20VC: Carvana CEO on Buiding a $50B Company, Losing 99% and Coming Back | Ernest Garcia: Inside the Mind of the Most Misunderstood CEO in America

Ernest Garcia is the Co-Founder and CEO @ Carvana. Under Ernie’s leadership, Carvana went from a back-of-the-napkin idea to a $50+ billion public company, became the fastest-growing online used car retailer in U. S. history, and landed on the Fortune 500 in under 10 years. However, it was not all up and to the right, in 2022, the stock plummeted 99% to a market cap of just $400M. Today they are back with a market cap of $35BN, that is a 100x in the public markets and selling 400,000 cars sold annually, with a logistics network that rivals Amazon. In Today’s Episode with Ernie Garcia We Discuss: 04:12 Are all great founders just “stubborn egomaniacs”? 06:55 How Carvana Almost Died on Several Occasions 08:46 Is Carvana’s Inability to get VC Funding a Sign the VC Model is Broken? 11:58 Operators vs. Strategists: What Hires Can Make or Break a Company? 21:46 Billionaire’s Biggest Lessons on Parenting 26:52 Is Life About Happiness or Achieving 32:21 The Reality of Being a Public Company CEO 39:07 Why Companies Should Go Public 43:55 Why You Should Price Your IPO to Perfection with No Pop 50:50 “What I Wish I Had Known About Debt in Building Carvana” 52:32 Quick Fire Round: Favourite CEO, Marriage Advice, Carvana in 10 Years

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  The pressure of scale pushes everyone up the pyramid. I think that if you want to make the biggest difference, get in the game. You don't want to be a reaction to other people's reduced view of what you are. When you're public, it's just cold. It's ruthless. It's just results. No one's ever going to clap for you. What's more important to you is is it important to succeed? Or is it important to have the best personal life that you can have?

• 0:22Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. Now today, we feature one of the most incredible stories from the public markets. Ernie Garcia is the co-founder and CEO of Carvana. Under his leadership, Carvana went from a back-of-the-napkin idea to a $50 billion public company, the fastest-growing online used-car retailer in US history, and landed on the Fortune 500 in under 10 years. However, it was not all up and to the right. In 2022, the stock plummeted 99% to a market cap of just $400 million. Today, they're back with a market cap of $35 billion. That's a 100X in the public markets,

• 1:04Harry Stebbings?

  and they're selling 400,000 cars annually with a logistics network that rivals Amazon. Before we dive in today, turning your back-of-a-napkin idea into a billion-dollar startup requires countless hours of collaboration and teamwork. It can be really difficult to build a team that's aligned on everything from values to workflow, but that's exactly what Coda was made to do. Coda is an all-in-one collaborative workspace that started as a napkin sketch. Now, just five years since launching in beta, Coda has helped 50,000 teams all over the world get on the same page. Now, at 20 VC, we've used Coda to bring structure to our content planning and episode prep, and it's made a huge difference. Instead of bouncing between different tools,

• 1:47Harry Stebbings?

  we can keep everything from guest research to scheduling and notes all in one place, which saves us so much time. With Coda, you get the flexibility of docs, the structure of spreadsheets, and the power of applications, all built for enterprise, and it's got the intelligence of AI, which makes it even more awesome. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to Execution in record time. To try it for yourself, go to coder.io/20vc today and get six free months of the team plan for startups. That's coder.io/20vc to get started for free and get six free months of the team plan. And while Coda keeps the engine running smoothly, Shopify puts the pedal to the metal when it's time to sell.

• 2:32Harry Stebbings?

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• 3:16Harry Stebbings?

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• 4:00Harry Stebbings?

  Go to gusto.com/go/20vc. That's gusto.com/go/20vc. You have now arrived at your destination. Ernie, I am so excited for this, dude. I am a massive fan of the Covana business. I've known Dan for a while. Neil Maitre has sung your praises for years. So thank you so much for joining me today.

• 4:22Harry Stebbings?

  Excited to be here. Thanks.

• 4:24Harry Stebbings?

  Now, when I was stalking the shit out of you, you once said that entrepreneurs are stubborn egomaniacs. Can I ask you? When you reflect on that, do you think you're a stubborn egomaniac?

• 4:37Harry Stebbings?

  Can we jump to the next question, please?

• 4:40Speaker 00

  Here's what I say. I think truth is oftentimes like you can find a positive word or a negative word to describe almost anything. And I think it comes down to like, you know, what are you trying to get across? Sometimes it's more impactful to communicate with the surprising choice. And so I think that there's a lot of good that comes out of being stubborn. I think there's a lot of good that comes out of self-belief, which could also be, you know, restated as being an egomaniac. But I do think that's what entrepreneurs are. I think it's really hard to sit in a room with a bunch of people who tell you you can't and to believe that you can if you're not stubborn and if you don't have maybe a touch too much self-belief. So I think that is a characteristic of entrepreneurs, in my opinion.

• 5:18Harry Stebbings?

  When did being stubborn in the Carvana journey help strategically the business in a very significant way?

• 5:26Speaker 00

  Many, many times. So even if I go back to six months into the business, we were out trying to raise money. We went up to Silicon Valley. We talked to every fund that you could possibly imagine. And basically, it was just like we were capital intensive, operationally intensive. We had like industrial components to our business and everyone wanted us to be software and everyone would just ask the question like, can't you just be a software layer on top of dealerships? And I do think that there's a very good chance we actually would have been successful raising money how we made that choice. But I think that we kind of believed that vertical integration was very important. Honestly, I think every bit as much so for control over the entirety of the customer experience as for the economic benefits and strategic benefits that come from being totally stacked and having access to all the economics. But that was just like a core belief that we had. We were like, we

• 6:10Speaker 00

  don't believe you can give customers the experience that we want to give them unless you do it all. And I think, you know, you face like a really tough choice there. You're like, okay, you have really smart people that are proven, that have backed lots of companies that have done well before, that are basically indirectly telling you they don't really think the way you're going to do is is going to work. And you can kind of bend to that and you can choose to to kind of shift in that direction and build like a software layer, or you can, you know, be stubborn and you can persist. And I think we chose the latter. And I think making that choice led to at least one extra near-death experience. But the truth is, I think most companies that take a big swing generally have multiple near-death experiences. And so I think avoiding, you know, one extra one. To to kind of sacrifice the things you deeply believe is not worth it. So we went ahead and just kept doing what we were doing.

• 6:55Speaker 00

  What's the most palpable near death experience that you remember? And what did you learn from it? In 2022, our stock went down 99%. Our bonds were trading at like 40 cents on the dollar. And I think to the world, that looked like a near death experience. Honestly, from my perspective, I didn't ever think it was that. But I think it very clearly looked like that. And I think it was very public. And I think that kind of thing is rarely public. And so I think that's probably the one that would be in most people's minds. But I think in my mind, there were real near death experiences early on, where you're struggling to get things built. You don't have the whole machine and you're struggling to get capital. And at the end of the day, like as a company taking a big swing, you're not going to make money for a while. And so you need capital. That's the lifeblood of the business and of kind of having the option to even keep building.

• 7:38Speaker 00

  And I think we were really struggled to kind of, you know, get that capital. So I think early on, we had several times where we got very, very tight on capital that were tough. And so those to me were like the real near death experiences that were that were hard to manage through. What do you learn? I think you learn like, how many stories have we all heard about, you know, somebody who had some injury where if the injury would have been one millimeter over, they would have died, right? We've all heard 100 versions of those stories. I think that there's two things you could take away from that. One is maybe all these people are really lucky. The other thing you could take away from it is a lot of times when we reassess things in retrospect, we think it was closer than it was. And I think the reason for that is because you have more moves than you think. When you find yourself with your back against the wall, you can find action that you might not have found otherwise.

