How to Build a Real Estate Marketplace - Kaz Nejatian, Opendoor CEO

Summary

Podcast Summary: a16z Podcast — “How to Build a Real Estate Marketplace” with Kaz Nejatian, Opendoor CEO

Date: October 7, 2025
Host: Andreessen Horowitz, with General Partner Alex Rampel and guest Kaz Nejatian (Opendoor CEO)

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Overview

This episode delves deep into the massive challenges and opportunities in disrupting the U.S. residential real estate market. Host Andreessen Horowitz (a16z), general partner Alex Rampel, and new Opendoor CEO Kaz Nejatian explore why home buying and selling remains broken, the cartel-like behavior of traditional real estate agents, and Opendoor’s quest to build a software-driven marketplace—a platform that could truly transform how Americans move, own, and finance homes. Kaz shares candidly about his first days as CEO, Opendoor’s strategic pivots, and their bold initiatives like “try before you buy” for homes.

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Key Discussion Points & Insights

The Reality of Leading a Public Tech Company

• Public vs. Private Pressure: Kaz describes the amplified scrutiny public companies face.
  • Quote [00:00]: “In a private company, these problems are discussed with your VCs at a board table. In a public company, they're discussed on Reddit and the Wall Street Journal. Luckily, I just don't care.” — Kaz Nejatian

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Opendoor’s Mission: Fixing Home Buying and Selling

• Kaz’s Motivation [01:28]:
  • Genuine excitement for Opendoor’s mission: Make home ownership accessible and the process seamless.
  • Belief in world-improving impact: “The more people that can own a home, the better off we are. This is objectively a broken process, so we can fix it.” — Kaz Nejatian
• Generational Opportunity: Opendoor aims to become “a generational company.”

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The Problem: Real Estate’s Cartel and Marketplace Dynamics

• Market Inefficiencies [02:26–09:18]:

  • 2 million registered U.S. agents, most do zero transactions a year—massive inefficiency and misaligned incentives.
  • “Every profession is a conspiracy against the laity.” — Alex Rampel [09:36]
  • The principal-agent problem: both buy-side and sell-side agents are often incentivized in ways that conflict with consumer interest.

• Opaque Fees and Regulatory Capture [09:27–14:00]:

  • U.S. real estate agent commissions are much higher than those in other countries and are protected by law and regulation.

• Market Power Holds Back Progress:

  • Regulatory barriers (e.g., bans on fee rebates, forced agent participation) actively prevent competitive innovation.

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Marketplace Strategy: The Amazon Analogy

• Solving the Chicken-and-Egg Problem [02:33–07:46]:
  • Amazon succeeded by aggregating supply (every book) to create demand, then expanded. Opendoor aims for a similar tactic in real estate—acquire enough inventory (“10% of supply gets you 100% of demand”).
  • “If you get 10% of all of the supply, you get 100% of the demand. And once you have 100% of the demand now, you could break this horrible monopoly.” — Alex Rampel [05:46]
• Comparisons to eBay, Copart, and Carvana:
  • Huge marketplaces exist everywhere except homes; Opendoor’s ambition is to fill that void.

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Opendoor’s Category Problem: It's a Software Company, Not a House-Flipper

• Misconceptions and Internal Mistakes [07:46–09:18, 41:39]:
  • Opendoor was misunderstood (sometimes internally) as a real estate investor when, in fact, the core is software and operations.
  • Over-focusing on “investing” in mispriced homes is a hedge fund mentality—not scalable as a consumer platform.

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Deep Structural Problems in Home Buying

• Principal-Agent Problems Multiply [16:53–18:25]:

  • Not just agents: mortgage brokers, insurance agents, inspectors—each with one-off incentives, leading to poor outcomes for consumers.

• Why It’s Not Like Healthcare… Or Is It? [26:28–28:40]:

  • Kaz and Alex agree real estate is more like pre-Tesla/carvana auto retail—a system once considered untouchable, until software (Tesla, Carvana) broke through.
  • Regulatory problems exist but are mostly localized and surmountable.

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Opendoor’s Innovations: “Try Before You Buy”

• Customer-Centric Moves [14:01, 31:22, 51:41]:

  • Opendoor piloting a seven-day home trial in Dallas: “You buy a home from Opendoor, you don't like it, you can return it. Like you can move in early. Yeah, try it out, don't like it, return it.” — Kaz Nejatian [14:01]
  • Leverages software and inventory scale to enable new services, lower costs, better timing for buyers/sellers.

• Friction Reduction and Financial Engineering:

  • “If all Open Door does is help you time your closing of your new house with buying your new, old [...] you now avoid on average about three mortgage payments.” — Kaz Nejatian [31:48]
  • Greater efficiency means buyers can pay less, sellers can earn more—at scale.

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Lessons from Opendoor’s Ups and Downs

• The iBuyer Craze and Market Meltdown [33:42–41:34]:
  • Success bred copycats—Zillow, Offerpad—but many underestimated cohort risk and inventory exposure.
  • 2022–23 interest rate spike was a historic shock: “The pace at which interest rate increased were... objectively, deeply irresponsible for the country.” — Kaz Nejatian [37:02]
  • Opendoor de-risked aggressively, arguably losing sight of its original tech vision.

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Returning to Offense: The Vision for Opendoor 2.0

• Software, Not Hedge Fund [42:25–49:06]:
  • Kaz’s philosophy: “Software companies need to be basically always on attack. Always, always, always on attack. We’ll attack some wrong hills. We’ll accidentally lose some ships. But always on attack.” — Kaz Nejatian [43:11]
  • Open to mistakes and learning, but focused on scaling, not retreating.
• Ambitious Product Roadmap:
  • Opendoor will do more for both buyers and sellers; not limiting the business to only “mispriced” home purchases [49:06].
  • Open in every U.S. market (from 48 markets to nationwide) [50:47].

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The Cultural Factor: Why People Root for Opendoor

• Passionate Community and Product-User Alignment [51:20–54:44]:
  • “People look at real estate and how those transactions are done and they say, well this is stupid. This is not how this should be.” — Kaz Nejatian [51:41]
  • Kaz committed to engaging directly with customers (“DMs are open”), leveraging real people’s intuition for innovation (“the average American’s intuition is a very good indicator of what’s true”).

