Afford Anything - Harvard Dropout Builds Nation’s First Car-Free Utopia, with Ryan Johnson and JD Roth

Episode Date: May 14, 2024

#505: Ryan Johnson isn't your average CEO. He's a visionary reimagining city life, one car-free community at a time. In this episode, we chat with Ryan, the co-founder of Culdesac, about building walkable neighborhoods designed for human connection, not just traffic. We'll dive into his experience with Opendoor, his passion for electric bikes (he owns over 60!), and his audacious plan to revolutionize urban living. Buckle up (or maybe don't) for a conversation about the future of cities, the power of community, and why you might not need a car ever again. For more information, visit the show notes at https://affordanything.com/episode505 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Ryan Johnson is a Harvard dropout who now is the co-founder and CEO of the nation's first car-free neighborhood built from scratch. There was a long and varied path that got him there. And at some point along the way, he was a reader of Get Rich Slowly, the original personal finance blog of the Internet, which was written by J.D. Roth. And so in today's episode, I and J.D. together will be co-interviewing Ryan about the crazy. adventures that led him to where he is. Welcome to the Afford Anything Podcast. The show that understands you can afford anything, but not everything. Every choice you make carries a trade-off, and that applies not just to your money, but to your time, your focus, your energy, your attention to any limited resource that you need to manage. Saying yes to something implicitly means,

you're saying no to alternatives. So, what matters most, and how do you make decisions accordingly. Those are the two questions that this podcast is devoted to exploring. My name is Paula Pant. I'm the host. And J.D. Roth, the creator of Get Rich Slowly, is sitting across the table from me. Hello, Jadie. Hello, Paula. Welcome. And let's get right to it. So, Ryan, you're in the hot seat today. Jady and I are both going to be grilling you. Let's go back to the Harvard dropout. You are a Harvard business school student. You did your undergrad here in Arizona, which is where you're from. what led to the decision to leave? So first, thanks for having me on and welcome to Tempe.

A friend that I'd been doing real estate with going back to undergrad, now almost 20 years ago, was starting a company called Open Door. I started working on it the first semester at school and just had a lot of conviction that there was a huge need for the service Open Door provides and it was going to succeed. And so wanted to be part of it. It sounds like before you became full time at Open Door, you were a Fulbright scholar, You worked at Bain, you worked at McKinsey. How did you fit in all of that?

I wanted to be an economics professor for a little while. When I did the full write, I was doing research on private sector bus systems in Brazil. And then I realized that actually liked the private sector and academia wasn't for me. I was still looking for exactly the right way to mix my interest and the right careers. That's why I tried consulting. I tried the private equity. I also tried working for the New York City subway at the MTA. What I realized was that real estate and transportation were the two things that I'm most interested in.

And those two things together are over half of the household spend and transportation defines cities going back to the Roman roads. And we can make our cities much better working on those two things together. So Bain, McKenzie, all of that happened prior to Harvard. How did you get that job given that you came from a state school? Yeah, the first person that got hired at McKinsey from there. Now there's been others. I think that they've realized that when you have these huge schools, the top 1% in a place like U of A or ASU would also be a very good student elsewhere. Basically, for me, it was about getting a foot in the door and getting an interview and having the chance to shine there.

All right. So then you began while you were a student at Harvard, you began working on this brand new project called Open Door. And I think most of the people, at least a good number of the people who are listening to this podcast, have heard of Open Door. So now, a massive real estate technology company, and we'll get more into that in a moment. But how did that work begin? Was it your idea?

Did somebody come to you? So there's somebody named Keith Rabeau. Open Door started at the end of 2013, and he had been talking about it for a long time. And I'd done real estate going back to 2003 with my college roommate, Eric Wu. Eric knew Keith from his prior company. And Keith said,

you should set this company aside and come work on Home Run. Open Door originally was going to be called Home Run, except for the domain was going to be $10 million. And Open Door was a lot of lower cost. Then Eric sold his company to Trulia and worked there. After that company, I peoed, he resurrected this idea with Keith and started talking with me about it, and that's how I got involved. Why did he start talking with you? Eric and I had worked together going back to college, and we bought lots of homes together, and we renovated them and we ended up selling them.

We put in the sweat equity. It was back in college when our time was worth nothing to us. We were full time in school and full time on that. But we learned a lot and saw so much opportunity. But the know-how that we had together was why we were excited to work together again. Introduce for the people who are listening who don't know what Open Door does. Like me. Oh, there we go.

Yeah. Explain it to JD. What does Open Door do? It's empowering. everyone with the freedom to move. So it's bringing liquidity to the residential real estate market. It's life's most important trends. Those sound like buzzwords. Buzzwords. So what does it actually? It makes it easy to sell your home. Okay. You enter your address. You answer a few basic questions. You get all-cash offer and you choose

your closing date. Oh, wow. And it makes it a much easier transaction. And Open Door charges a fee for that. But there are no real estate agents involved. So, well, Open Door then owns the home and does renovations, it puts it back on the market, and then buyers usually have a real estate agent. Sure. Sellers can use a real estate agent, but the core product is just selling directly to Open Door. Okay. How did you validate the idea?

How did you know that this was going to be worth betting on? So you put up a website that would get hits and see what kind of calls. Talk about the folks to see what they were interested. And then we built a site that would actually make offers and looked at the data and built financial models on could this be profitable, right, with all the different transaction costs and the cost of building the software. And that's some of the things that we did. And then from that point forward, it was a matter of finding the capital to then fund the transactions? Yes, we needed to get the capital. So there's equity. There's also a little bit of debt.

And so we needed to build a team. And that was what made the initial product work. So what timeline are we talking about here? How long did all of this take before you really felt like it was viable? We started talking about the idea at the end of 2013, and that was the point, it was in the research phases. And we had a working site under a separate name, like a testing name in the summer of 2014. And then we launched it publicly as open door at the end of 2014. Interestingly, we launched it in the coldest part of the year. We launched in Phoenix, Arizona, which is a very seasonal market. And from Thanksgiving to sometime in February, the market's very cold.

