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Welcome to Breaking Precedent, the podcast that dives deep into the stories of trailblazers, innovators, and game-changers who are redefining societal precedents. Join us as we sit down with extraordinary individuals who are pushing the boundaries of social norms, challenging precedents, and setting new ones in their fields. Whether it’s in technology, art, social justice, or beyond, Breaking Precedent is your source of inspiration for understanding how precedents are broken and new paths are forged.
# David vs. Goliath (Fighting the Monopolies)
**Speaker 14:** [00:00:00] we like to believe, that if the goal is noble, that you will be successful. But the healthcare system is rigged and the incumbents don't all want to play nice.
**Austin:** they effectively had a [00:00:10] monopoly on the form industry
**Lynnn:** Who doesn't love a monopoly with a guaranteed, you know, rate of return. And we were a threat to that business. And so Warren is himself actually personally was [00:00:20] lobbying against, you know, rooftop solar in that market.
**Austin:** So we got lawsuits and legal threats and cease and desist letters almost weekly for [00:00:30] years.
**Speaker 14:** we really wanna think that capitalism is fair, but it's not.
**Austin:** I think about resistance and skepticism and haters as validation. Like if you're not [00:00:40] getting resistance from the haters, then you're probably not doing something that's meaningful enough. by the industry incumbents, specifically the trade associations [00:00:50] to the digitization of copyrighted forms because trade associations had, um, these copyrighted forms and they effectively had a [00:01:00] monopoly on the form industry because they forced every member of their trade association to pay membership dues to get access to these forms.
The forms became [00:01:10] the industry standard. Meaning if you were an agent and wanted to write a contract, and if you didn't write it on the California Association Realtors contract, the selling, the listing [00:01:20] agent probably wouldn't accept it, right? Because they didn't know any other contract. Well, these trade associations had other software companies that they were trying [00:01:30] to promote that they made money on, and they viewed dotloop as a threat to those companies.
So we got lawsuits and legal threats and cease and desist [00:01:40] letters almost weekly for years. Right? Literally years. And we had to basically continue because we believed that [00:01:50] what we were doing was right and, and what we were doing was legal. Um, and it ultimately prevailed that we were right, but it was not easy.
I mean, we had, [00:02:00] you know, lots and lots and lots of, of resistance from the incumbents.
**Lynnn:** Yeah, absolutely. I think probably this was, um, [00:02:10] in Nevada, so Nevada. You know, again, getting back to utilities, don't really wanna give up their monopolies and they're good businesses and the, the utility there [00:02:20] is owned by Berkshire Hathaway.
And you even read in, you know, Warren Buffett's letters about how utilities are such good businesses. Like Yes. Who doesn't love a monopoly with a guaranteed, you know, rate of return. [00:02:30] And we were a threat to that business. And so Warren is himself actually personally was lobbying against, you know, rooftop solar in that market.
And, you know, the regulators decided [00:02:40] to not only, so back to this, you know, the disputes typically are around, can the home systems push power back into the grid and can [00:02:50] people earn revenue off of that? And they, you know, and it's important to the financial return that consumers can get some revenue from the power that, um, that they [00:03:00] don't use in the home.
They canceled that and they even, they made it, they even canceled it retroactively. So people who had made an investment in solar were unable to be fulfilled. The, you know, the promise that [00:03:10] they were given. And we just, you know, we were, did a lot of ground game. We hired some lobbyists, we got people on the, we found allies, we got on the ground and we got it overturned.
[00:03:20] And, um, you know, and it was, it was. You know, really meaningful because the overhang on our company from an investor standpoint was [00:03:30] utilities can basically like change these rules anytime and so there's no confidence in sort of the long term, you know, cash flows of the business. And the fact that we were able to.
You know, [00:03:40] basically defeat a really powerful utility with Warren Buffet's, you know, support was, was exciting.
**Speaker 14:** we like to believe, um, that if the goal is noble, that you will be [00:03:50] successful. But the system, the healthcare system is rigged and the incumbents don't all want to play nice. Um, and I think that can be uncomfortable because people wanna believe that we're operating in a rational [00:04:00] system, in a fair system, and that every startup has a chance, but we're not.
Um, and the incumbents, I see them. Play mean all the time. And I actually have a case study in my book about [00:04:10] PillPack, uh, where one of their incumbents try to take them down and how they fought that off incredibly well. Um, but more often than not, the, the incumbents win because they [00:04:20] can outspend, they can bend policy in their favor.
Um, and so I think that's something that's like, you know, you, it makes us uncomfortable because we really wanna think that capitalism [00:04:30] is fair, but it's not.
