In reading Kellman’s blog post, he looks like he’s still going with his convictions over rational calculation. This when Redfin is 6 years old and a successful online real estate business dramatically reducing the commissions charged to consumers.
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?” (emphasis added)
You have to be guided by your emotions in running a business or you’ll end up with no identity at all.
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.
At LexBlog, my vision (defined with a little help from my friends) is to empower lawyers to network through the Internet. To take lawyers where they’ve never gone before. A little Star Trekkie? Perhaps.
And to do this?
- A turnkey blog solution that empowered lawyers to connect with their audience in a real and intiment way. In a way that established a lawyer as a trusted and reliable authority. In a way that consumers of legal services, whether individuals or corporations, could select legal counsel in a more meaningful way.
- Blogs being free and not being used except by a handful of lawyers, I knew I needed to offer the solution at far below my cost and give my clients a 100% guaranty of success, no questions asked. LexBlog would succeed with our product working for lawyers and the public at large, who also would be one of the beneficiaries. We’d make our money back in the third year. It’s how partners (LexBlog and lawyers) work together.
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.
As we build a wonderful team of LexBlog’ians, each more talented than I, the problem is me remaining crazy. Me believing in the irrational. Smart teammates are, of course, not irrational in their counsel and insight. It’s their counsel, advice, and execution that enable us to serve our clients and get things done.
It’s easy to be crazy, but not after you know you’re crazy. 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.
I was sweeping the kitchen floor yesterday morning and using a piece of cardboard to pull crumbs out from under the baseboard. Out came a paper from a fortune cookie. The fortune read, “You will succeed by believing in your abilities.”
If I have any ability, it’s being crazy and irrational. Now I just need to have the courage of my convictions.