Eric Jackson on the “radical change” and “big swings” coming from Opendoor’s new management

When you’re at a conference for individual investors, Eric Jackson is a hard man to steal away from the crowd.

Everyone at the Independent Investor Summit in New York on Friday wanted to get a word in with the head of Toronto-based EMJ Capital. We’ve called him the architect of Opendoor’s initial massive rally, and his fans now refer to him as the general of the $OPEN Army.

After requests for selfies, fielding a pitch for a crypto data startup, numerous thank-yous, and individual investors wondering what they need to be able to invest in his fund, we caught up with Jackson on the sidelines of the event to talk about (what else?) Opendoor Technologies. Our discussion came one day after the stock had jumped 79% on the announcement that cofounders Keith Rabois and Eric Wu were being added to the board of directors and Shopify COO Kaz Nejatian was joining the company to serve as its new CEO.

Some highlights:

On what he’s learned about the company since chatting with management and key stakeholders:

“My perception of interacting with some of the board members and senior management is, Keith had a line he shared with me last week when we met for the first time in person, in New York, where he said, ‘This is a company that’s more interested in risk mitigation than value creation.’ I think there’s definitely a cautiousness to this company that’s not uncommon with boards, but I kind of sense that from the management as well. Maybe not surprisingly, I think that’s a reason why they’ve maybe been slow to adapt and respond to their declining stock price and turn things around. So now they’ve been given a jolt and they have a new CEO who’s totally from the same school of thought as Keith and is going to be much more action oriented.

I think there will be a significant job reduction in the company in the months to come and a focus on AI. There’s going to be a focus on crypto, because that’s something Kaz brings. Keith’s very anti work from home, and apparently that’s a big issue at this company, so I think that’s going away. There will be radical change for sure. And everybody now who’s at the top of this company is focused on taking a big swing. 

You can criticize Opendoor for taking big swings, like in version one when some of these cofounders were part of it and it almost killed the company, you could say, because they bought so many houses and had them on their balance sheet right as the housing market was dropping. But I think they feel like the opportunity for the company is still wide open to be this Amazon of housing, or however you want to call it or analogize it.”

On his leadership of a retail activist campaign:

“I obviously decided, when a reporter came and interviewed me early on, should I just let it fly and sort of take the kimono off and say to the world, ‘Yeah, this is who I am and I’ve been up and down, but here I am now, take it or leave it.’

After that decision to do that, no longer was I playing a part, and people seemed to react to that positively. I think it’s been part of the reason why the whole campaign has been successful. And every step along the way when I was sort of pushing Opendoor to change, I got so many critics telling me I’m doing too much, going too far.

People said, ‘You’ve got to make up with [former CEO] Carrie [Wheeler]. This is going to tank the stock. You’re going to hurt her feelings. You should apologize to her. You should send her a letter and try to make up, and then you’ll be united and it’ll be good for shareholders that you do that.’

I was like, no way. I’m not going to do that. I’m not her husband; I’m her shareholder. And I just know from the whole Yahoo thing, that’s not the way you change anything. These guys are just stalling for time and they’re dragging their feet and all that. The only way that you force a change is you hit them between the eyes and you just keep hitting them until they change.

And I just think people saw that approach and they liked it, and they responded to it and felt involved in it. They felt involved in the process. So there’s no question that there’s a galvanizing aspect of the community here that draws people in, makes them excited.”

We also discussed how quickly many of his milestones for the company had been hit, his personal and professional growth, the stories he’s been touched by, and why he’ll keep filming videos in front of Drake’s house to try to get the singer interested in the online real estate company.

A full transcript of the interview, lightly edited for clarity, is below. Emphasis added.

Sherwood News: When we first talked in mid- to late July, you talked about milestones for the company. You talked about getting some prominent people to invest. That’s happened. You talked about how your one concern was the management. That’s changed. You talked about how management should stop selling stock and buy stock instead. That’s changed. When you think of the early milestones you had for this company, for this stock, can you imagine that so many of them would have been hit so thoroughly in such a short time? 

Eric Jackson: No, I definitely wouldn’t have expected that when we spoke, or that it would happen so quickly or even that so many would get accomplished within a one-year period. And I wouldn’t, because I was involved in Yahoo for almost 10 years and I would say, “Do this, do that,” and then 10 years went by and like nothing happened and they just kept ignoring me and doing the opposite. So no, I didn’t expect it. 

There is something special about Opendoor, like the community coming together. The way it has the retail support has been unlike anything I’ve ever seen or experienced. Probably after GameStop, it seems to me anyway to be the biggest retail movement. It’s been just bizarre to be in the center of the maelstrom.