**Speaker 15:** Yeah, it is disappointing.
**Speaker 14:** Yeah, that is true.
**Speaker 15:** Yeah,
**Speaker 14:** it's not a meritocracy. Yeah, it's not. And um. And these [00:04:40] incumbents, the healthcare lobbyists are the biggest in dc.
So they're not spending their money outta charity, they're doing it 'cause it benefits their business.
**Austin:** my first company, uh, we created called [00:04:50] Dotloop, which was a digital, uh, transaction platform for residential real estate. Like DocuSign meets Dropbox for the real estate industry.
[00:05:00] And the first really large customer we got. Was the fourth largest real estate brand in the world at the time. So big company. Now they're the [00:05:10] largest real estate brand in the world called Keller Williams Realty. And we were a tiny little unproven startup with basically no customers. I mean, we had some, [00:05:20] but Tiny.
And this company, Keller Williams, basically, you know, rolled the dice on us. But [00:05:30] it wasn't really a dice roll, it was a calculated bet. But the reason why, in in, in my opinion, I think the reason why they bet on us is 'cause they believed we would not let [00:05:40] them down. And the reason why they believed and we didn't let 'em down, we delivered.
And I think the reason why they believed that, it goes back to this passion. I [00:05:50] was so passionate about this mission, I was so passionate about seeing this account succeed. 'cause I knew what it would mean for the business and the [00:06:00] mission, right? To be able to be in all these different markets and grow at a much larger scale.
So I was willing to do anything to make it succeed, including jumping in a [00:06:10] car with my wife and our dog and one of our first employees and driving all the way down to Austin, Texas to move there, to [00:06:20] basically live in the office, the, the Keller Williams office to implement the software until it was successful.
And that's what we did. And [00:06:30] it worked. And then we went on to do, you know, the same thing essentially in all these other markets around the country. Passion go. The point of this little, you know, [00:06:40] tangent is that passion goes a long way. And anytime I talk to a new entrepreneur, the main thing that I'm assessing is like, are they, are [00:06:50] they doing this because they're passionate about solving a problem, you know, with a solution they really believe in?
Or do they just wanna start a company to be an [00:07:00] entrepreneur? Yeah. And if it's the latter, you know, it's like good luck, right? Like it's, yeah, this is just too hard starting a company, [00:07:10] uh, especially, I mean, starting any business, even if it's like a lifestyle business where you don't have outside capital super hard.
But then you layer on the thing that we do in the venture capital world where [00:07:20] you're like doing very unnatural things. You know, you're in, in, um, infusing tons and tons of capital. To create these [00:07:30] insane growth RA rates that create all this stress and, and challenge, right? So it's very hard to be an entrepreneur [00:07:40] successfully.
And if you're not pursuing something that you're passionate about, I mean, good luck. You know what I mean? I,
**Leah:** yeah, I, I could not [00:07:50] agree more for sure. All out of all the founding teams, founders, entrepreneurs, I meet, I'd say that is the number one thing I look for too. It makes, it makes a lot of sense. [00:08:00] Now with Dot Loop, you know, you, you talked a lot about your passion there.
I mean, moving to Austin, sitting in the office, like getting these things implemented, but [00:08:10] real estate agents aren't exactly early adopters. Right? And this is an industry that is pretty traditional, pretty entrenched. Um, it, it [00:08:20] was precedent breaking for you to come in and create this platform for them.
Can you talk a little bit about. How to shift a market that [00:08:30] doesn't wanna change or isn't used to change? How did you do that?
**Austin:** Yeah. There are a number of things that I think make the real estate industry slow to adopt [00:08:40] change. Mm-hmm. Part of it is the independent contractor structure. So it's not, it's not necessarily, I mean, there is a cohort of, a [00:08:50] large cohort of real estate agents at the time that I was in the business.
I, I don't know where it's at today, but at the time that I was in the business, the average age of a real estate agent was like 65 or [00:09:00] something. It was like, you know, older. Like, so, so they're not as, um, early to adopt technology as someone that was like 35 at the time. So that [00:09:10] was the challenge. The other challenge is the independent contractor nature, where all these agents are based.
Almost all these agents are independent contractors, which means they can do whatever they want. [00:09:20] And that's it. It attracts a certain profile of independent thinking. Mm-hmm. Right? To be a real estate agent. So to get an independently minded person that [00:09:30] entered this profession so they could do what they want to do what you want is a very difficult thing.