So it didn't take off an earnest until February. What is taking off an earnest look like? It looks like having real volume and seeing that, oh, this is actually going to work. People are really selling their home to us. We're really able to do it. How long were you there before you exited? I left in 2018. What made you decide to move on?

So Colossack is the most important thing I've ever worked on. And it's been a dream going back to college to make cities better and just saw so much opportunity. So the other thing that was happening in parallel with open door was that there was big changes in transportation technologies where you saw the emergence of Lyft and Uber. You saw clear destiny where driverless cars and AV ride hail are going to be the biggest impact on real estate in decades. Also, you saw hourly car sharing empowered by technology, electric bikes, electric scooters, and even the evolution of things as simple as light rail, which was only installed in Phoenix 15 years ago. Can I interrupt here? Yeah. Because what did you say is going to be the biggest impact on real estate in decades?

AV ride hail, driverless cars. Really? Okay, explain that because I have no experience. That's like Waymo here in Phoenix, right? Yeah, have you tried it while you're here? No, no. Yeah, I might do it tomorrow. It is the most important thing.

And Phoenix is ground zero for it. There's the largest AV operating area in the world here. It's over 200 square miles. And AV is autonomous vehicle? Autonomous vehicle. Okay. Right. Phoenix has a long history of car testing because companies,

have always wanted to have tested in the extreme heat. And it's a new city with a grid system, which is relatively easy to navigate. And so it was a logical place to start this. And so many of these transportation companies started here. Okay. And so how are autonomous vehicles going to impact real estate? So when you don't need to have a parking space, it lets you build the city differently, and it's different for passengers, and it's more importantly different for how you can construct

things. So here in Phoenix, there's something like eight parking spaces for every car. and that has led to the sprawl, but all of a sudden when you can get around and the car can park itself, or you could use ride shares. And there are other technologies too. I mean, the electric scooters or just today,

I used an electric bike to ride 18 miles up to the Frank Lloyd ride house and then 18 miles back. And I'm like, wow, it was amazing. It took longer than driving a car, no question. But it was also so much more enjoyable just being out there and experiencing it. Yeah. It's interesting to hear you say that this is going to change real estate.

never made that connection. And I think, okay, maybe it could. Yeah. It's going to take time, though, right? It'll take some time. Yeah. It'll be one of these things where it'll be slowly then all at once. Do you think there'd be this, like, transitional period where vehicle usage declines in the

United States, and then that leads to a change in cities and the way real estate is developed? So it doesn't ask, what does the future look like? So it's less about vehicle usage declining, right? So there's one scenario where we get much better at building trains and bus rapid. transit, I think higher bike ridership. I worked with the New York MTA, which is about as staunch and slow moving over places you could find. I realized that we might not have the time to build trains everywhere, but what works great about A.V. Ridehill is it's compatible with our cities today. They can just plug in with the existing road network. And yet because they don't need a

parking space, it really does change everything. And it can really also lower the cost burden. And those cars can evolve over time to do carpooling and look more like buses. This is interesting. It feels like the Jetsons in a way. I'm trying to imagine. The thing that we haven't touched on yet, this relationship between the two of you, which you've just met for the first time, what, 24 hours ago. But, Ryan, you were reading Get Rich Slowly. That was the first personal finance website that you ever read. When do you first encounter that? It must have been right when you started it. It was when I was in college. I graduated in 06.

And, you know, I was using Google Reader and just had that. And, you know, the time it was probably a handful of blogs, five and ten that I read every day. And thanks for writing it. Yeah, you're welcome. Thanks for reading it. Yeah. The readers helped make that the site that it was, or is. And so how has personal finance content or financial independence related content shaped your ideas related to transportation and real estate?

Yeah, it's interesting that I don't know what year the fire term happened, but for me, it was a mix of understanding personal finance and the happiness research and understanding. and understanding what's going to make you happy, that it's being frugal can help, but also there's also willpower and there's also spending your money right on things that are going to make you happy. That was a big part of my philosophy and also making money. What's great about real estate is that you can do it all the way from like microscale to mega scale. You can do it all the way from right brain, left brain, go full spreadsheets on the math. You could also do creativity. But the bar for entry is so low. The first house that I got was a four bedroom rental. cost $11K and actually use scholarship money for the down payment and having that residual income

and also turning down MIT where I would have had $150,000 of debt to get a full ride to University of Arizona itself was partly a personal finance-driven decision. Do you regret that ever? No, not at all. I wonder what that path would have looked like. Two things happened from the scholarship. One was getting into real estate, which formed a huge part of my career. And then the other was part of the money was to go abroad.

and that exposed me to 60 countries, lived in a handful. 60 countries? Yeah, and there's great role models for cities all over. Tell me about some of the places that you went to, specifically where you saw examples that influenced your views on real estate and transportation. Yeah, and keep in mind, by the time I graduated high school, other than the beach in Mexico, I had never been outside the U.S. and grew up in Phoenix and had my SUV and thought that that was the world.

Budapest was the first place. They sent the whole freshman class of Flynn Scholar, there's 20 of us to Budapest. And I said, wow, this is nothing like Phoenix. And there's so many great ways to build a city that this shows us with great transportation. You can hop on and hop off rail everywhere. There's the density. There's all these great public spaces. And Budapest has plenty of cars.