Sherwood: By virtue of the position that you’re in with regard to the company, you’ve gotten to have a lot more contact with OPEN’s management. What have you learned about the company that you didn’t know before? In terms of the fundamental side, the operational side, what they’re trying to do, what have you learned over the past few weeks?

Jackson: I guess the biggest thing is that Keith Rabois, generally speaking, has almost been 100% correct about what he said about the company. He was very anti Carrie Wheeler from the beginning. He’s been very much saying the current team is kind of asleep at the switch and that there needs to be radical change. There needs to be a much heavier emphasis on AI. And I would definitely agree with all those things. 

My perception of interacting with some of the board members and senior management is, Keith had a line he shared with me last week when we met for the first time in person, in New York, where he said, “This is a company that’s more interested in risk mitigation than value creation.” I think there’s definitely a cautiousness to this company that’s not uncommon with boards, but I kind of sense that from the management as well. Maybe not surprisingly, I think that’s a reason why they’ve maybe been slow to adapt and respond to their declining stock price and turn things around. So now they’ve been given a jolt and they have a new CEO who’s totally from the same school of thought as Keith and is going to be much more action oriented.

I think there will be a significant job reduction in the company in the months to come and a focus on AI. There’s going to be a focus on crypto, because that’s something Kaz brings. Keith’s very anti work from home, and apparently that’s a big issue at this company, so I think that’s going away. There will be radical change for sure. And everybody now who’s at the top of this company is focused on taking a big swing. 

You can criticize Opendoor for taking big swings, like in version one when some of these cofounders were part of it and it almost killed the company, you could say, because they bought so many houses and had them on their balance sheet right as the housing market was dropping. But I think they feel like the opportunity for the company is still wide open to be this Amazon of housing, or however you want to call it or analogize it.

Sherwood: For you personally, what have you learned about investing through this experience? What have you learned about the power of community, the power of crowds, the ability and the need to garner attention and get eyeballs on Opendoor, and that change would come the more eyeballs were on it? It seems like you had this inkling, but again, the speed at which things have happened has been so quick. What have you learned from this?

Jackson: Well, before this year, I was really embarrassed about my performance as a hedge fund manager and that I wasn’t more successful in my career.

But I tried to cover that up and I tried to, you know, if I got an offer to go on CNBC, I tried to dress up and play the part of what I thought a successful hedge fund manager slash tech portfolio manager should be. But deep down I was feeling, “Oh, I’ve got this imposter syndrome, and what if people really knew about my up-and-down performance.” 

I didn’t have a clear road map, the idea that all I do is a hundred baggers or anything like that. So I obviously decided, when a reporter came and interviewed me early on, should I just let it fly and sort of take the kimono off and say to the world, “Yeah, this is who I am and I’ve been up and down, but here I am now, take it or leave it.”

After that decision to do that, no longer was I playing a part, and people seemed to react to that positively. I think it’s been part of the reason why the whole campaign has been successful. And every step along the way when I was sort of pushing Opendoor to change, I got so many critics telling me I’m doing too much, going too far.

People said, “You’ve got to make up with Carrie. This is going to tank the stock. You’re going to hurt her feelings. You should apologize to her. You should send her a letter and try to make up, and then you’ll be united and it’ll be good for shareholders that you do that.”

I was like, no way. I’m not going to do that. I’m not her husband; I’m her shareholder. And I just know from the whole Yahoo thing, that’s not the way you change anything. These guys are just stalling for time and they’re dragging their feet and all that. The only way that you force a change is you hit them between the eyes and you just keep hitting them until they change.

And I just think people saw that approach and they liked it, and they responded to it and felt involved in it. They felt involved in the process. So there’s no question that there’s a galvanizing aspect of the community here that draws people in, makes them excited.

I’ve also learned that you can’t have some grand plan. I got a Ph.D. in strategy and management from the Columbia Business School, but I had no grand strategy for this at the beginning. It was more of like, “Hey, this feels right. I think this is a company that for this, this, and this reason can 100x. I don’t know exactly how it’s going to play out, but I’m going to start saying this, and then tomorrow people will react and the critics will say this, or the shorts will say this, and I’ll say that, and I’ll have to figure it out as I go.” 

I mean, I had no idea the Drake thing would lead to what it was, but similarly, I had so many people saying, “This is so stupid. Why are you doing it? Stop, you’re embarrassing yourself. I can’t believe CNBC ever let you on the air.”