• 8:22Speaker 00

  I think it makes risk a little less risky than people think. Because like when you find yourself in that spot, if you have problem solvers around, you can usually do more than people imagine. And, you know, whether that's fundraising or finding a way to make dollars go further, or finding a way to be a little bit more efficient in the business. When you have to, you will. That to me was was like the lesson that I feel like I learned. You need to take risk to do something meaningful. And I think risk is less risky than most people believe. I do just want to stay on the fundraising element.

• 8:48Harry Stebbings?

  It would suggest a broken nature to funding and funding environments that Carvana cannot get funding in the way that you couldn't in the early days. Do you think that venture funding is broken in its mindset towards some of the businesses that we fund?

• 9:03Speaker 00

  You know, when you're looking at what other people are doing and you see patterns that are emerging that are successful over and over again, it takes real conviction to choose to kind of run against that. And I think at the time that we were trying to do our early fundraises, you know, capital intensity, operational intensity were not popular, marketplaces were very popular. That was kind of like the pattern people saw. Phoenix was not viewed as a market where you could build a company. And so I think we didn't fit the patterns and I think that we didn't have the relationships that gave investors the opportunity, I think, to have deep enough conviction in some other way that would allow them to overpower the fact that we weren't fitting those patterns. That would be my like PC answer today. At the time, when you're, when you're like pissed off and you can't get money and you're like, isn't the way this is supposed to work is that like venture capital is supposed to

• 9:48Speaker 00

  be risk takers, they're supposed to be the ones that fund risk in the economy?

• 9:53Harry Stebbings?

  It's also a challenging business because you have to be so mentally plastic to see the transformation margin evolution over time and buy into that. What it is today in the very early days versus what it will be are two very different things. And that you have to believe a lot is true for that margin transformation to be real. And so you have to be very mentally plastic as an investor.

• 10:13Speaker 00

  The reality is people taking like layered risk, like when you have to solve 10 problems in a row, there's just not that many people that want to take that risk. I think there's people that'll take two or three risks in a row, but when you've got like 10 in a row, it's just, it's very hard to find that match of someone who wants to take that risk. And I think, you know, given what I feel like I've seen and observed and learned throughout this journey, to me, the, the most important input to that question, to assess what the real risk is, is I think trying to understand the people, because I think that people are going to face problems and they're going to face the strain that comes from facing those problems and they're going to react in some way and they're going to try to solve them. And if you have many things in a row that have to be solved, I just think it's, it's impossible to foresee what all those things are.

• 10:55Speaker 00

  So you have to just decide you believe in the people to ultimately solve, you know, all the problems as they come.

• 11:01Harry Stebbings?

  In a world of AI, many, many businesses that we thought were impenetrable are suddenly very vulnerable overnight. And most defensibility is lost. Do assets like Carvana become more valuable because of the complex coordination, logistical challenges slash nightmare respectfully that the business is? Make it actually just far more valuable because there is such inherent defensibility?

• 11:26Speaker 00

  The simplest answer, I believe, and I hope is yes. I think it's easy to see kind of software layers, you know, being easier to build over time. But I think a software layer sits on top of physical processes and then fits on top of like business processes. And then software kind of enables that. As it sits today, I think you want to have meaningful, physical processes where things are moving. And ideally different business processes where the dots are connected in different ways. And then the software layer like makes all that happen because if the software is easy to replicate, the next two layers are still hard. So I think you want to have as many layers as you can.

• 11:58Harry Stebbings?

  You've mentioned problem solvers. You've mentioned the importance and centrality of team. When we spoke before, you said to me about operators and strategists. And I thought it was really interesting, but how do you differentiate between operators and strategists and their importance within a business?

• 12:13Speaker 00

  Like, one of the things that I've come to believe is that pairing those two things is exceptionally important. I think that if you can pick one, I think you want operators, like operators get things done and operators focus on the practical. And they make sure that the wheels turn and they make sure that whatever problems people are facing every single day get resolved. And I think that you must have that to succeed. Oftentimes, operator mentalities view, you know, more conceptual thinkers and kind of more strategic thinkers as sort of, you know, head in the cloud idealists, and it's hard for them to work well together. I think a lot of times, you know, these conceptual thinkers view operators as solving problems that are less important, right? It's not as interesting. Like, I can't sit around a campfire and talk about this for three hours and impress my friends.

• 12:58Speaker 00

  And so I think a lot of times the two don't fit together as well as you would like. But I think that in reality, like the more important of the two for any success, like getting from zero to one is the operator. But then I think the ceiling of your possible success. Is a function of the conceptual thinker. And so to me, marrying those things together, I think is really, really important and really hard. And I think the most productive people in the world are kind of both. I think through this journey, I've been lucky enough to meet Jeff Wilkie at one point. And we went through one of our inspection centers together. And the number one takeaway I had from that is just, he's one of these people that is both things. He's a very conceptual thinker. He's very analytical and he uses frameworks to evaluate everything. But then he also wanted to tell me that he thinks that the shapes in which we're parking

• 13:41Speaker 00

  cars are stupid because we're not able to move the cars around as quickly. That extreme detailed focus and then his storytelling of the ways that they faced those problems at Amazon and just hearing how iterative it was, was just interesting because you very rarely talk to someone who is as fluent in frameworks and concepts and also as obsessed with details. Pairing those things is really important and usually they repel each other because they're not the same type of person. It's hard to pair those things, but if you can, I think it's very, very valuable.

• 14:08Harry Stebbings?

  You said about kind of stress, just sitting around a campfire and discussing it for three hours. You also mentioned to me before about kind of living in the abstract and the potential for people to do that. How do you think about and reflect upon people living in the abstract and whether that's good or bad and how managers should approach it?

• 14:26Speaker 00

  I think abstraction is very bad, at least for a person who starts conceptual. I think abstraction is very bad because you have this constant desire to abstract.

• 14:35Harry Stebbings?

  How do you define abstraction?

• 14:36Speaker 00

  The closer you get to the ground, the better you are. And I think that like the pressure of scale pushes everyone up the pyramid. I think success pushes everyone up the pyramid. People do really well in their career and they want to go manage more people and they want to have one on ones and they want to influence a lot. But I think that if you want to make the biggest difference, get in the game, get on the ground where things are happening, sit there with the actual people that are doing work. Your one on ones are great, like you should have real conversations with people, but if you're just there influencing what's happening right now, you're leading. People are learning from that. That's like the way it actually happens. And so I think fighting abstraction, especially for a conceptual person, is very important.

• 15:12Harry Stebbings?

  Strategically and specifically, what do you do to be as close to the iron as possible despite the immense scale that you have today?

• 15:19Speaker 00

  First of all, I don't think I do this perfectly, but I'll tell you what I try to do. And it's

• 15:23Harry Stebbings?

  It's a podcast, Ernie. You just say the perfect view of yourself.

• 15:27Speaker 00

  Yeah, you're right. My bad. Edit that out. What I generally try to do is I try to pick several projects. You know, you sit in a room where you're getting kind of like readouts on what's going on with the project and you ask questions and you figure out who's answering all the questions and there tend to be a subset of people who everyone in that room, their heads kind of turn to that person when a question comes up that isn't on the slide. And that person is the person that has developed frameworks for how it all works and is probably doing a lot of the work. And so they know all the detailed answers. And once you find who that person is, it's like, go, go check in with that person every day. If you go actually sit behind that person, like pull up behind him in a chair and you look at a screen together and you try to solve the problem. Like, I think you want the flattest organization you can have in general, but you can only do so much. So you got to limit yourself in terms of how many projects you're working on.

• 16:10Harry Stebbings?

  You said that you should have the flattest organization. How many direct reports do you have? Are you the Jensen with 55?

• 16:16Speaker 00

  No, I'm not. No, because I'm not very good at that. So I've got, I've got seven. And then I think try to have all of them have as many as they can. I would not consider myself a great manager. I consider myself much better at trying to solve problems and get involved than I am, I think, a natural manager.

• 16:34Harry Stebbings?

  The one thing I find quite hard is especially for me, respect is earned over time. And so I don't respect many people coming in on day one, but month one, month two, month three, it grows and grows and grows. And it can be great, but you have to put up with little for a while. How do you think about where your respect starts and how your relationship with it changes with people?