Right. And then you layer on all the other like, um, [00:09:40] legacy challenges and regulatory challenges that make it slow to change. So yes, you're right. Real, real estate is a tough industry to to change. [00:09:50] Um, that being said, you know, there were a few things that enabled us to do it, and some of the things that we did were [00:10:00] things that everyone else told me were not possible.
Like the biggest one, I think the biggest like game changer was this Keller Williams deal. So typically real [00:10:10] estate software is sold either direct to the real estate agents. Or to the real estate brokerage offices, the [00:10:20] independent franchisees who own and operate these offices. The, the big brands like the Keller Williams and the re max and the Calwell Bankers of the world, they are [00:10:30] franchisors.
So they're actually in the business of selling franchisees, right? Mm-hmm. They're in the business of selling these, selling to these, uh, [00:10:40] owners who, who run these offices. So they, they didn't historically buy software to deploy to all of their agents. That was a very unconventional model, [00:10:50] and everybody told me it wasn't possible.
And basically, you know, I pursued it largely outta necessity. Um, but [00:11:00] also because of passion. I just believed that if a brand was willing to think outside of the box and invest proactively in technology, [00:11:10] if they could figure that out. It would advantage them in a big way over the other brands and Cock Keller Williams at the right place at the right time, they were the fourth largest.
They wanted to be the [00:11:20] first largest, and they were very bullish on technology. They were willing to do things that hadn't been done before. And in partnership with them, we were able [00:11:30] to come up with this model where they launched this whole platform. We powered a big part of it. They introduced this fee that flowed all the way down to the agents so that they were able to fund it.[00:11:40]
And it was the, arguably the first of its kind deal. Yeah. Like that. Yeah. So that, that was one thing that happened. Second [00:11:50] thing though that happened was kind of built into our go-to market strategy. We had this viral network effect kind of a, a model in the sense that [00:12:00] every time somebody would create a transaction, or not every time, but 80% of the time, a real estate agent would create a transaction.
It would involve an an [00:12:10] agent from another brand. Because only about 20% of the time is the real estate agent double ending the deal. And the, the core premise of our software was this [00:12:20] idea of inviting people to a shared workspace, which we called a loop. So as soon as we got the Keller Williams deal done, it meant that we had all these [00:12:30] little seeds planted all over the country, and 80% of the time they were inviting another agent into the loop from another brand.
So it created this network effect [00:12:40] where we went from a very small scale to a very large scale in a short period of time. The final thing that comes to mind, or no, I guess there's two other things that come to mind that were really [00:12:50] transformative for change. One is, um, we met a lot of resistance, you know, anytime, uh, category [00:13:00] creating.
Disruptor is bringing something new to market. It meets resistance. In fact, I think about resistance and skepticism and haters as validation. [00:13:10] Like if you're not getting resistance from the haters, then you're probably not doing something that's meaningful enough. Like in the early days of Pacaso, we had all these NIMBYs that [00:13:20] thought that Pacaso was gonna just be like an Airbnb with this revolving door of renters, which couldn't be further from the truth, right?
They thought that Pacaso was gonna take [00:13:30] homes away from the local workforce, couldn't be further from the truth. Pacaso is actually great for community. It doesn't allow renters, these are only owners, but yet we had these [00:13:40] haters that resisted the model. I actually love that it's like validating of the concept.
It it, it means that we're doing something that's interesting enough that it's [00:13:50] getting under some people's skin. And you see it across all these other industries like Tesla with dealers, right? When Tesla went direct to consumer, the, the dealership industry went [00:14:00] nuts. And there's lots of other examples.
In our case, the two things that people went nuts about were e-signatures and digital documents. Okay? [00:14:10] So in the e-signature front, we had banks, title companies, real estate agents, owner operators, you know, everybody basically questioning the validity of [00:14:20] e-signatures. We were getting threats, we were like contracts.
Um, were getting denied by banks and title companies and sellers, right? But [00:14:30] meanwhile, e-signatures had been legal for nine years. They were made legal as part of the Clinton administration, and we started in 2009. So really 10 years by the time we [00:14:40] started to take off. But yet everybody thought they were illegal and DocuSign really deserves, uh, most of the credit for educated.
They spent, I don't know how many, [00:14:50] you know, tens, probably hundreds of millions for dollars. Yeah. Educating the world on why e-signatures were legal and we got to kind of draft off of that, you know, awareness that they were [00:15:00] creating. But the second thing was around resistance
so that was a big one. And then the final thing that comes to mind is, is just change management. We [00:15:10] overinvested in change management. I remembered reading a book, uh, just before we launched Keller Williams.