Treating me like some desperate guy who obviously only wants this for his own personal attention and stuff, and yet I knew that wasn’t what it was about. I didn’t know if Drake would ever come out of the gates one day and show an interest in Opendoor. But I just felt like, you know, no, we’ve got to keep going. We’ve got to keep pushing this. I don’t know where it’s leading, but it’s going to lead to somewhere constructive and positive. And, so far anyway in this campaign, that approach has definitely worked: just sticking to your guns and believing in yourself and being who you are, take it or leave it.

The biggest surprise has been that it’s actually helped me in my own marriage and my own relationship with my kids too, taking that approach. I couldn’t be happier, personally, professionally, with how it’s gone.

Sherwood: That’s what I was going to ask next. You have people coming up to you now, you have people talking about how you’ve changed their lives. How has your life changed based on the experiences of the past couple months?

Jackson: I think it’s made me more religious. I went through my own personal, I call it “valley of death” in the last three years, where I had a big billionaire pull his money out of my fund and I had a lot of people telling me I should shut it down because it was too expensive to keep operating a fund with so few assets. And stuff like that creates stress and strain on personal relationships or family, when you’re worried about how am I as a dad going to support my kids and everything.

I know I wouldn’t be here today, doing this, had I not experienced such tough moments, and I never gave up. I always kept going, one step ahead of the other. 

But there are lots of parts where you understand people who just let go of the world and just forget it, just do something that’s easy, and I never did that. So it definitely has made me more spiritual and religious, and I am not afraid to share that publicly. Again, some people like it, some people don’t or whatever.

That’s been an important thing for me and makes me confident that when I continue on day 25 of Drake that it’s the right thing to do. It sort of makes me question myself less than I used to do, I guess. So that seems to be helpful. 

Sherwood: How do you balance your responsibilities between this newfound position of prominence within this individual company, the interests of the limited partners (LPs) in your fund, and the interests of the broader community right now that is involved in Opendoor?

Jackson: I got an email from one of my LPs, maybe within the first week of Opendoor, and he was basically like, “Hey, you don’t communicate with us in formal quarterly letters and stuff” — which is true — “and yet all I see is you tweeting online day and night about Opendoor. It seems kind of weird. You seem like all you care about is yourself, and you’re supposed to be running a fund and yet you’re doing this for personal gain and or personal brand.”

And I was like, “You know what, you’re right. Frankly, I’ve been embarrassed by the performance for the last few years and it’s been hard to sit down and kind of write formal letters, holding myself accountable to all of you LPs. But I will, I should, and I will try to do that.”

And I have been doing that monthly since then. But I said, “I don’t think you really understand about OPEN. I’m not doing it for me; I’m doing it because I really think there’s an opportunity here and we have a big and significant position in the company. If the world starts to come around and see this and bid it up, it will be very, very good for everybody involved, including you.” So I have had those conversations there. 

There was a point I was going to mention to you before, for other questions just last night. Obviously I get a ton of DMs from people, because I used to not have open DMs and now I do. And Adam Bain (he’s on the board) told me when I made an introduction for Marcus Lemonis [editor’s note: CEO of Camping World, host of “The Profit”] to Adam — because even Marcus wanted to do some business partnership with Opendoor — Adam was like, “Oh, his DMs aren’t open. Can you tell him to open his DMs? It’s much better that way.” And I was like, hmm, maybe I should do that myself. Because I thought I’d only get like, porn or whatever. But they’ve been 95% really positive and I’ve shared a lot of them. Obviously in the last few days, when OPEN’s gone up so much, I’ve been almost overwhelmed by all people saying, “You changed my life,” and, “Thank you.” Or “I paid off my student debt” or “I paid off credit card debt.”

But last night a guy — I read this to my wife because she’s here with me. I read this thing because he wrote me this long email — he said basically, “I’m 57. I got fired from my senior IT job after 37 years, and I started trading our Roth IRA. I started with $600,000 and I built it up to like $700,000, and then suddenly it was like $228,000. I made a bunch of bad trades and it was down to $228,000.

“And I made a decision in my own mind that if it had ever dropped below $200,000, I was going to close it and end my life because I have a $600,000 life policy for my wife and my two kids, and I have two grandkids. I knew that I could do it in a certain way that she’d get the money. With the $200,000 that was left in my Roth IRA, that would put her close to a millionaire and she’d be OK.

“I had it all worked out. Then I saw your tweet about OPEN, or something like this, and I ended up putting a hundred thousand into OPEN options or calls of some kind. And today my account is $1.1 million, or something like that.” And he was like, “You know, anytime you take shit from, I dunno, some short seller or whatever, you just tell him that you saved my life.” 