Right. So it's just a way of building the city so it's not car-centric. Exactly. Because I think probably the two best cities in the world are probably Tokyo and Amsterdam. and Amsterdam and the Netherlands more broadly is so interesting because in the 70s, sort of, you know, Amsterdam looked a lot like New York, but then they sort of went a different path. And now that country has more bikes than people. And what's great is that they're so effective at getting people out of their cars that the cars are

also traveling better. So Waze, the navigation company, before Google bought them, they used to publish an annual survey or study of the best places to drive in the world. And the best place to drive in the world was in the Netherlands. That's pretty funny. So what is it that the Netherlands did? What policies did they implement? Or how did they get people to move from cars to other modes of transportation?

So the biggest way to get people into bikes is road safety. And so they built a network of bike lanes. And once it was safe, and cities all over the world have been finding this out, that they had lots of bikers all along. They just needed to make the roads safe. So actually, we focused on working with the city of Tempe to build a protected bike lane from this light rail station up to the outdoor mall, Tempe Marketplace, where they have 12 restaurants and a super target and all this. And it's also, that mall is connected to the best

bike route in Arizona. And once that bike lane goes in, which is, we're now a few months away, the city's going to discover that there were lots more bikers all along. That's interesting, because that's the route that I took today to do my ride up to the Frank Lloyd Ride House. And yeah, it was just that two miles that lacked the bike lanes. Yeah. So it's a bit of an, if you build it, They will come? A little bit. People need to feel safe. It's a 25 mile per hour road.

And so cars are required, like bikes are allowed to take the full lane. And cars are required to treat them like a car in that way. But, you know, cars are so entitled, they do not. They will honk at you and they will punish past you. And so the reality is that you need to have a protected lane to get really good road safety and make people feel safe. Bringing this back to your story, because I'm fascinated by your career trajectory. because it's so varied. And you're young, you're 39, right?

40, yeah. Oh, 40. Happy birthday. Thanks. And in a short time span, you have lived a lot of lives. And so one thing that I'm curious about is how big was Open Door at the time that you left? It was about 450 people. Right.

And Caldasc, which you are the CEO of, is now 30 people, 30 employees. Tell me about the shift from being, one of the founders of a company that grew to 450 people to now being on the other side and you're running a company of 30 people. Like that's literally orders of magnitude different. One order of magnitude. It's an order of magnitude different. We were joking earlier today about how much Pete, Mr. Money Mustache, who's just off camera, hates the phrase orders of magnitude. It's funny. It's different and also transitioning roles.

Being CEO, that's a very different role. This business is also different in that it takes a long time to build things from the ground up. So, you know, we always thought open door was this, you know, slow thing where it had a limited number of transactions. One open door story was we had a tradition of taking a shot of tequila or a sip of tequila every time that someone sold a home to it. And then one day when it was really taking off, the night. just kept getting better. And I think we ended up like seven homes that day, but then people drank too much tequila. That was the end of the tradition. It was a fun night, though. But then, you know, now I actually look back at the open door transaction volumes and you're like, well,

that was fast pace compared to this where you're building things with sticks. Right. What, in terms of people management, I mean, with 450 people, I would assume you might not even know all of their names. Yeah, there's the Dunbar number, right? Which is something like 150 people is the maximum number of a group where everybody can have independently know each other. And it's noticeable when you pass that for sure. Well, so what is that experience like as a, as a founder and as a leader? When a company's growing quickly like that, it's its own thing. That's why there's so many books about it because it's this rare thing that's so different from sort of typical business things where it's, you know, drinking from a fire hose, onboarding people quickly.

For example, one team that I built went from no team to 25 people in like two months. And that could be a chaotic thing to build. But when the business is growing that fast, this is what you have to figure out how to do. So how did you figure that out? The most important thing was getting the right people. I actually had someone who's still with us at Colisec that was working with us at Open Door at the time. And the two of us were strong at figuring out who was going to be good on a team, bringing them on, training them. and finding people who were going to have great growth trajectories.

How did you know who would be the right person versus somebody who maybe had a lot of bluster or who looked good on paper but wasn't actually that good in practice? Interviewings is so important and it's this art and like asking lots of questions, getting the right people on the panel and having the right rubric and being really thoughtful about things and onboarding people in the right way and also managing them the right way. What's interesting is that the woman that was managing this team, it came time to do, annual reviews and employee satisfaction surveys. And even though that team was handling some fairly chaotic transaction volumes in terms of how

much they had to do, they had the highest happiness of any team at the company. And it shows that if you have a great manager and the right expectations and you have the right team, that that's where some big outcomes can happen. So you are measuring happiness? The company met with survey employee satisfaction across the company. It was right at the point where we were putting that in place at the company, right? HR gets significantly more robust over time. And that was the first time that we had done it.

I think it's fascinating because it's the second time you've brought up happiness. Earlier you mentioned that, I don't know whether it was in school or something you were talking about, that you were studying happiness or thinking about happiness. And now you're mentioning measuring happiness as far as your employees are concerned. So it sounds like happiness is something that's important to you as far as fostering it in the teams that you're working with. I don't have policy. interviewing skills, so I don't know how to phrase this into a question. You can just make a point, too.

Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size. But they also have the FinTech hustle that got them named one of America's most innovative, companies by Fortune Magazine. That's what being a fifth-third better is all about. It's about not being just one thing, but many things for our customers. Big Bank Muscle, FinTech Hustle.

That's your commercial payments, a fifth-third better. The holidays are right around the corner, and if you're hosting, you're going to need to get prepared. Maybe you need bedding, sheets, linens. Maybe you need servware and cookware. And of course, holiday decor, all the stuff to make your home a great place to host during the holidays. you can get up to 70% off during Wayfair's Black Friday sale.

Wayfair has Can't Miss Black Friday deals all month long. I use Wayfair to get lots of storage type of items for my home, so I got tons of shelving that's in the entryway, in the bathroom, very space-saving. I have a daybed from them that's multi-purpose. You can use it as a couch, but you can sleep on it as a bed. It's got shelving. It's got drawers underneath for storage. But you can get whatever it is you want, no matter your style, No matter your budget, Wayfair has something for everyone, plus they have a loyalty program,

5% back on every item across Wayfair's family of brands, free shipping, members-only sales, and more terms apply. Don't miss out on early Black Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W-A-Y-F-A-I-R.com. Sale ends December 7th. You mentioned that it's important to onboard people the right way and then manage them the right way. what is the wrong way?

