What I Learned from Harvard’s Most Elite Real Estate Investor Group (YPO) | Ep. 28

In this solo episode, host Brian Spear shares executive leadership and capital allocation frameworks derived from his experience attending the Harvard Business School Young Presidents’ Organization (YPO) Real Estate Program. The episode details observations from interacting with an international network of premier real estate operators, CEOs, family offices, and REIT executives. Spear structures the discussion around three core pillars: institutional financial guardrails, scalable organizational culture, and the varying spectrum of artificial intelligence adoption across the industry.
Listeners will examine strategic principles designed to mitigate corporate vulnerabilities, such as managing the key man risk that threatens scaling businesses. The briefing breaks down practical operational filters, including matching bottom-line growth rates against top-line revenues to expand annual margins, and applying percentage caps on general and administrative expenses during cycles of incremental growth. Additionally, the episode contrasts the traditional venture capital approach of blitzscaling with disciplined capital deployment strategies executed during macroeconomic pullbacks and credit market freezes. Tailored for high-net-worth individuals, active real estate operators, and corporate executives, this briefing delivers data-supported decision-making models. Operators can utilize these structural frameworks to evaluate down-market opportunities, instill psychological safety within their leadership teams, and strategically position their businesses on the practical edge of technology without jeopardizing core human resources.

Key Takeaways

Establish dual financial guardrails for sustainable growth: Operators must ensure top-line revenue outpaces the baseline market growth rate while intentionally driving bottom-line growth at a faster pace than the top line to continually expand annual profit margins.
Implement strict general and administrative expense governors: To avoid the cash-burn hazards associated with blitzscaling, scaling companies should cap general and administrative expenses at a specific percentage of new incremental revenue growth.
Capitalize strategically on economic downturns: Empirical data confirms that periods of macroeconomic compression and frozen credit markets present optimal opportunities for capitalized investors to deploy liquidity and acquire high-quality assets at deeply depressed valuations.
Mitigate key man risk through execution frameworks: Transitioning from a small lifestyle business to a scalable enterprise requires documenting strict execution guidelines alongside explicit core behavioral values to decentralize decision-making authority.
Foster institutional psychological safety to capture frontline feedback: C-suite executives must deliberately cultivate a workplace culture where downstream associates can freely communicate operational flaws and technical optimizations without fear of corporate reprimand.
Key Topics Covered
Executive Education and the Case Study Method
Young Presidents’ Organization (YPO) Membership and Demographics
Macroeconomic Downturns and Counter-Cyclical Asset Acquisition
Financial Guardrails vs. Corporate Blitzscaling
Corporate Culture, Meritocracies, and Scale
Institutional Key Man Risk Mitigation
Psychological Safety and Feedback Loops
Artificial Intelligence Adoption Variance among Elite Operators

Episode Chapters

00:00 Intro Host Brian Spear introduces his recent experience at the Harvard Business School YPO Real Estate Program, outlining a widening performance gap between adapting operators and those falling behind.
01:42 Inside the Elite Harvard Program (YPO) Spear describes the institutional background of the Young Presidents’ Organization, its strict demographic criteria, and its 75-year history of executive education collaboration with Harvard Business School.
03:19 The “Case Study” Method An analysis of how the Harvard case study method shifts focus away from rote factual memorization toward sharpening personal executive judgment and peer-reviewed strategic choices.
06:09 Surrounded by the World’s Best Spear reflects on the historical gravity of the Harvard campus and details the high-level boardroom transparency shared among multi-billion-dollar REIT executives and multigenerational family offices.
08:53 Preparing to Be Around the 0.01% The host candidly discusses confronting imposter syndrome as a scholarship student from the University of Kentucky interacting with Ivy League networks, highlighting the necessity of thorough preparation to deliver peer-to-peer value.
13:44 1. The “Guardrails” for Growth An in-depth review of financial guardrails needed to avoid optimizing for vanity metrics, emphasizing structured margin expansion and strict general and administrative spending caps over speculative blitzscaling.
19:13 Grow (Smart) During Downturns An assessment of empirical data demonstrating why market pullbacks and illiquid credit cycles represent the most profitable windows for counter-cyclical asset managers to accelerate capital deployment.
21:43 2. Rock-Solid Culture Builds Greatness Spear explains why culture dictates structural scale, breaking down the balancing act between establishing ironclad corporate core values and rolling out systemic execution matrices.
32:32 Your Team MUST Have a Voice Using a core operational parable about a misaligned rocket launch, Spear defines psychological safety and explains why organizational survivability depends on frontline staff speaking up without facing negative corporate consequences.
37:09 3. Evolve with AI An analysis of the deep variance in artificial intelligence adoption among global real estate executives, detailing Sunrise Capital Investors’ approach to pragmatic technology implementation and its role in heavy autonomous construction.