Obviously I hate that he was so sad or desperate that he was thinking that way, and he said he is seeing counseling and all this kind of stuff. But I dunno, I can’t believe that what you tweet about has such an impact on somebody that they see it, they take it in. It’s obviously a very personal story, but you multiply that with others and it’s just not something I ever expected to experience myself, firsthand. It makes you see that there’s like a gravity to everything you say or tweet and you don’t want to take that for granted. You don’t want to make some sort of flip or casual comment that could end up hurting people unintentionally.

Sherwood: That’s wild. That’s very touching, to be hearing these stories. One final thing I wanted to touch on was the power of imagination. It’s one of the biggest assets any investor can have, in my opinion. Right now this is a story where the opportunity was identified in part because of AI tools. It’s a company that is going to be utilizing AI heavily in an attempted business pivot. And right now a lot of its success as a stock is due to our humanity and the belief in that process playing out. How do you apply your imagination to the investment process and how do you think that’s playing out right now in Opendoor?

Jackson: Well, I am a student of the markets, kind of like you or Joe Weisenthal. One of the things I always find funny is how schizophrenic markets can be. Sometimes investors can be in moments of market despair, there’s blood in the streets, and everybody is convinced the world is ending and the sun will never shine again.

And then similarly, you go to these moments of euphoria, where nobody can see the dark clouds on the horizon. I guess it’s something about our own humanity. That makes sense. 

But I’ve always been interested in individual companies, especially tech companies and how, like, when people are just slitting their wrists, how that’s a good time to buy. I’m better at that than I am at the peaks, and saying like Jim Chanos, “Oh yeah, it’s bullshit. Everything’s going to go to hell in a handbasket by next week” — I’m less good at that. I remember like it was yesterday, Robinhood at five or six bucks. I remember Coinbase in the 30s in December.

[Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions.]

I remember, you know, Carvana. I was there obviously for Carvana as well, and sometimes you have these fleeting thoughts like, “Oh yeah, for sure Robinhood, this is ridiculous. It’s too cheap, at five bucks or something. They just need to do this, do that, and then they’ll be OK and then people will have confidence again. And then, yeah, it could go back to its prior IPO price or something like that.”

That’s usually how we think. We sort of think in terms of what came before rather than what could be. Carvana was always, “How do they get back to $400?” Not, “How did they go to $12?” or something like that.

But your attention gets pulled off in different areas. You don’t always follow through on a trade, or when you get into a trade like I did with Carvana early, you don’t stick with it long enough. I got into it at $15 and mostly got out at $150, and then missed the rest of the move. I would’ve made so much more money had I just plunked in a chunk at the beginning and done nothing.

Everybody feels like they have to do something and that’s partly why they watch business news every day, 24/7. They feel like they’ve got to know what [Fed Chair] Jerome Powell’s talking about and stuff. 

So with Opendoor, I definitely did want to try to learn from that and learn from my own mistakes and really just tune out the noise. I wanted to think more than, how does this go back to its all-time high of $39, but what seriously should this stock be trading at? That was how I first approached it before my initial tweet. Again, not knowing Carrie was a terrible CEO or anything like that, I said, “OK, with the rate cuts, with the kind of re-rating that should happen, they should they be able to prove that they can make consistent money with this model. This should be an $82 stop in three years’ time.”

That was my initial thing. And I said, “I don’t care that this is double the prior all-time high, I don’t,” and probably people will say, that’s crazy.

That’s really how it does work in real life, is that if you prove this viability, you will get rated in a certain multiple fashion that’s consistent with other multiples of high-growth companies.

So there was a way to get there, but it does take some work to think that way. That’s not how we’re all trained to think and my old boss at, when I had my billionaire, he had a CIO that worked for him who was a very stern Swede and more from the value school of investing. He didn’t mind making money on growth stocks. He was all for it, if he saw some growth trade that he could jump into. He was never going to fall in love with it, though. And he was always saying to me, “Eric, the problem with you is like, you never take a profit, Eric, a profit. You get into these crazy stocks and they 3x. What about 3x isn’t good enough for you. You like what? You have to hold up for a 10x, come on, take a profit.”

I think most in the investment world have kind of come from that view. It’s like going after a hundred baggers, you know, there’s Masayoshi Son, and that’s about it out there.

For whatever reason, that’s what I’m drawn to, and hopefully, going forward anyway, good at. You’ve just got to be aware of your own shortfalls and be aware of hubris. That’s definitely something that’s tripped me up in the past. But stick with what you’re good at, I think is what I’ve learned through all this.