• 16:56Speaker 00

  I would way rather take a person in any role that is respected by someone that I respect than someone who's done it before. My personal view is like, I don't care that much if you've done it before. I really don't. And I don't care that much if you did it at a company that everyone thinks is a great company. Or if you have a degree that everyone thinks is a great degree. If you're deeply respected by someone that I deeply respect, I just think you can figure it out. And so for me, that's like way more important than anything else.

• 17:21Harry Stebbings?

  I also find that great people bring great people. And so when you hire someone amazing, like say, hey, who are your great friends and who do you respect? As you said, when you reflect on people, we're going to get to what you got right. Are there any elements on what did you most get wrong? And what did you learn from them?

• 17:36Speaker 00

  I think that there's like an archetype of a person that is extremely common. And I think that they're even more common in like Silicon Valley. And I think they have good raw material, but I think that they can be very destructive. And so I think that you either need to avoid them or identify them and work to resolve what is inside them that I think can be problematic. And I think, you know, these people are storytellers. They're people that they're usually very smart. They're usually very conceptual. They're usually very good at fitting frameworks together. They're usually very articulate and persuasive. They're usually very high energy and charismatic, but they lack the ability to get practical and to find the occasions where they're wrong and then to like own that and adjust. They tend instead, when they find that like discomfort of being wrong, to shift the explanation

• 18:21Speaker 00

  or to shift to the next problem and to just like kind of keep bouncing to the next one. But because they're charismatic and high energy and smart, they always have people following them. And I think that those people can be tough. So I think when you see those people, you've got to make sure that you address it quickly. I think a very, very common archetype that leads, in my opinion, to like a ton of wasted effort.

• 18:40Harry Stebbings?

  One thing that I hate is bouncers, I call it, where people jump from company to company throughout their career. And one thing that's astonishing with the Carvana exec team is bluntly the longevity of it, the stickiness of it. How have you kept such a nucleus together for such a long time when respectfully, very, very few companies do?

• 19:02Speaker 00

  I think that it's a group of people that are not motivated by status as much as most are. A lot of times what creates the moments of change, like where people bounce from company to company, it's when the company faces difficulty and the people disintegrate as a result. Like blame starts to show up and it starts to feel like this is no longer great for my resume. This is, you know, this isn't what I signed up for. This isn't like the A path that I was on my whole life.

• 19:27Harry Stebbings?

  I do want to discuss resiliency of business. You said to me before about being robust to volatility versus overreacting to market conditions in terms of the way that you build a business. What did you mean by robust to volatility versus overreacting to market conditions?

• 19:44Speaker 00

  There's no stories of companies that that make it, you know, with with no volatility. There's no stories of companies where people just cheer the whole time and it's like a standing slow clap that never ends. That's just not how it goes, right? Like, the reality is, every single company has stories where they were questioned over and over again. And so you just kind of need to recognize that that's just truth. Like, that's just what it is. So if it's true, don't worry about it. Of course, you want to try to learn from the world around you, so you got to listen a little bit, but my personal view is people listen too much to the world around them who's further away from the problem, and they should, they should listen less. They should build what they believe in and they feel like they deeply know and not worry about it. And I think we try to, you know, get that going inside Carvana across all levels. And it's, it's not easy, right? Wake up and you read a new article about how you're going bankrupt and what you're,

• 20:29Speaker 00

  you know, working on doesn't matter and consumers don't want it, it doesn't fit the, whatever. You're going to go through those times and those times are tough, but you need to just know that there's no avoiding that. And, and if you know that, then it's like, when that happens, just use it. Like, you know, tape that up on your locker and use it, because it's energy.

• 20:44Harry Stebbings?

  I mean, not shying away from the directness, Ernie. You get a lot more criticism than a lot of CEOs, to be blunt.

• 20:52Speaker 00

  I'm sure I owe that. That's.

• 20:54Harry Stebbings?

  Calling as paid as paid. Uh, like, I mean, it's, yeah, I get given these, like, research facts, uh, and then I like highlight the things that are interesting. I'm like, poor dude. Like, that's a lot. My question is, do you just get a bit numb to it over time? Like, I get very upset with comments, bad critique, and I haven't got numb to it. So can you advise me, how do you manage that and not personally feel a blow every time?

• 21:21Speaker 00

  I've made peace with the fact that people are going to question you if you're ever doing anything that matters. And I don't think there's a path from the beginning to the end where they don't question you. What matters to me in my life is, you know, I've got, I've got a family with three kids. I've got Carvana and I've got pickleball. And.

• 21:40Speaker 00

  I don't care that much about the rest. I focus on those things and it is what it is. I don't know. You can't stop it. You just gotta, you just gotta keep going.

• 21:47Harry Stebbings?

  I'm, I'm not shying away here, but I think about this a lot with great entrepreneurs, which is how family money at the start and financial protection impacts upside thinking and downside protection. Given the financial protection that you had, how did that change your operating mindset, do you think?

• 22:05Speaker 00

  Wow. Um, that's a hard question. Let me start with this. I think any questions that you ever ask to any person about themselves are subject to the story they tell themselves. And so, uh, it's hard for anyone to even know the truth about themselves. Like, like, you know, we're, we're complicated creatures with very high quality storytelling capabilities that exist in our brain. So you're hearing people's stories and so you're trying my best to separate from that. I mean, here's what I would say. I think, I think that I have been unimaginably lucky in my life in so many ways. I think, um, like where does the willingness to take risks come from? I think one of the places, the, as a parent, I've got three kids. I, I think like the number one thing you have to do as a parent, in my opinion,

• 22:48Speaker 00

  is you have to make sure that your kids know they're unconditionally loved, no matter what happens. I, I think that if they know that one thing, they always have a foundation to come back to. Like every tough thing they go through, which they will go through tough things, they always have somewhere to go back. And when they have that and that's not going anywhere, no matter what, that they have the, the capacity to be confident. And I think that I had that growing up. That was very lucky. I think that, you know, my dad was an entrepreneur. You know, he, he, he went through personal bankruptcy and he went through his own trials and tribulations. And I think that up until I was 10 or 12 years old, I don't think I even knew that was happening, which I give them, my, my parents, a tremendous amount of credit for, because I think that

• 23:27Speaker 00

  you shouldn't know that when you're a kid. When you're a kid, you should be, you know, you should be eating dirt. It's like you shouldn't, shouldn't worry about like, you know, your family's financial situation.

• 23:35Harry Stebbings?

  It's funny. It's funny though. My, my family lost all of our money when I was like 11 or 12 and it gave me this like ferociousness that I would never let us be in such a precarious position again. I, dude, I'm quite young. I look quite old. Cause I like, I will never, ever let that happen again. Ever. And that's because I saw it. I don't know if it was good for me or bad for me.

• 23:55Speaker 00

  Yeah. But by the way, that, that sounds like a very deep question and I don't. I think you'd have to.

• 24:01Harry Stebbings?

  That's why I'm in therapy, I mean.