Full Transcript

[Transcript begins]

Brian Spear: What are the world’s best real estate operators doing right now that everyone else is missing? I just spent the last week over at Harvard Business School trying to figure it all out. I was surrounded by nearly 100 real estate entrepreneurs, CEOs, family offices, REIT executives, and investors from all over the world, people that are operating at an exceptionally high level. And what struck me was how differently these world-class operators are thinking about the future. You know, weren’t about chasing the next hot market or perfectly timing interest rates. It went way, way deeper than that. And what became abundantly clear is that there’s a massive gap forming between the operators who continue to adapt and the ones who are slowly falling behind.
So on today’s episode, I’m gonna give you an inside look at what the world’s leading real estate executives are doing and break down the three biggest lessons I took away from the Harvard Business School YPO Real Estate Program. I’m Brian Spear, and this is the Sage Investor Podcast. My mission is to help you generate cash flow and build legacy wealth in a tax-efficient manner, because that’s what I’m trying to do for my family, and I’m sharing all the secrets that I learned along the way.
Today’s episode is going to be a little bit different. I want to give you a behind-the-scenes look into some of the conversations that are happening right now amongst the highest-level real estate operators all over the world. Real conversations that are about leadership and capital allocation, about AI, and what it actually takes to build an enduring company over exceptionally long periods of time. You know, it would be honestly impossible for me to summarize everything from the time that I spent up at Harvard in a single episode, there were several different themes that stood out repeatedly. We’re going to cover three of them today, so let’s jump right in.
Before I get into the takeaways themselves, I just want to paint the picture of what this program was like, okay? Obviously, Harvard Business School is internationally renowned. It is almost universally the number one ranked business school every single year and has been so for hundreds of years. That’s one of the best business schools ever of all time. YPO, the Young Presidents Organization, they’ve been working together for nearly 75 years. In order to be inside of that group, you have to be a CEO or a president, somebody who’s managing a very large business of substantive size, has to be hundreds of millions of dollars, or you have to be managing hundreds of employees. You’re operating at a reasonably high level to ultimately be involved in this organization. And you have to be below a certain age, below 45 years old. And then in time, as you’re inside a YPO, you kind of can stay inside of that group until you turn 49. But the minute that you turn 50, they literally give you the boot. They kick you out and you have to go into YPO gold where you can kind of hang out for the next couple of decades and just enjoy the network and continue to grow personally and professionally along the way.
But two unbelievably exceptionally high-quality groups that have been working together for 75 years because the highest level CEOs in the world, they’re always looking to try to sharpen the sword, iterate and improve what they’re doing. So they, of course, want to go back to the best business school in the world to learn what’s going on in the marketplace. What are the top, most current ideas, confluence of events occurring, and how can we continue to manage our businesses most effectively? So for 75 years, YPO members have been going to Harvard to continue to sharpen their sword and take those learnings back to their actual business on a day-to-day basis, right? Massive, phenomenal executive education.
In addition, I think it’s important for you to understand a little bit about the Harvard case study philosophy and really try to understand how you actually learn over at Harvard. It’s different than the vast majority of other institutions on planet Earth. They have something called the case study method where basically you have to do exorbitant amounts of work in advance of ultimately showing up on site. So by way of example, there was a case study done on Boston Scientific. The CEO there is a gentleman by the name of Mike. I believe it’s Mike Mahoney. I can’t recall the last name, but in any event, his name is Mike. And he’s been the CEO at Boston Scientific for, call it, roughly 15 years. And it is a very current case study. And this particular individual situation was about making a decision to try to ensure that you can create an enduring culture. You, as somebody inside of Harvard, try to put yourself inside of the seat of Mike, inside of the head of Mike, and try to think through what you would do if you were in his respective position. And ultimately what it does is it helps you improve your personal judgment.
Because the truth of the matter is when you’re going through these case studies, it’s not like going and taking an exam. You’re not studying data and memorizing facts and then selecting A, B, C, or D in a multi-choice question to try to get an A, B, or C grade. Rather, you’re sharpening your skills on judgment. That’s the entire purpose of going through the case study process. And the truth of the matter is there is no right and no wrong answer. You’re trying to take the amalgamation of information and the market data that is currently available to the CEO in that perspective situation and make a case to all the other 100 CEOs that are internationally renowned real estate operators what you would do if you were in that perspective situation and have a really solid objective perspective and have a really solid perspective as to why you would ultimately make that decision.
And then you have 99 of your peers operating at an exceedingly high level pick apart why you are either making a good decision or why you’ve made a horrific decision on behalf of all the stakeholders. And there is no right or wrong answer. And that sort of scrutiny from exceptionally talented peers, ultimately sharpened your skills in terms of making the best decisions and improving your judgment on behalf of all of your stakeholders when you go back into the real world and actually perform your real job, right? And that’s what is so wonderful about Harvard and the way that they teach you and prepare you to become a leader, to become one of the world’s greatest CEOs, one of the world’s greatest businessmen. That’s what the world’s greatest business school does. It prepares you for the real world as opposed to simply memorizing facts to regurgitate information to go get a 4.0 GPA on a piece of paper that’s completely irrelevant. Just setting the stage of what it actually looks like, right?