Somebody introduced me to this book called Switch by [00:15:20] Dan and Chi Chip, I, I believe their names were Dan and Chip Heath. And it's such a great book on change management. And it, I, I still [00:15:30] think about that book a lot today. Anytime we're implementing the change in the organization, like as humans, we, we are sort of programmed as humans to resist [00:15:40] change.
I mean, if you just think about the environments that you're most comfortable in would be an environment for most people, it's an environment that's familiar to them versus if you take [00:15:50] someone out of their familiar environment and you put them in an unfamiliar environment, a change, they're uncomfortable.
So we naturally resist that. So in order to [00:16:00] implement big change effectively, you have to really think about it in the same way that you'd think about building a business. Like if you were building a business, you're gonna build a business plan, you're [00:16:10] gonna do research, you're gonna think about the psychological incentives, you know that, that are gonna be going through customer's minds when they're considering your product.
You have to think [00:16:20] about change in the same way. And that's what we did. We implemented the change management playbook, uh, largely inspired by this book. We executed, I think, pretty well [00:16:30] against that playbook and we continued it through the life of the company. We had an amazing customer success team. We ended up building out this network of these third party [00:16:40] affiliates called DOT Certified Trainers.
We created a certified training program, so real estate agents and admins would, would pay us to be trained on our software, [00:16:50] and then they would build many businesses. By training other offices on how to use the software. So those would be the four or five things that come to mind [00:17:00] on how to get a, uh, a big industry like real estate to adopt and embrace change.
**Lynnn:** Yeah, I, it was
back to first principles, you know? [00:17:10] Mm-hmm. We had this theory that, okay, people are missing this idea of, of a distributed grid and also they're, they're [00:17:20] investing in the hard, there's so much investment going up in the hardware upstream that it was apparent that the cost was really going to come down.
And also the price. The retail price for [00:17:30] electricity is so much higher than like wholesale price because half of the cost of what you pay for your electricity, more than half is transmission and distribution lines. We [00:17:40] believe we would hit the grid parody is what they call it, where, you know, where it's more affordable to, um, have the solar than actually buy the power for the grid.
So we had a very like, [00:17:50] tight thesis from a first principle standpoint on why it would be a good business, why, you know, the costs were gonna get there. Um, and then, you know, enter batteries and that [00:18:00] has. Ushered in a whole new set of innovation,
**Speaker 15:** Incentives. Incentives, yes.
**Speaker 14:** Yes.
**Speaker 15:** Back to that. Right. So, um, so for your readers who are [00:18:10] gonna read this book, I can't wait to read it. It's not out yet, otherwise I would've read it for this interview. But, um, you know, after they finish reading, they get to that last chapter, that [00:18:20] last page, that last sentence.
They close the book. What do you want them to do?
**Speaker 14:** Well, I'm happy that they got through it. Um, and I just learned that they're, they're not, [00:18:30] they're likely not doing an audiobook. I didn't realize this, but, um, at least for my publisher, I have an academic publisher. They, they sell the rights to the audiobook to [00:18:40] someone else.
And so it often doesn't happen at the same time because all the, the secondary publishers that then publish the audio book. Need to see the performance of the book to begin [00:18:50] with. So I was disappointed to hear that there's not going to be a audio book, because I do feel like getting to that last page for some, some learners is hard.
Some people are just like audio listeners, [00:19:00] so,
**Speaker 15:** well, you know, I even like, I'm a combo, like I will, I love reading, love reading, but if I'm driving in the car. And I wanna keep going in a book. All I go back [00:19:10] and forth, back and forth, back and forth. Yeah. And the
**Speaker 14:** Kindle can do that now. Right. I've heard the Kindle can let you pick up from where you left off, which is incredible.
Yeah. Yes. Um, okay. So, so your [00:19:20] question, so if someone gets to the end of the book Yes. And, um, they're
**Speaker 15:** gonna get to the end, they're gonna read that last sentence. Yes,
**Speaker 14:** I
**Speaker 15:** hope so. What do you want them to do?
**Speaker 14:** You know, I, gosh, so many things. [00:19:30] At a minimum, I want readers to ask better questions. Notice the dynamics that they might not have, uh, recognized before in terms of the incumbents that I've spoken of, [00:19:40] the regulatory capture that I, um, have spoken of, but feel like a greater sense of responsibility for, um, what they're building and how they build it.
And, you know, if that doesn't happen, [00:19:50] then um. Hopefully, at least they enjoyed hearing from the, the, the case studies and the founders that I featured. But I, I really hope to equip them with, [00:20:00] um, you know, a crash course in everything that I've, that took me 15 years to learn.