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Notable Quotes

• On Market Dynamics & Opportunity:

  • “If you get 10% of all of the supply, you get 100% of the demand.” — Alex Rampel [05:46]
  • “...ebay is a marketplace for everything except for homes. And it's a $45 billion company. There aren't actually big companies in residential real estate. It's kind of strange.” — Alex Rampel [04:31]
  • “Every profession is a conspiracy against the laity.” — George Bernard Shaw, cited by Alex [09:36]

• On Category Mistakes and Software DNA:

  • “Shopify does ecommerce. It's not an ecommerce company. Their leverage point ... comes from software. Very much is like the software. I think that's actually a problem that Opendoor has had.” — Kaz Nejatian [07:46]

• On Innovation:

  • “You buy a home from Opendoor, you don't like it, you can return it. ...Which is why, like, Amazon works so obscenely well.” — Kaz Nejatian [14:01]
  • “That’s the real thing: Opendoor is an exceptionally good business and the average person pays less for a house and average person sells a house for more”—Kaz Nejatian [31:22]

• On Public Company Pressures:

  • “If you care a great deal about what's said about you in the Wall Street Journal, running a public company is incredibly difficult…. Luckily, I just don't care.” — Kaz Nejatian [00:00, 41:39]

• On Customer-First Mentality:

  • “The most wonderful thing about this is that if you engage with the average person, they tend to be deeply reasonable, ask really good questions, have really good ideas.” — Kaz Nejatian [51:41]

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Timestamps for Major Segments

• 00:00–01:28 — Kaz on Public Company Pressures, CEO Mindset
• 02:26–07:46 — Market Structure, Amazon Analogy, Marketplace Building
• 09:27–14:01 — Real Estate Agent Misalignment, Monopoly Behavior, Structural Inefficiencies
• 14:01–18:25 — Transaction Frequency, Return Policies, Consumer Experience Parallels
• 26:28–28:40 — Market Structure: More Like Cars than Healthcare
• 33:42–37:39 — Opendoor’s Rollercoaster: Market Turbulence, iBuyer Craze, Interest Rate Whiplash
• 41:39–44:04 — Cultural, Strategic Reset for Opendoor; Returning to “Attack Mode”
• 51:20–54:44 — Why People Care about Opendoor; Engaging the “Open Army”

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Conclusion

This episode offers a masterclass in both real estate disruption and scaling software marketplaces. Kaz Nejatian shares an unvarnished, ambitious vision for Opendoor: recentering on software, operating with boldness, serving buyers and sellers directly, and learning from every customer and misstep. The challenge is monumental, but as Alex Rampel notes, “if you have a marketplace for homes, it is the biggest marketplace in the world.” This conversation is a must-listen for anyone interested in tech-driven transformation, the future of real estate, or what it takes to lead a hard-charging public company in America’s most valuable, most broken industry.

Transcript

[Kaz Najarian]

There are things you have to deal with at public company that are amplified. Like in a private company, these problems are discussed with your VCs at a board table. In a public company, they're discussed on Reddit and the Wall Street Journal. So if you care a great deal about what's said about you in the Wall Street Journal, running a public company is incredibly difficult. It's just very difficult. Luckily, I just don't care.

[Podcast Host]

Buying a home is supposed to be the American dream. Instead, it's one of the most painful, opaque, and inefficient markets in the economy. On this episode of the A16Z podcast, I'm joined by A16Z general partner Alita Rampel, who leads our apps practice, and Opendoor's new CEO, Kaz Najation to talk about fixing those issues. We discussed why real estate has resisted disruption for decades, how a marketplace model could finally break the real estate agency cartel, and why Opendoor's mission to make buying and selling a home as seamless as clicking buy now is much bigger than just flipping houses. Cas shares what it's really like stepping into the CEO seat of a public company, why Opendoor is really a software business, and how he's putting the company back on offense. Let's get started.

[Podcast Host/Interviewer]

Kaz, welcome to the podcast.

[Kaz Najarian]

Thanks for having me, man.

[Podcast Host/Interviewer]

I feel like you're the man of the moment. You recently took over as Open Doors CEO. It's been a few weeks, a month.

[Kaz Najarian]

It's day 16, I think, day 16.

[Podcast Host/Interviewer]

And I feel like you're pioneering a new way of being a public company CEO first, what got you excited about the opportunity and then coming into it. What was your mindset going into how you were going to be CEO of this company?

[Kaz Najarian]

I think Opendoor will become like this generational company because I think people like when you go to business school, like, you should have a business plan and it should be 17 pages and it should have like, porters, five forces on it. And that's how it's going to work. And that's just like, generally not how great businesses are built, at least not that many of them. I think it's important that great businesses start with a very, like, simple statement that people can buy into or disagree with. Right. Like, it's that. That's actually important that you're saying something. Yeah, I think home ownership is good for the world. The more people that can own a home, the better off we are. This is objectively a broken process, so we can fix it. So I think I was just like, genuinely excited by the mission of the company. And I've just been a fan of it for a while. And looking from the outside in, I'm like, look, this feels the type of problem that I can help with. So we're 16 days into this journey. Let's find out if that ends up being true. Wow.

[Podcast Host/Interviewer]

Well, let's trace a little bit of the history. Alex, you led our investment into the company. What was the thesis or vision that got you so excited about it?

[Alex Rampel]

I'm going to talk for a little bit of the background, and I'm going to start with Amazon, and then I'll get to Opendoor. So I remember I met Eric Wu when he had first started Opendoor with Keith, and I think they had flipped maybe 70, 80 homes, like, right around Phoenix. And the reason why Phoenix is a very interesting market is there's a term that I'm sure you're intimately familiar with called cap rate or capitalization rate. And think of it as, like, the income of some asset divided by the price of the asset. So the Bay Area has very low cap rates. So you could buy like a $20 million house in Pac Heights if you wanted to rent it, it might rent for, like, $10,000 a month or 20, which is a lot, but not as a percentage of the price of the asset. That is very, very low yield. In a place like Phoenix, all the homes are pretty similar. I'm exaggerating. I'm not trying to offend people who live in Phoenix, but you would have a $200,000 house that might rent for $20,000 a year. So like a 10%. So the net operating income divided by the asset, like, that's your cap rate, 10%. You can actually make a lot of things work because there's always a default buyer of somebody who will say, I can arbitrage this. I'm holding a house. I don't have to sell it to another person that wants to buy a house. I can now rent it out. And because I can get a mortgage from a bank for 5%, like, I can make the whole math work. So Eric had started flipping homes in Phoenix and made money on most of them. But I was like, ah, you know, I don't know. Flipping home seems kind of challenging. I mean, it sounds great when all prices go up. But what I was really drawn to is the vision that he laid out. And when I finally invested, I thought he was pretty along towards getting that vision become a reality, which was this is what I mentioned. I'm going to talk about Amazon. Amazon started off in the 90s, basically selling every book in the world. Hence Amazon, in Jeff Bezos's garage or basement or warehouse or something. And by selling every book, like having infinite supply of books, he got all of the demand. And then because he got all of the demand, he could say, all right, I want to now sell something that isn't books. I'm going to sell CDs and DVDs that was next. But I also still stock those in the warehouse. But eventually it's, I'm going to sell TVs, I'm going to sell something else, I'm not going to stock them. But I already have all the demand. And I got the demand because I had all the supply for something else. So I start up because this is the chicken and egg problem. Do you start off with supply or do you start off with demand? And marketplaces we know are very valuable, but you have to start somewhere because nobody wants to sell if nobody's buying. Nobody wants to buy if nobody's selling. So the Amazon model was find something in one niche, use that to get all of the demand. And then once you get all the demand now you can actually attract the supply in a non principal risk taking way. So fast forward to Opendoor. So I remember when Eric was flipping all the homes in Phoenix, I was like, that's clever. But I don't know, like, I know other people that flipped homes in Phoenix. But I think it got to the point where in one of the markets, I think it was Charlotte, if I remember correctly, almost 10% of homes in Charlotte that were under a certain price, call it like $600,000 homes, which actually buys you a lot of house. In Charlotte, 10% of the homes were bought by Opendoor. So now imagine that I want to go buy a house in Charlotte. I can go to the multiple listing service, the mls, which is, you see that on Zillow, Redfin, all of these other sites kind of, they just mirror the MLS. But that's only going to show me 90% of homes for sale. The other 10% are only on this thing called opendoor.com so you don't have to get 100% of the homes in order to get 100% of the users. You get 10% of the homes, you get 5%. It's kind of like the Laffer curve. You can't exactly define what it is, but there's some quantum and I would call it 10%, where if you get 10% of all of the supply, you get 100% of the demand. And once you have 100% of the demand now, you could break this horrible monopoly. I did this whole video out of which I know I said to you, this horrible monopoly of real estate agent dumb. And you can say, you can list your house on opendoor.com and, and we'll charge 1%. And if you pull that off, it's the biggest market in the world. And that's what made me so excited. Because ebay is a marketplace for everything except for homes. And it's a 45 billion company. There aren't actually big companies in residential real estate. It's kind of strange. Like, the biggest ones are Costar and Zillow. There's no $100 billion plus company in residential real estate, which is kind of bonkers because it's a bigger asset class than like everything sold on ebay.

