Today's episode is a unique one. Shortly after @Opendoor reported earnings, @ReustleMatt spoke with CEO @nejatian for a breakdown of $OPEN. We talk about the quarter in the context of Opendoor's turnaround, including Kaz's view of the business as a market maker, the priorities on the product roadmap, the opportunity in attached services, and the path to profitability. Some highlights from the conversation: 1/ Opendoor is a market maker, not a prop desk. 2/ I was shocked by how the company was being run by outside consultants for so long. The people who were making decisions for the company had almost no stake in the outcome of those decisions. The OPEX was just honestly stupid. 3/ Saying Opendoor is an asset manager that happens to have software is like saying Amazon was a warehouser of books that just happened to have software. 4/ Opendoor has fewer than seventy engineers. I think that would surprise most people. 5/ When we buy lots of homes and sell them very quickly, we get very live feedback about actual market conditions. We pick up data in a way that no one else does. We have a 90 to 120-day advantage on the market. 6/ My job is to make sure that when you want to buy a home, sell a home, that you think of Opendoor the way you think about Uber or Amazon. 7/ Opendoor has an embedded advantage compared to every other buyer and seller of real estate in our cost of capital. But that has not been adequately used by the company. 8/ I want the teacher in Kansas City to have a one-click mortgage, title, escrow, and home buying experience and home selling experience. 9/ Opendoor has had too little discipline when it comes to being a for-profit business because it has been able to reach for capital markets over and over again. 10/ I think it's important that Opendoor be funded by its cash flow. 11/ What I think is very hard to say is that the largest real estate company on the public market in the United States should not be very large. There isn't a $100 billion market cap real estate company in the public markets in the US. That feels like a flaw in the matrix. 12/ I know what every single one of our engineers is working on because we don’t have the luxury of waste. 13/ I can take a series of services in a highly fragmented market, all of whom have very low NPS scores, and jam them all together. All of these players have to pay for CAC, and I don't. They all have to pay for gathering information. I don't. That's the opportunity. Timestamps: 00:00 Intro 00:42 What Kaz found inside Opendoor 03:12 The business model 05:49 How Opendoor makes money 06:48 The data and information advantage 12:18 Sizing the TAM 15:19 Product roadmap: title, escrow, mortgage, solar 18:33 The bundling thesis 21:37 Capital allocation and path to profitability 23:39 70 engineers and AI leverage

Today, we are breaking down Toast ($TOST) Sean Barrett, Managing Partner and CIO of Counter Global, returned to cover his history with this business and what makes it so exciting today. Enjoy!

Today, we break down Auto1 $AG1 It'd be easy to call it the Carvana of Europe, but our guest, Harrison Moot of SandStone, helped detail what makes Auto1's model different. Harrison joined @reustlematt to break down the European used car market, cross-border sales channels, credit quality, and much more. Enjoy!

Opendoor CEO @nejatian on why too much access to capital markets led to a lack of discipline for the company: "I was honestly shocked by how the company was being run by outside consultants for so long. The people making decisions for the company had almost no stake in the outcome of those decisions. The OpEx was honestly stupid. Opendoor has had too little discipline when it comes to being a for-profit business, because it has been able to reach for capital markets over and over again. That has actually been bad for Opendoor. So it's incredibly important for us to be incredibly disciplined. This will be painful as hell. Am I forgoing areas of growth that I would not forgo if I had lots of profits? Yes, for sure. But this is healthy discipline. It's important that Opendoor be funded by its cash flow."

@bizbreakdowns - great interview / questions with @nejatian My top 3 takeaways: 1. Best real estate data and systems in the world for market making. OPEN = citadel / jane street. Speed is everything 2. Complexity is just cope. Attached services opportunity even bigger than he though. 3. Cost discipline and elite team - currently at 70 cracked engineers. He knows what every single one is working on. youtu.be/m53ysyhjDJs?si=efLK…

Kaz on Opendoor's structural advantages that almost no other player in real estate has: (1) cost of capital (2) real-time data (3) a 90 to 120 day lead on the market "Opendoor has an embedded advantage compared to every other buyer and seller of real estate in our cost of capital. When we buy lots of homes and sell them very quickly, we get very live feedback about actual market conditions. Not just about the clearance price, also about the renovation process, also about the demand that impacts every other demand. We pick up data in a way that no one else does. And by the way, we're ahead of the market. Even if you were scraping all the data you could from MLSs, you'd be 90 to 120 days behind us, because we're picking it up live. We have access to data in a way that very few people do. We have a 90 to 120 day advantage on the market. You can't use that advantage if you want very high margins on every trade. If I can have very tight spreads — buy from you with more certainty than you would sell into the market, and sell to the next person with more certainty than they would buy from the market — I'm just increasing my information advantage."

.@Opendoor CEO @nejatian on how investors misunderstand the company: "Opendoor is a market maker, not a prop desk." The business is to make it easier to buy and sell houses, not to profit from owning them. "The underlying assumptions about the business are fundamentally wrong. Those assumptions were held by some people inside the building for a while. People in New York were wrong. People in San Francisco were also wrong. Saying Opendoor is an asset manager that happens to have software is like saying Amazon in its early days was a warehouser of books that just happened to have software. Did Amazon warehouse books? Sure. But was it a warehouser of books? No. That's not where the leverage comes from. There's a very real difference between a prop desk and a market maker. If you're a prop desk and you hold assets for profit, you do one set of things. If you're a market maker and your fundamental job is to not hold assets for profit, you do a different set of things. Opendoor is a market maker, not a prop desk. Do we have to be very good at underwriting? Damn right we do. But there's a real difference about where that underwriting engine is pointed. Citadel gathers a crap ton of data. The end matters as much as the means."

This was fun. Thanks for conversation!

Shortly after Opendoor reports earnings today, @ReustleMatt will talk with @nejatian to discuss the quarter, the company's turnaround, and more specific operating questions about the business. What should we ask him?  Full episode on X, Apple/Spotify and Youtube tomorrow.

underrated pod

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