Truth Over Feelings: Inside Opendoor’s Massive Turnaround

Eric Wu

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

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

Eric Wu

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. And I'm like, haha, very funny, this is hilarious. And my wife said no, no, I'm not kidding, do not come back. She went Amazon and ordered a mattress to the office for me. Like I knew I was gonna 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 in a. 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 the last 12 months. And like all the accounts, like I'm just 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.

Shane Parrish

What do you mean by that?

Eric Wu

If you're trying to avoid looking bad, you do a certain number of certain things right? So 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 figured that I was going to join the company and then the chair of the board sent me a Google Doc that was going to be my announcement that this guy's going to become the CEO of the company. And I like read the doc and it sounded like it was written by someone trying very hard to avoid saying anything that might offend anyone. So I took over and made edits. And then someone went in and undid my edits and like changed the doc again such 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 Opendoor anymore. And I didn't realize that both the consulting firms that the company had hired to do PR for it were in the Dock what happened as a happy accident is 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. 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. This company had come in and had told Opendoor 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 Opendoor. And by the way, I think that actually happens to a lot of companies where the founders are no longer there. There's no large shareholder that cares a lot about the company. So over time, many of these companies essentially become hosts for professional leeches whose job it is to suck the company dry while making management look good.

Shane Parrish

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 and. Yeah, because you find a culture that exists without you.

Eric Wu

Yeah.

Shane Parrish

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

Eric Wu

Handor had gone fully remote. So at 9am 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 demanded ownership. But the third thing that was impressive is this actually must have been the best good surprise of Opendoor. I would, every once in a while I find someone who I thought was exceptional and I would honestly ask them in that first couple weeks, why are you still here? And it was a series of these people that had kept the company alive on their shoulders. And we've now rebuilt the company around these ICs.

Shane Parrish

ICs are individual contributors.

Eric Wu

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

Shane Parrish

So it was on life support?

Eric Wu

Yeah. Honestly, Opendoor would have died had it not been for maybe a dozen people.

Shane Parrish

Well, so this is fascinating to me.

Eric Wu

Right?

Shane Parrish

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.

Eric Wu

There's a lot to be learned from books. But if Opendoor 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 week in Opendoor, 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. 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 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.

Shane Parrish

Was the view from the inside. Were all of these nice lies sort of aggregating into the company's doing? Okay, yeah.

Eric Wu

I think a lot of people had convinced themselves that bad things were happening to Opendoor, That Opendoor was like this victim of the macroeconomic environment, you know, the victim tech mentality that people develop. Right? You know, people who blame the world for everything that goes wrong with them. Opendoor felt like that a 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.

Shane Parrish

But how do you change that in the sense, like, you're one person, you're coming in, and you have to have this equal and opposite force. I would imagine to counteract this and start changing the culture, and you pull the curtain and you're like, God, guys, we need.

Eric Wu

I mean, I think. I think, like, a commitment to truth over feelings is incredibly important. I sent my team, I have a blueprint that I sent to the entire company because my job was to create strong repelling forces, I. E. I wanted everyone who didn't like how I was going to run the company to quit.

Shane Parrish

You wanted people to opt out?

Eric Wu

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.

Shane Parrish

What makes them so dangerous though?

Eric Wu

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 at internal politics. And you can see that this person keeps saying 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 have had to basically hire an entirely new company and that has been very painful.

Shane Parrish

So if you sat down and had to write a document on the key principles involved in turning around a business, what would they be?

Eric Wu

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. Opendoor was remote. Opendoor was never going to become in person if we had a seven step plan over eight months. I know this because Opendoor 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 Opendoor was through significant amount of aggression transparently. I thought Opendoor was a place where some people were kind of mailing it in. Yeah, not everyone, but some people. So I stopped at the office. I thought Opendoor was a place where people were unwilling to take risks. So we took risks public. So they went, 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. Ye Pia who isn't right. But you have to say things that a reasonable person would say. I don't want any of that. You have to figure out what those things are because it matters. And third, if you're starting 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.

Shane Parrish

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

Eric Wu

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 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 team is real, right? Like having small teams is real. Because you can be truthful in smaller rooms. You can say things you would never say in a big room and you need to get that in a company. If you're and you 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.

Shane Parrish

So what's a meeting with KAZ like?

Eric Wu

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

Shane Parrish

Wait, go deeper on that.

Eric Wu

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.