[Podcast Host/Interviewer]

And so why is that?

[Alex Rampel]

Why is that? Because it's so hard to aggregate the supply and the demand. And what Zillow and others do is they just do lead generation. It's a terrible business model from a consumer perspective. Like, it should have like negative 100 NPS because you're just getting called all day by real estate agents who are not actually improving the value proposition. And Opendoor, it's not about flipping homes. I mean, maybe it is. You run the company. It's about how do you build a marketplace, the biggest marketplace in the world. I mean, to give you a sense of how crazy this is, there's a company called Copart Public company. You know what they do? It is auctions for not used cars, but for like totaled cars. So if you get into a car accident and state farms, like, oh, that's a total loss. What do they do with the car? They sell it on Copart. Copart, I think it has like a 70 billion dollar market cap.

[Podcast Host/Interviewer]

Who buys it?

[Alex Rampel]

Who buys it? Like people in Russia? No Russia anymore. But like all sorts of, like, I buy it for parts or I'm going to go fix it up. But Copart is a bigger company than Zillow. How is that possible? And it's just because nobody's tackled this. It's the biggest market in the world, but you have to build hopefully a capital light marketplace.

[Kaz Najarian]

I think Opendoor is deeply misunderstood as a company. I think you have to think about companies as category problems are real in public market investing. I remember when I first joined Shopify in 2019, I think it was among the most shorted stocks on Wall street because people made a category mistake about Shopify. They're like, well, it's another e commerce company. What are the odds it will build all the warehouses? That's going to category mistake. Shopify does e commerce. It's not an E commerce company. Their leverage point for Shopify does not come from E commerce. It obviously comes from software. Very much is like the software. I think that's actually a problem that Opendoor has had is that externally and for admittedly for some time internally, the company thought of itself as essentially an investor in real estate as an asset class, which is not the job of the company. This is not, that's not what the company does. It's a software company designed to solve that problem. I think if you attack it like that, you just fundamentally do different things. Right. If you look at, I mean it's a publicly traded company. You can actually look at the numbers. The company has repeatedly been buying fewer and fewer homes every year. Right. Because they're like, if you're cool, I'm going to buy an asset class. You only buy homes that are mispriced. But turns out not that much in the world is mispriced for a very long time. It may become a good business, just won't become a big business. And that's I think a fundamental mistake the company has made in the past few years.

[Podcast Host/Interviewer]

Yeah, let's understand this problem a bit deeper. Maybe Alex, you could share a couple points from the talk that you gave or maybe explain more sort of the monopoly real estate agents have or give some more context here.

[Alex Rampel]

So real estate agents for a very, very long time. There are about 2 million registered real estate agents in the United States of America. And the stat that I quoted a couple years ago, I assume it's still the stat.

[Kaz Najarian]

But it is, I looked it up.

[Alex Rampel]

It's true. So if you remember, mean, median, mode, mean is the average, median is the one in the middle and mode is the most frequently occurring number. The mode number of transactions per agent per year is zero. So it's kind of like, well, I'm an actor. Oh well, what was the last film that you're in? Well, I'm kind of a waiter right now. I'm waiting to get a film job. And that's what a lot of real estate agents are. So even the really good ones, they don't do that many transactions per year and they fundamentally are misaligned with their customers. Because if I'm a buy side agent, the more money you spend, the more commission I get. So I normally get 2 and a half to 3% as a buy side agent. So normally you have 5 to 6% as a commission pool, half of which goes to the sell side agent, half of which goes to the buy side agent. And there have been numerous, numerous lawsuits, some of which have gone to the Supreme Court, attacking this as this kind of like evil, not oligopoly, but this monopoly behavior. And there's an expression that I love. It's by the playwright George Bernard Shaw. Every profession is a conspiracy against the laity, and it's very, very hard to deal with problems of concentrated benefit and diffuse harm. So there's a concentrated benefit to the 2 million real estate agents, small number of whom actually do active transactions, but they conspire, literally conspire to keep these commissions very, very high. Because you buy a house once every 10 years and you are absolutely harmed. Because if you're a buyer, well, wait a minute. Like, the more that you convince me to pay, you get more of that. And then why is it misaligned as a seller? Because the sell side agent is getting more. If you sell for more, because they just want to move on and get their check tomorrow. So if I say, okay, you're selling a $10 million house, that's a lot of money. And then there's another seller who will offer you 10 million, $10,000. Well, the sell side agent is like, I get 3% of that I don't really care about. You get an extra $10,000. Like, you really do care about that. So there's just. This is where the whole. The frame, the phrase principal agent problem doesn't come from this, but it's like this is a personification or like a real life version of the principal agent problem. So there's just so many things broken where it's like, every other auction is fair. It's like, I see, okay, I want to go list out, I can sell a used car on ebay. They actually do a pretty good job of that. And I see there are 24 bids. Here's my reserve price. And like, it's just very opaque. And because it's a very infrequent transaction and you have concentrated benefit and diffuse harm. There have been so many attempts to, like, really, really violently disrupt this industry. And one of them, and I should, I should say I'm on the board of Rocket Mortgage, which bought Redfin. And Glenn Kelman is an amazing guy, started Redfin and really wanted to disrupt real estate and said, okay, we're gonna, we're only gonna charge you 1%. Actually. Let me take a step back. The funny thing about real estate Agents. I've bought many houses. I've never used a real estate agent. Actually, that's not true. I. I did use a real estate agent one time to buy a house, but I was trying to say, I don't want to use a real estate agent to buy a house because you're going to charge me money. It's like, no, no, no, no. You don't pay me. The seller pays me. And I'm like, where does the seller get the money from? They're like, well, from their bank account. I was like, no, no, no. I send the money to the escrow agent. And then the seller gets the money from the escrow agent and then pays you? No, no, no. It's different money. It's like. And I remember, like, talking. This is when I bought a house at Palo Alto. I told the real estate agent, I will not name and shame him. I was like, you know, with all respect, or maybe whenever you say you mean no respect, but with all due.

[Kaz Najarian]

Respect, you mean all due respect.

