much real way.

• 26:09Shane Parrish?

  What does it mean to be a market maker in housing?

• 26:12Speaker 00

  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. Craigslist is 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 is a great example of this. Actually eBay, Discovery, PayPal, trust. I will allow you to trust your counterparty.

• 26:43Shane Parrish?

  Yep.

• 26:44Speaker 00

  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 a much more volume, right? If you go back to 2002, everyone thought eBay was going to win against Amazon.

• 27:13Shane Parrish?

  Yeah.

• 27:14Speaker 00

  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 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 because they have not found a buyer for their home. And our job at Open Door is to say, we're that buyer. We will buy your home. Come to opendoor.com, type in your address, we'll buy your home at a fair price. And then we'll sell it to someone, whenever that person is available.

• 27:49Shane Parrish?

  So how does Open Door make money then? Like, how do you become insanely profitable doing that?

• 27:54Speaker 00

  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 mortgage, insurance, talent 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 that 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. The 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.

• 28:38Speaker 00

  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.

• 28:54Shane Parrish?

  How did you learn this concept?

• 28:56Speaker 00

  I've just been always interested in the history of companies. It just seemed relatively obvious to me that that had what had happened in the world, that these ancillary businesses to core business had become a real thing. Because if you have software grew.

• 29:13Speaker 00

  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. 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 then Shopify came along and said, cool. I will make very money from you for a very long time over a relationship, but from services. Right? And that pattern has always held true in every business. Cause there is a word for people who make all their money from you upfront and never talk to you again. We call them carnies. Like they come to town, they just get take your money and run away.

• 29:52Shane Parrish?

  Yeah.

• 29:53Speaker 00

  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 stockbroker that made all their money from you from one trade. You would just never 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.

• 30:30Shane Parrish?

  I built an AI version of myself with HeyGen. Today I'll have a 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. 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, 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 HeyGen. Record yourself for 15 seconds and get an AI avatar that delivers professional video on demand.

• 31:14Shane Parrish?

  Your first three videos are free at heygen.com/TKP. That's H E Y G E N dot com slash TKP.

• 31:24Shane Parrish?

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• 32:08Shane Parrish?

  So one of your principles was sort of say the thing, but I was surprised another one was get shit done.

• 32:14Speaker 00

  Yeah.

• 32:15Shane Parrish?

  Why do you have to tell people to get shit done?

• 32:18Speaker 00

  So let me tell you a story. Toby Luke is among the most thoughtful people on the planet. There's a reason why people call him the founder's founder. If you walk the offices of Shopify, first of all, they're incredibly thoughtfully designed, but they all say on the walls, do things, tell people.

• 32:37Speaker 00

  And I always found that was odd. I actually haven't had a conversation with Toby about this, but like I realized that like in most companies, the order is reversed.

• 32:49Speaker 00

  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 can approve that idea. And there's a whole process that takes many months before you can do the thing. The 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 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, no, no, no, we're default yes company, which worked incredibly well for Amazon.

• 33:36Speaker 00

  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.

• 33:47Shane Parrish?

  Yeah.

• 33:48Speaker 00

  And only have people that you want and trust to do things. This, by the way, is not, people, this is not a very cool 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 manage it would show up.

• 34:08Speaker 00

  And the power would not be on in the home. And when this happened, the person was managing a home would get a note saying, hey, power isn't on. And who that this person was a good sales force, flood of form. That form would get emailed to someone else. They would look at it, then it 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 nastiest 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,

• 34:52Speaker 00

  and the credit card number you can give them to turn on power. We're the largest buyers of home in North America. And by the way, Open Door was not run by unintelligent people. There 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.

• 35:20Shane Parrish?

  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.

• 35:40Speaker 00

  This is a thing I'm like, I'll use our pilot example. I want to be a pilot. My wife won't let me.

• 35:45Shane Parrish?

  Smart. Listen to your wife.

