Truth Over Feelings: Inside Opendoor’s Turnaround

**Kaz Nejatian** (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.

**Shane Parrish** (0:15)
You took over a company that was months away from bankruptcy. Take me inside the company.
What did you do on day one?

**Kaz Nejatian** (0:25)
I left home to fly to San Francisco, where Opendoor 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 to try to figure out what had gone wrong. Because basically, what happens is all companies fail in similar ways.
No companies succeed, and 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 picking fights with your customers and partners. So that had happened at Opendoor. I asked for a full list of all employees, every contract, every payment the company had made for last 12 months, and all the accounts. I'm just like, 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.

**Shane Parrish** (1:46)
What do you mean by that?

**Kaz Nejatian** (1:47)
If you're trying to avoid looking bad, you do a certain number of certain things. Opendoor 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 agreed that I was going to join the company, and then chair the 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. I 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 changed the doc again, such it would be not offensive. So I put in big bold letters on top of the doc, whoever wrote this doc doesn't work at Opendoor anymore.
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, both the consulting firms very loudly resigned the account. 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 income statement. So I got every expense the company had paid for the last 12 months.
Usually for tech companies, your largest expense to an external vendor ends up being your cloud provider. But for Opendoor, number one was millions of dollars written to very large consulting firm. This company had come in and had told Opendoor to basically offshore every job, to massively overload the company with G&A and basically cut engineer, which is literally what you do if you have zero desire to create Alpha. And that basically happened to Opendoor. And by the way, I think this actually happens to a lot of companies. Where the founders are no longer there, there is no large shareholder that cares a lot about the company. So, over time, these companies essentially become hosts for professional leeches whose job it is to suck the company dry while making management look good.

**Shane Parrish** (4:11)
So, I want to go back to day one too. Like 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.

**Kaz Nejatian** (4:21)
Yeah.

**Shane Parrish** (4:21)
Because you find a culture that exists without you.

**Kaz Nejatian** (4:25)
Yeah.

**Shane Parrish** (4:25)
How do you tell what to keep, what to get rid of?

**Kaz Nejatian** (4:28)
So, Opendoor had gone fully remote.
So, at 9 AM that Monday, I told the entire company, hey, Opendoor 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 demand ownership. But the third thing that was impressive is, I just actually did the best good surprise of Opendoor. Every once in a while, I find someone who I thought was exceptional.