[Alex Rampel]

Yes, with all due respect, of which I give you none. You must think I'm an idiot or I think you're an idiot. Like, those are the only two options, because it's like, it's just absurd to say that, like, it's free to be represented by a buy side agent. So what Redfin started doing, and this actually did have, like, a very, very positive impact on the industry, was like, why don't we bring down the 3% buy side fee to 1% by rebating part of it back to the consumer? But, you know, the state of Oregon bans that going back to every profession as a conspiracy against the lady. If I say, hey, use me, Eric, and not Kaz to buy your house, and I'm going to take that 3% that's advertised as a commission and I'm going to share it back with you. Nope, you'll go to jail. You can't do that. It's like, that's absurd. And then even if you say, I'm going to do buy side representation for 1%, well, the seller still has to pay 4% now, right? Because if it's a 3% listing arrangement and then 1%, you know, maybe it's 6% all in, but, like, up the 3%, 2% goes back to you. The whole thing is messed up. So the only way to really violently change this is to have your own marketplace. In my perspective. I think.

[Kaz Najarian]

I think actually the key part here is, like, transactions that happen incredibly infrequently usually end up Being full of fraud, like there's a reason why carnies leave town. That's a real thing, right? I got your money, I'm out of here. Like the odds are you're gonna buy maybe two homes in your lifetime and the odds are you're not gonna use the same process to buy both of them. And it's like people, people intuitively understand this about used car dealers, right? They're like, hey, like I'm not going to go to a used car dealer that doesn't offer certified pre owned cars because I don't like, I don't trust a counterparty. I need someone else to certify this thing, right? That's a very real thing. This is why, like, by the way, in software we have a very hard time understanding this problem. Because in software, like most of us get paid every month someone uses our product. It's a long term relationship, right? Like the more you use it, the more money I make. But this didn't also used to be true in software. And back then software also had this problem. You kind of want to. The best way to align counterparties is to take the transaction and stretch it out over time to make sure that I'm interested in you liking me 10 years from now. And if you do that, most of these problems tend to get solved. But in order to do that, you need a counterparty or at least a third party to certify that this thing is good, that has an interest outside that one transaction immediately. And it's by why, like Amazon works so obscenely well. Like, you buy things from Amazon, you didn't like it, you can return it. Which by the way, we launched just yesterday at Opendoor in Dallas, Texas. You buy a home from Opendoor, you don't like it, you can return it. Like you can move in early. Yeah, try it out, don't like it, return it. Wow. And this is like, no one would do that like this. Don't think that would happen regularly with a regular real estate transaction. Which is why if you've ever bought a house, your agent has said something along the lines of this, oh, they just turned down an offer exactly like that. Or oh, they have another offer coming on Tuesday. They never have another offer coming on Tuesday. They didn't just turn down an offer like that. So I think it's a very real thing that like you just need to A, have a counterparty who is interested in the long term, right? Stretch out a transaction and B, remove the I make all my money from this one thing transaction right now. Thing and that's. Both of those things just tend to, in any market, lead to bad outcomes. Where there are agency problems, they'll lead to terrible outcomes.

[Alex Rampel]

Yeah, well, there's a corollary to that as well, which is on the financial services side. So part of it is like, well, if you, if I only make a transaction happen every once every 10 years, I don't know it that well. But if you're only doing two of these a year, candidly, you don't know it that well.

[Kaz Najarian]

Yeah.

[Alex Rampel]

And then you have this other complicated thing like how do you buy a house? How do you afford a house? And to me, it's kind of crazy that like, the financing stuff is totally divorced from like the buying and selling, which is like, I mean, part of how we, we became friendly is through a firm. Right. Where. How do you divorce buying and selling from financing? They're one and the same. And like, I can't, I can't buy a house until I sell my current house. And like, the real estate agent is not going to help me with that. They don't have a big checkbook. No.

[Kaz Najarian]

I think the agency problem better for it's worth. The agency problem that exists in real estate is actually multiplied along the chain because there's usually an agent involved in the mortgage, there's usually an agent involved in the insurance. There's usually like in every single thing you do, sometimes even in escrow, like, there's usually like. So you have like, let's say one principal agent problem is a bad one. In a real estate transaction, usually have five. So it's multiplied and let's say one person making money off you once and never seeing again is bad. In a real estate transaction, usually have at least like, at least five, sometimes bigger number, like the guy who does the inspection for your house, you're never going to see that guy again. And I think that actually is. But I think people, you have very good people along this chain of the whole chain, and you end up with very terrible outcomes because the system's basically designed to not lead to good outcomes.

[Alex Rampel]

Well, and the thing is, you have a lot of these subscale things that actually are pretty cool that have never been productized and rolled out. So if you are an English professor at Princeton or Stanford, you probably can't afford to buy a house. The university helps you buy a house where they will subsidize a mortgage or, you know, one of my favorite examples is there's something called seller financing. So every now and then you'll see a House sold by a very rich person who is like, you know what, I don't need all the cash right now. You can pay me over time. It's like, like bnp. I mean a mortgage is bnpl, but like this is somebody saying I will be your financing option and not a bank. These are all really interesting ideas but like, you know, only Stanford and Princeton and other schools do that for their English professors. And only really rich people do this for homes where you could see a lot. Oh, here's a home that's listed for sale that has this like special financing and that's done in like the brick and mortar like retail world. Every day that's called like every day that ends in Y. It's like, oh, we want to sell more stuff. Like Procter. Yeah, we want to sell more stuff. Here's a coupon. Or Xbox wants to sell more things. Or you know, Lexus wants to sell more cars. You know, 0% financing, 0% APR, Labor Day sale. Like doing that for homes makes so much sense. But like the real estate agents are not, they just don't, they just don't know what they're doing.

[Kaz Najarian]

There is one area in real estate where I think actually there's far fur these problems which is when you buy a brand new home from a builder. Yes, when you buy a brand new home from a builder, like when you walk into a Lennar community and buy a home from them, like mo, they've solved most of these problems. The production line, they're like, yeah, everything is bundled. You, you have very few agency problems. You have some still even then if you shop with your own financing. But the odds are you shouldn't just take their financing cuz like optimized for you. And this is, I think this is a very classical problem in basically it's a marketplace problem that you have to solve. And I agree with you, the way to solve it is you need to just gather significant inventory and make it possible for counterparties to make it desirable for a counterparty to come to you to buy it. This is like we spent so much of our time in the first 16 days, me being at this company working on buyer stuff because like it must be beneficial to buy a home from us in a way it wouldn't be somewhere else. So you can actually start the flywheel. Yeah.

[Podcast Host/Interviewer]

And you said a company that could do that will be one of the biggest in the world. Has a company like Amazon or other big companies tried to do something like this or is it just so far field that they wouldn't would never.