• 35:47Speaker 00

  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. And people say you'd be surprised by a number of new pilots who come out of sky clouds fully inverted. Cause 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.

• 36:25Speaker 00

  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 in groups and out groups that no one can tell if anyone else is inverted. And the only one who can tell 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.

• 36:55Shane Parrish?

  This comes back to sort of like trying to touch reality and being in the weeds and having a bigger context.

• 37:00Speaker 00

  I've literally turned on utilities. I've fixed work orders. I like, cause you have to do it. Otherwise I don't know how you, like 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.

• 37:24Shane Parrish?

  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?

• 37:34Speaker 00

  Yeah.

• 37:36Speaker 00

  Early on in my career, I used to ask everyone who worked on my team to read Orwell's essay, Politics and 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 that as someone who was not, English is not my first language. But Orwell 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.

• 38:15Speaker 00

  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 worked 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. It's incredibly hard 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. Like it just means almost nothing all the time.

• 39:00Speaker 00

  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.

• 39:11Shane Parrish?

  And they're sure ambiguous, right? So it's like, I can weasel out of whatever happens because this word can mean multiple things.

• 39:19Speaker 00

  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 passive tense is very bad. But even the worst is uttering a fact. Let me give you an example. Legal decided that X would be true.

• 39:41Speaker 00

  I have a rule at Open Door that people decide things, not teams.

• 39:44Shane Parrish?

  Yeah.

• 39:45Speaker 00

  So whenever someone says legal decide X, I'm like, who? Legal doesn't get to decide thing. Like what's 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 mutating everything into bad by taking away specifics of the situation and living with generalities. Like you're a pale pink imitation of everything.

• 40:15Shane Parrish?

  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?

• 40:24Speaker 00

  Products, man, I think of products first. I really do. I think most people over emphasize strategy.

• 40:32Speaker 00

  I must think 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?

• 41:17Speaker 00

  Can you find 1,000 people who love the product?

• 41:24Speaker 00

  And if you can, you had to be on the right track. If you can't, all the capital in the world won't save you.

• 41:30Shane Parrish?

  How do you think about risk? A lot of people think, you know, for instance, that delaying a decision reduces risk.

• 41:38Speaker 00

  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 our colleagues said, "Hey, we're gonna run this A B test and then decide what to do." And I said, "Great, guys, I'm from the future. I'm from six weeks from now. The A B test was 51% positive. Tell me what you're gonna do."

• 42:17Speaker 00

  What most tech companies end up doing, and I thought A B tests are like the most, because people misunderstand 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, A B tests have done have been the safety blanket

• 42:42Speaker 00

  for management.

• 42:43Shane Parrish?

  I don't have to make a decision.

• 42:45Speaker 00

  Like, this is like, uh, Google famously A B tested some like 400 different shades of blue.

• 42:50Shane Parrish?

  Yeah.

• 42:51Speaker 00

  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 A B tests don't matter, to be clear, I'm not saying that. But what I am saying, I'm saying A B tests matter a lot,

• 43:12Speaker 00

  but they cannot replace human judgment.

• 43:16Shane Parrish?

  Of course, yeah.

• 43:17Speaker 00

  And if you sit in a room and tell me, like, a one slight deviation of shade of blue matters, I just don't wanna be in a room with you.

• 43:27Shane Parrish?

  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?

• 44:01Speaker 00

  If you know anyone who's had a problem with alcohol 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.

• 44:19Shane Parrish?

  Yeah.

• 44:20Speaker 00

  The first step is taking ownership over the problem, right? They're taking ownership, saying, "I understand, there are things I can do." Right? There's a reason why AA works so well. Because 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're writing over and over again. And the score tends to take care of itself over a very long period of time. And I think that pattern tends to be one that is repeatable over and over again.

• 44:59Speaker 00

  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 than the average person, it can feel lonely. Luckily for me, I have an incredibly supportive family.