Eric Wu

Yeah. 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.

Eric Wu

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 we ornery than the average company's meeting and 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.

Shane Parrish

How do you disagree without being disagreeable?

Eric Wu

So in my blueprint I sent to whole company, I said I value being told I'm wrong. Like our commitment is to truth when we make a mistake. Opendoor made a mistake. All mistakes belong to Opendoor. 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, but I got to Opendoor, 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 a note at my mother, Shopify. 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 Opendoor, so it's incredibly important. Say it now. Don't wait second. Say it about the thing, not the person. Say it over and over again until you've been heard. And those three things are a cultural expectation. Not doing it is considered rude. And this has been a very real part of our learning at Opendoor is allowing people to object to things that are stupid.

Shane Parrish

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

Eric Wu

I think it's a new company because AI has made this a different company 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 an AI exoskeleton around every human being at Opendoor such that they 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.

Shane Parrish

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Eric Wu

IC I think what AI does is two things. One, it 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, the chains of the company. The second thing it does and what it has done at Opendoor is AI fundamentally changes who wins and who loses. The people who use AI well will win and there'll be more of them. Opendoor has more engineers today than it did when I joined because we use AI well.

Shane Parrish

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

Eric Wu

Actually, you know me a bit, so you know this is true. I have these written down. First, friction is underestimated. 2. Map is not to train. 3. Truth over feelings to subject the three. So let me give you the first one. Everyone has seen a 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. 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 Opendoor parallel, before I got to Opendoor, from a time you entered your address into our homepage, the time you got an offer, there'd be 11 people in the path. Many, many days. Many, many processes, many, many docs. All of 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 reduced 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 genuinely underappreciated. He gave a speech called Pretense of Knowledge, but the entire speech is basically about this idea that all of us confuse the map for the train portraying afflict 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? Yeah, because everyone did. It just so happens that unless you recognize you are 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?

Eric Wu

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

Shane Parrish

know when the environment changes.

Eric Wu

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.

Eric Wu

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, in contact with the ever shifting terrain?

Eric Wu

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.

Shane Parrish

And it gives you a huge context window.

Eric Wu

It does. You just have to. Just have to do it. So the map is not true. And the last one, which we 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, facts do not care about your feelings. They just don't. And it's incredibly important that everyone be committed to truth.

Shane Parrish

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

Eric Wu

Yeah.

Shane Parrish

Why?

Eric Wu

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, that just tends to be true.

Shane Parrish

Why do you think that is?

Eric Wu

Like, what explains that you lose a lot of culture? It's very hard to build a culture remotely because Opendoor'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. Yeah, amazing. 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, intra company multiculturalism does not work.

Shane Parrish

What does that mean?

Eric Wu

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

Shane Parrish

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?

Eric Wu

In my first four weeks, I killed two entire business lines Opendoor used to have. Essentially we provided general contractor services to other companies which was. It was a profitable business for us. But it's not the mission of our company. Our job isn't to become the world's best contractor. So we killed that. We had a business where we essentially called OD select, which we essentially were like quasi builders, that we would take essentially homes that were unlivable and just build them from scratch up profitable business side for us. Killed it off because again, that's not our job. There are builders in the world. We're not one of them. We're a market maker. It's a different job. If you think of my time at Opendoor, I think it's reasonable to say I've only started three products and we've shut down a few dozen. You start Mortgage Mortgage, our buyer product and our new product cash down more later, which like, existed in an odd shape, but exists under me now in much, much real way.

Shane Parrish

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

Eric Wu

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 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. E eBay discovery, PayPal trust. I will allow you to trust your counterparty. 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 reduced the friction so she can have much more volume. Right. If you go back to 2002, everyone thought eBay was going to win against Amazon. That clearly has not happened. Amazon won because it solved the full problem. Now it's a much harder problem to solve. So the job of a market maker is to stand between two people who want to transact and allow them to transact with you such that they don't have to actually look for each other and find them. And that's our job for housing. Right. The largest problem in housing is people want to move and they can't because they have not found a buyer for their home. And our job at Opendoor is 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.

Shane Parrish

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

Eric Wu

We make our money in two ways. First, we make money in each transaction, relatively thin margins on each transaction. But we make our real money from the first derivative of the business, which is mortgage, insurance, title, and escrow, all the things that go with a home. So our job is to buy and sell the home at fair prices as fast as we can and make our money on the services you get. This, by the way, is how we built Shopify. If you look at Shopify, you can buy Shopify, the software for $1, like, and it's $1, because it can't possibly be less. 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 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.