The wrong way is micromanaging people. It's different for different people, right? People respond in different ways. You want to really understand the team and understand their experiences and where they've come from. But there's some things that are often bad ways to manage people, such as micromanaging, obviously not being understanding, being rude, things like that. Having great managers on the team is one thing that a lot of companies have forgotten, right? It's undervalued skill now, actually.

How do you identify good managers? Some of it was knowing who would be great. So for example, someone who's on my board now, her name is Megan, and hired her early on at Open Door. And hiring her was like one of the best, if not the best, most impactful thing that I did at Open Door. We've now worked together four times. Open Door was the third and knew that she was one of the best people that I ever worked with.

And not just somebody that was really good at that point in her career because she joined Open Door 10 years ago, but somebody that would scale really well. And now she's the number two. She's other than the CEO. She's running most of the company. And that was, to me, obvious that she would grow into that kind of leader, even though she had not done anything like that before. So in your case, you have now reverse scaled, right, from a team of 450 to a team of 30.

What have you had to do in order to adjust to that? Some of it's in terms of like, what's the exact number of employees? Like, there's also lots of people that are building on the site that they're not employees. So there's over 100 on many days here. On a smaller scale, and more importantly than the size, it's a slower scale, is hypergrowth creates a lot of natural urgency, right? And without that, you know, being deliberate and setting the strategy and managing to milestones and things like that because there's less natural pressure. The challenge is to not get rich too slowly. That's right.

Right. It's like, you know, talk to someone who's run a restaurant or run a grocery store or a foreigner store or a foreigner's. and ask them what's the hardest time to manage. It's not when they're really busy, it's when they're really slow. The reason that I'm asking so many questions about business and management and the management of teams is a lot of the people who are listening to this are either entrepreneurs or aspiring entrepreneurs. And most of them are going to be bootstrapping.

Most of them are going to be starting off as somebody with a side hustle. Is there any advice that you would want to share with them? A lot of times when people start, and you can keep a lot in your head, right? You can do so much individually. And some of the easiest times for me or some of the happiest times even building where with two people where you just have one communications thread and if the two of you have the right context, it's pretty easy.

When it gets to be more people, it's harder. But people can keep a lot in their head. But learning to build systems and especially before you need them, right, how to do tracking, how to bring on technology, how to manage events. which are effectively employees, what tools to buy, and how to run all the things in a multidisciplinary way, those are the things that people, you know, need to work on before they become a larger company. Given how dynamic and ever-shifting a small company is, how can a small team, a team of one

or two people, nail systems in place given that those systems might change three months down the road? Yeah, and you don't want to put things in place too far between the two. you need them. A lot of the things that work at a larger scale are actually more painful at a smaller scale. But generically getting good at operations, right? Things like task management, following up, understanding that just because you told somebody something doesn't mean they're going to execute it perfectly, like learning to repeat yourself, learning to follow up and check in, learning how to manage upward, downward, laterally, and inward, which is often the hardest. So those

are all skills that people need to build. What for you has been the biggest challenge in terms of managing inward. Inward is understanding what strengths, weaknesses to focus on, right? How to accentuate strengths and how to improve and the things that I've needed to be good at change in different parts of my career. Really understanding that and understanding how that impacts the relationships that I have with teams, et cetera, has been a big learning. I've actually worked with a leadership coach, which is highly recommended if someone's interested in that. I've never heard of a leadership coach. So what does a leadership coach do?

So it sounds like itself explanatory, but. Yeah. So a leadership coach is someone that works with leaders. And it can be CEOs or doesn't have to be CEOs. And they're good at coaching them to be a better leader for understanding these different dynamics and what the things that are unique about them and that they need to work on. And there's different forms of it. One of the forms is where they actually talk to the other people at the companies. Then they start to have an understanding of those relationships.

And they can get, they can help you think through like really precise things. Like, okay, the nature of, you know, this is how you've been managing. There's this leader on your team. There's this other leader on your team. And this is the dynamics of these three. And given that, let's talk together about how we might work through this situation. Right. And they're also helping you with that inward stuff.

Exactly. Yeah. Right. For the things that can be conflicting. Also, some of the things like hard conversations, right, helping you learn to inspire. learn to challenge better. Yeah. Do the hard conversations ever get easier?

So as business just grow and as you become more senior leader, it just becomes more normal, right? And then it's something that would have been a major event in a month or a year than just becomes an everyday thing. Oh, interesting. And you just kind of, it becomes more normal. It reminds you of watching athletes where they're in the Super Bowl. And you're like, how could you handle that much pressure?

And you're like, well, because the game to get into the Super Bowl was also a lot of pressure. And they had a lot of pressure in college and a lot of pressure in high school. and they just ramped up. I would say it never gets normal. I think we all have a little bit of insecure overachiever in us. Right. For the people who are listening who are currently running a side hustle, or maybe they are a one person or two person team,

how should they think through the decision as to whether they want to stay small, keep it a lifestyle business, where it's sort of a part-time side hustle that allows, them a leisurely life. Right. Or go big. Go an order of magnitude bigger. So this is real interesting because it brings in the sort of personal side with the professional

side, right? In the startup world, lifestyle businesses are frowned upon, right? And part of it's because venture capital financing and you get congratulated when you raise money, even though you should actually be celebrating the milestones. But something that is not trying to raise a lot of money and is not trying to become a big company can actually provide a great lifestyle for people. There's businesses that, you know, are generating substantial cash flow and those people might actually be happier. So it's a very deeply personal thing because making something a startup and trying to become larger can be

very stressful. So that's something people have to think about for themselves. So there's some people that maybe should go the lifestyle path. But there's also some people that should be thinking about this actually could be a bigger business and to challenge themselves. And a lot of times the people who get to do startups are the people who dare. And the people who take a chance and they put themselves out there. And sometimes it also involves like getting lucky by meeting the right mentors, the right investors, the right partners, et cetera. But a lot of, a lot of people may have an opportunity to build something larger. You said the people who dare. What does daring look like? Well, big part is having the mentality of like, I'm going to try this, right? And I could do this.