[Alex Rampel]

Well, the other thing that's, I think, very unique about this industry is it's so fundamentally local. So if you say, I want to beat the mls, there is no mls, Inc. It's not like, ooh, I'm going to go beat those guys. And the commander's intent of the general is like, take that hill. Every market is different. And that's the thing. It's like, just because, like, you could dominate Charlotte, and that does not make a single dent at all in Hawaii. And actually, the one case where I used a real estate agent to buy my house was in Hawaii. I have a house in Hawaii. And they don't use the MLS there. It's just like this captive system where it's just like, they make sure that you go through. And like, those agents do so well because, like, it just shows the value of a marketplace. But you could have a company that decides, I'm going to go run the table in XYZ place. And it doesn't show up in a different geography. So what. What you do see going back to these kind of pockets of esoteric, you know, products, either financial or real estate executive moving, this is actually like a big thing. So imagine that you're hired as. Actually, I have a friend who was hired as the CMO at Home Depot, and she and her husband lived in New York. And guess what? Home Depot is not in New York. They're in Atlanta. They're like, okay, we will buy your old house from you, and we'll pay, like, top dollar cash. We'll help you buy a house over here. We'll put you up in an apartment for two months. We'll do all of these things. Why? Because they want to get this person hired as the CMO of Home Depot, and they bundle in all these other things. They're not trying to say, I want to go disrupt the mls. I mean, they should. I mean, I would hope that ebay and I don't know the history on this. I'm sure you probably have looked into it. Like, I know ebay has tried doing real estate, and there's another company called Auction.com that really got into the distressed commercial real estate space and some distressed residential, because if it's distressed, like, you haven't paid your property taxes, government seizes your home. Government doesn't want to hold onto home and pay its own property taxes to itself. So it auctions it off and it needs to close within five days. Like, that's what like, something like auction.com is, like, very well situated to do. But I find that you have some of these bespoke products for, as an example, executive moves. And those are done in the very, very first class way. Like, why can't. This is the cool thing about technology. It's like, would you rather be the richest person in the world in 1900 with no penicillin and no iPhone and no Netflix, or a middle, lower middle class person in 2025 with penicillin and, you know, and Netflix? And I'd much rather be the lower middle class person than the richest person in the world in what technology often does is it helps diffuse these amazing products down to everybody. Like, everybody gets the education of a billionaire. I think that's the motto of Alpha school, right? It's like, let's do all of these things. So you have some of these products for executive moves, and I kind of point to that as an example. And you have had attempts at, like, kind of taking parts of the market and turning it into like an actual, you know, either open outcry English auction, or what's called the second price auction of dickory auction. Like, do all of these cool things that are known to work, that are known to maximize the price, but they'll work for one market. And then just because I got one market, it doesn't help me at all. And then, by the way, you have like 2 million people, but call it a subset of those 2 million people who are like, I want you dead and I will vote to change the law in Oregon to like ban this product. So, like, this is. This is what everybody's up against.

[Kaz Najarian]

Yeah, I think actually is a hard look. I think it's a hard problem, which is why no one solved it. And like, lots of smart people have worked on this problem, or at least subparts of it. Do I think, like, there's been three, like, structural flaws that have basically killed every attempt to solve this. The first one is like, let me solve a part of it. Let me solve the tiniest, like, most profitable part of it first. Which objectively has failed, like every single time it's been tried. Like, like when Amazon started, they didn't say, hey, let me solve. Like, selling books is not that profitable. But it's a really good way to get inventory. Right. Because you can get all inventory for all books. There's a PDF you get and it has literally every book. So the first problem has been essentially narrowing yourself down to one thing. The second problem has been basically a channel problem, which is that, hey, I'm going to solve this problem through the Traditional channels, and that objectively just has failed, I think miserably every single time. And the third problem, which is like some people have gone relatively. There are some relatively large businesses that do this in some pockets of the world, but they all essentially tip over and fail because they've solved it by throwing human beings in trees, like an operational problem. Essentially three buckets of problems. Why no one can solve this. And for us, I think before Carvana solved it for cars, this exact same problem was the exact same set of problems, same way existed for cars. By the way, Carvana is like 3% US car market. I don't know how much, but probably somewhere around there. So I think there's a very real parallels of. There are things that probably could not have been solved in a way that was affordable and efficient 10 years ago. I generally think it's actually a real thing. And there were other problems that were solved the wrong way because for a brief period of time, money was free. Yeah. And like everyone made all the wrong decisions they possibly could. But I do think we're in this, like, special time, this window where like basically all the tools you need to solve this problem kind of exist.

[Podcast Host/Interviewer]

We just get deeper there for a second. How much is real estate like healthcare, where sort of the regulatory landscape has distorted the market and prevented, you know, mass, mass. And feel free to quibble with that even framing of healthcare, but. Or is it just a hard. Is it like the. The market dynamics you were describing? Is that just emergent in how real estate sort of works?

[Kaz Najarian]

So I think, I think it's far more similar to automobiles than it's healthcare.

[Alex Rampel]

I agree.

[Kaz Najarian]

Like, it's just like basically identical, honestly. Like, if you look at like how cars were sold, basically till Tesla, everyone had a dealer network because once you had a dealer network, one was required. But Tesla's like, hold on a second, if I don't have one dealer, I don't have to have any dealers. And the answer is yes. Outside New Jersey, I think where.

[Alex Rampel]

And I think Texas, you're not allowed to buy a car unless it's sold at a car dealer. So like, again, regulatory.

[Kaz Najarian]

There's a couple of these things places. So for example, in North Carolina, Georgia and Louisiana, I think those three states, you can't close a real estate transaction digitally. You have to have a wet signature. That's kind of annoying. That's a real thing. But it's not at all like the healthcare system. It's much more similar. Like there are regulations, some of them good, some of them terrible, but they're in nature much more similar to how cars were dealt.

[Podcast Host/Interviewer]

But how come we've solved this in cars? And it's just because it's.

[Kaz Najarian]

We hadn't solved that. We had not solved this in car until like five years ago. Like we solved this car for new cars, Tesla solved this. And for used cars, Carvana solved this. And keep in mind, like, those are actually like, there are very real operational challenges that Carvana has that don't exist for homes. Right. Like Carvana moves every single car they buy. Like Opendoor does not move homes. Like homes stay where they are. Yeah. So there's a very real, like, there are upsides to trying to solve this problem in homes rather than cars. There are obvious downsides too, but I think there's like a very real. And underwriting for what it's worth is like, similar, ish. The underwriting of a car is difficult. Underwriting of a home is difficult. They're similar, ish, difficult. Like different problems, but similar problems.

[Alex Rampel]

Well, this is the nice thing, is that you can really sub segment the market. I mean, the reason why we can Talk for like 10 hours about why healthcare is messed up, but fundamentally there were no prices, right. It's like, how much does this cost? Like the doctor doesn't even know. And then like, oh, well, we're going to bill your insurance company this much. They won't pay it. And then because they won't pay it, like the doctor charges more. It's like the whole thing is messed up. And here you have price transparency for sure. It's like, I know exactly how much everything is going to cost. You get a little bit misled by some of the agents who say like, oh, buy side is free because the seller pays, blah, blah, blah. But there are, you could, you could chop this up into different markets. Right? So I mean, this is what's very helpful to understand, like selling $50 million luxury homes and like how to price those. Like a $50 million house that's a spec home could sell for 25. Like there's not really. But this is the cool thing, like for real estate, because you are almost more so than cars. Real estate people need to live somewhere and they either rent or they own. And then of course there are different models in between. You can like, you know, rent to own. You can like get your friend to like give you a free spot and not charge you anything. But you either rent or you own. And then the floor on valuation is what's the rental price? And how does that compare? Going back to like cap rates. Like, how does that compare to the cost of capital? So the vast majority of homes in America, number one, they qualify for what are called conforming mortgages. So there already is this idea of. It's like, where they're, like, really expensive homes. That's where you get, like a jumbo mortgage. And then there's like, everything else. And the pricing of everything else is a lot more like cars.

