Opendoor: Falling Upwards

Opendoor is the latest beneficiary of Wall Street Bets massively follow trading each other.

I’ve been intrigued by iBuying and Opendoor for a long time. The unit economics are absolutely terrible and no company can survive on it as a business. Yet, the value to the customer is very real. Could iBuying be the foundation of a lot more profitable business on top of it? Maybe, but I don’t think that is the case for Opendoor. The company has shown that they can’t execute on what they say. Their unit economics leave no room for errors. Yet, I’ve been chasing this ghost for 5 years, so watching the surge come is a little surreal.

What I Learned

I’ve owned Zillow for 5+ years now and have some LEAPS on Opendoor, but both of these investments had been losers for me before Wall Streets Bets saved my LEAPS. I tend to fall in love with weird businesses with unique business models. I’m willing to look past some flaws that many investors won’t (low gross margin % businesses aren’t inherently bad!). Yet, with something like Zillow and Opendoor, I get wrapped into the ultimate potential of that business and ignore the likelihood of reaching that potential. The math in my head goes something like this:

1. The potential here is so large
2. The company has this competitive advantage over its competitors
3. Invest

The problem here is not stepping back and being patient enough to wait for the business to develop. You’ll miss on a small portion of the upside, but significantly reduce risk in the process. Let the company prove to you that it can 1. execute, 2. at least start out the thesis.

PS – It helps when you’ve been blogging for 5 years too. Your thought process is documented.