The Exchanges

Q Let's talk about Kaz. So how did you decide this is who we need a CEO?

A Well, we needed someone with product innovation ability. So he's not only, he was not only serving as a COO of Shopify, but he also ran the product team. So he needed someone to understand how they innovate a product. Opendoor has an innovative product five, maybe longer years. Uh, so someone who has that muscle and steroids, but the most importantly, he's both bold and ambitious. But very disciplined and rigorous and analytical. And that's a rare combination. A company like Opendoor needs to be rigorous and analytical, but it can't sacrifice the ambition and the boldness and the willingness to do things and push the envelope and creativity and innovate. And so that was what was very appealing. And then the company at a kind of tactical level just has too much of a bloated GNA. It's always had too much of a GNA that was Way out of control, uh, since 2015. We need to fix that. There's 1400 employees. There should be like more like 200 or 300 max, and one of the things he did at Shopify when he got promoted to be COO was cut their GNA as a fraction of revenue from 14% to four percent, and I think they're on target next year to be at one percent. So, it's even more important for a non-software based business to have a GNA that's In line with the cost structure that's in line with the cycles that real estate always goes through. Every decade, residential, commercial real estate goe…

AI assessment note: “we needed someone with product innovation ability. So he's not only, he was not only”

Q So in terms of all this, all right. So let's talk about open door. In general, macro. How did we get here with Opendoor? You mentioned back in 2015, things started to go south?

A No, no, no. The company did really well. You know, we were almost, we were just, I think we hit twenty billion as a market cap company for at least a day or two. Um, minted money. We were actually free cash flow. We were between, we were minting five hundred million to a billion dollars of free cash flow, um, when we were public. We went public in, uh, 2020, late 20 20, uh, and company's doing really well, but The company did not build the foundation correctly so that when interest rates rose, and the Fed raised interest rates six times in a very compressed period of time, unprecedented compression of time. When interest rates rose, the company's cost structure was inappropriate for the amount of transactions that were going to occur in the United States. In a peak United States housing market, six million Americans buy a home, and in a bad market, Four million do. So it's a pretty big way, a pretty big variability there. So you need to be able to be profitable or break even in a market when only four million Americans transact. Opendoor is currently a transactional business, so we get paid when we buy and sell. And so if less people, like, 50% less are buying and selling, all of a sudden, your costs are out of whack. But the reason why I mentioned in 2015 is Vinod Coastal, my partner warned us about this. I remember a meeting, a review we did, Eric and I did, Uh, with Vinod an…

AI assessment note: “The company did not build the foundation correctly so that when interest rates rose”

Q What do you think you've learned from watching everyone go on their own path? Like, what are the key lessons that you've taken away from this person went that way? This person went that way? Like, I think more macro of like human behavior.

A Well, macro human behavior is, I think you have to find, and it's advice I give people constantly, probably every week, what people want professional advice, uh, and even people don't want it. And I sort of force them to listen, uh, is you have to find what your comparative advantage is in life and then double and triple down on it. So each of the people that worked at PayPal that was talented had different skills and traits. And I think the reason why they went different directions is they figured out how they wanted to compete with the rest of the world. So I was mentioning, you know, I grew up reading this bio autobiography by Pat Riley. Um, and in the autobiography I read when I was probably a sophomore in high school, I saw this quote that he was quoting Jerry Garcia, the Grateful Dead and said, You don't want to be the best in the world at what you do. You want to be the only one who does what you do. And so I think that's mostly people who are successful. They figure out how to frame themselves. So they're not just the best. They're the only. So Peter, not many substitutes for Peter. Max, not many substitutes for Max. David Sachs, I think, you know, has found his own roll off. You find your own course and you double and triple and quadruple down on it. And that's how you want to be successful.

AI assessment note: “you have to find what your comparative advantage is in life and then double and triple down”

Q So are you going to use open door?

A Um, well, we don't currently, ah, so that the mission and the goal of a company was always to serve the middle of the bell curve of homes in the United States, technically, 83%. So when we go into any market, Bay Area, New York, Atlanta, Dallas, wherever, we price 83% of homes. For better or for worse, my homes are not within the 83% standard deviation. I am. Uh, well, I intentionally like, um, you know, like I, I remember when I was having Lasix and, um, I was so nervous about having Lasix. It's 2003. Uh, and the doctor could kind of tell, and he figured out a little bit about me professional and, and he did all these tasks. It was like an hour long, uh, sort of program. And he comes back to me and he says, like, I'm going to tell you something that you've probably never been happy to hear before. He's like, you're right down the middle of the bell curve. This, he's like, this procedure was designed for you. There is no way anything goes wrong unless I personally screw up. I was like, great. We're finally doing this procedure.

AI assessment note: “we don't currently... For better or for worse, my homes are not within the 83%”

Q Performance is a big part of building companies and investing in companies. There's a company you've probably heard a lot about. It's really popular. We're sponsored by Brex. It's this amazing company. They're all about spending smarter, moving faster, intelligent finance. You're well aware of this. You love intelligent finance. Who is someone that you've learned a lot from and what was the biggest lesson?

A Oh, I learned a lot from people constantly. Like, um, I've actually given a whole presentation, a whole podcast, a whole speech on, like, lessons I've learned from Vinod, Peter Thiel, Reid Hoffman, Max Levchin. Um, but I try to absorb from everybody. Like, founder, the benefit of working with a lot of talented founders is I've learned things from Christian at Trade Republic. I've learned things from Eric and Kareem at RAMP. I've learned things from Mike Atraba. Constantly. It really is like maybe the best part of the job. One of the two best parts of being a VC is you get to work with the most talented entrepreneurs in the world, and you get to watch them, and you learn things, and then you apply, try to apply them. The same, the other benefit is if you're intellectually curious, And this is why Delian became a VC actually is he's very intellectually curious. It's the only job where you get paid for learning new things. So every hour, every day is different. And I sit in a partner meeting and my colleagues at KB bring in these very weird, unusual companies that are cutting edge of technology. And I learn, I sit there and learn by osmosis. And over the years I've learned a fair amount about AI. I've learned a lot about batteries, things I never would have been Capable and horny on my own. And so I really don't believe there's a better job for somebody who's intellectually curiou…

AI assessment note: “I try to absorb from everybody. Like, founder, the benefit of working with a lot”