When you go on site, you know, you’re taken aback by how pristine the lands are. It’s hard to put into words what you experience when you walk onto the campus at Harvard. I can only try to compare it to, you know, the other universities where I’ve spent time. But again, by way of example, I went to undergrad at the University of Kentucky, which I adore tremendously. Love every bit of it. At Kentucky, you have wonderful facilities. You’re in one of the best conferences in the country. I actually played baseball in the SEC. An exorbitant amount of capital put in place into the athletic programs to create wonderful facilities and a wonderful environment. And I loved every bit of it. But there’s something that’s a little bit different when you go to Harvard. You just feel the sort of legacy and the weight of responsibility that the university has and the clout, the type of individuals that have ultimately walked the same paths that you walk when you’re on site. Buildings that are named after some of the world’s greatest businessmen and entrepreneurs.
It’s just unbelievable to experience this, as well as going to the Harvard Museum and seeing relics, paintings from some of the best artists in history, and relics from 6000 BC. Just unbelievable amounts of deeply ingrained history dripping from every hallway that you walk through. Sitting around the table with executives that are doing multiple billion dollar deals. You know, one of the guys that’s, you know, in my study groups ultimately doing multiple deals with Blackstone, one of my guys that’s in my groups running one of the biggest REITs in all of Europe. One of my guys is a fourth generation family office that has built a multi nine figure net worth over time and there’s multiple guys that are inside of Tiger 21 and these people are ultimately openly sharing around the table what’s actually happening in their business right now today currently and the practical takeaways that derive from that are second to none. Not only are you able to receive world-class education, but you’re in the midst of an unbelievably profound network that allows you to receive benefit far outweighing what I might be able to try or attempt to convey to you in a mere 30-minute podcast.
So for me leading up to the event, I would say emotions were high and I had a little bit of anxiety, uncertainty associated with what to expect. And I wanted to ensure that I was overprepared for the opportunity when I arrived on site. You know, there’s always going to be a little piece of me that has imposter syndrome when arriving on site at one of the Ivy League schools. Why is this the case? Well, I grew up in an environment where, you know, I didn’t grow up with a silver spoon in my mouth. I didn’t believe that I was going to be on that respective track, worked exceedingly hard academically and athletically to put myself in a position where I was going to end up getting scholarships to go to college. It was the only way that I was going to have my college paid for and the only way that I was going to get to university. And had a great opportunity, earned academic and athletic scholarships to numerous different universities, but ultimately selected the University of Kentucky because it was the best opportunity athletically. I graduated fifth in my high school class, and all the associates that graduated above me went to more academically pristine universities, right? You know, Yale, Georgetown for Law, and ultimately University of Chicago Business. Great, great universities, right? Amongst others. And I always wondered, what if I had chosen the academic institution path and ultimately went to an Ivy League school out of high school? But I didn’t.
I ended up going down the path of attending the University of Kentucky, had an unbelievable run, would never change anything I did. But there’s always the imposter syndrome of wondering what if I had gone to the Ivies, et cetera, et cetera, along the way. And so I just wanted to ensure that I was prepared upon arrival and, you know, I would say that the experience was amazing knowing that once I did get on site, right? Now, if I go full circle, after being on site, sharing the experience amongst unbelievably well-heeled individuals, top-tier international real estate associates operating in an exceedingly high level and have done so for decades, and being able to hold my own, and I would say add value to them, right? Along the way, um, I felt a lot of vindication, a lot of, a sense of, uh, achievement just by virtue of, uh, trying to, um, add value to them in their lives and their journey, uh, along the way, because that’s, what’s so special about that environment. If everybody prepares in advance of ultimately going and having deep conversations in the room, um, while you’re, uh, all together, um, that’s the only way that you’re going to extract exorbitant amounts of value. Everyone has to be prepared and ultimately, um, you’re going to add as much value to other parties as they’re going to add to you along the way.
So in any event felt great. And, and, you know, while that I had, I would say maybe a sense, some sort of sense of excitement and wonderment while I was leading up to the time that I spent on site, by the time that I’d left, I’d felt accomplished, I’d felt appreciative of the journey, and I felt some vindication knowing that I felt that not only was I able to add value, but hold my own, but maybe exceed my own individual expectations of the value provided to the peer group along the way. So I’m, again, anxiously awaiting the opportunity to continue to go back. I intend to do this every single week or every single year that I can moving forward.