[Kaz Najarian]

It's actually more transparent, too. It's far more transparent than cars. Like, this is a very real. Like, you don't. Like, this is a very. Like with cars. There's a very real thing about repair of cars where, like, it's very opaque. It can't really know. Like, just very hard, like, structural damage. Structural damage. I call it like. Or like, like your fan belt. I don't know what a fan. Like, just very. There's things that are, like, difficult and there's oem, like this whole thing. Like. Like an OEM part. Not only in part, there's like, a variety of, like, things that the decision matrix is much bigger, whereas for homes, it's relatively transparent. And by the way, like, two, Opendoor's credit. This is a thing that Opendoor's exceptionally good at. Opendoor is exceptionally good at pricing renovations and changes. They have just like zero credit. To me. They've dialed this in and in a way that's actually surprisingly good, which makes.

[Alex Rampel]

Sense because who's going to get a better shipping rate with ups, right? Me, who ships one package a year? Or like Amazon, who eventually got such a good shipping rate that they couldn't get any better unless they started their own shipping network called Amazon Delivery, Right? So you have economies of scale that never go to the agent, that never go to the customer, but that should go to a company.

[Kaz Najarian]

Yeah, I guess the real thing. And this is like actually like the real thing. This is like I'm. I'm relatively ideological about this. Like, I think you can make it such a. Like, Opendoor is an exceptionally good business and the average person pays less for a house and average person sells a house for more. Like, I think you can. It's actually not. The math here is not that difficult.

[Podcast Host/Interviewer]

How do you do that?

[Kaz Najarian]

Well, there's so much friction at home. But if just. Just let me just give you an example. If Open Doors does nothing else, then help you time your closing of your new house with buying your new old. Like, selling of your old house with closing of your new house. Like, if just if that's all Open Door does, you now have Avoid on average about three mortgage payments. Like who was getting paid that money, like why? And that's a real thing that everyone, like everyone pays at least one extra mortgage payment or one extra rent payment as frequently more that's just like one thing. And by the way, that's like a service that Open Door can deliver to most people even without buying their house. Like there's a very real thing. So like I think there's a bunch of these things that exist and like the agency problem is real. The very real thing on cost of capital, which like when you aggregate lots of homes, your cost of capital tends to be lower. Therefore, like that's a real thing. It's a very real thing about like the level of underwriting you can do on warranties. Like the reason Opendoor can offer a seven day trial of a home is because we own lots of homes. You don't like this one? If we take it back, the odds are you're gonna buy another house from us. Right? So this is like there's all these frictions that exist because the system everywhere is subscale one, two because there's so many principal agency problems. Right. The second one and third, because there's so many of these transactions that are one time transactions. Yeah.

[Podcast Host/Interviewer]

Okay, let's zoom back into the company for a second. So Alex, you make the investment and you've got this vision for the company and the opportunity. What have we learned about the feasibility of the opportunity based on the company performance is another way of asking like for people who haven't been following the company trajectory, you know, how have things gone, what have we learned, what are the ups and downs been, etc.

[Alex Rampel]

Well, so there was a point in time where Opendoor was such a good idea. You know, there's a saying that we use a lot of venture capital is like, you know, you want to invest in a bad idea, something that looks like a bad idea, that's actually a good idea. Because if it looks like a good idea that it becomes a bad idea. And Opendoor was somewhere in between the two of these because Zillow was like, oh my God, like, you know, Rich Barton comes back to Zillow, Spencer leaves and it's like, I have to go do what Opendoor does. Everybody was getting into iBuying, then OfferPad popped up. But like Zillow was the big one and they couldn't do it. Well so, but, but here's why they couldn't do it. It's an interesting story. And like the other part of the story is Like, Ben Thompson wrote a post that almost like, kind of summarizes in a more eloquent form, like what I was talking about with, like, you know, if you get all the. If you get all the supply or just a small sliver of proprietary supply, you get all the demand. And once you have all the demand, then you can have your own. Then supply just comes to you, and that's how you finally build a marketplace. And I think rumor has it that Rich. Pardon? Reads Ben Thompson as. As everybody should, because Ben Thompson's very, very smart. Like, holy shit, we have to do this.

[Podcast Host/Interviewer]

Yeah.

[Alex Rampel]

So they start doing this, and they're making infinite money. But this is where cohort math is so important, because the first homes to sell are the positive selection homes. So imagine that. You know, what is it? It's October right now. Kaz and I buy a thousand homes today. The best homes will sell tomorrow. And then the homes that we're stuck with two years from now, like, you know, there are ghosts that live in those homes. Or like, the termites, like, they're like mega termites. Like, there are things that are wrong with it. So Zillow thought, as a public company operating in the public limelight, they were like, we're making so much money on iBuying because we're holding everything that hasn't sold at nav a net asset value. And then we're yielding profits all along the way. But you have to let the whole cohort cure as the term goes. And then it's like, oh, we lost a lot of money on that cohort. So what happened was open door now is getting outbid by. Because this is such a good idea, everybody thinks it's a good idea kind of started becoming a little bit of a bad idea. Pre marketplace, Zillow starts paying more. In fact, Zillow even had like, hey, don't sell to open door. Sell to us. We'll pay a dollar more. And you always have to realize, if you talk to anybody who's a professional trader in the equity markets, they're like, you have to assume that it's an adversarial process, is that, you know, anytime that you have anybody, somebody hits your bid like there's something wrong, Right? It's like, you should assume that you're about to get taken advantage of. Zillow didn't really understand that, but they kind of muddied the waters for everybody else. Eventually, Zillow pulled out of that business. Um, money started becoming not free. And if you're stuck with a huge amount of inventory. You know, being a market maker, I mean, if you look at the most profitable companies in the world, like Jane street is a market maker. Virtu is a market maker. Citadel Securities, a market maker. They don't win all of the time because if they did, then they were doing something, you know, probably illegal. They make money most of the time. They have a weighted coin and they hold inventory and they're making money on this bid ask spread from somebody who's hopefully not taking advantage of them, which is why they want retail flow. And what happens though, is that if you like a lot of the market makers in the equities world, world, they don't like to hold positions overnight because things could change. So Opendoor is holding a lot of positions beyond just overnight. And then interest rates went from like 0% to like 4%. And 4% is not high in the history of the world, but it's really high to go from like 0 to like 4% in like a few months.

[Kaz Najarian]

The pace at which interest rate increased were. I mean, I think we can say in hindsight this was objectively, like, deeply irresponsible for the country. Like, I don't think. I think it was very. Like, I don't.

[Alex Rampel]

That's why Silicon Valley bank went bankrupt. Asset prices went down.

[Kaz Najarian]

Yeah, I think this is like, look, I think opendor had made lots of mistakes regardless of interest rates. But, like, there's a very real thing that happened which. And companies shouldn't take credit or blame for macro, but what happened in the US with interest rates had basically never happened before and I think will literally never happen again because it was so obviously stupid.