Shane Parrish

How did you learn this concept?

Eric Wu

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 look at how software grew, the way software used to be sold is you came to me for software, I wrote some code and handed it to you, and I ran away. Because 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. Because 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 take your money and run away. Yeah, right. That's not how businesses work. No one trusts someone where you know that the second this relationship is over, you'll never see me again. But that's how the largest asset people have transacts. It's crazy. It is insane that this is how we deal with the largest asset class in the world. You would never trust a 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. It is important that you and I be committed to knowing each other for a very long time.

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Eric Wu

Yeah.

Shane Parrish

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

Eric Wu

So let me tell you a story. Toby Lutke 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. 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, someone who 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. Both companies are default no. The chain of command is designed to reduce risk and say no to many things. Right? That's what it does. Amazon said no, no, no, we're a default yes company, which worked incredibly well for Amazon. But I think a better way to deal with this problem is to not have the chain of command to minimize the number of people who can say no and only have people that you want and trust to do things. This, by the way, is not. This is not a theoretical thing. I want to give you this very specific example. I got to Opendoor and I realized that for a substantial number of homes we had bought, the person who was supposed to benefit would show up and the power would not be on in the home. And when this happened, the person was managing a home would get a note saying, hey, power isn't on. And this person would have go to Salesforce, fill out a 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 nuttiest thing ever. So we literally gave everyone corporate cards and said, hey, if you see a home whose power is not on, if you type in the address into Slack, you will get back the phone number you're supposed to call, the account number you're supposed to say and, and the credit card number you can give them turn on power. We're the largest buyers of home in North America. And by the way, Opendoor 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. So do things becomes actually difficult.

Shane 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.

Eric Wu

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

Shane Parrish

Smart. Listen to your wife.

Eric Wu

I have a bunch of plain analogies, but there's a very real thing that happens to new pilots. New pilots go 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 clouds fully inverted, because you basically end up upside down one degree at a time. That's basically what happens to every company. This is a very good sign that your company is upside down. If you have acronyms, if you have lots of acronyms, the odds are you're upside down as a company, because acronyms are things that people do when they want to create in cultures and out cultures, by definition. So if you have acronyms, the odds are what you have done is create so many 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 CEOs don't go that deep. They manage the dashboards.

Shane Parrish

This comes back to trying to touch reality, being in the weeds and having a bigger.

Eric Wu

I've literally turned on utilities. I've fixed work orders I've collected. So 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.

Shane 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?

Eric Wu

Yeah. Early on in my career, I used to ask everyone who worked on my team to read Orwell's essay Politics in the English Language. It's an incredibly good essay because in it he talks about how English is among the most powerful tools ever invented by humanity in the English language. And I say it as someone who was not. English is not my first language, but Orville says English is in trouble because words have lost their meanings. And the word he uses is fascism. In the essay, he says fascism doesn't mean anything anymore because everyone's a fascist. Like, everyone gets called a fascist. Anyone I don't like is a fascist. Therefore, fascism doesn't mean anything anymore. I used to share this essay with people I work with because in order for language to be useful, we must hold it properly. And English is an incredibly powerful tool. If you speak simply. And that is an incredibly important thing to learn inside a company. And it's incredibly guard against it because most business talk is designed to confuse the listener. Deliberately confuse the listener. I challenge anyone to find any sentence that includes the word leverage that means anything. Like it just means almost nothing all the time. And there's a series of these words that are very common in the corporate world that are designed to have a low density of information to words and

Shane Parrish

they're sort of ambiguous. Right. So it's like I can weasel out of whatever happens. Because this word can mean multiple things.

Eric Wu

Yes, it's very. And there's another one by the way, that it's. The passive tense is another example of this very. The passive tense is very bad. But even the worst is othering of facts. Let me give you an example. Legal decided that X would be true. I have a rule at Opendoor that people decide things, not teams.

Shane Parrish

Yeah.

Eric Wu

So whenever someone says Legal decide X I'm like who? Legal doesn't get to decide thing. Like was the name of the person. Because if you name the 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 pale picture pink imitation of everything.

Shane 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?

Eric Wu

Products man. I think of products first. I really do. I think most people over emphasize 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 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. Can you find 1000 people who love the product? And if you can, you have to be on the right track. If you can't, all the capital in the world won't save you. How do you think about risk?