As is often the case when you’re actually having in-person events, right? The speakers that are there, whether it is at a conference or the actual Harvard business professors, they’re part of it and they add value undoubtedly. And I’m going to go deeper on that here momentarily. But the real business and a lot of the growth and the experience that you have, right, it happens in the hallways. It happens in the connections that you make, right? It happens in the late night operator conversations or when you’re out having a couple of drinks afterwards and you’re able to really talk shop about what’s going on, sharing war stories, a practical implementation of what you’re doing in the real world today, right? The willingness to share and the openness of the room is really where you get exorbitant amounts of value. And then also the networking, right? Everyone has a contact for somebody. By way of example, you know, one of the insights was that we’re one degree of separation away from Mark Andreessen, right, inside of the room of somebody had just had lunch with Mark Andreessen the day before, and then they come in, they were talking about AI and what they’re implementing in their business. So you’re hearing directly from what Mark is seeing day to day in AI, who’s, for those unaware, you know, operating one of the most profound venture capital firms in the entire world, on the bleeding edge of AI, right? And you’re getting it immediately the day after having a conversation, sitting down for lunch with Marc Andreessen. That’s exceptional, right? Where else are you going to find that sort of immediate feedback that’s practical and able to be implemented into your business? Nowhere else. The answer is the network is unbelievably powerful, and that’s a lot of the value that you’re going to receive from spending time up there.
You know, after spending a week fully immersed in all of those conversations, there were really three different themes that kept surfacing over and over and over. So the first one that I really wanted to highlight here is the importance of financial guardrails and intentional growth. Every business owner wants to continue to grow. You want to scale, and rightfully so. Everybody yearns to continue to grow and improve what they’re doing, and there’s nothing wrong with that, grow enterprise value. There’s benefits and a myriad of them associated with doing that. But you do not want to grow just for growth’s sake. Many businesses optimize for growth at all costs, but that can ultimately leave you in an exceedingly precarious situation. I’ll give you a real examples that you guys have seen. And unfortunately, in the syndication space in the last handful of years, there’s a lot of guys that were growing for growth’s sake in 2021, 2022, 2023, raising a bunch of money, doing a bunch of deals. And it felt good to talk about the revenue numbers that they were putting up. But revenue is vanity. Profit is sanity. But again, profit is just an opinion. Cash flow is a fact. And the only thing that matters is after-tax cash on cash return.
But running back to the vanity piece, right? You’re growing gangbusters and raising a bunch of money and buying a bunch of deals. And congratulations. Fast forward two, three, four, five years. What happens? Pause distributions, capital calls, sometimes total loss of capital, obviously. Optimizing for growth at all costs is an imprudent decision. And history has repeated itself over and over and over in this regard. Raising capital is not even remotely in the same vein as creating value to society at large, right? I think a practical takeaway here is that when you’re scaling, you’ve got to ensure that you’ve got guardrails in place that are going to benefit everybody involved. And you’ve got to structure your incentive system in such a way that all stakeholders win when you have a fair structure in place between general partners, limited partners, and all stakeholders, including the residents inside of your respective communities, assuming you’re operating a residential property. Everyone has to win for that business model to ultimately be successful over long periods of time.
What does this mean? Practical takeaway, right? You want to have the top line revenue. How do you ensure that you’re beating your peers? What does winning look like? How do you know that you’re winning? Try to ensure that you’re not growing for growth’s sake, but it’s nice to beat your peers in the industry. And so how do you set that barometer, right? Practical takeaway of having your revenue exceed all of the benchmarked peers inside of your industry, right? So your revenue must exceed the market rate of growth. Your individual top-line revenue needs to exceed the market growth, whatever market you happen to be in. Prudent, that way you’re beating your peers. However, you don’t want to just grow for growth’s sake, right? There was a case study that talked about a business that was valued somewhere around $5 billion. They ended up doing a merger in M&A where they ultimately swallowed up another business that was valued at six billion dollars okay so a five billion dollar business swallowed a six billion dollar business and ultimately ended up leading nearly to complete and utter ruin along the way why because they were focused on growth for growth sake of course the top-line revenue looked exceptionally phenomenal massive growth upon doing so but did you really benefit the stakeholders in pulling the trigger there or did you run into exorbitant amounts of issues along the way, which was inevitably the case in that respective example?
So how do you put some additional guardrails in place? By ensuring that the bottom line grows at a rate higher than and faster than the top line. So not only do you want to have high quality top line growth, but your bottom line growth needs to grow at a faster rate than the top line. This ensures that you’re increasing your profit margins on an annual basis, right? And if you can do those two things, you know you’re going to be growing faster than your peers and you’re going to be growing more profitably year over year over year, putting yourself in a great position. Well, what about the difference between blitzscaling and growing prudently? Blitzscaling used to be back in the old Silicon Valley days where you would just raise an exorbitant amount of money, go hire hundreds or thousands of employees, and then ultimately try to eventually grow into, have the revenue grow into the expense load that you’ve already created along the way. You’ve got massive labor costs and you’ve got to then, you know, it’s a race against time where you’re going to run out of cash. Your cash burn is such a, a ridiculous situation that you have to blitz scale and you have to scale as quickly as humanly possible or else you’re ultimately going to go to zero. That’s just not something that we’re interested in doing along the way, right?
So you’ve got to put an additional barometer in there to ensure that your expenses, your general administration expenses, are capped at a certain percentage of the new incremental growth that you’re going to have, of the new incremental revenue growth that you’re going to have on a day-to-day basis, right? Right. So if you go plug in one, two, three, four, five different individual properties, which, you know, is accretive and you get another $10 million of revenue on the top line, great. Well, you can’t have your expenses, your general and admin expenses, meeting or exceeding any of that sort of revenue increase along the way, right? You’ve got to try to find a way to have a percentage, a specific percentage that is a governor of the general and administrative expenses in such a way that you’re not going to put your business in a precarious situation with high fixed expenses that you can’t really get out of, right? Those are the controllables that put you in a tough spot if the economy were to turn and soften.