and I could be a leader. There's this imposter syndrome of like, oh, I could never start a company. I could never be a CEO. But everybody had to start somewhere. Great people can grow into things maybe even more than they thought. So sometimes there's people that are overconfidence, right? You know, there's job postings that I'll have out for something that really does need substantial experience. And you'll get like a college junior just coming in guns of place, like they're qualified, right?

So there's some people like that. But then there's also lots of people who are much more qualified than they think. Right. Also, when you have these job postings, you'll see people that are overqualified on eight aspects of the description. Marginal are not quite technically by one of the bullets. It's like, no, these people absolutely should be applying. Similarly, you know, founders can come from anywhere. Leaders can come from anywhere. And so a lot of people should aim a little higher. I've been around entrepreneurs all my life, and I think this is an important point that you make about daring. I think it's too casually dismissed by a lot of people who are not fond of the more negative aspects of capitalism, but there really is a lot of risk-taking and a lot of daring that occurs when people do the sorts of things that you've done or that Paul has done. And it's an important part of being a successful entrepreneur, whether you're talking about a sole proprietorship, or building a big company.

Absolutely. How do you manage the risk of ruin? Thinking about it a lot. The, you know, Warren Buffett, who just wrote his, like, memoir to Charlie yesterday. He was a big inspiration. The Berkshire Hathaway letter just came out

as of the time that we're recording this. As of the time, we're recording it. It's like any number, any string of numbers, if there's one zero in there, zero and multiplied together. And so it's something to think about a lot. And, you know,

think a lot about looking for opportunities that have asymmetric upside, like thinking about the things that can go wrong. There's no knowns. There's known unknowns. There's unknown unknowns. I'm bursting with follow-ups, but the two follow-ups that are in my brain right now is one is how do you identify asymmetric upside? The other is how do you become conscious of unknown unknowns? The asymmetric upside opportunities are rare for a reason. Warren Buffett talks about, what does he say, whale hunting or something with he's looking for these perfect businesses and it's so rare to find those opportunities. Recognizing them is yeah. Yeah. And then and then in terms of unknown unknowns, being conscious that they're out there, being prepared for when they come up and being able to

handle those situations and making as many of those as possible known by asking experts in new fields by paying attention to more dynamics. Oftentimes there's there's warning signs. There are warning signs, but often they don't become clear until hindsight. Yeah. How do you translate hindsight into foresight? So ideally it could happen with repeat transactions and working with people that have done it before. One of the challenging things is that there's no substitute for personally experiencing something to get that experience. In real estate, things that start off as one-offs turn it over time turn into a huge range of experience, especially with single family residential.

The first property that we did had a huge margin of safety, right? And it's part of the reason why I got into the business because my parents and Eric's parents were like not in real estate, not excited about it, right? His parents especially like he was just supposed to be a doctor, right? And we were interested in business opportunities and gravitated to real estate. And this place rented for 1400, the mortgage was 580, seemed like it was worth significantly more. And we knew that we weren't experts in real estate. We had some mentorship. but we also knew that we would figure it out.

Two months after we buy the first place, we had our first residence in. They call us and they said, the ceiling's raining. What? So there was, it mostly only rains in August in Arizona. And it had a flat roof.

And it had those old tile, roof tiles with the perforated holes. And there was a leak and it was coming down. And we're like, our lives are over. And what were we thinking? Like, we're going to. Our lives are catastrophizing.

Like, why did we think this was a good idea? Well, it turns out that the whole repair was like under a couple grand. There was even insurance. And it actually wasn't a huge disaster. And that was one of the lessons around being extra diligent on roof inspections and roof repairs. And take that and then take 100 things like that. And then over time, you have a system, then eventually you turn it into checklist, then eventually it turned it into software.

And you have the right cadence, the right management system to implement it. And now you have something that can handle a whole range of scenarios. And there's always still going to be something that's new. What assumptions did you make about being the leader of a business that turned out to either be correct or incorrect prior to these two major businesses? I never needed to be the leader actually, right? Eric was the leader at Open Door. For me, it was about what is a great business and being part of it.

The other thing that I was really excited about in parallel with Open Door was it was transportation technologies. Like Uber and Lyft to me were, you know, clearly going to be complete changers. And same with driverless cars where it's just going to change so many different things. And it was evident that that business was so much bigger than a taxi company and was going to be changing real estate. And so it was sort of thinking about those were sort of the two different angles, the two different angles at the time. But for me, it was never actually about like I need to lead something. Right.

Right. But it's inevitable that as one of the founders or being on the founding team of Open Door, you would inevitably be part of the top brass there. Yeah. And because I was there so early, was able to, you know, I knew what the business would look like and shaped it in some ways. And then over time, especially because as you know, I left, it's important to have leaders that can carry that on. It seems very risky, actually, to leave something that's working. Right. So 2018, Open Door has massive proof of concept, right? It's got 450 employees at that point. It's working.

It's well-funded. It's successful. And you left to start a car-free city in the desert that you're building from scratch. Yeah. At the time we didn't know it was going to be in the desert. We knew that there was demand everywhere, including in the desert. and it was a great point for Open Door. Open Door had just hired some key senior execs.