• 24:02Speaker 00

  Yeah, yeah. Well, I think you'd have to define what's good and bad to even answer that. Like, uh, cause I think that there's probably different answers depending on different definitions of good and bad. But, but to me, once I became aware of what my dad did, like, I would say the biggest benefit of that was I saw that he was successful and I saw that he was human and I believed that if he was successful, I could be successful. That made it less scary. I think for a lot of people, like you, they think that other people that are successful are made out of different stuff than they're made out of. And I think if you have an example, it's very close to your life where you know who that person is as a person and you see them being successful, it gives you the belief that you can do it yourself. So I think that was tremendously helpful. The next thing that I'll say, which I think is my version of the motivation that you just described in yourself, which was

• 24:46Speaker 00

  like seeing difficulty. I don't know where it comes from and I don't know if it's good or bad in the same way. You don't know if your situation is good or bad, but I've always been a deeply competitive person. High school football, like every time we lost, I would go sit in the back of the bus by myself. I wouldn't talk to anyone and I would sit there and cry like a, you know, but, but like a tough cry, like a, like a cry that, that would, that would make you proud. But I would, I couldn't take it. My stomach just hurt. I would sit by myself and like I said, I wouldn't talk to anyone. Everyone knew to leave me alone. I hated losing. You, you would think if you hate losing so much that you would, you would just stop putting yourself in a position where that's even a possibility. But I think truly competitive people, they like, they can't stop putting themselves in that position. They, they have to compete and I had to compete, but I, I

• 25:30Speaker 00

  also just hated losing. And I think that, that transferred a little bit into like, okay, like if my dad can do it, I can do it and I can do it better. And so I think from a very young age, I felt like, you know, people always have these founding stories that are about their specific problem. I think for me, it was way more, and I, like I said, I hate to say this because I don't think it's like a, I don't think it's a, an obviously noble thing, but it was like, if he can do it, I can do it and I can do it better. And, and so I'm going to do something. I don't know what it is, but I'm going to do something.

• 25:55Harry Stebbings?

  In the majority of really successful men, there is this deep rooted desire to please slash impress their father. Did you feel that?

• 26:04Speaker 00

  I think, I mean, the reason I'm pausing, I'm trying to decide is it please impress or beat. Um, and I think I'm positive that it was beat. But I think there's no doubt that that please and impress are are in there. But but sure, I think that's I think that's like, I think that's all in there. Right? Like, I think we're all humans like, um, it's not all conceptual. Some of it's like emotional and just inside, and I think that's true.

• 26:27Harry Stebbings?

  You said something there about kind of the humanity of people and people who've achieved and kind of them being just like everyone else. You kind of reminded me of the Steve Jobs quote, which is very famous, which is like the world around you and all the amazing things is built by someone just like you. I don't really buy that, Bernie. When I meet the greatest entrepreneurs in the world, they are fucking awesome. And they are not like everyone else. That's by definition why they've built these category defining businesses. And I almost think it's a lie to tell your random person on the street. Oh, don't worry, you can do anything. Look at Steve Jobs. It's different. Am I overly cynical?

• 27:03Speaker 00

  If I got to live a thousand lifetimes, I don't think I would be likely to be part of something as big as Carvana in very many of those lifetimes. There is luck in the world like I just think that there is. And I think that there's prerequisite skills that a group of people has to have to have a chance at success. But I think that that that opportunity does have to kind of meet like with some luck to to to ultimately manifest in success. And so I think what I would say is for every Steve Jobs out there, you know, that's out there and has done an amazing thing, there's probably a hundred people of similar quality that haven't had anywhere near the same level of success. And so there aren't people nodding their head every time they talk because they don't have that superficial proof that that what they do is exceptional.

• 27:47Speaker 00

  So I do think there's a lot more exceptional people in the world that than there are exceptional outcomes, uh, because I do think that luck plays a part in all this.

• 27:55Harry Stebbings?

  You mentioned the love that your parents kind of showed you and the confidence that it gave you. This is totally away from our schedule, but I'm just enjoying this way too much. If that's like what you've carried with you to your children, what have you deliberately decided to do differently from the way that you were brought up with your children?

• 28:12Speaker 00

  Not much, honestly. I think, um. God, I want to.

• 28:15Harry Stebbings?

  Like mine, like mine, for example, is like financial shielding. I don't think actually it was that good to know every night that you could lose your home is scary as a child. I would have a very clear Chinese wall between finances and what my children know, period.

• 28:31Speaker 00

  Yeah, let's dive into that one for a second. And that's going to go back to what's good. My guess without confidence would be knowing that you could lose it all every night is not good for your happiness and for your mental daily wellbeing. It's probably very good for your ambition. It probably hardens you and creates character that you couldn't otherwise get. So to me, like, is that one good or bad? I think it depends on what you're aiming for. What I think I believe in deeply is basically two things. We talked about one of them. Make sure your kids know that they're unconditionally loved. And then I think give them a chance to go explore the world. Give them a chance to go fall down and figure things out. Because I just think that that's how we learn as people. You can't tell people all the rules. People have to go learn things themselves. They have to go figure stuff out.

• 29:16Speaker 00

  To me, like, those are the two things that I feel strongly about in parenting. And then I think the rest, I feel like I don't know because it's just too complicated. But but those two things I believe in for sure.

• 29:26Harry Stebbings?

  It's super interesting. Norway is the only country which encourages children to climb trees. It is also the country which has the lowest cases of depression in under 18s.

• 29:35Speaker 00

  Yeah, yeah. So great example, right? Like, it's very easy to see the problem with climbing trees. It's not easy to see the 15th order impact of climbing lots of trees. You know, do you want your kids to climb trees or not? I don't know. You want to love them for sure and you want them to know their love for sure.

• 29:52Harry Stebbings?

  You said like, is it good for you? But hey, it does give you drive and it does give you, you know, ambition. I know this is incredibly meta, but I actually think about it a lot. Is it actually about happiness for you? Or is it about achievement, success, accomplishment? How do you think about that?

• 30:11Speaker 00

  I think that I think happiness is probably the unit that that we should all be chasing. But I think that there's superficial happiness and there's deep happiness. You know, like there's, there's cheap dopamine and there's expensive dopamine. You know, stock goes up, cheap dopamine, you know, like jump on, jump on Twitter, read that you're smart, cheap dopamine. Then there's like build something, do something, you know, overcome something difficult. Put yourself in a fight and lose, then put yourself back in a fight and win. And I think that that drives like satisfaction, right? Like contentment, like it's like a deeper happiness. And so maybe that's a story. That to me is the pursuit.

• 30:49Speaker 00

  I, I think that like a beautiful thing about our complex system and economy is that it is probably the case that to find outside success, the results of your actions have to be positive for other people. So you're driving their happiness. But I think to find that outside success, you, you have to, you have to put yourself in battles and you have to seek the expensive dopamine. You have to go try to build something and find that fulfillment and satisfaction. And, and I think that that's to me, that's like what it's about. But, but I think for different people, it's about different things.

• 31:18Harry Stebbings?

  I think one thing that's very challenging, respectfully for people in your position, and I speak to, through what I do, I speak to many incredibly successful billionaires, entrepreneurs. And the unifying thing that we talk about, sometimes off mic, sometimes on mic, is bringing up children in an affluent environment and having that same level of ambition and hunger that they had. And then infusing that in their kids. How do you think about that, given, you know, the financial background that your kids are brought up in?

• 31:45Speaker 00

  I think it's brutally hard. You know, your palpable story is laying in bed, wondering if you were going to lose everything. Like humans are impacted by those moments. So I think that when those moments aren't happening, it's going to be a little different. I think as a parent, I, I heard a quote the other day that I thought was a good one. For as long as, as you know, time has been going, children have not listened to their parents, but they've never failed to observe what they do. I think that that's pretty true. The actions you take every day matter. I think that your kids are watching and I think that what you value, they will value. And so I think having stuff and being around stuff is one. Thing, but but modeling for them that that's important, I think, is is is a much more dangerous

• 32:27Speaker 00

  thing than being around it. But but both are probably not perfect for for kids coming up in the world. I think that's hard. I think that the best answer, in my opinion, is sport. Not everyone loves sports, but the thing about sports is someone wins and someone loses every single time. And it doesn't matter where you start. It doesn't matter, you know, where you woke up this morning or where you go to bed tonight. It's like they want to win and you want to win, and only one of you is going to. So I think sport is one of the few places where we can go collect extremely real experiences very quickly. So I'm a huge fan of of sport and competition for kids. I think that it's it's very useful to help them like figure out how to navigate the world.

• 33:04Harry Stebbings?

  Do you push slash encourage your children to do sports and to be actively competitive to get that?