So another little takeaway in terms of the financial guardrails and just discipline in general, it is empirically proven that when you have downturns in the economy, that is the time when you would otherwise want to go ahead and push the gas pedal. That is one of the moments in time where it is prudent as an investor to actually deploy cash, hit the gas pedal and push. It’s why Warren Buffett always has so much cash on the balance sheet, right? And it is not just a sentiment or a feeling. It is literally proven empirically with data that when the market pulls back, credit markets freeze, those individuals that lean forward, that lean in and ultimately make investments at periods of difficulty ultimately perform much better over the very long term. And that’s really what we’ve seen play out in the last handful of years. There’s a lot of guys that have been pencils down in the last couple few years because credit markets have frozen. Unfortunate but true. That said, those individuals that were able to deploy capital where prices have depressed significantly, right? Multifamily values are down 10%, 20%, 30%. Office values massively off the top, right? And, of course, office is a little bit different because you never know what’s going to happen moving forward. But multifamily specifically, right, properties that are down 20%, 30%, 40%.
If nobody has the ability to go deploy capital and ultimately acquire those assets at significantly depressed prices, that’s a missed opportunity, assuming that that demand does come back to the marketplace. And again, history has repeated itself over and over and over. It’s a prudent time to ultimately deploy more capital when you get massive pullbacks like that. It was gratifying to hear some of those points reiterated not only by the professors, but also throughout the room by some of the guys saying that have built some unbelievably solid businesses over time. At Sunrise, we’ve already been doing a lot of these things. We intentionally focus on durably wonderful businesses that are going to outperform during any respective environment. We’re intentionally focused on prudent capital allocation, not just growth for growth’s sake, but rather protecting the downside risk first, recession-resilient investing, recession-resistant thinking, having cash on the balance sheet to deploy capital, when the markets pull back, it’s why we were able to go buy a 700-space institutional asset when everybody was sitting on their hands at the very tail end of 2023, early 2024. That’s when you really do need to, I’ll say, back up the brink struck and actually go deploy capital when the market pulls back in a massive immaterial way. It’s counterintuitive, but over the long term, that’s really when you outperform.
But I would say financial systems alone and some of the dotting I’s and crossing T’s sitting inside of the financial side of the business, that does not alone build a great organization. Culture does, which leads me to the second theme that kept popping up over and over and over again. It’s one thing to actually have the practical blocking and tackling and finance. Beautiful. But if you really want to build an enduring organization, you’ve got to focus on culture. One of the things that elite operators obsess over is culture, because that’s what’s going to scale the business. The truth is that culture is very hard to scale. It is, it is very difficult to, to, to, create an enduring culture as you bring in more and more and more and more associates into an organization. When you have more of a lifestyle business where it’s a group of six to 12 extremely talented individuals, you’re kind of operating like a SEAL Team Six, everybody knows everybody, everybody knows everybody’s family members, their children, and it’s very simple, small lines of communication. Everybody knows what’s going on. It’s easier to build a tight culture in that environment.
But when you’re actually growing and building a massive organization, how do you ensure that that phenomenal culture that you had at the outset endures when you get to 20 people, 50 people, 100 people, 200 people, et cetera, et cetera? You have to be very intentional about crafting these items solidifying them, carving them in stone, and explaining them to all of your associates over and over and over and over again. It takes seven times before somebody hears something for the first time. So you have to not only have ironclad core values inside of your business, but you also have to implement an execution system and set a standard that ultimately ensures that you are handling both sides of the table, meaning the soft side, the soft skills, the culture, how you want people to behave, meaning to live, enjoy the ride, have fun along the way, be upstanding individuals, live by the golden rule, all these wonderful things associated with having integrity and the like and accountability. And then the hard aspects, not just the soft stuff, but the hard stuff is the actual execution. Dotting I’s, crossing T’s, operating exceptionally effectively. And you have to have both of these items of really ironclad core values juxtaposed with an exceptional execution system.
Let me paint the picture for what that means over here at Sunrise by way of example. So for us at Sunrise, we have what are known as the bedrock principles. These are the core values that have been in place in our organization since the outset. The acronym bedrock spells out the five core values that we have here. So B is be a sponge, E is enjoy the ride, D is do the right thing. We have an internal D that we really haven’t shared overtly to society at large. I’ll go ahead and pass along. D, don’t be an a-hole, right? There’s no I in team. You just wanna go ahead and be a team player. And the last one is to be rock solid, be accountable. Do what you say you’re gonna do, right? Those are the bedrock principles, the core values of who we are, and they’ve been in place for a decade at Sunrise, right?