[Alex Rampel]

So basically what happens, you're left with all this inventory. And the whole point is, if you're just buying and selling and you make money 51% of the time and you're earning a spread between, basically you have the top bid and the lowest ask, and then there's this margin in between. And if you just kind of keep buying, keep selling, you can actually make this work. And this is again, how. This is why Jane street makes a lot of money. Or Citadel securities or any of these companies that you've heard of, they're doing it very, very frequently. They're typically not holding onto assets for a very long period of time. Some of them never hold on to assets overnight, just as a standing rule. And Open Door has a lot of assets. And then what happens is when asset, when, sorry, when interest rates go up, what happens to asset prices? They tend to go down because now it's like, think of it in terms of like a mortgage payment. Like, well before my mortgage payment used to be a thousand. Like I only have $1,000 a month to, to switch from like my rental payment to buying a house because I can make a down payment. Well, wait a minute now it cost me $2,000 a month, so therefore I don't want to buy the house. What happens when aggregate demand goes down while prices go down? And actually this didn't happen as much in housing as would have been anticipated because we have a shortage of homes and that's a separate topic. But asset prices in general went down. Like SVB Silicon Valley bank went bankrupt because interest rates go up. And if you're stuck with a bunch of like, you know, 75 basis point 10 year T bills, they're worth half as much as they were before. Now you have to go sell them, oh, you're bankrupt. So the pace that this happened was very, very high. Nobody really, I mean people anticipated, okay, our rates are low, but it's like, oh well, the Fed will raise by 25 basis point, another 20. Like it wasn't like boom. And that was the like five sigma or I'm making up the number of sigmas, but it was many, many standard deviations beyond the norm in terms of what you can anticipate. And then it's like all of the risk cap. Actually it was kind of a double whammy because risk capital, like, you know, venture capital is risk capital. So when interest rates are low, well, I don't want to earn 75 basis points on T bills. I'm going to invest in riskier things. I'm going to give it to venture capital, I'm going to give it to private equity. So risk capital kind of pulls back. Asset prices go down, demand for homes goes down because interest rates went up. So my monthly, so it was kind of like this, everything went wrong at the same time. And the vision of the company, at least my vision of the, I'm not the founder, but like my vision as an investor was like, you know, you guys have a chance at building a marketplace, but it's going to take time. You can't just like snap your fingers and boom, you have a marketplace. Like how long did it take Amazon to build a marketplace? How many like very, very sad, despondent shareholder letters did Jeff Bezos have to write before marketplace appeared? A long, long time. And then open Door I think was on the path, but then just kind of got hit with this like triple, quadruple or maybe quintuple whammit.

[Kaz Najarian]

I mean it is also a real thing. Look, I think companies, it's very good when companies are blamed for their mistakes. Actually a good thing for the world. And we should all admit our mistakes because that's how we learn. The same thing happened to Amazon much earlier and to Carvana around the same time. Yeah, but Amazon and Carvana reacted differently to that thing happening. Like Amazon and Carvana, like cool. Was the original idea, a good idea? All right, what was the mistake? Let's just shed the mistakes and go. I think what Opendoor very publicly did was essentially abandon the original mission. Was like, cool. We're going to de risk this company a lot. We're just going to de risk the company across the entire segment. I think that actually is a very hard spiral to recover from because you've now made a category mistake about who you are, which makes it really easy for everyone else to make the same mistake. And then I, I don't, I think if, if Open Door is an old fashioned operational house flipper, like that's not that it could be meaningful. It's not that big a business. Right.

[Podcast Host/Interviewer]

And they lost faith in the original vision and the feasibility of it or what explained this sort of thing.

[Kaz Najarian]

Look, I think there's a very real thing about being a public company that like there are things you have to deal with. A public company, there are amplified. But I think private companies basically all have the exact same problems. But in a public company, in a private company, these problems are discussed with your VCs at a board table. And a public company, they're discussed on Reddit and it's found in the Wall Street Journal. So if you care a great deal about what's said about you in the Wall Street Journal, running a public company is incredibly difficult. It's just very difficult. Luckily, I just don't care. So it's slightly right.

[Podcast Host/Interviewer]

So you've come back and you, you, you, you, you've joined and you've said, hey, let's, let's go back. The original vision was a good idea. Let's, let's bring it or how did you look?

[Kaz Najarian]

I think the mission is a worthwhile one. I think OpenDorm has made mistakes along the path and we should learn from our mistakes. But the company is not made better by becoming Meeker. Right? Yeah, that's a very real thing. Will we, will we make mistakes again? 100%. We will for sure make mistakes again. Like we just launched try before this, the seven day trial of homes in Dallas, Texas. It's Day one. I don't know how it's going to go. We'll find out. But I was telling this to one of our product managers this morning. I got to open door and I felt. Have you ever watched Braveheart? There's a scene where Mel Gibson is standing in front of the Scottish army and the English are coming with weapons, and Mel Gibson's standing there saying, hold, hold. Oh, my go. Don't hold attack. I got to Opendoor, and I felt like for like, three years, someone had stood in front of the company saying, hold, hold, wait. Like, just wait for the macro to recover. And you just don't tend to build great software companies like that. I think you can build great hedge funds like that, but Opendoor is not a hedge fund. If it was a hedge fund, it needed to be six guys in New York with laptops. We're not that. We're a software company, and software companies need to be basically always on attack. Like, always, always, always on attack. We'll attack some wrong hills. We'll accidentally, like, lose some ships. But, like, always on attack. Yeah.

[Podcast Host/Interviewer]

Alex, what. What advice have you given a caz? Or what would you be thinking about in terms of what strategic decisions you have to make or what's important if you were taking over as CEO?

[Alex Rampel]

I, I think a lot of it. I. I think when I first heard that he was taking the job, I think I sent you my YouTube video. It's actually my most viewed ever video, largely by real estate agents who hate me and want to kill me. This was like, circulating. Speaking of Reddit and, you know, the Courage to be Disliked, it's a good book called Courage to be Disliked.

[Kaz Najarian]

It's an excellent book to camera. Courage to be Disliked is among the best books to read as a founder. You must read it.

[Alex Rampel]

Yeah, it's this excellent. It's this whole, like, Socratic dialogue, like in this Adlerian psychology mode. It's very, very interesting. So after giving that talk, oh, my God, the number of real estate agent hate mail. I didn't know that there was a such thing as, like, real estate agent hate mail. Because I was basically saying, like, these people are like leeches on society. And like, lo and behold, they don't like being called that.

[Kaz Najarian]

They don't like being called leeches on society.

[Alex Rampel]

And I know some real estate agents, but it's just like the whole process doesn't make sense. There should not be a 6% tax, which, by the way, I make this point in the presentation. It's unique to America. You go pick any other country in the world. It's nowhere near that. That level of spread. And you don't have all this regulatory capture. It doesn't make any sense. So I think my. My big thing was it's like, if you have a marketplace for homes, it is the biggest marketplace in the world, right? Like, we know that the stock market is big, but you know what? The residential real estate market is bigger. So we know that, you know, everybody. Like, why is the NYSE and NASDAQ worth a lot? Like, why is ebay worth, like, all of these things that do everything but homes if we. If you stick to that, which I think the company. I mean, this is what Eric Wu was kind of committed to doing. And it just became. It was an untenable situation where it's like all of your public. It's hard to do it in the.

[Kaz Najarian]

Public eye, for sure, because it's harder. But I don't think it's like. I think the company could have still done it in the public eye, but just. The company just had a. Had learned a bunch of wrong lessons.