• 33:10Speaker 00

  Yes, I I mean, I would say model the behavior and have them want to, right? Go in the backyard and throw a football with them and they'll let them know when they when they drop it. Yeah. And then if if they react to it the right way, and they think that that's fun, they don't want to drop it anymore, and they want to go out and play again more. It's like, so I think I think sport is great. And I think try to make it fun and try to make them want to do it. For people to be impacted by things in positive ways, they have to want to. So I think you have to make it fun.

• 33:34Harry Stebbings?

  You're a public company CEO. You have so much expectation. You have so many people working for you, so many mortgages that rely on you respectfully. Sometimes you can't always be there for your kids in the way that you'd like to be. Is there a time when that has most been prominent to you? How did you think about and reflect on that?

• 33:52Speaker 00

  I think being present is the most important thing. I think the the quality of the time, I think, is more important than the time. I think we have a million things on your mind. It's really easy to go lay on the couch and be deep in your head with kind of glazed over eyes. I think with your kids, it's most important that when you're there, you're there. It can be moments that are seemingly unimportant, right? It's like picking them up from, you know, practice and driving them home or whatever it is. But I just think when you're there, it's like, you know, engage with them. Don't like, accept the how was school? Good. You know, how was soccer? Good. How'd you play? Good. And then I'm like, okay, cool. I'll go to my mind, you go into yours, and I'll see you later. Like, don't accept that. I think try to engage. And I think as long as you that's where you show that you care, right? That's where you show that that like, the love is deep and unconditional. So I think I think quality is more important than quantity, in my opinion.

• 34:36Harry Stebbings?

  On money, I think people have a lot of misconceptions, wrong thoughts around bluntly wealth. What do most people think about money slash wealth that actually in reality is not true? I know you're thinking, Jesus Christ, what have my comms team done putting me in front of this deep conversation?

• 34:54Speaker 00

  That was my second thought. My first thought was, what's the answer to that question? My second thought was actually exactly that. You are who you are. It's hard to change who you are deeply in meaningful ways. And I think it takes real effort. One of the things that's weird, whatever, like any outside story labels get placed on you is you see that you change in other people's eyes in a way that you haven't changed in your own. So like, an example of that would be, you know, Carvana, when it was, you know, 20 people, 50 people, 100 people, I didn't ever feel like I was the CEO. I felt like I was Ernie, right? I felt like it's like you walk in a room, you sit behind the person, you figure out the problem. And then all of a sudden, when you're 1,000 people, 10,000 people, you kind of see the way people are looking at you and you see that you're the CEO now. You've become this label. You've become this

• 35:38Speaker 00

  reduced concept. It's like a bummer, to be totally honest, because it's like inside, you know, you're still like, you're still that 15 year old kid, like looking out your eyeballs at the world. It's like a little competitive and wants to figure things out. And you see people seeing you differently and you just wish that they didn't. And I think that trying to fight that as best you can is important because I think that you don't want to, you don't want to be a reaction to other people's reduced view of what you are. And so I think that the reality is, as, as things change, as your, as your title changes or your financial situation changes, I think that the way you feel inside changes a lot less than people think. And so, and I, and I think that that's important. I think that's probably the healthiest way to approach it.

• 36:17Harry Stebbings?

  You said about being a reaction to who people think you are, maybe who people want you to be. Do you like being a public company CEO? And how do you reflect on what the world thinks about Ernie and what, who you actually are?

• 36:30Speaker 00

  The superficial answer to that is no. I think it's a cost of the goal, basically. You know, my advice to any, any person out there considering like going public would be, what's more important to you is, is it important to succeed? Or is it important to have the best personal life that you can have? If success is, is more important to you, I think you want to be public. I, I think that the things that people say about being public are true. Like there are bad things, right? People are short sighted and they focus on things that don't matter that much. But on average, I think it's very, very helpful because it creates pressure that I don't think you can create otherwise.

• 37:05Harry Stebbings?

  I mean, this respectfully, Ernie, I've, I've, I've listened and spoken to you now for over an hour. And my takeaway is that you're incredibly disciplined. You're incredibly competitive. You don't need some analyst at a bank to tell you that you should have a margin improvement of 1%.

• 37:20Speaker 00

  So I think that's right, but I think you, um, I don't think you need that to push you in general, but I do think it helps to push you specifically. And, and what I mean by that is like earnings prep is, I think viewed by many as like a waste of time. Right? Like every quarter, you gotta go sit in front of, you know, analysts and investors. You gotta answer these questions. You have like a day afterwards or you talk to all your big investors for half an hour and you, you gotta answer their questions. But to me, it's, it's like my, my natural way to approach the world. I, I like to go sit at, like I said, behind someone, understand a problem, think about like the fundamentals. What are the moving pieces? What are the people? What are the processes? Think about things functionally. I don't think about things from an accounting perspective. But then I think when you have to kind of like reorient your mind into that, like accounting perspective,

• 38:03Speaker 00

  it forces this different view where a lot of times it, it pushes you down other like nooks and crannies that you might not have otherwise wondered about as quickly. And I think you kind of realize like, okay, there is like an area, like we're going to get a bunch of questions here. And the reason where you get a bunch of questions from a bunch of smart people is because they're good questions. It's like not fun because you're like, I want to go attack this problem over here that I'm focused on. And now I gotta get pushed over in this direction. But I just think that like pressure is good, like, like humans, all, all of us, myself very much included, we gravitate to things that we like. And a lot of times productivity is found by like confronting the things that you don't want to confront. I do think it's helpful.

• 38:40Harry Stebbings?

  I'm playing the contrarian side, though. There are very, very smart investors that we both know. You're Neil Maitre at Green Oats, as we said, Vince and Josh at Thrive, who would provide that similar pressure dynamic in a board environment, more naturally in a later-stage private company environment, as say they do in a Stripe of the world, without the challenges of being public.

• 39:02Speaker 00

  I disagree, but I respectfully disagree. Let me tell you why, and I have a ton of respect for them. I think that when you're public, effectively, there's almost zero relationship influence in the way people are reacting. Like, the stock does not care about who you are. It doesn't care about your relationships. It just doesn't care. When you know someone for a year, or two years, or five years, they do care who you are. You can evaluate someone on intentions. You can evaluate someone on their actions, or you can evaluate someone on their results. Being public, it's just results. When you have a relationship, there is some portion of the way you're evaluated that is based on intentions and actions. When you're public, it's just cold. It's ruthless. It's just results.

• 39:46Speaker 00

  It's very hard to replicate that. You know, it's like there's the heuristic, like, everything before the but is nonsense, right? And I think being public, like I said, I think personally, it's not perfect, but it's, I think the feedback that you get is cold and ruthless, and I think that's valuable.

• 40:01Harry Stebbings?

  Where do you feel public markets around Carvana are short-sighted, where it would be most helpful for you if they were long-sighted?

• 40:09Speaker 00

  So I think everywhere. And I think that that's like a useful, I think that that's a useful, like, thing for us to dive into, because it kind of like contradicts my previous answer. In good times, in like, in 2021, what percentage of investors said that they weren't long-term focused investors? It was zero. But the reason was because it was in their short-term interest to be a long-term investor in that moment, right? But then you find out who the real long-term investors are when it's not in your, like, short-term interest to be a long-term investor. That's when you like know if it's real or not. We went through a moment where I think that became exceptionally clear. And, you know, you see who people are and what they care about in moments of strain. It becomes very clear. And I think the market, in my My opinion is constantly kind of panicking about everything.

• 40:52Speaker 00

  It's constantly like over evaluating all these kind of micro data points. You don't want to overreact to all of that. You need to have your convictions and beliefs. But it is useful to sit there and be like, okay, but what is the one thing we're going to get 15 questions about? And then is that something where the market is just wrong and we don't care? Which many times that that is the case and it's like, just don't worry about it, move on. But absolutely on occasion, you're like, that's not perfect. What's going on there? Like, let's dig into that. It does matter to like the long term trajectory of carbon. And it does mean that this is an area where we can put more focus. You have to sift through the pressure because the pressure comes in all kinds of crazy directions.

