In a board call last month, I finally told everyone that the commission savings that Redfin offers home sellers and buyers dramatically lowers our profits margins and there is no evidence that it drives more revenue.
We have, I told our investors, given away $100 million because of my irrational belief that
- Redfin was put on this earth to make real estate better, and that
- One of the simplest ways to make real estate better is to give consumers more value.
The problem with the refund is that it’s like the tooth fairy: nobody really believes in it until a gift shows up under the pillow. The first act of a rational CEO, I said, would be to keep the service exactly the same and eliminate the refund entirely.
The line was silent. Then Austin Ligon, the founder and former CEO of CarMax, asked an unexpected question: “Can you name a great consumer brand that was built by someone completely rational?”
I thought about one of my heroes, Ted Turner, who once broke through a stalemate with stunned Japanese businessmen by removing his clothes one article at a time. He publicly described TimeWarner’s decision to shut down CNN’s cash-hemorrhaging foreign offices as a clitorectomy.
I remembered that Nike was so committed to its athletes that it paid for Tonya Harding’s legal defense after her goons clubbed a competing figure-skater in the knee. I thought about Whole Foods’s concupiscent piles of fruit, which are, like someone you fall in love with, so much better than they have to be.
Wouldn’t a more calculating business skimp on the strawberries?
The problem with rational decision-making is that you can’t ask consumers to have an emotional connection to your company if you yourself aren’t guided by emotions. When the only basis of your identity is an elaborate calculation of self-interest, you have no identity at all.
Nobody cared about Han Solo until he rode after Luke into a snow-storm yelling “Never tell me the odds!” And nobody will care about your company if you don’t take a similar stand. This is why Steve Jobs hated the word “brand,” because Apple’s identity was an authentic expression of himself, not a calculated construction of the marketing department.
What this cynical, jaded, spun-out, over-hyped world is still famished for after all these years is a reason to believe. Belief is such a deep need that we find ourselves developing tearful, fierce relationships with silly little products and then feeling like dupes when we find out how cynical their manufacturers can be.
Our need to believe is why investment bankers, who are so good at making money as investors, are almost always terrible at making money as the CEOs of consumer companies. They always do the math.
The problem is, that I do too. It’s easy to be crazy, but not after you know you’re crazy. Why did Redfin go to the trouble of figuring out how many people the refund put off, and how many it drew in, if we were just going to ignore the result?
I don’t know. What’s really hard about this job is knowing when to be crazy and when to be calculating, because you can’t just be one or the other. It’s certainly easier to be calculating. It takes confidence to ignore numbers, to set aside focus groups and advisers, and do what you believe in, because then the only person you’ll have to blame for your craziness is yourself.
But if I met my old self, the one just starting out in a consumer Internet business, the first advice I’d give him would be: have the courage of your convictions.
We do this all the time outside of business, without thinking a thing of it. A lovely friend of mine once broke up with someone because he wasn’t a little crazy. How, she asked, could she be crazy around someone who was always totally, maddeningly normal? Then she said, “That’s crazy right?”
I told her it was the only completely sane thing she’d ever said.