• 45:23Speaker 00

  So those days where I say, "Hey, I made a mistake, I am to be blamed." I have 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 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 in companies as it is in people.

• 46:01Shane Parrish?

  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.

• 46:11Speaker 00

  I have a 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.

• 46:22Speaker 00

  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.

• 46:31Shane Parrish?

  Yeah.

• 46:33Speaker 00

  And that usually shakes you pretty good.

• 46:36Shane Parrish?

  Yeah.

• 46:37Speaker 00

  Because if you do nothing, you're dead. Like, you're, 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. Uh, and like, so I think that allows founders just to act differently than other people would. But I don't, I don't wanna 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.

• 47:21Speaker 00

  But if you arrive at the site of a chemical spill, the first bit is really easy to solve, just grab a shovel.

• 47:29Shane Parrish?

  Yeah.

• 47:30Speaker 00

  The last bit requires a bunch of microscopes and shit. But the first bit is shovel territory, man.

• 47:37Shane Parrish?

  It's like your grandfather's wisdom, right? When you find yourself in a hole, stop digging.

• 47:41Speaker 00

  Yeah, yeah, no, it's real.

• 47:43Shane Parrish?

  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. Like, that was the moment where he started to change his behavior.

• 48:07Speaker 00

  In a movie, there's this very famous scene where Steve Jobs had fired the Apple II 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, he's like, "You almost bankrupted the company." Like, there is a very real thing that if you have come close to death.

• 48:30Shane Parrish?

  Yeah.

• 48:30Speaker 00

  If you look at the balance sheet, you're like, "Holy God, I only have X number payrolls left." 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.

• 48:50Shane Parrish?

  Is part of that sort of not caring what other people think? Like, the courage to be disliked and thinking.

• 48:55Speaker 00

  Yeah.

• 48:56Shane Parrish?

  Like, so many people optimize their life in order not to be disliked versus on mission or towards a goal or...

• 49:05Speaker 00

  First of all, Courage to be Disliked is an excellent book. Everyone should read it, but it's a very real thing where most people's limitations are self-imposed.

• 49:14Shane Parrish?

  We're capable of so much.

• 49:15Speaker 00

  Yeah, which like, everyone is. And everyone's pain is more imaginative 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 have never cared.

• 49:41Shane Parrish?

  Is that learned or something you...

• 49:43Speaker 00

  I just think what happened was I immigrated from Iran, my family fled Iran.

• 49:49Speaker 00

  And when we moved, I was a teenager and I didn't get into any clubs. And by the time I was, I'd grown up and I could get into clubs. I cared way less about them. So I just grew up making, uh, making a future out of necessity. And that I think has played a very large role in, uh, in my life. And it's the second thing, which is very real. I played rugby, uh, in, uh, in high school.

• 50:27Speaker 00

  And I, uh, am not a big dude, but I'm fast and have a high paid tolerance.

• 50:36Speaker 00

  And I really, really enjoy winning as a team. Rugby is actually a special sport for this.

• 50:41Shane Parrish?

  It's crazy.

• 50:42Speaker 00

  Uh, it tends to be a sport that if you play in North America, it 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.

• 51:10Speaker 02

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• 51:40Shane Parrish?

  Is it or Sharp, who founded Four Seasons, said excellence is the capacity to take pain?

• 51:45Speaker 00

  Uh huh.

• 51:47Shane Parrish?

  Do you agree with that?

• 51:48Speaker 00

  Yeah. Yeah, over a very long period of time, by the way. The person who can hold your 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.

• 52:16Shane Parrish?

  We always end these interviews with the same question, which is what is success for you?

• 52:22Speaker 00

  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 they would optimize our marriage for putting a dent in the world. But that's what we would spend our time on.

• 52:45Speaker 00

  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

• 53:03Speaker 00

  would have looked at the open door opportunity and, uh, not ride 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. 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.

• 53:41Speaker 00

  And for my career, 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.