• 41:28Harry Stebbings?

  You said nothing else matters but results. There's a famous saying, and I can't remember who said it, so I'm not going to try. But they said that, you know, the market in the short term is a voting machine and in the long term is a weighing machine. Would you agree with that analogy?

• 41:43Speaker 00

  I think that's Benjamin Graham and I think a hundred percent. I just think like that whole analogy through that book is like Mr. Market, which is this crazy thing that you get to trade with every day. I think that there's like a recognition, the sum of investors is a is a volatile thing. And I think that when you're evaluating something that is necessarily true under high potential is high volatility. Because high potential means high upside, but it also means probability of downside is is greater than in many other cases. If you if you have something that is high potential, you're probably going to have high volatility. Like, sorry, I think that's just part of what it's going to be and you've got to deal with it. But in the long run, it's it's like it works. We went public at 15 bucks and like the vast majority of the time, the stock has looked pretty good compared to that.

• 42:25Speaker 00

  Like if you're just connecting dots that are very far away, yes, it looks pretty good. We've had moments where it didn't look great, right? Which is actually hard to do from some of the places that we were just mathematically, but we did, we found a way to do it. But I think on average, it's like, you know, the the market will weigh you. Build the things that you think matter. Use the pressure the market provides to find the things that they may be right about that you're hiding from because it's not comfortable or because it's not what you're naturally good at or what you're naturally interested in. And then go go just try to do your best over and over again and and make peace with the fact that the market's going to move around and you can't control it.

• 42:56Harry Stebbings?

  I often think about Adam Smith and the Adam Smith's invisible hand theory and kind of markets kind of self-regulate and correct in a very natural and authentic way. Do you agree with Adam Smith's invisible hand belief? Or do you think sometimes interventions in in many other ways are much more necessary?

• 43:13Speaker 00

  I do believe in his belief. I think that it's, I think like the market and you know, capitalism and like, I don't mean to, I don't know, like fall into the expected trope of all the things that I would have to believe, but, but I do think they're true. I just think that, that they're like beautiful organizing functions for people. And I think as long as you believe people are smart, markets will make all kinds of mistakes, but I think that they progress on average. Like, I think on average they weigh. I think it's like a wonderful, I don't know if it's a coincidence, I would need to think through it more carefully, but I think it's a wonderful coincidence that like people pursuing their own goals in like a free market necessarily serve the interest of others. I think that that's like wonderful. It's like a beautiful truth.

• 43:55Harry Stebbings?

  When you look back now, you went public, I think five years into the journey?

• 43:58Speaker 00

  Four.

• 43:59Harry Stebbings?

  It was fifteen, four. Okay. Unbelievably sharp or curt amount of time. Do you regret going public so early? Do you wish you'd gone public earlier? How do you reflect on that?

• 44:10Speaker 00

  I don't. But again, like, you know, subject to like, you know, retrospective rationalization and my own storytelling, but it created pressure. And I think it made us more resilient. Like, I remember, you know, we went public at fifteen and we came, you know, we were down to eight within a couple of days. And I remember walking into the office, you go on this roadshow and it's like, it's like you have forty-five minute meetings, you know, where you have smart people just asking you everything about the business. And then you jump in an elevator, you run downstairs, you get in a car, you drive for five, go to the next meeting, you're trying to find two seconds in between to go to the bathroom. It's like, you have ten of them a day and you do it for a week straight. I lost like ten pounds. And so that's like the pre-IPO process. And then you go public.

• 44:51Harry Stebbings?

  Do you think, do you think they got it in that roadshow? Like reflect on that?

• 44:55Speaker 00

  Some did, but I think it's, I mean, it's hard, right? We're an unknown entity out of, out of Phoenix, Arizona, with none of the hallmarks of success. We don't have any of the big funds where they can go, yep, that's smart. And I can call this investor that I deal with fifty times and they can tell me about the company. So it's like, we're coming in and they're like, who are you? What's going on? How do I check on you? I don't have any idea. So that was like a lot to ask of investors. And I think that's part of why we immediately dropped afterwards. But you go through that period, you go out, you Imagine like ringing the bell and the stock goes up and everyone hugs and it's a party and it's like they can't even open the stock because it's like no one wants to buy it. So it's just plummeting post the IPO, which like the bankers are losing their minds on because that's like not the way it's supposed to work. And then you already set up like four TV interviews and yeah, I had never done one before and you jump in front of the camera and they're like,

• 45:41Speaker 00

  why do investors not believe in you? And you're just like, come on. So I mean, it's like, I have no idea how to manage this. And then, and then you get, you know, you get back to the office and I remember

• 45:51Harry Stebbings?

  What do you say to that? Like, I mean, I don't know.

• 45:54Speaker 00

  Like I was a deer in the headlights trying to make stuff up and talk fast like I, as, as is my, uh, my habit. So I don't know. Try to do the best you could. But, but you get back to the office where it actually matters because it's the people that are going to build the thing for a long time. And it's the people that believe in what they were building and it's the people who bought into that it matters. And it's the people who aren't close to investors and they think that the fact that investors are rejecting us means that we're not good. And so now they have a moment of questioning it and you walk in and you feel the energy, right? You feel that the energy is like, this was supposed to be a party and it's not. That's like, that's tough. And, and so I got a text message from someone who was like, hey, listen, I think we have to address this. Like we have to pull everyone into a room. And I saw the text message and I was just like, because I knew it was right and I just, I was like, I just lost like 10 pounds on the road for the last week.

• 46:36Speaker 00

  I just, you know, I had like the worst, you know, like, like day ever. Try like when the stock's doing the opposite thing of, of what you're hoping. And I gotta, you know, try to jump in a room and like have energy and have this conversation. But, but then you jump in there and you do it and it was the right thing to do and it did, it went well. But you're building resilience, like personal resilience you're building, but you're also building company resilience because you, you just had a moment where everyone questioned you and you all came together and you have an honest conversation about it. And people decide whether or not they believe your answers. And then if they do, you're all now a little tighter because you just fought something together. And so to me, like, that helped to build a kind of resilience. Like as a private company, what do you do when you go through a tough time? Like for the most part, what do you do?

• 47:19Speaker 00

  You don't talk about it because there's no, there's no forcing mechanism to make you talk about it. You just keep going. It's like, you get to avoid building resilience. So I, I think that, um, I think going through it was like, it wasn't fun. It, it was superficial, like superficially, it was, it was massively dopamine reducing. But I think deeply, it allowed you to find the, the expensive dopamine. Uh, so I, I think, I think it was better for us.

• 47:44Harry Stebbings?

  How do you think about IPO pricing? Do you like to price it to perfection where then you're going to likely drop? Or do you want to price it?

• 47:50Speaker 00

  Yeah, I mean, yeah, yes. And like, you're not supposed to say that. I don't understand why any rational person would take any other view. If we all could.

• 47:59Harry Stebbings?

  So you take the view that actually I want to leave a little bit of room. So people feel like they got a bump. It creates a synthetic excitement and that could lead to subsequent excitement and upward mobility.

• 48:09Speaker 00

  Yeah, I don't buy into that. I think price it as high as you can price it. I don't think that it's very likely. So let's take our example. You're not supposed to say this. So like, sorry to everyone where you're not supposed to say this. I just don't think that the standard view is right, in my opinion. We went out at 15 bucks. We opened at 12. It's a complete disaster. We're down to eight like a week later. Do you remember? Do I remember? Who cares? Do our investors today care? No one cares. No one cares. But if we would have priced it at 10 or eight or whatever, to try to get some magical bump, we would have gotten a lot less money and would have been more likely to not make it across the line. And we would have taken more dilution for all of our pre-existing shareholders who we also owe something to. So and then everyone's going to forget anyway, because Mr. Market's wild. So to me, it's like, the results are going to matter. Get the money where you can get the money and go build the thing. That's my take.

• 48:55Harry Stebbings?

