Truth Over Feelings: Inside Opendoor’s Massive Turnaround  🔗 **Source:** [Truth Over Feelings: Inside Opendoor’s Massive Turnaround](https://share.snipd.com/episode/b78a4e2a-c16c-423c-9014-72e63b227e64) ## Highlights - **First Week Mattress And The Expense Audit** - Kaz slept in the office the first week and demanded full transparency: he requested every employee, contract, payment and account to find the root causes. - He discovered heavy consulting fees and offshoring that inflated G&A and hollowed product execution. Transcript: Kaz Nejatian 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. And I'm like, haha, very funny. This is hilarious. And my wife said, no, no, I'm not kidding. Do not come back. She went on 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 trying 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 people lose control Of innovation gna goes up and over time you end up fighting picking fights with your customers and partners so that had happened at open. I asked for a full list of all employees, every contract, every payment the company had made for the last 12 months, and all the accounts. I'm just kidding. Give me the state. And one of the things I realized is that it is actually surprising how lack of active management allows companies to add for fee. ([Time 0:00:25](https://share.snipd.com/snip/7cb4b707-2170-4ce4-abc9-024057044959)) - **How Professional Leeches Hollow Companies** - Over time Opendoor became run by professional consultants who offshored work and created process wins rather than product alpha. - The largest vendor spend was consultants, not cloud, showing cultural capture by external actors. Transcript: Kaz Nejatian What do you mean by that? If you're trying to avoid looking bad, you do a certain number of certain things, right? So Open Door for a very long time was doing everything it could in order to not be noticed, in order to not stand out, which meant the company was basically had become a company run by professional Consultants. Let me give you two specific examples. So I got, we figured that I was going to join a company and then chaired a board, sent me a Google Doc that was going to be my announcement, that this guy's going to become the CEO of the company. And like read the doc and it sounded like it was written by someone trying very hard to avoid saying anything that might offend anyone so I took over and made edits and then someone went In and undid my edits and like changed the 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 would like to have nothing to do with the company which did two good things one i didn't have to pay 30 days of notice and two i got to have one less expense on my uh on my income statement So i got every expense the company had paid for the last 12 months and usually for tech companies like your largest expense to an external vendor ends up being like your cloud provider. But for Opendoor, number one was millions of dollars written to very large consulting firm. ([Time 0:01:46](https://share.snipd.com/snip/731d6857-7d13-4896-8c54-3ece1fc3f45c)) - **Change Defaults Violently To Stop Drift** - Do force major default changes quickly when a company is drifting: Kaz mandated immediate return-to-office and cut remote opt-outs. - He used abrupt change to repelled people who didn't want the new operating style, creating space to hire aligned talent. Transcript: Kaz Nejatian Remote. So at 9 a.m. That Monday, I told the entire company, hey, open door is going to be back in the office next Monday. If you don't plan to be in one of these offices, we appreciate your help, but you're no longer with us. Then the second thing that happened was that Opendoor 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 good surprise of Opendoor, I would, every once in a while, find someone who I thought was exceptional. 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 that had kept the company alive on their shoulders. And we've now rebuilt the company around these ICs. ICs are individual contributors. Yeah. Who actually do the actual work. So it was on life support. ([Time 0:04:30](https://share.snipd.com/snip/201a339d-eba3-4c6d-adc9-ded08bc974ad)) - **Use Your Career Page To Repel The Uncommitted** - Do rewrite hiring language to repel the uncommitted: Kaz changed Opendoor's careers page to say the job will be hard and to discourage casual applicants. - That explicit repelling attracts people who opt in with ownership and stamina. Transcript: Kaz Nejatian So the first week in 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. Opendoor'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. 