It felt like the right time. And Coldestack is something that has been a dream for a long time, and it seemed like the clear moment for it, right? When you think about a lot of the great companies happen because of another technology and what it enables, right? So the iPhone enabled things like Instagram and Lyft and Uber and Instacart and DoorDash and so many different apps. And if you think about what changes in transportation,

technology enable. It's going to enable new ways to build things. And because of the timing of when those were happening, it felt like the right moment. I also had the right credibility in my career to take a bigger swing. And it's such an important problem. It's one of the most important problems of our day, how our cities are in the U.S. and how we've built them and how we're forcing people to live, have made people less happy, less healthy, less wealthy. Our cities have less funds as a result of it. And we need to make it better. And it's what people want. And it's possible. But it takes doing something bold, but it's urgent and important. Actually, you said something yesterday that I want to highlight because yesterday you spoke about the difference between

dendritic cities versus grid cities. Can you, for me, as well as for everyone listening, elaborate a little bit. I have an immediate visual intuitive understanding of what you mean, but can you elaborate on that concept a little bit and then talk about the ramifications of that on happiness, health, and most significantly for this podcast, wealth? Yeah, so a grid system, and you can think of New York City, for example, there's more connections between places, more connections between neighbors, easier to navigate. A dendritic system, you could think of the way we built so many subdivisions where they're purposely, included, and there's lots of dead ends, the proverbial cul-de-sacs.

And that means that there's fewer connections between neighbors. It takes longer to get places. There's less spontaneous discovery. The implications of that, it's hard to overstate how painful that is for a lot of aspects of our lives. And we now no longer know our neighbors in the U.S. It's created a loneliness epidemic. We've become more sedentary, and it's dangerous to bike, and there's not places to walk around. And that's made us less healthy.

It really is a big challenge in all aspects of life. How does it impact a person's network? A big part of cities is the connections that people form. Cities at their core are job networks. And when there's more of those connections, people can thrive better. There's better jobs. And also just directly on what people spend. So the two biggest buckets of spend are housing and transportation.

Together, they're about half of the household spend. And so much of it is inefficient spend, right? The average household spent 18K on car now. Average new car price is $48,000. Average monthly cost of the car is $800. And that's not to talk about all of the extra price that people pay. When you go to the grocery store and that grocery store had to build a parking lot, you pay more for that. Even if it's indirect, your taxes are because the cities are built inefficiently and fire departments have to travel farther.

Police departments have to travel farther. The maintenance costs are so high. It's so expensive to maintain these road networks. And there's also still big prices to pay. There's a reason people are complaining about potholes because it's just really inefficient to build roads that way. And the bill for this is actually still in the future for cities. Listening to you, it brings up a question that I've had for a long time.

And I feel like maybe you've got the education and the knowledge and the practical experience to answer it. So I've noticed that in most areas of the country, especially where I'm from in the Pacific Northwest, we use land use planning, right? Everything's zoned residential, commercial, industrial, and so on. And that's just the way we do it. There must be reasons, and you probably know them, why it ended up that way, but it creates a separation where you've got these dandritic residential areas,

and they're isolated from the commercial hubs, and those are isolated from the industrial jobs. And when I go to Europe, when I walk around to Europe, one of the amazing things to me is how the commercial is just blended casually with the residential. Do you have knowledge about, like, why did the land use planning come about? And is this actually affecting the way our cities are developing in a negative way? Yeah, absolutely. As the U.S. was growing quickly, putting in these planning policies was part of, you know, it's helpful for moving more quickly. But we didn't realize at the time how damaging it was to make cities car dependent. And the challenge now is that we've basically made it illegal to build walkable neighborhoods in most of the country.

And it's changing fortunately. But if you had to boil it down to one topic that I think is perhaps the most important, it's parking spaces where parking minimums, where most land uses in the U.S. In most cities, you're required to build lots of parking. And that means that the city's going to be more spread out, and it also means that people need a car to get around because there's not things that they can walk and bike to, and we haven't invested in public transportation. And so then there's this illusion of that people want to live to have a car,

but it's just because they didn't have a compelling alternative, which has led us to think even more that we need to have those minimums because people want to have those parking spots. But we need to break this cycle. And Donald Chub, who we have a conference room named after, and he's still alive. He's like 84 now. He's bet with our team.

He's still at it. He's still like posting on social media. He really raised awareness for this. And it's not a coincidence that his big book that came out while I was in college. What is that? The high cost of free parking. The high cost of free parking. Yeah.

It's this cycle that perpetuates itself. But we need to break that. And that's what we're doing at cul-de-sac. And this has become the reference project for cities and for developers to say, you actually can't build like this. And look, actually, neighbors love it. And you have a much better place for residents and a much better place in the area. And we should just state for people who are wondering what exactly cul-de-sac looks like,

We've kind of skipped over that. Yeah, what it feels like on a day-to-day basis, it's a mixed-use development as restaurant and retail and is near light rail and is constructed in such a way that apartments form clusters known as pods such that there are interior courtyards where people can hang out and socialize. What am I missing? You're doing a great job. And part of the reason why we love having so many visitors so that they can spread the word and tell people what they sauce and tell developers and cities that they want to see. more like this. But yeah, so Col de Sack is a mixed-use neighborhood. We're on 17 acres, and we're right on a light rail. We basically have our own light rail stop. We're a couple miles from Arizona State University and downtown Tempe, and our first phase is now open. So we have something like 150

residents, and we'll ultimately have something like 1,000. And this looks nothing like the typical apartment complex in the U.S. And we do that because we're really focused on community mobility and open space. And because we don't need to have a massive parking lot, we can instead have lots of great things like a plaza. We have a great restaurant. We have a corner store. We have great retail and micro retail.