  When you have shit, and sorry for being blunt, shit like Hindenburg. Do you worry that Mr. Mark is also irrational?

• 49:01Speaker 00

  I think one of the things that I have grown to believe is that the market can be more volatile than you, than I ever thought. And so I think you want to build in resilience in whatever ways you can. I think the most important resilience is people. It's people that have had hard days. It's ideally teams who have had hard days together and made it through. And so I think when those things happen and the market tells you that you're wrong, those people have like reps that they can go back to that they've made it through before and they can probably make it through again. So I think that's important. I think resilience also ideally, especially in build phases before you are generating cash, means like a little bit stronger balance sheet than you think you need. Because if you find yourself in a moment where results are a little worse than you thought,

• 49:45Speaker 00

  and the market's a little worse than you thought, and you face another bump that you didn't foresee, that can be a problem. So you want to minimize the odds of those existential moments. Which I think honestly is like a lesson that I'll never fully internalize. And I, I think it was one that I had to learn the hard way, uh, for sure. Not a natural one for me. Like I want to take as little dilution as possible the entire time. But, but I, I think, yeah, then those things are going to happen. Like never expect, like I said, no one's ever going to clap for you. Think about all the most amazing companies in the world today. Are people standing up clapping? Like maybe in, in the tiny world of, of like investors and people that like study businesses, maybe there's like some, some applause that occurs. But for the most part, like read the news, look at like public sentiment every day. It's like, no one ever stops and, you know, says, great job.

• 50:29Speaker 00

  It's like, you just got to keep marching and build a thing that's valuable and productive and useful. If you allow yourself to need outside validation, I just think that you're, you're putting yourself in a weak spot.

• 50:40Harry Stebbings?

  You said you wanted to take as little dilution as possible. I think Bluntney Kazoo and Alex will very openly say that of the cancerous nature of debt and what debt did to the business. How do you reflect on relationship to debt as a business, the cancerous nature of it, maybe the benefits of it? How do you reflect on debt as an instrument?

• 50:58Speaker 00

  I think debt is dangerous in general, and I think it's more dangerous for a company in a phase that we were in. Where you're, you're not like positively cash flowing. I think those things are definitely true. I also think in this case it worked out, like had we raised equity in the same dollars at the, at the same time that we took out debt. We would have taken a lot more dilution than let's say that we just like raised equity today and paid it off just to like, you know, allow you to do that math. We would have taken quite a bit more dilution had we done it the other way. So I think it like, it worked out. And then I think, yeah, which doesn't necessarily speak to it's whether or not it's good in general, like, you know, you observe one case of the world, but the world is complex. The other thing that I think was like interesting about the debt, it was, it was almost like being super public because it's, um,

• 51:42Speaker 00

  it created like a way bigger pressure. We were not a positive cash flowing business. And then all of a sudden the market said, we're not giving you money. And not only did you have to get to break even, you had to get to a place where you could cover, you know, the interest. And that pressure, I would like to believe that we could have created it for ourselves, but I, I don't think we could have. And, and I think that Like we're a group of people that put a tremendous amount of pressure on ourselves. I really do believe that we're relatively unique in that way. But there's no substitute for huge cash flows that have to be covered and a market that's telling you you're stupid every day. That that generates a type of pressure that is extremely valuable. To me, like, that was not the plan, right? Like, we weren't like, hey, let's take out this debt because it's going to create this near death experience. It's going to be great for us in the long run.

• 52:26Speaker 00

  Like, that wasn't our story. So we don't get to take credit for that. But I think that it that there were positives that came from it.

• 52:32Harry Stebbings?

  I've enjoyed this conversation so much, like, the breadth is amazing. I'd love to do a quick fire round now, if it's okay with you. I say a short statement. Let's start with, what do you believe that most around you disbelieve?

• 52:45Speaker 00

  Wow, I believe people matter a lot, like, like the the underlying capabilities of the person matters a lot more than the experience. I'm not sure how many people around me don't believe that, but certainly a subset do.

• 52:56Harry Stebbings?

  I believe that if you have kids, you are willingly accepting a trade off in execution professionally. Is that fair?

• 53:04Speaker 00

  Wow, that's a good question. Um.

• 53:06Harry Stebbings?

  My brother's just had a baby and I just see the intense amount of work that takes. I am ruthlessly selfish, Ernie. I work sixteen hour days.

• 53:15Speaker 00

  That comes across. It's very, very clear. Just stuck with you. No, well, by the way, I I think it's a, that's a very good question. I think that there's, um, in support of that perspective, like, I've even seen, like, uh, like, papers about professors. The the number of times that their papers are cited is, I think, like, it goes down when they get married, and I think it goes down again when they have kids. So I think that there's like data that supports that. I also think kids are like, um, at least an offset is that they remind you of what matters and what humans really are. It's very easy as you get older to drift into highly intellectualized views of the world. When you see your five year old kid

• 53:56Speaker 00

  explaining to you why something just happened in a way that is so obviously wrong, it's unbelievable. You remember that, like, okay, this is obvious to me because I have a lot more experience and I'm a lot smarter than my five year old kid right now. So I know this story is nonsense, but like. A much higher intelligence than me would probably look at all the things that I say all the time and would view a lot of it as completely dumb as well because we are naturally storytellers. And like when you, when you get these, these little examples that you care so much about that are running around constantly displaying to you what the human animal is, it's like a very helpful reminder that I think helps you manage better. I think it helps you understand customers better. So I, I think there's at least an offset there.

• 54:39Harry Stebbings?

  Where do you have little resilience where you would like to have more? It could be something as trice as like I eat far too much chocolate.

• 54:47Speaker 00

  Yeah. The pause here is a very arrogant pause. That's, that's my first thought. I'm trying to think of the place where I'm least resilient. Um, man, I eat a lot of salty food at night. I don't know why that is. I'm not, I'm not a sweet guy. I eat a lot of salty food at night. I, I have some things I could bring up like, you know, I, I think any good relationship, you've got your, your recurring battles. Me and my wife have a recurring battles where, where I probably less resilient. I'm going to stay away from that one. I'm going to stay away from that. That's, there's gotta be some lines or somewhere there has to be lines. So I'm going to stay away from that one, but I think there's some areas where I'm probably less resilient than I should be there.

• 55:26Harry Stebbings?

  I do love that dude. It's like Hindenburg, Harry will be like, yeah, fuck it. And then there's like, I'm not going there. Harry's like, I totally get it. Well played. Don't go there. Not worth it. That one not worth it. What is the secret though to a happy marriage in your eyes? You're a CEO of a public company that's freight demanding and you're also a happily married man. What's the secret?

• 55:45Speaker 00

  I think that comes down to people too. I, I think my wife is someone who she's probably the most present person that I know. She's probably the person who is most likely to be 100% engaged with the people around her. She had the benefit of growing up of she clearly has a family that unconditionally loves her. And so I think she's a confident and happy person. And I think she defaults to positivity, uh, which I think, you know, different people default in different ways there. That makes it all, I think, pretty easy. So I think, I, I think, yeah, in my mind, I think that like the, the foundations of, of people are unconditional love, the confidence that emerges from that and the ability to be happy that emerges from that confidence, I think is like kind of the building blocks. And I think if you have that, I think you're in a good spot.

• 56:28Harry Stebbings?

  Which public company CEO do you most respect and admire and why them?

• 56:33Speaker 00

  Wow. I mean, God, I hate to say such expected things, but I will say like, I think we've studied Amazon forever as just kind of like, it's an incredibly analogous business to our business. There's a lot of like moving things. There's a lot of very similar problems that you face. And so I think we've always paid a ton of attention to that business. I think someone who I was lucky enough to meet, so I'll bring up someone that I met. I was lucky enough to meet Brian Niccol at a couple of times in my life. And I think that he's now the CEO of Starbucks and was previously the CEO of Chipotle. Like to me, Chipotle is one of the most amazing operational machines I've ever seen. Like you walk in there and you have, you have an unbelievable burrito bowl in 30 seconds.