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's important is to discover who you are, discover that kernel of truth, and build only on that. ([Time 0:06:00](https://share.snipd.com/snip/4599e10b-a283-4a26-9cc6-bd9225433ad3)) - **Competent But Misaligned People Are Hidden Risks** - The most dangerous employees are competent but not mission-aligned because they can tilt the organization through politics. - Kaz's goal was to identify those people and accelerate their departure to prevent subtle cultural capture. Transcript: Kaz Nejatian I mean, I think a commitment to truth over feelings is incredibly important. I sent my team, I have a blueprint that I sent to an 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 you wanted people to opt out yeah to opt people 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 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. What makes them so dangerous, though? Well, because competent people have a way of tilting the org in their direction, right? Everyone has had at their job someone who is very good in 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. ([Time 0:08:08](https://share.snipd.com/snip/3ff6003e-ab5f-4fab-b4c9-333aa766aa05)) - **Make Truth Over Feelings A Cultural Default** - Commit to truth over feelings and make truth a visible cultural default; Kaz mandated being a 'nuclear bomb of truth' to counter niceties. - Small rooms and named individuals increase truthful exchanges and reduce corporate smoothing. Transcript: Kaz Nejatian 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 significant amount of aggression. Transparently, I thought Open Door was a place where some people were kind of nailing it in. Yeah. Not everyone, but some people. So, um, I stopped at the office. I thought Open Door was a place where people were unwilling to take risks. So we took risks public. So they went 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 yi pia who Isn't right but you have to say things that a real person would say i don't want any of that You have to figure out what those things are, because it matters. ([Time 0:09:24](https://share.snipd.com/snip/48c81712-1ae8-4a37-a518-0e893dd66853)) - **Say The Thing Until You Are Heard** - Do 'Say the Thing': encourage immediate, issue-focused disagreement—say 'this sucks' not 'you suck' and repeat until heard. - Make disagreement polite duty: silence on problems is considered rude at Opendoor. Transcript: Kaz Nejatian So what's a meeting with CAS like? We try very hard not to have meetings unless they're needed because meetings are a bug in the system. Wait, go deeper on that. So meetings exist because people could not get the information they needed to make decisions before the meeting. Shane Parrish So most meetings are like context sharing effectively. Kaz Nejatian So typically, we only have meetings where we're broadcasting, not narrowcasting. And our meetings end up being relatively full of disagreement. Shane Parrish Go deeper on that. Kaz Nejatian 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 ornery than the average company's meeting. And 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. How do you disagree without being disagreeable? So in my blueprint, I sent the whole company. I said, I value being told I'm wrong. 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. So when I got to Shopify and it was true when 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 shape of the chart so i wrote note about the shop i said hey say the thing say it now like the second you know something say it say it about the thing not the person Always say this sucks, not you suck. And say it until you've been heard. People don't have to agree with you, but they have to hear you. So if you feel like you're not being heard, say it over and over again until you feel like you've been heard. Because you get paid to do this at Open Door. So it's incredibly important. Say it now, don't wait. Second, say it about the thing, not the person. Say it over and over again until you've been heard. And those three things are a cultural expectation. ([Time 0:11:58](https://share.snipd.com/snip/87ce79ea-9b21-4541-8379-8253fa622ce3)) - **AI As An Exoskeleton For Operations** - AI changes the company shape: Kaz calls Opendoor a new company because AI acts as an exoskeleton making humans 3–4x more efficient. - That efficiency halved OPEX relative to prior comparable volume. Transcript: Kaz Nejatian Because look, 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 the AI exoskeleton around every human being at Opendoor, such that it can be 3, 4x more efficient than everyone else. To give you a sense, the last time Opendoor bought as many homes as we bought last quarter, Opendoor'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. ([Time 0:15:11](https://share.snipd.com/snip/8db28f1a-615b-4769-ad24-08039e6fd12a)) - **Reducing Friction Multiplies Demand** - Friction is massively underestimated; reducing it expands market size. - Opendoor removed 11 people/process steps from offer flows and now buys 6–7x more homes week-over-week. Transcript: Kaz Nejatian Actually, you know me a bit, so you know this is true. I have these written down. First, friction is underestimated. Two, map is not to train. Three, truth over feelings. Those are like that. Three. So let me give you the first one. Everyone has seen the supply and demand graph in their life. 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. 