[Alex Rampel]

And that was the point. It's like when money is free, like, success is a terrible teacher. And it's like, oh, we're making all this money flipping homes. And the real magic is going to happen if it's like, opendoor.com does not take principal risk on a house. And it just means that, like, it's the lowest cost to sell. It's the best way to buy. And that's what, by the way, like, buying stuff on Amazon is. That's what buying stuff. I mean, ebay has kind of lost its luster, but still, if I catch a new home run at a Giants game, where do I go sell that? Who has the deepest liquidity? It's going to be ebay, and I'm going to sell it there. And everybody who wants to buy a baseball, they go to ebay. And, like, ebay does not have to take possession of the baseball. That's why they have an amazing business. They probably have too many people that work there. They have, you know, it's a shadow of its former self. Apparently it's still using the same net library in, like, 1997. So all sorts of issues there. But, like, I'm just excited about this vision of having a housing marketplace and then also kind of coming up with creative financing options, because finance is like, all of these are one offs to your point. And then, by the way, you can come up with, like, better insurance options, like, if you control the entire thing and to Your point? If you have, like, a lifelong relationship with that customer, there are so many things that you can do.

[Kaz Najarian]

This is a. This is a very. I mean, look, underwriting a home for mortgage and underwriting a home for insurance and underwriting a home for buying it, like, fundamentally not that different as exercises. They really aren't. But all the players in this space come up with different answers to these questions. Right. It's just like this all should very clearly be done by one person. It's very clearly one company should do this. And you and I are money nerds. So I later wrote a book about PIMs.

[Alex Rampel]

Yeah.

[Kaz Najarian]

No payments in the US. So I think there's a very. I'm genuinely excited about this. I do think, for what it's worth, that the right model actually is much closer to Amazon than to ebay. Because I actually think for. I think Opendoor will have principal risk on quite a lot of its inventory for a very long time now. Should it only have that? Obviously not. And it's also not a binary thing. It's not like zero risk or 100% risk. There's like, it's a gradient. You can live anywhere along the chain. You can deliver different values to, like. Like, we don't have to agree with a seller on the price of the home. We can say, cool. We agree. It's at least this.

[Alex Rampel]

Right. Right.

[Kaz Najarian]

We'll give you at least that and then let's sell it. You take the rest of the risk. We'll take the risk for the first bit. Yeah. I think there's a lot you can do here that's not, like, quite binary and becomes like a UX problem rather than underwriting problem, but fixable.

[Alex Rampel]

Well, this, the thing. It's like there's a market order and a limit order.

[Kaz Najarian]

Yes, yes.

[Alex Rampel]

And there's a value. There's. There's a place for both. Yeah. And there's a lot of liquidity, you know, beneath the kind of the. The top big and the lowest ask.

[Kaz Najarian]

There's.

[Alex Rampel]

There's always a lot of liquidity there. And those are the limit orders gearing towards the.

[Podcast Host/Interviewer]

The future.

[Kaz Najarian]

What.

[Podcast Host/Interviewer]

What else can you hint at in terms of the biggest priorities or decisions or strategic directions that you're. You're focused on?

[Kaz Najarian]

The thing I admired, deeply admired about my time at Shopify is that, like, if you actually, if you watch chess players, like, go back in time and, like, start chess, they'll teach you, like, opening strategies. Opening, like, this is what you should do. If you look at modern chess players to do something Called positional chess. Right. Like, always put yourself in a better position, like, play for the next position, then one after that, and just like, give yourself more options. And that actually is the right way to build a company transparently. Like, you don't want to. Like, you want to hold the strategy very loosely. Not the mission, but the strategy. So I don't have like a secret bag of tricks, but I think there's a very real thing where Opendoor does too little for its sellers and does almost nothing for its buyers. We'll solve both of those problems. I think there's a very real thing where, like, I think due to some bad advice, the company tried for a little while to essentially only buy homes that were mispriced. Like, we will only buy homes that are mispriced by 20%. And turns out just again, you can build a hedge fund doing that. You can't really build a software company doing that. Like, our goal is to build, buy and sell homes for a fair price. Like, for a fair price, we will buy and sell homes. And I think those are like three big. Like, like everyone that way. Ish. And then what we'll do is we'll just like, ask people to hold us to account against this mission. Like, hold us to account against this mission. That what we are going to do out there is try to be the. The person you transact with quite frequently when buying, selling homes. Not just like 0.5% of the time, but a significant percentage of the time. And then. Well, I think that's like. And by the way, we've already like. When I started at Open Door, Open Door was only available in 48 markets in the U.S. it is now available in every market in the U.S. because, like, you can push pixels relatively easily. Yeah. So there's a bunch, but a bunch of that stuff that's like, I think. I think people should expect us to be a much more ambitious company.

[Podcast Host/Interviewer]

Well, in terms of holding you to account. One thing that's so remarkable about the company, among other things, is how many people on the Internet feel so passionate about the company. The open Army. How do we explain why Opendoor is a company that so many people feel so fashionate and how does that impact at all, sort of the business or how you think about.

[Kaz Najarian]

I never worked on Wall street, and until I started this job, I owned one ticker. It was Shopify. At some point soon, I own this ticker. Once, you know, I'm about to. I'm not like, I'm not a stock analyst. I'm Just not one. I build products for a living. But I think there's a very real thing that happens where people feel like the natural intuitions of the average American is a very good indicator of what's true. Like William Buckley used to say, used to rather grab the phone book of Boston, Massachusetts than go to Harvard professor's book for like advice. Because it's a very real thing about the natural intuition of people is real. And I think people look at real estate and how those transactions are done and they say, well this is stupid. Yeah. Like this is not how this should be. And it makes it like, I think that's what it is. I think like people are looking at and saying, hey, this is not how this should work. There's a company out there who's supposed to, who has told us they're going to fix this problem, we want them to go fix it. And by the way, I think like this, the most wonderful thing about this is that if you engage with the average person, they tend to be deeply reasonable, ask really good questions, have really good ideas. Whereas if you engage with like supposed experts, they have like pre perceived biases and they're like usually wrong. There's like a whole like pretense of knowledge thing that happens. So I think it's actually deeply helpful for the company to be a company where like, like cool. You know who I want advice from? The average person who owns this talk and is about to buy or sell a home. I want advice from that person. Yeah. Because the odds are they have a wider aperture of possibility. Like this is real question that someone asked me the other day saying hey, why can't, why can I return what I buy on Amazon and not a home? Like that's a really decent question. That's like the honest. From the time someone asked that question to the time we launched a product was maybe I think 12 days. Because there's a certain amount of like there's something broken here that is like, it is intuition. Like is intuition is crystallized knowledge. And intuition by lots of people is literally knowledge of like significant number of people. And I think it's important, it is a bad thing for the world that people in this country can't afford to own their home. Like people who own homes. Kids that grow up in homes that are owned by their parents have better life outcomes. People who live in homes have better communities, lower crime, higher health results. If you're so inclined to solve this problem with us, my DMs are open. Find me. We are going to build the most aggressive team in software and we're always recruiting.

[Podcast Host]

Thanks for listening to this episode of the A16Z podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating, or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X16Z and subscribe to our [e-mail] thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com disclosures.