• 57:18Speaker 00

  And it's like, you know, there's no wasted movement in that entire place. It's unbelievable. That's something that you know, you try to learn from because I think it's, it's like an area that that's like the practical area where I think is my relative weakness. And then I think like every time you find like a clip on Twitter, whatever, with like little nuggets of wisdom from Steve Jobs, I just think that like the depth there is is like unbelievable and it stems from like a deeply human place. And I think like a very deeply driven place that I think is remarkable. I think Elon Musk is like, has there ever been a greater builder? Has there ever been someone who's faced more 0% likelihood of success problems in a row?

• 58:00Speaker 00

  And continually succeeded, I think that that's unimaginably impressive. And I think you have to try to learn from that. So I don't know. Those were incredibly expected answers. So my apologies.

• 58:09Harry Stebbings?

  No, they weren't at all. I'm actually very excited. We've got Brian Niccol coming on the show.

• 58:12Speaker 00

  He's great.

• 58:13Harry Stebbings?

  Yeah. I always think he's like the most underpaid CEO in the public markets. When you look at his, when you look at his pay.

• 58:19Speaker 00

  You should tell him that just to put him in a bad spot where he has to dance.

• 58:22Harry Stebbings?

  What have you changed your mind on in the last 12 months?

• 58:25Speaker 00

  Two things I'll say there. What I've come to believe over the last three years is that focus is very important and that for an ambitious company, it basically requires constant tending. Like every three months, you have to uncomfortably take things off of your board that you're working on. Because I think that. It's very, very hard to stay focused. I think the companies naturally drift away from focus. Trying to continually manage that takes, I think, a lot of effort. And then I think that we, as a company, not to like dive too deeply into the specifics of us, but I think we face a two-year period where we focused on nothing but profitability. And I think, I think that we've, you know, more recently been trying to find the right balance between profitability, growth,

• 59:07Speaker 00

  and continuing to build a machine that is even more differentiated than the machine that we had before. And I think that we're, we're at a place where it makes sense for us to be shifting some of our finite focus toward growth and toward foundation laying. That's hard. Are you worried about a knee-jerk reaction? I'm worried about allowing a shift in the thing that you're focusing on to lead to diffuse focus everywhere. Because what I think can happen is when you say, you know, we're going from just focusing on this one thing to, hey, we're, we're going to work on this, but we also have this other goal and this other goal. It gets really easy for everyone to say and, right? Okay, so we're going to do this and this and this and this and this and this. And they just keep adding more things. I think when you shift the thing that you're focusing on,

• 59:52Speaker 00

  you have to make sure that you're taking things off the board that were, that were pointed at that focus and replace them with things that are, you know, pointed at the new focus, just to make sure that you just, you don't just and yourself to a million projects and get nothing done. That's the hardest thing about managing a change in like the area of that you're focused on. Where did you naturally drift to that you wish you hadn't? My natural drift is, is capabilities first, scale second, blocking and tackling third. And for two years, we focused on blocking and tackling, and we had tremendous success as a result of that. I'm always worried in myself of drifting, you know, too far in the other direction. And I think we find ourselves now at a place as a business where we should drift in the direction that is more natural to me.

• 1:00:35Speaker 00

  Everyone on Twitter wanted to know why you're buying car dealerships.

• 1:00:40Speaker 00

  I think we're going to stick with our public statement on that one. Let's, let's circle back on that in the future. Is that a spicy one? We can edit out. I had no idea. No, no, there's nothing spicy. I just think it's early. I think, you know, we're, we're always running experiments, trying to, trying to learn. And I think that it's, it's extremely early. And so I think that it's, we should save our words for when we've got very concrete things to say. Final one for you. You have.

• 1:01:05Harry Stebbings?

  I think you're 400,000 cars of a 20 million used car market in the US. That was Dan who mentioned those, give or take.

• 1:01:13Speaker 00

  Yeah, 40 million used cars.

• 1:01:15Harry Stebbings?

  Forty million, yeah, okay. God, Dan.

• 1:01:18Speaker 00

  Yeah, come on, come on, Dan. Tighten up.

• 1:01:20Harry Stebbings?

  We should double, we should double the stock price on that one. Where are you in 10 years' time? Like, if I had tech painted a, and like, great case, so like, meh, good and great case, where are you?

• 1:01:31Speaker 00

  I, I think that we hope it's, it's many millions. I think that we are built today, we have infrastructure in like, you know, without diving too much into like, the details of what this means. We have infrastructure that I think clearly supports 3 million. And I think that the reality of how these things work is, you know, if we go backwards in time to kind of like, think about how we'll project the future. I think, you know, at, at 100 cars, it was easy to see 250. And at 250 cars, it was easy to see 500. And at 500, it was easy to see 1,000, 1,000, it was easy to see 10,000, at 10,000, you could imagine 100,000. Everyone always wants to look from the moment you are to what the finish is gonna be. But you have to remember that where you are is gonna keep changing. If the trajectory is positive, then your, your position in space is gonna keep changing.

• 1:02:13Speaker 00

  And I think what looks possible is always kind of like a multiple, depending on how big your eyes are. It's a multiple of where you are today. You know, I think our goal is to keep making progress. And if we keep doing that, regardless of what the multiple is that people have in their mind, they'll start applying that multiple to bigger and bigger numbers. And, and I think, you know, our numbers are real big, but, but I think we don't wanna, we don't wanna share them, but we wanna, you know, we're ambitious.

• 1:02:35Harry Stebbings?

  Ernie, as I said, I, I like doing what I do, but this show is a very rare one where like, honestly, you're able to have such natural discussion. And like bluntly build the relationship in a way that's just supernatural. And so thank you for reminding me why I love what I do so much. Thank you for joining me, and this has just been fantastic.

• 1:02:55Speaker 00

  Wow, that was a very nice thing to say. Thank you back, really appreciate it, and it really, uh, had fun as well. We did not talk about any of the things that I thought we'd talk about, so.

• 1:03:04Harry Stebbings?

  You know what I love about that show? I love the fact that I just thought, you know what Ernie gets? Just asked the most tough, annoying shitty questions all day by journalists. Let's just have some fun with this one and ask him questions that no one's ever asked him before. I want to say a huge thank you to him for being so willing to discuss some very personal elements there. If you want to watch the show, you can find it on YouTube by searching for 20VC. That's 2-0-V-C. But before we leave you today, turning your back of a napkin idea into a billion dollar startup requires countless hours of collaboration and teamwork. It can be really difficult to build a team that's aligned on everything from values to workflow, but that's exactly what Coda was made to do. Coda is an all-in-one collaborative workspace that started as a napkin sketch.

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  To try it for yourself, go to coda.io/20vc today and get six free months of the team plan for startups. That's coda.io/20vc to get started for free and get six free months of the team plan. And while Coda keeps the engine running smoothly, Shopify puts the pedal to the metal when it's time to sell. I spend my time looking into successful businesses of today and tomorrow, and often there's a business that's behind the business helping drive success. For millions, that is Shopify. Shopify is home to the number one checkout on the planet, boosting conversions by up to an astonishing 50%, meaning way less carts going abandoned and way more sales going into the business. Winner.

• 1:05:13Harry Stebbings?

  So if you're into growing your business, your commerce platform better be ready to sell wherever your customers are. Go to Shopify.com/20VC to start your $1 per month trial today. That's Shopify.com/20VC in letters. And while Shopify helps you make the sale, Gusto makes sure your team gets paid without the headache. Look, payday's awesome, but running payroll, calculating taxes and deductions, staying compliant, it's not easy. Unless, of course, you have Gusto. Gusto is a simple online payroll and benefits tool built for small businesses like yours. Gusto gets your team paid while automatically filing your payroll taxes.

• 1:05:54Harry Stebbings?

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• 1:06:32Harry Stebbings?

  Head of Product at Harvey AI, one of the fastest-growing AI companies in the valley, and formerly Head of Product at Scale AI.