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. Right. And if you look at the open door parallel, before I got to open door, from the time you entered your phone address into our homepage, 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 that friction. And every one of these we removed increased demand. ([Time 0:18:22](https://share.snipd.com/snip/57bf1c6c-3df1-4b12-833a-2b821f650035)) - **Keep Contact With Reality Not Just Dashboards** - Map is not the terrain: companies drift by confusing derivative models for reality; dashboards can create a false sense of knowledge. - Kaz visits customers, homes and raw data weekly to avoid simulation-driven blindness. Transcript: Kaz Nejatian If you were in Europe, pre-discovered a new world, you would look at a map from an expert and trust it. Right? Yeah. 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, 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 derivative. They build models upon models, and no one says, excuse me, how far am I from the fact? Shane Parrish But how do you do that as a company? How do you stay in contact with reality? Kaz Nejatian 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. Shane Parrish And you don't know when the environment changes. Kaz Nejatian You end up losing a feeling for the business. Ray Kroc, the guy, the founder of McDonald's, used to go into the kitchens. Shane Parrish Yeah, he'd be like, that's too much ketchup. Kaz Nejatian 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? Shane 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? Kaz Nejatian 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. ([Time 0:20:09](https://share.snipd.com/snip/ed45c69b-e22f-497d-936e-b6dd754f3a63)) - **Killed Profitable Non Core Businesses** - In the first four weeks Kaz shut down two entire business lines that were profitable but off-mission: general contractor services and quasi-building OD Select. - He prefers Opendoor to act as a market maker, not a builder or contractor. Transcript: Kaz Nejatian I killed two entire business lines. Opendoor used to have, essentially, we provided general contractor services to other companies, which 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 OD Select, which we essentially were like quasi-builders. Like, we would take essentially homes that were like unlivable and just build them from scratch up. Profitable business side for us killed it off. Because again, that's not our job. They're 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 Opendoor, I think it's reasonable to say I've only started three products and we've shut down a few dozen. ([Time 0:25:10](https://share.snipd.com/snip/7a788c36-911a-42de-b04b-e3534e7e8dff)) - **Minimize No People And Empower Doers** - Do things before building sprawling approval processes: Kaz flattened decision paths and handed corporate cards so individuals could turn on utilities and fix homes immediately. - Minimize people who can say no; empower trusted doers. Transcript: Kaz Nejatian Toby lucas 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 um do things tell people and i always found that was odd i actually haven't had a conversation with toby about this but I realized that In most companies, the order is reversed. 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 for someone that can approve that idea, and there's a whole process that Takes many months before you can do the thing. There's a chain of command designed to minimize risk. And there's two ways to deal with that chain of command. The first is to do what Amazon said. Amazon became a default yes call. Most companies are default no. The chain of command is designed to reduce risk and say no to many things. That's what it does. Amazon said, no, no, no. We're a default yes company. Which worked incredibly well for Amazon. But I think a better way to deal with this problem is to not have the chain of command. To minimize the number of people who can say no yeah and only have people that you want and 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, the person who was supposed to benefit it would show up and the power would Not be on in the home. And when this happened, the person who was managing a home would get a note saying, hey, power isn't on. And this person would go to Salesforce, fill out a form. That form would get emailed to someone else. They would look at it. Then they would ask for permission from the manager to turn the power on. Then they would call the utility company, turn the power on. They would mail something. There would be a back and forth that involves three or four managers. And I thought this was the naughtiest thing ever. So we literally gave everyone corporate cards and said, hey, if you see a home whose power is not on, if you type in the address into Slack, you will get back the phone number you're supposed To call, the account number you're supposed to say, and the credit card number you can give them to turn on power. We're the largest buyers of home in North America. And by the way, Open Door was not run by unintelligent people. They were highly credentialed people. But the general incentive inside every company is to reduce risk as much as possible. And the way you reduce risk is more process, more people in the path. ([Time 0:32:20](https://share.snipd.com/snip/2da99b8f-0843-4d46-9c85-391ab542c822))