That said, it took us a little bit of time to roll out the execution system. The core values were always in place, have been so for over a decade, but the actual execution system, from my perspective, it took a little bit of time for us to actually ingrain it. Why? Because when you’re really small, that culture can build via osmosis. But as you grow and you get to 50 people and 100 people, you have to literally overtly share and explain the expectations for everyone in the organization so they can abide by those expectations. So they understand what you’re seeking, right? So the core values are one piece of the puzzle. The second is our execution system. We literally call it the ROSE execution system. It’s an acronym, R-O-W-S. That ultimately tries to exemplify the idea that we all have to be in the boat together. We all are rowing together in the same direction, pulling for the betterment of everybody. So it’s yet another acronym. R is run the play. O is own the outcome. W is win the week. And S is strengthen the system.
And what I mean is run the play. We have a standard operating procedure. We’ve been there, done that, got the t-shirt. We know what works. Run the play. Do it over and over again. Reminds me of Denzel Washington in Remember the Titans. Just go run the play over and over and over. We know it works. O is own the outcome. We are all relying on you, be accountable for the result. W is win the week. Have your individual key metric, the thing that you must do in your seat better than anybody else. Everybody’s counting on you. Win the week. You might not win every single day, but over time, if you win the week, you win the month, you win the year, everybody wins. We all benefit from it. And everyone’s relying on you. And the last piece is S, to strengthen the system. What I mean is we are relying on you. At Sunrise, we have a system, right? A way that we’re all doing business. This is the Sunrise way. This is how we operate. This is the standard that we set. It is impossible for me to see everything inside of the organization. As we continue to grow and scale, I am relying on all of our associates. Okay. They know more about their day to day than I do, right? They see things that I can’t see. It’s impossible for me.
So if you see something that needs to be fixed, please tell me. That way we can strengthen the system. But it’s to try to create a feedback loop. It is incumbent upon you as an associate inside of the organization to tell me where I’m bad, where we are not holding up to our end of the bargain, where we need to improve, please tell me. And we’ll go ahead and fix it, right? If you don’t have the resources that you need, if you know that there’s a better way to implement AI inside of your role on a day-to-day basis, please tell me. And we’ll find a way to ultimately get you the resources we need to strengthen the system for the betterment of all. And if you take those two different things in tandem, the culture, the core values, and the execution system. And then you create a matrix that ultimately is a behavioral matrix of ultimately how you want people to weave these items together for the betterment of all. That’s really how you build an enduring culture because now all of your associates, as opposed to just speaking randomly about what you want people to do, they literally have a 60-page document of what the expectations are when they come into the organization.
You can more easily avoid the key man issue far too often when you’re just getting started in business, you have one main key individual that ultimately all decisions go through him. Good, bad or indifferent. And it ultimately creates significant amounts of risk. Either A, he’s a wizard, congratulations, and all the business goes through him. And it’s a beneficial thing until he gets hit by a bus. But that’s the sort of thing that ultimately, if you want to create an enduring organization, you have to remove that key man risk. And the only way to do it is to set up exceptional core values, exceptional execution system, and allow the team to grab the ball and run with it, to kind of invert the pyramid of the organizational chart and allow the team to lead the charge along the way.
The reason it’s so important to outline the types of behaviors that you’re seeking to achieve inside of the organization is that you can then foster an environment of fairness amongst everybody involved. When you’re a manager and you have a direct report, it is important that everyone has clarity and there’s an exorbitant amount of trust built between that one-to-one relationship with the manager and the direct report. The only way that you could do it is if you outline the rules of the game. Here are the rules of the game. These are the core values that we abide by. Here is the execution system. This is what we demand inside of the organization, what we believe to be acceptable behaviors. And it allows you as a manager to set a standard. We have a high standard. We raise the bar inside of the organization. And it also allows you to share how devoted you are to everyone inside of the organization. You’re trying to foster an environment where everyone loves everyone and we’re devoted to all the associates. It’s team first. It’s all about the team. There’s no I in team, right? Don’t be an a-hole. There’s no I in team. We’re fostering that environment of love across the board while simultaneously setting an exceedingly high standard. And another case study that popped up was Steve Kerr.
You know, what I’m trying to share is exemplified by the case study associated with Steve Kerr. And how did he create such an exceptional culture and exceptional environment to create a dynasty where everyone is held to an exceedingly high standard, but the culture is such that everybody loves everybody inside the locker room. And if somebody is not holding up to their end of the bargain, they can get called out in a fair way. It allows you to treat everybody fairly in a, in a, as if we’re in a meritocracy, because if you have an exceptionally high standard for folks and you’re extremely devoted to them, the end result inside of a big matrix, if you take that big matrix, that axis on the very top pinnacle, you’re going to have justice. You have an exceptionally high amount of standards and an exceptional devotion to that associate. And if they abide by not only the love, but the high standard, you’re gonna ultimately have justice. This is a meritocracy. This is the quadrant that you wanna live inside of that matrix. If however, you simply have exceedingly high standards, but you don’t care about the associates, you have severe consequences, right? It’s severity, severe consequences if they don’t hold up to their end of the bargain. And they don’t necessarily feel terribly safe working with you.