We have a park that's going in. And this is made possible by not having the costs or the pain of an asphalt parking lot. And also we don't have the heat island effect where this apartment complex feels 15 degrees cooler than the apartment next door. Can you elaborate on that just for a moment? I mean, intuitively, my guess is what you're saying is by virtue of having less asphalt,

it's cooler because there's more plants and less concrete. And that's useful in Phoenix. Right. Yeah. Is that correct? Yeah, there's three big things that make this 15 degrees cooler than the apartment next door. There's not a drop of asphalt. The buildings are white, which reflects heat.

And there's narrow corridors which create lots of shade. And I'm also answering the question you haven't asked yet, but everybody always does with the heat, which is like, oh, how could you build this in Arizona? And you're like, well, first of all, there's five million other people that live here, so clearly it's okay. Also, if you think about what people are talking about when they're hot, they're talking about when they get in their car on the burning asphalt and the greenhouse gas effect after shopping. And that's like 175 degrees, right? Interestingly enough, when you get in a lift, it's air condition. When you're on an electric bike, you use the throttle, you get a great breeze.

You can electric bike comfortably at like 105, 110. in the desert. So the diurnal temperature range, if you look at the delta from the high to the low, in Tempe, it's 33 degrees. And then something like New York or San Francisco, it's like 15, so it's like twice as much here. So you're in a T-shirt. But like tonight, it'll get really cold. Like if you wake up at two in the morning, it's going to be... It's still going to feel warm to me.

Okay, well, yeah, compared to... I've been cold in the evenings, for sure. I've desert. That's true. The desert gets cold tonight. Yeah. But that's because by building asphalt everywhere, it's absorbing heat. It releases it at night.

and that's part of what's made it less livable in our cities. The investors who have come on board, are they interested in the mission or do they purely look at this through a profit lens? I can see just strictly from a profit lens, there is also the case that when you're dedicating square footage to residential housing or commercial mixed use retail and restaurant, you don't have to devote that to parking spaces which economically fetch less money. Yeah, it's actually a key thing that the project is profitable because if it's not profitable, it can't scale. By showing that there's the demand for this, it's part of how it's going to show others across the country that this can scale, right? So it's an important part of, as with anything, with investing in something, it's important that it makes money. I think also you can

care about the impact at the same time. There are so many. things that a given investor could be investing in right now. And particularly at this moment, we're right at the brink of AI. There's a lot of hype about that. Everyone in their dog is excited about the next AI super star. And one of the biggest, and even today, the most clear manifestation of AI is driverless cars, right? We'll reshape our city substantially. Right. So then why are investors given opportunities to invest in anything else? Why are they allocating capital towards this? Because we've been building our cities in the wrong way, and this is what people want, right? Like we were part of Y Combinator. One of their key slogans is make something people want,

and people across the country want to live this way. Every generation would pay a premium to live in a walkable neighborhood. This is a national association of Realtors study, including 92% of Gen Z. And if you look at the percentage of students in colleges and high schools that are even getting their driver's licenses, this is going to be a tidal wave. Yes. And I see that in the young people I know. Right. Gen Alpha, they're probably also going to be the AI generation, but they're going to be the e-bike generation where they're taking those to school and they're realizing that this is a better life. It combines leisure and transportation. It's not stressful and having a painful commute like a car. When people see those tailwinds, they see where things are going. That's why people are excited about it.

So you keep talking about the demand, that there is a demand for this kind of living in this kind of community. Have you seen that firsthand? Is there a waiting list to get in for the, so far you develop what, 100, 150, 200 units or something like that? There's 174 units open. We've got another 114 that are under construction now. Do you have a wait list? So right now we're almost full in phase one. What we hear a lot is like people are like, I want to have this in my city, right? Yeah. I'm sharing that for any developers and people in other cities that hear this to make sure people know that we hear that every day that someone was like I would live here in a second if it was in my specific area. So a lot of things have to go right for someone to come specifically here.

Jobs and things like that need to line up. That's why we have plans to grow and this has become the reference project for others to have the confidence to build car free. I'll be honest. Before I came down this weekend, I was skeptical of it because I've seen other people try certain things like this. I told you in Portland. They're not exactly like this by any means, but they try to encourage car free communities.

it doesn't really work. It's just, it's like putting band-aids on a bigger problem. Are you competing against the massive subsidies that we give towards cars? Yeah, exactly. And so for me to actually experience this for four days, I'm like, okay, I should have Ryan send me some propaganda because maybe I want to buy a place down here. And we also hear that one. This one's for rent.

And another thing is we hear people that want to buy. And one of the things that's interesting is the average hold period in Phoenix is like over 15 years for property now. Oh, wow. And when you think about how strong these tailwinds are, like still less than half the country's tried ride share, in 15 years, like, it's pretty clear that we're going to have lots more driverless cars and that the world's going to be a very different place. And so a lot of people are like, hey, even if I'm not personally confident that I could live like that, where things are going and I want a piece of it. And that's one of the reasons why you'll see us have some first sale product in the future. Well, for me, when I say that I want propaganda, I don't mean just for for sale product.

Yeah. I'm like, well, maybe I can rent a place down here too. Yeah, we'd love to have you. Anyway, I'll email you about that to get the property. All right. We're coming to the end of our time. Again, I'm committing the cardinal sin of asking two questions at once. What's the final takeaway related to transportation, related to the way that we design our cities and car-free or car-reduced living?

What is a final message there that you want to impart to the audience? And the second question is, what final lesson do you want to impart to the audience, to the people in the audience who have a side hustle, who have a small business, and who are thinking about potentially scaling and want to know what they ought to do next in order to think bigger? Yeah, so the first part of what messages around transportation, which is the era of private car ownership for everyone with cars that are parked for 95% of the day. is going to be coming to an end. And instead, people are going to use a portfolio of transportation options and choose the best way of getting around. Our residents here at Koldesack, they use the light rail, electric bikes.