Shane Parrish

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

Eric Wu

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 one of her colleagues said, hey, we're going to 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 going to do. What most tech companies end up doing. And by the way, a B tests are like the most because people misunderstand statistics and misunderstand, like what 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 for management.

Shane Parrish

I don't have to make a decision

Eric Wu

like, this is like Google famously AB test tested some like 400 different shades of blue.

Shane Parrish

Yeah.

Eric Wu

I'm 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 AB tests matter a lot, but they cannot replace human judgment. Of course.

Shane Parrish

Yeah.

Eric Wu

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

Shane 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. 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?

Eric Wu

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.

Shane Parrish

Yeah.

Eric Wu

The first step is taking ownership over the problem. Right. Like taking ownership saying I understand 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 do the right thing 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. 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. 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.

Shane 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.

Eric Wu

I have high degree of sympathy to people who do that. I really do. One of the best parts about being a founder, which is why I think founders are such unique characters. Basically, every founder I know has had to look at, like, a bank account statement and count how many payrolls they are away from, like, not being able to make payroll. Yeah. And that usually shakes you pretty good.

Shane Parrish

Yeah.

Eric Wu

Because if you do not think, you're dead. Like, Paul Graham has this essay where he calls it default dead. And you just have to do something. Like, action creates information. You have to do something. And so I think that allows founders just to act differently than other people would. But I don't want to pretend like I know. I know all the answers, but I can tell you this. You will find that the first thing to fix Will is easy, intuitive, and makes you feel good. And people who win tend to win over and over again. So the analogy I use internally at Opendoor is this. Chemical spills are notoriously difficult to solve and clean up. But if you arrive at the site of a chemical spill, the first bit is really easy to solve. Just grab a shovel.

Shane Parrish

Yeah.

Eric Wu

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

Shane Parrish

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

Eric Wu

Yeah, yeah, yeah. No, it's real.

Shane 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. That was the moment where he started to change his behavior.

Eric Wu

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.

Shane Parrish

Yeah.

Eric Wu

And if you look at a balance sheet you're like holy God, I only have X number of payrolls left. You do not care at all what it looks like. You just care about what it is. You realize 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.

Shane Parrish

Is part of that sort of not caring what other people think. Like the courage to be disliked and thinking yeah. So many people optimize their life in order not to be disliked versus on mission or towards a goal or.

Eric Wu

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.

Shane Parrish

We're capable of so much more.

Eric Wu

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've never cared.

Shane Parrish

Is that learned or something? You just.

Eric Wu

I just think what happened was I immigrated from Iran. My family fled Iran and when we moved I was a teenager and I didn't get into any clubs. And by the time I was. I had grown up and I could get into clubs. I cared way less about them. So I just grew up making. Making a feature out of a necessity. And that I think has played a very large role in. In my life. And it's the second thing which is very real. I played rugby in, in high school and I am not a big dude, but I'm fast and have a high pain tolerance and I really, really enjoy winning as a team. Rugby is actually a special sport for this. It's crazy. It tends to be a sport that if you play in North America that basically never has an audience. Like no one goes to watch rugby games in North America. Really. So you do it for your friends. You do it for your teammates, not for the audience. But you get something better out of it, which is this idea of 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.

Shane Parrish

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Eric Wu

18

Shane Parrish

Isidore Sharp, who founded Four Seasons, said, Excellence is the capacity to take pain. Do you agree with that?

Eric Wu

Yeah, yeah. Over a very long period of time, by the way, the person who can hold their hand over the fire the longest tends to be the winner. The difference between doing something incredibly well and doing it poorly is not that high. But people just give up too soon. Unfortunately. I think the sugar rush of easy like satisfaction in the modern world has underprepared people for pain.

Shane Parrish

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

Eric Wu

I have four kids, they're seven, five, three and two. And I care a great deal about what they say to their kids that their dad did. When my wife and I got married, we agreed that we would optimize our marriage for putting a dent in the world, that that's what we would spend our time on and that would be our definition of success in our marriage. So I try to wake up every day and think what is the most the thing I can do that leaves the biggest dent on the world? Like I think most people in my position would have looked at the open door opportunity and 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 and 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 is used for the good of the world. So I hold myself accountable and thankfully my wife also holds me accountable. To that end, Sa.