That said, if you’ve got a lovey-dovey environment where everybody loves everybody, but there’s not exceedingly high standards, you’ve got this environment of fidelity which is nice, but you’re not performing near as optimally as you otherwise need to to ensure that you’re running an efficient organization. So you have to simultaneously have exceedingly high standards and craft an environment where everyone is very devoted to each other because that is justice. That is a meritocracy. And you can’t do that unless you set out what the expectations are for all the associates in the entirety of the organization. And it’s why Steve Kerr can have a screaming match with Draymond Green, and then they go back into the locker room, and it’s completely fine, hunky-dory. Because they know that at the end of the day, everyone is just in it to win it. They’re in it for the long haul for each other. They’re all roaming in the same direction, trying to achieve the same thing at the end of the day.
The way that I had historically implemented this inside of our organization, I’ve always talked about a rocket. I used a rocket as an example. I just tried to exemplify the idea to get feedback from all the associates. I don’t know what I don’t know. How do you strengthen the system? You have to tell me feedback. Please tell me if you see something that’s messed up so that we can fix it. The example that I’ve always given is that let’s assume that you’re in your first day on the job. And let’s say we’re working at SpaceX. And you’re going into SpaceX. It’s your very first day on the job. And ultimately, you’re taking a tour of the facility. And you’re walking around. And the manager that’s giving you the tour says, wow, it’s a beautiful day. Today, you’re actually really lucky. We’re actually doing a rocket launch today. It doesn’t happen every day. You’re kind of in luck here. And you walk on. You’re touring the facility. You walk outside. It’s a beautiful day. And you notice something that seems a little bit odd to you. It’s that the rocket is kind of pointed upside down. But you think to yourself, that’s kind of weird. You know, if the rocket’s shooting up today, you would think that that’s already turned around. But hey, you know, what do I know? There must be, you know, the group knows something that I don’t know, obviously. They clearly know what they’re doing. No big deal. So you don’t think anything of it. You don’t tell anybody. You just keep on going with your day. And all of a sudden, you know, gets down to four o’clock. Four o’clock is when the rocket’s about to get launched.
You all are now in the command center in the command room. All of a sudden, we’re 60 seconds away. You still see the rocket pointed upside down. And all of a sudden, five minutes left, four minutes left, three minutes left. And you’re wondering when they’re going to turn this rocket upside down. Somebody’s got to say something. This is kind of weird. And all of a sudden, 10, 9, 8, 7, 6, 5, 4. You end up not saying anything. Countdown goes to zero. Immediately upon blastoff, the rocket gets shot directly into the ground, explodes, and it’s a huge disaster. And the manager says, oh my gosh, I can’t believe it. I wish somebody would have told us that the rocket was pointed upside down. It begs the question of why you as an associate have chosen not to say anything. You know, you might feel as if you’re unwilling to say something to your superior because, again, you feel unsafe and you don’t believe that you might feel like you’re going to get reprimanded for recommending something or saying something that clearly they must know what they’re doing. So you choose to keep that information within as you feel like, I would be taking a risk if I say something that you believe is incorrect. And ultimately, you might get reprimanded by getting out of line, as it were.
And so what ends up happening is that the organization does much poorer than it would otherwise if you had shared your feedback. Now, let’s run the inverse here. And if you would have spoken up, what would have otherwise occurred? Let’s say you would have talked to the manager and said, oh, my gosh, like, hey, I don’t know if you guys noticed this, but the rocket is pointed upside down right now. I know that we’re supposed to do a blast off, but the rocket is pointed upside down. You guys know that. Why is that the case? And the manager might easily simply say, oh, well, yeah, no big deal. We actually point the rocket upside down for a period of time to refuel it. And then prior to launch, we’ll go ahead and flip it on over and we’ll be good to go. No big deal. Oftentimes, the repercussions that come from you speaking up are significantly lower than that which you would have otherwise anticipated. Okay. But it is incumbent upon the CEO and the C-suite to build and establish a culture that allows for the associates that are a little bit further downstream to feel comfortable enough to actually speak up so that they are confident that the feedback that they provide to you will not be reprimanded in such a way that there’s severe consequences.
You know, back in the day in investment banking, right? One of the professors when we were at HBS was sharing that she had worked in an investment bank. She actually was at Lehman, by the way. If ever she, as a junior associate at the investment bank, would go talk to a superior and bring up something that she felt that the company was doing poorly, I mean, she could easily get fired on the spot. So why would she ever say something? And ultimately, it led the organization to complete and utter ruin. That’s what you ultimately need to avoid, right? And you need to foster an environment where everybody has, if I’m going to use the academic terminology, it’s psychological safety. You have to foster this environment and build a culture where everybody has a sense of psychological safety, where they know that they can speak up. Because if they see something that they believe the rocket is pointed down, that they can say, hey, I believe that there’s a better way. And there will be no repercussions at all for them for sharing their experience, sharing their feedback, because they’re trying to do it for the betterment of all. And you have to basically foster that. And the only way you can do it is by setting the ground rules, giving them the rules of the game, both in the core values as well as the execution system, the standards that you set inside of the organization for everybody involved. So a little bit of feedback on culture and how to ensure that you can build an enduring culture that survives and it’s not completely and utterly dependent upon one human being, one key man that could ultimately put you in a precarious situation.