They use Lymeau. We have car rental on site for weekend trips. And also there's great things on site and nearby. That is very different than the model of only driving everywhere. And it leads people to be happier, healthier, wealthier. And would encourage people to try that, right? I'm sure there's people listening that haven't tried Lyft. And y'all should make sure to try Waymo while you're here.

And becoming power users of those services and also delivery services, Instacart, Gordash, et cetera, will show how it's possible, right? Like a lot of our patterns and habits are so ingrained. I want to say that for me, I'm having my head that, oh, my only options are walking, traditional bicycle and driving. And recently I was in Austin and I tried one of the electric scooters for the first time. I was like, oh my gosh, this is revelatory. Yeah.

I mean, I'd seen them for years, but I thought, oh, it can't be that big a deal. But I went home immediately and I ordered one. And now I'm just waiting for the rain to go away in Portland or Corvallis so that I can ride around all summer. I love it. Yeah. Once people try this, right, electric bikes, the minute they hit that throttle, they're like, oh, this is not just a little bit different than a bike.

Yeah. It was awesome. Like I told you, I wrote 18 miles to the Frank Lloyd Wright House and then 18 miles back today on electric bike. And, yeah, it was fun. It's fun. Yeah. Yeah.

Nice. And what about the final message for anyone who's listening who has a side hustle or a small business and they're thinking of scaling? What wisdom do you want to impart them with? Thinking about aiming higher and thinking about doing what's right for them. One book I love is Be So Good They Can't Ignore You. By Cal Newport. Yeah. Yes.

Yeah. That's a relatively recent book. That's the book that I wish existed when I was in college. It's really good. The first part of the book picks apart the passion hypothesis and says a lot of times you ask these people after they've accomplished something what to do. and it's like find your passion. And actually, no, it's, those people are actually a bit disconnected from the earlier career stuff. And instead, it's like build skills and having impact is what will create passion later.

Right. And nobody wakes up and says they want to do B2B SaaS. But there's lots of great careers in that for some people. I hope that people get a chance to visit Coltac. And I love watching new businesses emerge from small businesses. Fantastic. Well, thank you. Thanks for visiting.

It's been great having you. Thank you. It's been great being here. Thank you. Ryan. What are three key takeaways that we got from this conversation? Number one, the world around us is constantly evolving and changing and developing, and sometimes it can be difficult to see how a particular development might have a long-lasting impact on how we live and on where we live. Ryan Johnson, who really spent his career at the intersection between real estate, technology, and driverless cars, he believes that we are witnessing developments that will change how we live and where we live for decades to come.

And so in this first key takeaway, he explains how ride sharing and driverless cars have the ability to significantly change how communities and homes are built. and why this will impact real estate. There was big changes in transportation technologies where you saw the emergence of Lyft and Uber. You saw clear destiny where driverless cars and AV ride hail are going to be the biggest impact on real estate in decades. Also, you saw hourly car sharing empowered by technology, electric bikes, electric scooters,

and even the evolution of things as simple as light rail. When you don't need to have a parking, space. It lets you build the city differently, and it's different for passengers, and it's more importantly different for how you can construct things. So here in Phoenix, there's something like eight parking spaces for every car. And that has led to the sprawl. But all of a sudden, when you can get around and the car can park itself, or you could use ride shares, A.V. Ridehill is compatible with our cities today. They can just plug in with the existing road network. And yet because they don't need a parking space, it really does change everything. And it can really

also lower the cost burden. And those cars can evolve over time to do carpooling and look more like buses. So that is the first key takeaway. Key takeaway number two. When you want to start or grow a business, the biggest limitation is often yourself. And that applies whether you are bootstrapping a side hustle or whether you're starting a funded major company that is going to be playing in the big leagues. In this takeaway, Ryan shares the pieces to focus on when you're looking inwards and assessing what your business needs and who you need to be in order to bring that to the business. He also shares the impact of coaching and talks about how coaching can be incredibly beneficial regardless of whether you want to start your own business or

improve within your role at work. Inward is understanding what strengths, weaknesses to focus on, right? How to accentuate strengths and how to improve. And the things that I've needed to be good at change in different parts of my career. And really understanding that and understanding how that impacts the relationships that I have with teams, etc., has been a big learning. I've actually worked with a leadership coach, which is highly recommended. Leadership coach is someone that works with leaders. And it can be CEOs or doesn't have to be CEOs.

And they're good at coaching them to be a better leader for understanding these different dynamics and what the things that are unique about them and that they need to work on. So regardless of whether you are an entrepreneur or you want to get promoted at your day job, coaching and a devotion to lifelong learning overall can be beneficial. That is the second key takeaway. Finally, key takeaway number three. Begin with the end in mind. Before you start any type of a project, assess whether you want to build something that's going to be an eight-figure business with a huge team of employees.

Is that what you want? Or do you want to build something that's a lifestyle business that will allow you to have a little bit of part-time residual income while you enjoy a leisurely life? There's no wrong answer. Both of these are great. But decide what you want before you get started. That way you can build your business accordingly. By knowing the answer to this question in advance, you will know whether or not you want to build the type of business

that's based on systems that can scale, or whether you want to really optimize for a mom-and-pop side hustle that will bring in some residual income that adds a little added luxury to your retirement. Those are three key takeaways that come from this conversation with Open Door Founder and Caldesack CEO, Ryan Johnson. Thank you for tuning in. If you got value from today's episode, please do three things. Number one, please make sure that you're following us in Apple Podcasts and in Spotify.

Please follow us on both. And if you don't mind if I can throw in a third, YouTube.com slash afford anything. And while you're there in Apple Podcasts or Spotify, you can leave us up to a five-star review. That's number one. Number two, share this with a friend, a family member, a neighbor, a colleague, share it with someone in your life. And number three, subscribe to our show notes, which are available at afford anything.com slash show notes. Thank you again for tuning in. My name is Paula Pant.

This is the Afford Anything podcast, and I'll meet you in the next episode.