Moving on to the third topic here, there was one topic that dominated nearly every single conversation throughout the week. And that topic is AI, right? The single most eye-opening thing from the week that may have been just how wildly different AI adoption levels there are, even amongst elite operators. Again, I’m in the room with 100 unbelievably sophisticated real estate associates who internationally. And just because they’re operating exceptionally profound real estate businesses does not mean that they are at the same level of the adoption curve. Some of these individuals ultimately are early adopters. Some of them are in the middle of the bell curve. And some of them are late adopters or laggards even, which was shocking to me. And it told me that there’s just this massive variance in AI understanding. Some operators are deeply integrating AI in what they do and trying to find a way to be more AI native throughout every respective department. Others barely understood ChatGPT and like the very V1 prompting working with a chatbot.
You know, so from my perspective, there are huge opportunities for early adopters to roll out some agentic AI across the board. I’m the kind of associate that might not want to be on the bleeding edge of AI. I don’t need to be hanging out with Marc Andreessen trying to, like, get out in front of all the crazy VC stuff. There’s nothing wrong with that, but that’s not my world, right? I want to be involved in durably wonderful businesses that are not easily disrupted. So I don’t need to be on the bleeding edge of technology, but I do want to be on the dull edge. I do want to be on the dull edge where once a couple of these items and issues are tested and, and we know the veracity of those respective tools, we want to be able to implement them throughout our business as quickly as humanly possible for the betterment of all. I’ve said this before. I am the type of individual inside of our organization that is not going to go ahead and completely railroad the organization that we’ve built by virtue of taking AI and implementing crazy cost-cutting measures and removing all of the associates from our organization. That’s not what we’re all about here at Sunrise. We are a human-first organization.
That said, we are human first, and I want to go ahead and power everybody with AI to make everybody superhuman. We are human first, powered by AI to make everybody superhuman. And we’re going to be implementing that across every respective department. By way of example, we’ve talked about this before. Just as a quick one in finance, we have an aspiration to process twice the amount of bills in accounts payable with the same exact amount of human beings by virtue of leveraging technology to the best of our ability, are doing so across the board in every respective area of our company. That at a time when some individuals haven’t even begun to implement AI in anything that they do inside of the organization. So again, massive variance in AI understanding. And from my perspective, AI will be impacting every single industry. Real estate is a durably wonderful business, specifically our manufactured housing industry. But nothing is completely immune. You have to continue to iterate and improve and stay out in front of the new advance in technology.
This is a massive and significant technological wave. And if you think that real estate is not gonna be impacted in a material way, I would give you an example of what Rembrandt Koenig shared. So he was one of the HBS professors who had been in Silicon Valley the day before, who was spending time with the Harvard folks out in the Valley and learning about some of the better businesses that are out there and how they’re implementing AI across a litany of different sectors. And one of the organizations that popped up was a bleeding edge organization construction firm that basically was building the Waymo for construction equipment. Imagine a scenario where construction has been a business where people have been putting up buildings for decades and decades and decades and decades, largely the same way, largely the same way. It takes a lot of manpower, takes a lot of labor, a lot of construction workers, blue collar folks out there putting in the work four or five in the morning, getting up and grinding it out.
This organization has basically created software that plugs directly into construction vehicles that basically create a Waymo for massive industrial construction vehicles. He went and showed a clip of a ton of different construction vehicles operating right now, real world, on the ground floor, moving dirt, building buildings with no human being operating the crane, with no human being operating the bulldozer. Fascinating for those individuals that are developers that were in the room at the time. Shocking for some folks who had felt as if their portion of the industry was not going to be disrupted. Rest assured, everyone in some way, shape or form will be disrupted. There will be varying levels of this, but we all as operators clearly need to keep our finger on the pulse. And while we don’t need to be on the bleeding edge of the newest technology, depending upon what sector you’re in, I do want to ensure that we’re on the dull edge for the betterment of all of our stakeholders.
Those were probably the three biggest themes that I walked away with from the week. One of the things that I’ve come to appreciate over time is that great businesses, they’re not built accidentally. They are built intentionally. The best operators think deeply about risk. They think deeply about culture. They think deeply about systems, and they stay intellectually curious enough to continue evolving as the world changes around them. And that was probably the biggest takeaway that I had from the entire week up at Harvard, right? It’s not that anybody has all the answers, because nobody does. But it’s that the best leaders, they never stop refining their thinking. And I’m excited to implement all of these insights into Sunrise. I’m incredibly grateful for the experience, for the relationships, and for the insights that ultimately derived from that week. Here is the next year’s session. Extremely excited to get back there. But I appreciate you joining me for this episode, guys. Until next time, you be great.
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